Debate over pension reform resumes

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Following a decision in October to phase out the early retirement scheme for civil servants, in late 2002 the French government set out its schedule for pension reform and issued various statements on the issue. It has developed two priority areas - 'equal treatment for all' and 'freedom of choice'. Trade unions are challenging the process and fear that the government has already decided how pensions are to be reformed.

Following a lengthy period on the 'backburner' because of the May 2002 presidential election, pension reform (FR0201112F) once again became a government priority (FR0208103F) in autumn 2002. In the run-up to the start of talks in January 2003, a certain number of pension-related initiatives have already been put in place. In addition, the conservative government has been laying the groundwork for pensions overhaul in late 2002 in a number of statements on the issues at stake and possible solutions.

Rules on inter-fund transfers changed

The government has decided to incorporate unemployed people, whose state retirement pension contributions are funded by the Fund for Old-age Solidarity (Fonds de solidarité vieillesse, FSV), into the general employees' pension fund, the National Old-age Insurance Fund for Wage Earners (Caisse nationale d’assurance vieillesse des travailleurs salariés, CNAVTS). This increases the weight of the general CNAVTS scheme compared with the other various other state retirement pension schemes, and thereby boosts the CNAVTS contribution to inter-pension fund transfers by EUR 825 million. At the same time, the change reduces the contribution of the civil servants and state blue-collar workers’ scheme by EUR 270 million, and the contribution of the National Pension Fund for Local Authority Employees (Caisse nationale de retraite des agents des collectivités locales, CNRACL) by EUR 130 million.

Members of the joint union-employer board of CNAVTs are challenging this unilateral change in the compensation rules for inter-pension fund transfers. The president of the board, Danièle Karniewicz of 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), stated that it was quite inappropriate for the general scheme once again to have its contribution increased, to the benefit of other, as yet unreformed, schemes. Any surplus should be ploughed into the Pension Reserve Fund (Fonds de Réserve des Retraites, FRR), created in 1999 to buttress the state pension scheme by making investments in the financial markets (FR9812147F). This fund is supposed to amass EUR 150 billion by 2020, but by late 2002 contains only EUR 13 billion.

Total early retirement abolished in civil service

On 31 October 2002, the government announced the phasing out, from 2003, of the 'end of career leave' (congé de fin d’activité, CFA) scheme for civil servants. Its abolition was then passed by parliament on 7 November. Created in 1996, this scheme enabled civil servants to retire as early as 56 on an income equivalent to their future pension provided they had 40 years of contributions and 15 years of service in the civil service. Those with 37.5 years of contributions and 25 years in the civil service were eligible to retire at 58, while those with 172 quarters of contributions (ie 43 years) and at least 15 years' service could retire at any age. Renewed annually since 1996 and used by approximately 10,000 civil servants a year, this programme enabled new recruitment on a replacement basis. The equivalent private sector 'early retirement for jobs' scheme (ARPE), set up by the social partners running the UNEDIC unemployment insurance scheme in 1995 (FR9901150F), expired at the end of December 2001.

On 4 November, the Social Affairs Minister, François Fillon, explained the decision to terminate the CFA scheme, stating in the National Assembly that 'early retirement is a disaster for France’s economy and pension schemes, especially in light of the fact that in the future, employees will be required to face much longer contribution periods.'

Nevertheless, the early retirement concept has not been scrapped. The 2003 finance bill provides for: 7,000 people to receive 'special National Employment Fund allowances' (allocations spéciales du Fonds National de l’Emploi, AS-FNE) to assist private company restructuring; 10,000 people to take phased-in early retirement packages (préretraites progressives, PRP); and 10,525 to enter designated employee retirement leave (Cessation d’activité pour certains travailleurs salariés). The latter scheme, which was set up in 2000 with a view to extending to other sectors a provision already in place in the automobile industry (FR0102131F), continues to be broadened, with around 30 sectors involved so far. The number of phased-in early retirements has also increased significantly. A total of 27,525 employees are due to take early retirement in 2003, up from 25,700 in 2002. However, in an attempt to promote a 'more responsible attitude' among companies, their contribution will be doubled for AS-FNEs and trebled for phased-in early retirement (bringing it to 10%).

Proposed reform schedule

The schedule for pension reform has been set. The core principles underpinning the overhaul are to be fleshed out at the end of January or early February 2003. This will be followed by individual talks with both private and public sector trade unions. The consultation process is to take three months. A bill will then be tabled in June 2003. Heads of state-owned corporations will oversee talks with trade unions on the sector-specific pension schemes such as those covering the Paris Public Transit Board (RATP), French national railways (SNCF) and the EDF-GDF electricity and gas concern. The Prime Minister has already stated that he will submit his government to a vote of confidence on this issue in the National Assembly.

The government has set out two priorities: 'equal treatment for all'; and 'freedom of choice'. Specific areas of reform have already been suggested, including a plan to make employees with over 40 years of contributions eligible for additional pension entitlement. Another possibility under consideration is the concept of allowing employees to begin contributing earlier - an idea promoted by the General Confederation of Labour (Confédération générale du travail, CGT). Other ideas include allowing employees to buy pension 'points' corresponding to time in education, or considering the arduousness of people's work in pension calculation, a possibility supported by both CGT and the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT). Lastly, as far as the civil service is concerned, the Prime Minister has indicated that 'the cornerstone of reform is equal contribution periods'. In return, the government is prepared to consider a proportion of the bonuses paid to civil servants in the pension-calculation formula.

Reactions

The government's decision to alter the inter-pension fund compensation rules has given rise to strong reaction and rekindled the debate over the differences between public and private pension schemes. The Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), the main employers' confederation, has lamented the lack of transparency, which it views as further proof of the need for a new way of running the social protection system. CGT, CFDT and CFE-CGC have all taken the government to task over this new drain on the general CNAVT scheme. As for the General Confederation of Labour-Force ouvrière (Confédération générale du travail-Force ouvrière, CGT-FO), it has defended the local authority CNRACL scheme, maintaining that it has to date provided significant support for ailing private schemes.

The announcement of the scrapping of the CFA civil service early retirement programme led to an outcry from trade unions. The CGT affiliate in the civil service viewed this decision as the first step in an attack on the civil service pension system, with the goal of not only obtaining a contribution period of 40 years but even, as employers are demanding, of 42 or 43 years. In the opinion of the CFDT-affiliated Federation of Civil Servants and Local Authority Employees (Union CFDT des fédérations de fonctionnaires et assimilés), the National Assembly has taken on the heavy responsibility of reforming the civil service pension system by 'chopping up' the issue into small pieces. The CGT-FO-affiliated Federated Civil Service Union (Fédération générale des fonctionnaires FO) has also condemned the veiled extension of contribution periods.

Lastly, the statements by Minister Fillon on early retirement and the prospect of extended pension contribution periods have not sat at all well with trade unions. The CGT general secretary, Bernard Thibault, contended that the government is preparing badly for the talks on pensions. He has called for nationwide action early in 2003. The CFDT general secretary, François Chérèque, has attacked each government decision as it has been tabled. The general secretary of the National Federation of Independent Unions (Union nationale des syndicats autonomes, UNSA), Alain Olive, has maintained that the government’s 'provocative' approach is the wrong way to proceed. The CFE-CGC president, Jean-Luc Cazettes, has stated that it will be impossible to settle the issue in six months. Lastly, the general secretary of the French Christian Workers' Confederation (Confédération française des travailleurs chrétiens, CFTC), Jacky Dintinger, fears that the social dialogue process on pensions reform will merely be a facade.

Mr Chérèque stressed that CFDT wishes to take part in the negotiation process. He believes that pension reform should allow those with 40 years of contributions to retire even if they are under 60 years of age. This idea was the basis for an amendment tabled in the National Assembly by the Communist parliamentary group during the last parliament, but was thrown out on the basis of cost. The CFDT general secretary also raised the prospect of cooperation between his confederation and CGT on this issue, provided common ground could be found. However, any alliance with CGT-FO was rejected. CGT-FO has continued to demand a return to a norm of retirement after 37.5 years' contributions for all employees in both the private and public sectors.

Commentary

The industrial action that resulted in autumn 1995 from the 'Juppé plan' to reform the social security system, which included plans to align sector-specific social security schemes with the general scheme, remains at the back of the minds of all parties involved. The trade unions suspect the government of having already decided on the major reforms to be made to the pension system. In addition, the elections to joint industrial tribunal s (conseils de prud'hommes) on 11 December 2002 (a major test of union support) have hardened the various trade unions’ positions.

Scrapping the ARPE 'early retirement for jobs' scheme and cutting support programmes for private company restructuring have led to a sharp drop in early retirement. However, the number of people not required to seek new employment (starting at 55 or 57.5 years of age) continues to grow (by 4.8% a year). At the same time, the rise in extended periods of absence from employment due to sickness among employees has raised some concern. According to statistics published in July 2002 by the National Sickness Insurance Fund (Caisse nationale d’assurance maladie, CNAMTS), the increase in the number of people claiming sickness benefits for more than three months is mainly concentrated in the 55-59 age group, (a 24 % increase between the first quarter of 2000 and the same period in 2002, compared with an average rise of only 8%).

The government’s goal is to discourage the systematic exit of older workers, in an attempt to raise employment rates among the 55 and over age group. Nevertheless, reducing the number of people taking early retirement will not be enough. The situation faced by older workers seeking employment should be a major factor to be taken into account in pension reform talks. (Annie Jolivet, IRES)

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