Wednesday, September 19, 2007

Social Security in France

Fascinating news from France, reported earlier today:

The French President has unveiled controversial plans to overhaul his country's generous social security system.

Nicolas Sarkozy is eyeing off the pensions of public servants.

In 1995, moves to reform France's pension system led to weeks of protests.

Now, the new French President has announced a package aimed at cutting benefits to workers like train drivers and electricity workers, who until now could retire early.

Mr Sarkozy says the system is financially unsustainable and he has pledged to negotiate with unions and companies, but he insists the new system will be implemented without delay.

The French President also criticised generous social security payments, arguing that handouts discourage people from working.

"Our social system is not financially tenable. Our social system discourages work," he said.

"Our social system does not ensure equal opportunities. Basically I'm saying, let's stop the hypocrisy."

The moves are part of a wide-ranging plan for social reform, aimed at boosting the country's economy.

France's demographic shift, like those in other developed countries, is more pronounced than in the United States. The French system also penalizes work by older workers to a greater extent than the system in the United States. It is not surprising that the French President feels like he has to act sooner, rather than later. If the United States cannot begin the process of reform in the coming years, it is likely that we will find ourselves in an analogous position in the future.

Good luck to President Sarkozy. He's going to need it.

My country's Social Security deficits are thiiiis big.


ProGrowthLiberal said...

While the long-run solvency (or lack thereof) of the US Social Security system has been hotly debate (with some occassional light), I'm clueless as to the long-run solvency of the French system. This post makes it sound rather bleak, but is there any good analysis of this French issue.

Andrew Samwick said...

There is an interesting post on net burdens in 2050 over at the WSJ's RTE blog.

The best academic work on this is being done at the NBER, in a series of volumes by Jonathan Gruber and David Wise. This is a good place to start.

Andrew Samwick said...

More on the situation in France this year: