Latest developments in pension reform

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The French government was forced to amend its controversial proposals on pension reform by wide-scale strike action and demonstrations organised in protest on 13 May 2003. Following talks with the social partners, it revised the plan - though not the key point of increasing the contribution period required for a full pension - on the basis of a deal agreed by two trade union confederations, CFDT and CFE-CGC. The talks thus led to a split in the united trade union front on the issue, and unions opposed to the planned reform have called more protest action. Parliamentary debate on the bill began in June and is expected to to be completed in July.

The government presented a controversial draft bill on pension reform in May 2003 (FR0305103F). It was met by a record-breaking day of protest strike action and demonstrations on 13 May. Across the central government civil service, 57.5% of employees took strike action. Between 1 and 2 million people demonstrated in over 100 towns and cities, responding to the trade unions’ combined strike call. Public transport came to a standstill on 13 May and was still affected the following day.

Government changes plans

On 14 May, the Minister for Social Affairs, François Fillon, accompanied by the Civil Service Minister, Jean-Paul Delevoye, met all the main trade union confederations and employers' organisations: the General Confederation of Labour (Confédération générale du travail, CGT); the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT); the General Confederation of Labour-Force ouvrière (Confédération générale du travail-Force ouvrière, CGT-FO); the French Christian Workers' Confederation (Confédération française des travailleurs chrétiens, CFTC); the French Confederation of Professional and Managerial Staff-General Confederation of Professional and Managerial Staff (Confédération française de l'encadrement-Confédération générale des cadres, CFE-CGC; the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF); the General Confederation of Small and Medium-sized Enterprises (Confédération générale des petites et moyennes entreprises, CGPME); and the Craftwork Employers' Association (Union professionnelle artisanale, UPA).

At the end of a very long negotiating meeting - the first talks on the issue to be presented as such - the two ministers put forward 14 amendments to the initial pension reform plan. Despite a number of advances made, especially on the pension level for employees paid the national minimum wage (Salaire minimum interprofessionnel de croissance, SMIC) and on workers with long careers, no trade union confederations agreed to sign a document presented in the early hours of the morning. Talks resumed on 15 May without CGT. CGT-FO walked out after a few minutes and, of the union confederations, only CFDT, CFTC and CFE-CGC stayed until the end of the meeting. CFDT and CFE-CGC ultimately agreed to the government’s proposals.

The agreed list of decisions contained 19 amendments, seriously altering the bill but without challenging the key issue of lengthening the contribution period required to receive a full state pension (40 years' contributions will be required in 2008). The main points are as follows:

• the reform will affect private sector employees, civil servants, the self-employed in the retail, wholesale, crafts and farming sectors and the liberal professions (special schemes are thus excluded);

• by 2008, no employee who has completed a full career earning the SMIC will receive a net pension worth less than 85% of the net SMIC. This objective will be reviewed in five years’ time;

• every three years, talks will be held between the government and the social partners on pension increases. Discussions will also take place in the civil service;

• the option of retirement before the age of 60 will be extended to people who have been employed since the age of 16 (this applies to employees in the general pension scheme and employees and non-salaried workers in aligned schemes). This option will be reviewed in 2008. A working group will be set up to address this issue in the various branches of the civil service (central government, local authorities and public hospitals);

• the 'pensions bonus' for working longer will be set at 3% per extra year of contributions over the basic level. The penalty for shorter-than-standard contribution periods will be lowered to 5% per missing year;

• the option of 'buying back' years of contribution will be open to all, regardless of age;

• the old-age pension contribution under the general scheme is to be raised by 0.2 percentage points as of January 2006. Funding will be re-examined during five-yearly meetings. By 2008, all the funding parameters will be re-examined (particularly those of compulsory contributions);

• the mechanisms for compensation when members move between schemes will be reviewed in consultation with the social partners;

• the social partners will be encouraged by the law to complete talks within three years on the way to take account in pensions of a job’s degree of arduousness. In the civil service, the government will undertake a review of the situation of the jobs listed as 'difficult';

• in the civil service, pensions will still be calculated on the basis of the last six months of employment. A penalty for missing years of contributions will be established by 2006 (instead of 2004, as previously proposed) and an upper limit will be set until 2020. The calculation of pensions under a new supplementary scheme will include bonuses received throughout the civil servant’s working life up to a limit of 20% of salary. The scheme will be compulsory and managed jointly by representatives of the social partners as a public fund. The contribution rate will be 10%, shared equally by the employer and civil servant; and

• specific measures will affect teachers, armed and police forces personnel, nursing auxiliaries in public hospitals, part-time civil servants and staff whose pensions will be raised to the new guaranteed minimum.

A bill incorporating amendments based on the list of decisions agreed on 15 May was passed by the cabinet on 28 May 2003. Scrutiny by the National Assembly began with a stormy debate on 10 June. Over 6,500 amendments were tabled.

Reactions

CFDT feels that the pension reform bill, after the integration of the above-mentioned amendments, constitutes an acceptable compromise. Although a number of points are still unsatisfactory, it thinks that it was vital to be involved in the process in order to improve the government’s draft before debate in parliament began. Nevertheless, the rapidity with which CFDT decided to sign up to the final list of amendments has been fiercely criticised, including by some of its own members.

The compromise agreement signed by CFDT and CFE-CGC spelled the end of the united trade union front on the pensions issue (FR0302108F). CGT, CGT-FO, the National Federation of Independent Unions (Union nationale des unions autonomes, UNSA), the United Union Federation (Fédération syndicale unitaire, FSU). FSU) and the Group of 10 (Union syndicale Groupe des Dix) - a coalition of several independent unions plus the member unions of Solidarity, Unity, Democracy (Solidaires, Unitaires, Démocratiques, SUD) - have continued to oppose the planned reform. As early as the end of the first session of negotiations with the government, Bernard Thibault, the general secretary of CGT, called for the mobilisation to be broadened for a national demonstration in Paris on 25 May. The unions opposed to the government plan have continued to demand the opening of genuine talks and have called more days of national industrial action on 25 May and 3, 10 and 12 June. Two other days of action have already been planned for 15 and 19 June 2003.

CFTC, which took part in the negotiations but did not sign up to the decisions, found itself in a tricky intermediate position. It took no stance on the draft as a whole, but did not join the call for a demonstration on 25 May. However, its president, Jacques Voisin, thinks that CFDT’s hurried signing of the deal prevented the other unions from making progress in the negotiations. CFTC now prioritises the tabling of amendments and is lobbying various parliamentary groups. Its main demands relate to setting the minimum pension at 100% of the SMIC, and obtaining better conditions for people who have raised children and survivors' pensions.

On the employers' side, UPA, CGPME and MEDEF support the draft presented by the government. However, UPA regrets that the basis for calculating social security contributions was not widened to include all sources of wealth creation in the country. CGPME has criticised both the return to a pension calculation method based on the last six months of employment for civil servants and (along with MEDEF) the increase in old-age pension contributions paid by employers. The MEDEF president, Ernest-Antoine Sellière, acknowledges that companies should contribute to the reform by enabling older workers to work longer in adequate conditions.

Unsurprisingly, the ruling Union for the People's Movement (Union pour un mouvement populaire, UMP) and Union for French Democracy (Union pour la démocratie française, UDF) political parties are supporting the Fillon plan. However, the Communist Party (Parti Communiste Français, PCF) is getting ready to do battle in parliament, with 6,000 amendments tabled by its deputies alone. The Socialist Party (Parti socialiste, PS) delayed taking a position on the pension issue. It was only at the end of its national conference on 16-18 May 2003 that its rejection of the planned reform was clearly stated. The PS is critical of the strategy based mainly on lengthening the contribution period, and of the rejection of an increase in contributions and taxes to fund pensions. Bernard Thibault of CGT was greeted triumphantly at the PS conference, while the absent CFDT came in for stiff criticism. The PS is asking the government to reopen dialogue with the unions.

Commentary

An extraordinary session of parliament scheduled for July 2003 should enable the pensions bill to be passed once and for all. The Prime Minister, however, ruled out the use of Article 49.3 of the Constitution, which allows the passage of a bill to be speeded up. It is therefore likely that the debates on the bill submitted by the government will last longer than planned.

Whatever the changes to the bill made by parliamentarians, two crucial problems inherent in the planned reform are likely to persist: the fact that the problem of the funding of pensions has only been partially addressed; and the absence of an overall employment and labour policy. (Annie Jolivet, IRES)