Is the pay-as-you-go pension system in danger?

► How does the PAYG system work?

The government keeps repeating it: the objective of its reform is to ensure the future of our pay-as-you-go pension system. “We need this reform to save our pay-as-you-go system,” confided, for example, to the Association of Social Information Journalists, MP Stéphanie Rist, rapporteur for the text in the Assembly, for whom it is a “ social debate”. “In my permanence, people tell me” I want to manage on my own: contribute for me, not for the old people”, says the deputy Renaissance. But this is not my vision of the social pact. »

Our system works on solidarity between generations. “We deduct from the wealth produced by the assets to allow the financing of the pensions of those who no longer work”, summed up Pierre-Louis Bras, president of the Pensions Orientation Council (COR) before the Assembly. A weakened balance when the number of retirees becomes too large compared to the number of active people.

Unless pensions are reduced or contributions are increased – but France is already the second OECD country with the highest social contributions (28%), just behind Italy (33%) – the system managers have various levers at their disposal to stabilize the system: improve employment (particularly for young people or those over 55), to increase the number of contributors; or raise the retirement age, to both reduce the number of retirees and increase the number of working people.

“What counts is the effective age of departure which allows equity between generations”, explains Hervé Boulhol, principal economist in the direction of employment, labor and social affairs of the OECD. “In OECD countries, two years in the labor market corresponds to around one year in retirement. Faced with longer life expectancy, it is therefore important to maintain this ratio: for example, if it increases by one year, working time must increase by eight months, and retirement by four months. »

► Where is the French system?

Taking into account the different legal retirement ages – 67 for the age of cancellation of the discount, 60 for long careers, the case of special schemes –, France is one of the countries where the retirement age effective labor market is the lowest: 60.4 years for women and 60.9 years for men. And therefore one of the longest retirement periods: 27.1 years for women and 23.5 years for men. However, while life expectancy has fallen somewhat in recent years (0.1 year gained between 2014 and 2019), it should increase again “between two and a half and three years by 2050”, according to the OECD.

Thanks to a long favorable fertility rate (close to two children per woman), France has been able to maintain a still bearable pensioner/working population ratio of 37 pensioners for 100 working people. This is the famous 1.7 contributor for 1 retiree at the heart of the pension reform debate.

“We must be careful not to caricature the figures”, warns Pascale Coton, vice-president of the CFTC and member of the COR. “When we compare the 1.7 contributor for 1 retiree with the 4 working people for 1 retiree of the 1970s, we forget the progress in productivity. According to France Strategy, a contributor produced 25 dollars in 1970 but 68 dollars in 2018. Today’s 1.7 contributor therefore has a productivity equivalent to 4.6 employees in 1970…” Hence the call from the CFTC to look for other avenues to balance the pension system. For example on the side of the employment of seniors or the birth rate.

However, the situation could deteriorate. “We have to look at what will happen in the next thirty years,” insists Hervé Boulhol. Within thirty years, France’s ratio will thus drop from 37 retirees per 100 active workers to 54, slightly above the OECD average, which will drop from 30 to 53 retirees per 100 active workers.

“What matters are the baby boomers,” explains Didier Blanchet, chairman of the pension monitoring committee. As long as they worked, it was the golden age of the pay-as-you-go system. Since 2006, a large number of them have retired and they will stay for a long time because they fully benefit from the increase in life expectancy, even if it is tending to slow down. According to Hervé Boulhol, the decline in the current fertility rate (around 1.85 children per woman) “will not have a noticeable effect within fifty years.”

► How are other countries doing?

All OECD countries are faced with ageing, often more so than France. And not all at the same rate. By 2050, in Belgium, the pensioner/active ratio will thus increase from 33/100 to 51/100; from 36/100 to 58/100 in Germany; from 34/100 to 53/100 in the Netherlands.

In southern Europe, which combines low fertility rates and significant gains in life expectancy, it will drop from 39/100 to 71/100 in Portugal, from 39/100 to 74/100 in Italy, from 38/100 to 75 /100 in Greece, from 33/100 to 78/100 in Spain… In Eastern Europe, which suffers from strong emigration, it will double, from 30/100 to 60/100, in Poland. The already very aging Japan will go from 52/100 to 80/100.

To adapt, all have already had to reform their pension systems, with systematic age measures. “While some have had time to initiate structural reforms to link demographic changes with retirement parameters, some have been forced to do so with their backs to the wall, such as Italy, to join the euro, or Greece and the Portugal, cornered at the time of the 2007-2008 crisis,” says Hervé Boulhol. Italy will thus see its starting age rise to 71 years. In Portugal, retirees leave at 66 years and 7 months, an age regularly raised according to life expectancy.

Today, two-thirds of OECD countries have adopted automatic adjustment mechanisms (AAM). Denmark, Finland, Greece, Italy, the Netherlands, Portugal and Sweden can thus index the retirement age to life expectancy. In 2026, Sweden will raise the age of entitlement to a basic pension from 65 to 67. In Denmark, the generation born in 1996 will have to wait until they are 74 for full retirement. Hervé Boulhol believes that France must necessarily work on its effective starting age.

► Is France doomed to perpetual reform?

France has undergone numerous reforms: in 1993 (from 37.5 to 40 years of contribution); 2003; 2010 (raising the legal retirement age from 60 to 62); 2013 (passing from 40 to 43 years of contributions to obtain a full pension). The one under discussion is therefore not the first. And probably won’t be the last. “There will certainly be others, recognizes Pascale Coton. But we cannot ad vitam aeternam postpone the retirement age or take measures that will have this effect. Or will it be necessary to go until 80 years? »

Setting a reasonable limit would be a societal and political choice. In the meantime, and to avoid recurring crises, the OECD advocates the establishment of automatic adjustment mechanisms. “It is not a question of blind automatic piloting, but they offer regulatory stability”, pleads Hervé Boulhol for whom their implementation “requires a broad political consensus to avoid a questioning at the slightest change of majority”. This is what Sweden did in the 1990s, in a solid consensus that has lasted thirty years. In France, it was one of the major aspects of the systemic reform of 2019, buried because of the Covid.

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