Crisis and reform of the pension system

Crisis and reform of the pension system

Crisis and reform of the pension system and the sécurité sociale in France through the prism of the common and the socialised wage. A historical and theoretical perspective.

~ by Francesco Brancaccio and Carlo Vercellone ~

“…In this article, Francesco Brancaccio and Carlo Vercellone take issue with the pension reform in France which has sparked a long and powerful movement across different sectors in society since January 2023. The article is divided in two. In the first part, they discuss the public-common hybrid format of pensions in France in the aftermath of the second World War, and the various reforms introduced after that. In the second part, the authors critically discuss the current Borne-Macron government rationales for raising pension age and argue for the need for re-ground pensions on common-public principles…”.

¡More on pension reform!
Crisis and reform of the pension system

Introduction : This article is the updated version, completed with an indicative bibliography, of the text of a speech given on 23 March 2023 at the assembly of teachers, administrative staff and students of the Culture&Communication department and the CEMTI research laboratory at the Université Paris 8 Vincennes-Saint-Denis. In a pedagogical way, it aimed to fuel the debate on the meaning and the more general objectives of the ongoing movement against the current Borne-Macron reform by reconstructing some salient features of the particular history of the social sécurité and the pension system in France. It is divided into two parts: a) The genesis of the social protection system in France as an institution of the common (or rather, a public/common hybrid) and the process of re-centralisation progressively carried out by the state. b) An analysis of the way in which the evolution of the French pension system has been inscribed in this framework, starting from its origin and then developing a critique of the current reform. The article concludes with some quick notes on the prospect of an alternative society project that is inscribed in the reference to the Sociale, a term that constantly animates the collective subjectivities of the movement in its dual reference to the Paris Commune and the reform programme promoted by the Conseil National de la Résistance.

Crisis and reform of the pension system and the sécurité sociale in France through the prism of the common and the socialised wage.
A historical and theoretical perspective. (see also Against pension reform and work ideology)

What is at stake in the current pension reform in France goes far beyond the issues of the distribution of value between labour and capital and the raising of the legal retirement age. It consists in the dismantling of the very nature of the social sécurité system and in particular of the institution of the pension conceived as a guaranteed and continuous social wage capable of allowing everyone a third phase of life freed from the constraint of work. At the same time, the implicit objective of the reform is to favour the parallel development of a capitalisation system for the more affluent segments of the population.

To better understand these stakes, the article will be divided into two parts:

In the first, we will briefly recall the concrete, and in many ways anti-capitalist, utopia embodied in the immediate post-war period by what is known as the Sociale, i.e. the ordinances that promulgated the institution of the sécurité sociale and the role that was attributed in this framework to the progressive development of the pension branch. In what follows, we aim to reconstruct the logic and main stages of the neo-liberal counter-offensive.

In the second part, we will then show the ‘disingenuous’1 and unfounded nature of the main arguments developed by the government to justify the current pension reform.

The genesis of the social security and pension system as a hybrid common-public institution

On 15 March 1944, the organisations that formed the National Council of Resistance issued an action programme called ‘les jours heureux‘ (happy days), which was to be applied after the Liberation from Nazi occupation. Among its main measures was the creation of “a comprehensive plan of social sécurité, aimed at providing all citizens with the means of existence, in all cases where they are unable to procure them through work, with management belonging to the representatives of the beneficiaries and the state (italics ours).”

From the outset, the sovereignty of the state and the self-governing democracy of the common thus combined in the project of the social sécurité, according to a dialectic that was at times complementary, but more often conflictual, and that has spanned its entire history, from the moment of its establishment to the present day, with alternating phases of hegemony of one of the two poles of the common and the public.

In the aftermath of the war, the provisional government of the French Republic, under the aegis of the Communist Minister of Labour Ambroise Croizat, issued the two ordinances of 4 and 19 October 1945 that defined the scope of social sécurité intended to cover the risks associated with the interruption of professional activity: accidents at work, illness, maternity, old age and unemployment2. Two founding pillars of social security should be highlighted here in order to understand the continuation of history up to the present day:

The first is that, in a context in which the bosses and the Vichy government had been completely discredited for their collaboration with the Nazi occupiers, the organisation and management of the social sécurité were initially largely autonomous, with a financing method based not on taxation but on social contributions3, corresponding at first to 12% of the wage (i.e. a socialised wage). The budget and the collection of social contributions did not depend on the state or on the employers, but on a ‘fund’ whose management was entrusted mostly to workers’ representatives (3/4), first appointed by the trade unions, then directly elected by the workers. In this sense, the first organisational model of the social sécurité can be understood as a macroscopic institution of the common and still constitutes an essential reference for rethinking an alternative to the state-market duopoly.

The state, employers and finance could not peacefully accept the idea of such an institution mobilising a huge mass of financial resources beyond their control. In the beginning, faced with the complexity and ambition of the project, these actors bet that the ordinances would remain a dead letter or, in any case, that their realisation would take an enormous amount of time during which the initial project would lose its radicality. They did so without taking into account the process of commoning (acting in common) that was rapidly realised thanks to the mobilisation of a multitude of voluntary workers and militants who, on their own initiative, put in place the material and logistical infrastructures (administrative protocols, beneficiary files, etc.) that enabled the creation of the first ‘fund’ of the social sécurité. This dynamic took the state and employers by surprise, which explains why, from the late 1940s onwards, a gradual process of re-centralisation and resumption of state and employer control over the governance of the social sécurité was set in motion, which deepened when the growth of its budget began to exceed that of the state 4

These measures went hand in hand with the reduction of the power of the councils made up of elected representatives and the professionalisation of the directors of the funds. Subsequently, and not without resistance and strong trade union mobilisation, this process of re-centralisation found one of its main stages in the Jeanneney Ordinances which, in 1967, imposed complete paritarianism and sanctioned the abolition of the direct election of directors by wage earners. The rules of this new parity system, with the change from 75% governance by wage-earners and 25% by employers to a system of perfect parity, had a fundamental consequence: it was enough for a minority or a yellow union to go over to the side of the employers for the latter to take control.

This turning point was followed by a revision of the Constitution in 1996, with the introduction of a new type of financing law (Title V, Article 34, Paragraph 2), the Social Security Financing Act, which extended the prerogatives of Parliament, and thus of the government5. But it was above all the Organic Law of 2005 that completed the nationalisation of the social security by submitting its budget to the classic model of the finance laws6 . The social security is thus progressively deprived of its initial autonomy, which made it a common good belonging to those who pay contributions. This evolution goes hand in hand with a trend towards the taxation of the social security system characterised by a gradual reduction of social contributions, especially employers’ contributions, in its financing. We note that the problem is not so much that of the replacement of social contributions with a more ebveridgian financing linked to taxation, but the way in which this process is used as an instrument by the public and private sectors to empty the social sécurité of the last elements of democracy of the common that had characterised it at its origin.

In this regard, it should also be mentioned that the stratagem adopted to pass the current pension reform through the vehicle of a rectifying social security finance law was only possible because of this progressive process of re-centralisation and the resumption of state and employer control over its governance. Last but not least, the boards of directors of the social security funds were abolished in 2004 and with them the election and representation of workers within them, when the opinion of the trade unions became purely advisory.

The pension system: the ups and downs of a socialised form of wages and right to life versus work

A second founding pillar of social security concerns pensions more specifically.

In the words of Ambroise Croizat, retirement should no longer be ‘the antechamber to death, but a new stage of life’, i.e., contrary to what they would like to impose on us again today, a new phase during which one can live in good health to realise new projects sheltered from want and illness.

From this perspective, the philosophy of the project of the French pension system was organised on the basis of a system of intergenerational solidarity and pay-as-you-go, a project that was to come as close as possible to the egalitarian principle of social justice according to which – Croizat, paraphrasing Marx in the Critique of the Gotha Programme – everyone ‘contributes according to his means and receives according to his needs’. In this sense, pensions, like the other components of the sécurité sociale system, were not conceived by their founders as a deferred wage, but as a socialised wage, i.e. a set of resources shared and managed to serve the common good.

In fact, in spite of its many shortcomings, in particular with regard to the establishment of a single and general system of social security and gender equality, this pension system improved with successive reforms, at least until the 1980s, coming close to achieving some of its goals.

In particular, under the impetus of the cycle of struggles starting with May 68 and the social crisis of Fordism, the so-called taux de remplacement (i.e. the ratio of the pension amount to the last percentage salary)7 was considerably increased in 1971 by the Boulin law. At the beginning of the Mitterand presidency, in 1982, the legal retirement age with a full amount (without penalties) was raised from 65 to 60 for insured persons who had paid 37.5 years of contributions: in this way the development of the pension system actually succeeded in lifting the majority of pensioners out of poverty (which was not the case until 1970) and in significantly reducing the income gap between workers and pensioners.

This positive development comes to a halt and is partly reversed in the context of the neo-liberal counter-offensive. It is in this period that a series of counter-reforms are introduced, such as the one against the ‘Juppé plan’ in 1995, sometimes countered with partial success by society8, as in the case of the great mobilisation and transport strike that, to the cry of ‘Tous Ensemble!‘, lasted for three weeks during December, according to a dynamic that will lead Negri to speak of ‘a Paris Commune under snow’.

A decisive turning point in this process was the Balladur reform of 1993. This reform initiated the increase in the number of quarters of contributions required to benefit from a full pension (from 37.5 years to 40 years) and established the criterion for calculating the pension based on the average of the best 25 years of salary, instead of the previous 10 years. Then, in 2003, François Fillon decreed the alignment of the seniority of contributions in the public sector to that of the private sector9 and in 2010, under President Sarkozy, the legal retirement age was again raised from 60 to 62, further increasing the number of quarters and the legal age to qualify for a full-rate, penalty-free pension (while the legal age of full-rate, penalty-free pension is progressively raised from 65 to 67).

In the same vein, the Touraine reform, under the presidency of François Hollande, decreed a further gradual lengthening of the contribution period (by one quarter every three years) to 43 annuities for a full pension in 203510 .

It should be noted that, as a result of these reforms, the average replacement rate (taux moyen de remplacement) relative to the last wage and income level of pensioners is decreasing in relative terms compared to the income of so-called active workers.

It is in this context that, after the withdrawal of the points-based reform project in the face of the great social mobilisation of the gilets jaunes and the trade unions as well as the impact of the Covid 19 health crisis, the current Borne-Macron reform is inscribed. This reform, like its predecessors, is based on an accounting and parametric logic based on two main components. The first is to accelerate and anticipate the implementation of the Touraine reform by setting the target of extending the duration of contributions to 43 years for a full pension in 2027 instead of 2035. The second, as we know, consists of raising the statutory retirement age from 62 to 64 years11 .

The government’s main argument to justify the reform is demographic. The pay-as-you-go system would be endangered (with a projected deficit of EUR 12.4 bn in 2027, EUR 13.5 bn in 2030 and EUR 21.2 bn in 2035), impressive figures but in reality much smaller and easily absorbed when compared to GDP, i.e. 0.4% of GDP in 2027 and 2030 and 0.6% in 2035. According to the government, the main reason for this deficit would be that the ratio between active taxpayers and pensioners would continue to decrease: in 1960 there were 4 active taxpayers for every pensioner, whereas today we have 1.7 active taxpayers for every pensioner and in 2040 we should expect 1.5 active taxpayers for every pensioner. These figures deliberately conceal a whole series of essential counter-arguments, of which we will limit ourselves here to recalling the most important ones:

  1. This reasoning, conducted on a strictly demographic level, completely excludes from the analysis the growth of apparent labour productivity and GDP achieved over the last 50 years. In fact, if since 1960 the number of contributors for a pensioner has actually been divided by 2.4, the hourly labour productivity and GDP have multiplied by more than 5. Better still, by prolonging these trends, every inhabitant could have a better standard of living while working less.
  1. The government’s reasoning is based on an erroneous and binary opposition between active and retired, between productive and unproductive. In reality, the majority of healthy pensioners work in the ‘anthropological’ sense of the term: suffice it to think that a large number of mayors are pensioners, that pensioners make up a large proportion of volunteers in the social and solidarity economy and in the knowledge commons, without forgetting that they often perform essential functions in the care of children and dependent persons, and so on. If we translated all this into monetary equivalents, we could even say that with their work pensioners pay a large part of their pensions. An important consequence of this is that raising the retirement age would lead to the destabilisation of entire sectors of this non-merchant economy and free labour, and this while the activity rate of seniors is already much lower than the European average and many of them are in RSA12 or in early retirement. For many of them, raising the retirement age to 64 would only mean an extension of the period of inactivity and a precarious situation (unemployment benefits, RSA, etc.). In short, the so-called savings associated with raising the legal age to 64 would be amply offset by significant and unestimated costs for society, costs that would be all the greater the more the wear and tear linked to precariousness and salaried employment would aggravate a situation in which life expectancy in good health has already been stagnating for ten years at around 64 for women and 63 for men (INSEE data). This, then, is the civilisation project promoted by the government: to once again turn retirement into a mere antechamber to death.
  1. The government’s “insincerity” is all the more evident in that, in order to support these deficit forecasts, it has conveniently chosen the most pessimistic of the four scenarios proposed by the COR (Conseil d’Orientation des Retraites), the one in which – and we emphasise this point strongly – the state’s participation in the financing of the pension system is expected to be reduced very rapidly. This is an essential point because it clearly shows that the problem of financing and organising the pension system does not follow a purely mechanical and accounting economic logic, but depends on a choice of model of society.

Finally, it must be emphasised that the difficulties of the pension system and more generally of the social sécurité do not depend on overspending, but first and foremost on an artificial and programmed scarcity of revenue resulting from three main and complementary causes in the logic of neo-liberal policies:

First of all, French capitalism, as a very detailed report by the IRES of the University of Lille shows, is “a capitalism under perfusion”, so much so that some do not hesitate to speak of a transition from a welfare state system to a corporate welfare system. Indeed, in the name of the fight against unemployment and the strengthening of corporate competitiveness, over the last forty years, a multitude of devices have been developed to provide aid to corporations without counterpart, the effectiveness of which is more often than not strongly contested even by economists close to the government. Most of this aid without quid pro quo comes from tax breaks, such as the research tax credit (EUR 7 billion), EUR 32 billion in budgetary expenditure, and of course from exemptions or reductions in employers’ social security contributions (EUR 64 billion at the time of the study, but given their growth, almost EUR 85 billion is expected by 2023), part of which is not compensated for and has a heavy impact on the social security budget. The total amount of this uncompensated aid received by companies amounts to EUR 205 billion and corresponds to the equivalent of about 8.5% of GDP (cf. graph 1, source Alternatives Économiques), i.e. 41% of the state budget!

Just compare these figures with those that would put the pension system in mortal danger and all is said: le petit roi is naked.

The second cause depends on the lack of social contributions linked to austerity policies and the freezing of wages and employment in public services such as health, education and research, services in which there would nevertheless be a huge reservoir of work and unmet needs that should be urgently addressed, especially since, as we have shown13, these are also key sectors for the reproduction of a knowledge-based economy and for the implementation of a true ecological transition.

Crisis and reform of the pension system and the sécurité sociale in France through the prism of the common and the socialised wage.
A historical and theoretical perspective.

Chart 1, source ” Alternatives Économiques “, February 2023

The third cause lies in the inaction of successive governments in eliminating gender inequalities in pay and working conditions. An INSEE research team estimates that by ensuring equal pay between men and women, where the gap is 10% for the same tasks and qualifications, but also by retraining so-called ‘women’s’ jobs, which are paid on average 19% less than ‘men’s’ jobs, wage growth would allow for higher contributions and easily close the pension fund gap.

To conclude, we will limit ourselves to two observations. It is in the root causes of the evil they have described that the solution to the problem also lies.

Firstly, a drastic change in the orientation of economic policy that allows both a positive evolution of the pension system and the transition to a socially and ecologically sustainable model of society, based on the primacy of the non-mercantile and collective services such as health, education and research.

Secondly, a return to the spirit of the common that had initially animated the institution of the sécurité sociale, capable of re-establishing its autonomy and the democratic nature of its governance mechanisms, while at the same time eliminating all the measures that had deprived it of resources as part of the strategy of what we have called the transition to a corporate welfare system.

In conclusion, the strength of the current movement is to be found in its not purely defensive character but in its collective desire for a life freed from the constraint of wage labour and in the concrete utopia of the common, even as it looks back to the past of social sécurité to anticipate the future.


1 This term is used in legal terms in the current appeal by the NUPES to the Conseil Constitutionnel, which is due to rule on the constitutionality of the reform on 14 April.

2 The assurance chômage (unemployment) scheme will not be implemented until 31 December 1958.

3 The role of cotisations sociales (social contributions) as socialised wages is to ensure, as a counterpart, precise social rights for all workers and their households. The impôt (tax), on the other hand, constitutes a levy without counterpart, and thus without activation of social rights, used in a coactive and discretionary manner by the state administration, which decides on their use in financing the different items of public expenditure. For example, Bernard Friot considers this distinction, inscribed in the French constitution, as decisive in distinguishing “socialised wages” and social security based on a welfare logic, as in the case of the RSA (Revenu de solidarité active) in France and the Reddito di cittadinanza in Italy.

4 It rose from 14.3% of GDP in 1959 to 24.5% in 1981.

5 The 1996 constitutional reform (Organic Law No. 96-646 of 22 July 1996) gave Parliament a droit de regard (a supervisory power) over the financial balance of the social sécurité. Parliament can now pronounce on the main orientations of health and social sécurité policies and how they are financed. The growth of social expenditure and the generalisation of social protection to all residents, no longer limited to employees, made this reform necessary. But this control remains limited. Parliament has no power to determine the revenues of the social security system. The LFSS (law on the financing of social security) does not authorise the collection of revenue, but merely forecasts it. Similarly, expenditure targets, voted by Parliament, assess expenditure but do not limit it.

6 The organic law of 2 August 2005 reforms the LFSS. It changes its legal status by bringing it closer to that of finance laws, expands the powers of parliament, in particular by extending the scope of the LFSS, places forecasts in a multi-year framework, and introduces an ‘objectives-achievement’ approach, based on the model of finance laws.

7 With the publication of the Ordinance of 19 October 1945, the pay-as-you-go system was born and the legal retirement age was raised to 65. In 1982, President François Mitterrand reduced the retirement age to 60 for members who had accrued 37.5 years of contributions in one or more basic schemes.

8 On 15 December 2005, the government withdrew the reform of pensions, the civil service and the special schemes (SNCF, RATP, EDF), but retained the other points that made up the ‘Juppé plan’ including, in particular, the establishment of the law on the financing of the sécurité sociale. On the other hand, the reform of the special scheme for railwaymen will be carried out by Sarkozy in 2008.

9 Fillon, then head of government, was also the promoter of two savings plans: the Plan d’épargne de retraite populaire (PERP) and the Plan d’épargne pour la retraite collectif (PERCO).

10 In 2014, the reform sought by the left provided for the extension of the minimum insurance period to be able to claim a full pension: it progressively increases from 166 to 172 quarters for insured persons born between 1958 and 1972. Since 1 January 2015, workers subject to tasks considered particularly arduous and meeting certain conditions can obtain points. These points accumulated in supplementary schemes can be used to switch to part-time work and/or to lower the retirement age, or even to benefit from training with a view to retraining.

11 The key objective to absorb these deficits is to stabilise or even reduce the amount of pensions by 14% of GDP.

12 The active solidarity income is similar to the citizenship income in Italy.

13 Cf. Monnier J.-M., Vercellone C.. 2007; Brancaccio F., Giuliani A., Vercellone C. 2021.

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