Union unite against employers' proposals on supplementary pensions

Download article in original language : FR0102132FFR.DOC

The "industrial relations overhaul" project initiated by France's MEDEF employers' confederation in early 2000 has given rise to a protest movement involving all trade unions in early 2001, including a day of demonstrations on 25 January. At the root of this protest are MEDEF's proposals on supplementary pensions, which involve increasing the retirement age and the contribution period.

In France, supplementary top-up pensions are administered by employers' associations and trade unions within the framework of two separate "pay-as-you-go" systems - for managerial and professional staff and for other employees. These supplementary pension schemes are renegotiated by the social partners on a regular basis. The last series of agreements reached in 1996, lapsed at the end of 1999. A new round of talks was convened on 1 March 2000.

These latest negotiations have dealt with both the future of the supplementary pension system itself and the funding of the Financial Structure Management Association (Association pour la gestion de la structure financière, ASF). This body, which was set up in 1983 after the retirement age was cut to 60, is designed to fund the extra costs for supplementary pension schemes brought about by this measure. Even though the age of eligibility for a full pension from the basic social security pension scheme has been 60 since 1 April 1983, the employers succeeded in keeping the age of eligibility for top-up pensions at 65. However, in 1983, the government, the unions and employers' associations reached an agreement enabling workers retiring at 60 to take their supplementary pension at 60 without penalty. The resulting extra cost was borne by the "ASF" contributions paid by employees and employers. This agreement was renewed in 1990, 1993 and 1996, and most recently came up for renegotiation at the end of 2000.

Employers' proposals

After several sessions of talks, at which the trade unions tabled a joint platform on 30 May 2000, negotiations stepped up a gear when the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF) employers' confederation tabled a "working document" setting out its proposals on 24 October 2000. The key proposals in this document were an increase in the retirement age and an increase in the contribution period required for full pension eligibility. This was designed to address the future commitments of the supplementary pension schemes without the need for increases in contributions. Under this system, referred to as "actuarial neutrality", the balancing of the budgets of these pension funds would be ensured by simply varying age criteria and contribution period requirements in line with changes in life expectancy. As part of this proposal, MEDEF was prepared to extend the current agreements until 2003, provided the new system came into force in 2004.

Unions respond

The trade unions unanimously rejected MEDEF's actuarial neutrality-based system and tabled their own joint working document to the employers' associations on 23 November 2000. In their document, the unions propose first to resolve the urgent issue of ASF funding and then to continue negotiations on supplementary pension funds between 2001 and 2003.

Francis Bazile, heading the MEDEF delegation at the talks, considered the joint union response "almost wholly unacceptable". The MEDEF president, Ernest-Antoine Sellière, threatened to instruct companies to suspend their ASF contributions if no agreement on supplementary pensions was reached with the unions during talks on 21 December. This meeting ended in disagreement. The employers' representative who chairs the jointly-managed organisation responsible for administering ASF contributions then sent out a letter to companies asking them to withhold the payment of contributions. This heightened tensions. The trade unions called a national joint demonstration in protest at the employers' ultimatum.

The demonstration, which was held on 25 January 2001, was a resounding success for the unions. Several hundreds of thousands of demonstrators descended on the streets to protest against the employers' stance and to show their commitment to retirement at 60. Even within the ranks of employers, some challenged the MEDEF negotiators' allegedly heavy-handed approach. Against this backdrop, a final meeting between employers and unions was set for 9 February but both the unions and MEDEF had very few illusions as to the outcome. (On 10 February, after this article was completed, a deal was reached between the employers and CFTC and CFDT - FR0102134F.) If the stalemate continued, the government had announced that it intended to face up to its responsibilities and take the necessary measures to ensure that the retirement age continues to be 60. Whether government intervention had come sooner or later, it would probably have sounded the death knell for jointly-managed supplementary pension fund organisations, at least in their present form.

Commentary

The power struggle triggered by MEDEF, which has been threatening to pull out of jointly-managed social protection agencies since the start of the talks it initiated in 2000 on its "industrial relations overhaul" project, has highlighted some contradictions (FR0002143F). As both the trade unions and many observers have pointed out, MEDEF is demanding a longer contribution period and a higher retirement age, while employers continue to follow workforce management practices that shed older workers. Several early retirement agreements, in particular, in the insurance and automobile sectors, are currently under negotiation between workers and employers, while an agreement has recently been concluded in banking (FR0102131F).

This contradiction partly reflects the competing interests that exist within the employers' associations between large companies - especially manufacturers – and small and medium-sized enterprises (SME s). The wide support shown for MEDEF's strategy at the organisation's general assembly on 16 January probably stems, to a large extent, from its new one-company-one-vote system, which gives SMEs more voting clout. Indeed, these are the companies that use early retirement less and that are the most receptive to the idea of cutting social security contributions. The steadfast stance of MEDEF, which is advocating freezing contributions at current levels, will satisfy SMEs, and will, as a result, lead to the development of funding-based pensions. Any such goal would be applauded by the current MEDEF vice-president, Denis Kessler, who is also chair of the Association of French Insurers, (Fédération française des sociétés d'assurance, FFSA) and the main architect of the "industrial relations overhaul" project.

However, the employers' association argument has been undermined by recent forecasts regarding the budget balance of the supplementary pension funds. Indeed, these forecasts indicate that these funds will not move into a deficit situation until 2014. Despite the "doomsday scenarios" put forward to date, in particular in some official reports (FR9903168N), pension funds do not require an urgent "overhaul". As some trade unions have pointed out, overhaul does not necessarily have to mean regressive measures for employees.

By threatening to challenge retirement at 60, MEDEF has nevertheless, following a series of official reports published over the past few years, helped to undermine the confidence of French people in their pension funds. It has thus fuelled the notion that more or less individualised funding formulae are required to pay for pensions. The employers' confederation's proposal once again to cut private sector employee pensions, has also indirectly rekindled debate over the disparity between civil service and private sector pensions. The government, which has been lambasted for its "failure to act", has thus found itself indirectly challenged. However, it is unlikely that the government will take any official action in this area until after the next presidential election in 2002, even though the multi-year (2002-4) public finance programme that it tabled recently includes bringing the civil service pension contribution period – currently 37.5 years – into line with that of the private sector – now 40 years. (Pierre Concialdi, IRES)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Tilføj kommentar