1) President Macron's government in France proposed reforms to raise the retirement age from 62 to 64, sparking widespread protests. 2) The current pension system is seen as a cornerstone of France's social protections, but the government argues reforms are needed to sustain the system financially as life expectancy increases. 3) Opponents argue the reforms negatively impact blue-collar workers and other alternatives could have been pursued instead of raising the retirement age.

1. Is France’s Success Story Over
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3. France, a global power that is no stranger to public uprisings, is
facing an unstable political situation amid massive – and at
times violent – protests over President Emmanuel Macron’s
decision to raise the country’s retirement age.
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What’s Happening in France?

4. The unrest, which started in January when the French
government announced the proposed overhaul to its pension
system, took a new turn when the increasingly unpopular
president invoked a special power to force the legislation
through.
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5. The legislation raises the retirement age by two years to 64.
The change will be implemented gradually, with the age
increased by three months each year starting from this
September, until 2030.
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What are the proposed Changes?

6. Some workers in jobs deemed physically or mentally arduous
will maintain the right to retire earlier than most of the working
population.
From 2027, most workers will have to make social security
contributions over 43 years rather than 42 years in order to
draw a full pension.
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7. The pension system is a cornerstone of France’s cherished
model of social protection.
It is founded upon an obligatory contributory pension scheme
and upon solidarity between generations.
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How does the Pension System Work in France?

8. In other words, the contributions of those who are currently
working directly fund the pensions of those now in retirement
–by paying mandatory payroll charges.
France has the lowest qualifying age for a state pension among
the main European economies and spends a significant amount
supporting the system.
But the active working population pay high payroll charges and
see fair pensions as the bedrock of how society should work.
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9. The government argues that life expectancy in France increases
and so does its ageing population.
As a result, there will be more retirees than new entrants into
the workforce.
And hence the current pension system will fall short in the
coming decades.
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Why Government seeks Reform?

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11. Macron’s government says such a situation would see the
pension system record an annual deficit of 13.5 billion euros by
2030.
The principal measures were initially seen generating 17.7
billion euros in additional contributions by 2030.
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12. The government calculated that “accompanying measures” to
smooth the way would cost 4.8 billion euros, creating a 0.3
billion euros surplus in 2030.
The government hance says that the measure to gradually raise
the legal retirement age by three months every year, till it
reaches 64 by 2030, is “indispensable” in order to balance the
pension system and keep it financially viable.
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13. The change in retirement age from the current 62 to 64 means
that people will have to work longer or contribute payroll taxes
for a greater number of years to get a full state pension.
By this logic of a phased increase of three months every year
till 2030, those who were born in 1961 and were due to retire
this year will have to work an additional three months in order
to get a full pension.
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Implications of the Reform

14. Those born in 1968 will have to be 64 and completed 43 years
of work when they retire in order to get their dues.
There are exceptions, however. Those starting work between
the ages of 14 to 19 will be able to seek early retirement, as
will public workers engaged in physically or mentally arduous
jobs.
The government also says it will put in place a ‘seniors’ index’ to
check if companies are making progress in hiring and training
seniors so that they don’t get left out as the retirement age
increases.
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15. The reform will also put an end to a dozen or so “special
regimes” with different retirement ages and benefits for
different categories of workers including rail workers,
electricity and gas workers, and central bank staff.
However, the changes will only apply to new workers in these
sectors—existing workers will still benefit from the special
regimes.
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16. The lower house of parliament, the National Assembly, was
poised to vote on the legislation earlier.
But Macron took a surprise, last-minute decision to instead use
special constitutional powers to force the plans through
without a vote, because he was not certain of the support of
enough lawmakers.
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Why did Macron choose to use special powers?

17. Special powers contained in article 49.3 of the constitution
allowed government to bypass members of parliament.
The prime minister Élisabeth Borne announced the decision in
parliament amid chaotic scenes in which radical left lawmakers
sang the Marseillaise (the French National Anthem) at the top
of their voices in attempt to stop her from speaking.
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18. The use of special powers illustrates Macron’s difficult position
in parliament.
He was left severely undermined in the National Assembly after
his centrist grouping failed to win an absolute majority in
parliamentary elections last June amid major gains for the far
right and radical left.
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19. Without a majority, the government needed to rely on
lawmakers from the rightwing party, Les Républicains, to back
the pensions changes.
But despite weeks of negotiations, the numbers did not add up.
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20. The French cherish the retirement system, as well as national
healthcare, as it is seen as hard-earned, having been introduced
by the National Resistance Council after the Second World
War, when the country was reeling from the aftermath of the
war.
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Why has this made people angry?

21. Generations of workers have accepted high mandatory taxes to
fund the pension system because it creates interdependence
and guarantees state-backed pension earnings.
The new system means current workers will have to work
longer to sustain pensions for the ballooning aged population.
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22. Observers also worry that the reform will negatively affect
blue-collar workers (manual labour) who often start working
young, have shorter life expectancies, or have less optimum
working conditions compared to white-collar workers (workers
in office settings in clerical, administrative, or management
roles).
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23. Opponents of the reform argue that instead of altering the
pension age, the government could have balanced the system
through other measures— like increasing payroll taxes paid by
workers, taxing the wealthy more, or not tying pensions to
inflation.
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24. Others also argue that Mr. Macron’s government is amplifying
the danger of the system’s projected deficit.
But this isn’t just about pension reform, experts say. It’s about
the French people being angry at a government that has not
been leading based on their will.
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25. Now, protests are more about a feeling that representative
democracy has been emptied out, by Macron and the
administration, of all its substance.
The pension reform was the spark that lit a bigger fire that had
been kind of dormant before.
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26. Macron defended his use of Article 49.3 by describing it as
something he didn’t want to do but felt he had to.
But otherwise, the French president has stayed largely quiet in
the face of the discontent, instead focusing on his international
standing and foreign policy agenda, including a trip to China.
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How Has Macron Responded?

27. Macron also doesn’t have many people demonstrating on his
behalf and is in general “lacking any kind of widespread
support.”
A team from Macron’s government, led by Prime Minister
Élisabeth Borne, met with the labor unions on Wednesday, but
the negotiations did not lead to any progress.
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28. The protests in France do bear a similarity to protests in India
over the issue of the Old Pension Scheme (OPS) vs the New
Pension Scheme (NPS).
Starting 2004, the central government, under then Prime
Minister Atal Bihari Vajpayee, discontinued the Old Pension
Scheme and introduced the New Pension Scheme.
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Similarities With India

29. In the old regime, pension was 50 per cent of the last drawn
salary of the employee and the entire amount was paid by the
government.
In the new system, which works on a defined contribution basis,
government employees are required to contribute 10 per cent
of their salary and dearness allowance to the retirement fund.
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30. The government shells out up to 14 per cent for the pension
corpus.
Some experts note that India’s New Pension Scheme (NPS) and
the proposed pension reform in France are similar in many
ways.
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31. Both aim to address the financial sustainability of the pension
system.
Both governments argue that an increase in life expectancy has
led to a strain on the state’s finances and that the reforms are
necessary to reduce the burden of pension payments on the
state.
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32. Government employees in many states are now demanding a
move back to the Old Pension Scheme.
In Punjab, the Bhagwant Mann-led Aam Aadmi Party
government has formed a committee to formulate the standard
operating procedure (SOP) for implementing the old pension
scheme (OPS).
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How Things Played out in India?

33. Other states like Himachal Pradesh, Rajasthan, Jharkhand and
Chhattisgarh have already junked the new plan.
In the western state of Maharashtra in India, government
workers finally called off their strike after the Eknath Shinde-led
government announced the formation of a three-member
committee to conduct a comparative study of the old and new
pension schemes and submit a time-bound report.
In Karnataka, where similar protests were held, the employees
called off their strike, for now, after the government agreed to
a salary hike.
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34. The fundamental flaw with the OPS is that there is no special
corpus for the pension pay out.
Which means that the taxes paid by the working population is
used to pay pension for the retirees.
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Conclusion

35. Considering that older population is increasing along with the
life expectancy which means pension will have to be given to
more people and for longer period.
The State’s burden of this will eventually be passed on to
people in form of increase in tax levied.
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36. The State’s revenue spending should be more focused on
younger population, the future of the country.
But that does not mean that older population should not have
social security.
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37. The NPS provides a middle ground where the ageing
population gets fixed sum every month after retirement as
pension where the working population does not have to bear
the burden of it.
Moreover, NPS seems to be receiving good response from the
people as well.
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38. In 2022, the government revealed that 83% of NPS subscribers
who has reached the age of 60 choose to continue investing
beyond maturity.
Instead of opting to receive the pension and withdraw part of
the NPS, subscribers are extending the accumulation phase well
into the retirement.
The pension vehicle currently allow subscribers up to the age of
75.
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39. QUESTION