Geneva, April 1999
Pensions
through solidarity
Interview
with Mr. Jean-Michel Charpin, Commissioner at the French Planning
Office. Author of a report on the future of the French pension
system
Is the pension system based on
redistribution, such as the French one, still viable?
The French system of
redistribution has achieved its goals. It is now a universal
system, even if not a unified one. It is a system based on many
forms of solidarity: solidarity between generations, solidarity
between various pension regimes, solidarity within these regimes,
with corrective measures for career risks and family situations,
and solidarity at the national level with a minimum old-age
pension. This system is now mature and has on the whole succeeded
in ensuring that the income of pensioners is proportionate to
that of the working population, which is quite an achievement.
For the future, this system can perfectly continue to function as
a universal system. However, it will be faced with demographic
changes: longer life expectancy on the one hand and ageing
post-war generations on the other. This system will,
consequently, have to be adapted to maintain its long-term
balance.
One of the measures mentioned
in your report is extending the period of contribution from 37.5
to 42.5 years. What would be the economic effects of raising the
retirement age? In particular, how would it affect unemployment?
The Prime Minister has asked the Commissariat
général du Plan to assess the situation and the prospects
of our pension system. In this context, we had to consider a
certain number of modifications to ensure the long-term balance
of our pension regimes and, in particular, consider extending the
period of contribution to obtain a full pension. Such an
extension would result -- starting in 2005-2010 -- in a gradual
raising of the retirement age between 60 and 65. This is natural
insofar as we know that life expectancy will continue to increase
at a rapid pace, the age of
entry into the labour force has not ceased to increase and,
finally, the health of the over-60s has improved considerably.
With regard to the link with unemployment, it is necessary to
study carefully the compatibility of this change in the
retirement age with the situation on the labour market. It is
clear that for the coming years, and at least until 2005, the
absolute priority must remain the fight against unemployment and
making it easier for young people to join the labour force. After
2005, the situation on the labour market should improve, the
integration of young people should become easier and the number
of early retirements should fall. This is why we are considering
increasing the period of contribution, which would have a
statistically significant impact only from 2010.
How do you reconcile job
insecurity, unemployment and the fact that people will have to
contribute for longer?
Macro-economic simulations have
considered three scenarios. In the first, the rate of
unemployment decreases to 9% and then remains constant. In the
second, the rate of unemployment drops to 6% and nearly all the
potential early retirees stay in work. In the third scenario, the
rate of unemployment falls to 3%, potential early retirees stay
in work and, in addition, young people join the work force 9
months earlier. We thus studied a broad range of macro-economic
scenarios, all of which foresee a fall in unemployment compared
to today. These scenarios cover a relatively broad field.
Regarding the jobless, there are already mechanisms to cover
spells of unemployment for pension purposes. If there are gaps in
these mechanisms, they will have to be filled.
Germany spends 12.8% on funding
pensions, Italy 13.4%, France 12.1%. Would it be feasible to
increase these social contributions in France?
The option of increasing social
security contributions to finance the welfare state is always
available. It is up to the country as a whole to decide what the
best solution is. Increasing social security contributions
remains one of the options open to public debate. The reason why
our proposals focus mainly on raising the retirement age and
building up a reserve fund is that both require decisions to be
taken long in advance. Financing through higher contributions
does not require this. It will always be possible to cover
deficits, if deficits there are, by raising the contributions.
In Germany, it takes 45 years
of contribution to obtain a full pension, in Italy 40, in Great
Britain 44. Are we moving towards harmonization?
There is no need to harmonize this
kind of rule between European countries. Enough things are
already regulated at the European Union level; there is no need
to add others unnecessarily. Some coordination mechanisms are
useful, but there is no need to unify the pension plans.
Will the pensions that your
scenarios generate be sufficient to live on or will a
complementary plan be needed?
We have studied the possibility of
a reserve fund, but we have not studied the option of pension
funds, which would create new benefits. The central problem is
that in an average scenario pension expenditure represents 16% of
GDP, whereas the foreseeable income will be 12% of GDP, so a
number of parameters will have to be adjusted. We have not worked
out what would happen if new benefits were added.
The Charpin report is being
hotly debated. Why? And what is the next stage?
Reforming a pension system can
never be straightforward. In all the countries where it has been
carried out, it has required studies, consultation and public
debate. In France we are in the middle of this process. I have
just held consultations with the unions and the employers,
pension plan managers and the representatives of the pensioners.
This has made it possible to reach a joint assessment of the
situation and of the future of the pensions. The next stage must
be a public debate on this assessment and all the partners
concerned should put forward their proposals.
For further information please
contact:
Information Unit
United Nations Economic Commission
for Europe (UN/ECE)
Palais des Nations, Room 356
CH - 1211 Geneva 10, Switzerland
Tel: +41 (22) 917 44 44
Fax: +41 (22) 917 05 05
E-mail: [email protected]
Website: http://www.unece.org