There is an unfortunate habit, especially in the English-speaking press, to (deliberately?) misrepresent some of the recent protest movements in France.
On the face of it, they can easily be labeled as irrational.
The yellow vest protests of 2017-18 have often been framed as a “protest against climate action”. Current opposition to an increase in retirement age is presented as somewhat irrational and bemusing in an age of growing life expectancy.
Although some focus is put on Macron’s use of clause 49.3 (the pension reform was rammed through parliament without a vote, so French protests are also about the non-democratic process), there is relatively little discussion of the underlying reasons for this unrest.
What have the French got to complain about?
By all accounts, including my own, France is a fortunate country, with excellent infrastructure, social services, education and, of course, food. It is understandable that, from the outside, these massive street protests raise questions – after all, are these not just squabbles amongst a privileged group of spoiled people?
The problem is not one of absolute standards of living. It is one of trajectory and unfairness.
The following figure sheds light on the sentiment of unfairness galvanizing people in France. It shows that the overall tax burden is lowest for high income earners, and hardly differs across the 40th to 98th percentiles: the more you earn the same you pay, unless you are a very high earner – then you pay less.
As some journalists have pointed out, the yellow vest movement was not against climate action: it was against inequality, specifically against the concurrent introduction of a fuel tax (that hit poorer households hardest) and a reduced wealth tax (the ISF – the reduction of which benefits the wealthy).
French people seem to be more aware than others (such as Canadians1) of the regressive nature of their taxation system: this awareness is leading to massive discontent.
In that sense, the real question may be: why are Canadians so complacent?
What lies beneath the pension protests?
It is in this context that the pension protests begin to make sense. French people are not lazy, and many of them would understand the need to increase retirement age if it were felt that all French people were contributing.
In France, income and wealth inequality are growing, but so far have grown less than elsewhere, partly because of its generous pension system.
“A French singularity remains, that of social spending, the importance of which partly explains the stability of poverty and inequality in France […] France’s particularity lies in the importance of its pension system, which itself accounts for almost half of social spending. “Julien Damon, 2019
France’s social stability – including its regressive taxation system – seems to rest upon an implicit pact. Inequalities will be accepted provided the social safety net is preserved and provided inequalities do not become too blatant.
The combination of increased taxes on the lower middle classes (e.g. hikes in sales tax on fuel) and concurrent reductions in wealth tax led to the 2017-18 protests, motivated by a sense of unfairness rather than by climate skepticism or by absolute poverty.
Likewise, a sense of unfairness, of a pact being broken on the backs of the lower and middle classes, is driving pension protests. This has been compounded by ramming the reform through parliament without a vote.
[It should be noted that the pension reform hits lower class workers hardest. A full pension is available in France under two conditions. 1) reaching the retirement age; 2) having contributed to the pension fund for a fixed number of years (40 years or thereabouts). For most graduates and knowledge workers, who start working in their mid-20s after studying, retirement already can’t occur before their late 60s: thus, shifting retirement from 62 to 64 makes no difference to most better off, or higher social class, workers. For most manual and personal service workers, many of whom enter the workforce before they are 22, shifting the retirement age from 62 to 64 adds two years of work and of pension contributions. Added on 8th April 2023.]
Why this matters: unfairness in Canada
The bemusement of some commentators outside France is understandable. French people’s absolute wealth and income levels are high. Many outsiders feel – and I tend to agree – that retiring at the age of 64 does not constitute a great hardship in a world where life expectancy is 80 or more (of course, provision should be made for physically arduous jobs and for people with health issues, but as a general rule 64 does not seem shocking).
But I do sympathise with French protestors. They rightly see the pension reform as the (not so) thin end of the wedge. Within most countries wealth and income inequalities have risen, and daily life of lower and middle income people is getting harder. This is not because countries are less wealthy – GDP is steadily rising, notwithstanding a few shaky quarters now and then. It is because the GDP dividend is skewed towards investors, high-end managers, and bankers – often rewarded by way of share options and capital gains (Figure 2) – away from wage earners.
In countries such as Canada there is general complacency about high and rising wealth and income inequalities. Although the story is nuanced the general trend towards inequality is difficult to deny. Writing about Canada, Green et al (2017) say:
“Many people form their notion of the fairness of society and self-respect based on their role relative to that of others in the productive system. Accordingly, a more unequal distribution of rewards in the labour market can challenge this notion of fairness.
The decline in the effectiveness of the tax-and-transfer system in offsetting market income inequality [in Canada] is […] problematic.”Green, Riddell & St-Hilaire, 2017
1 Canada, which on the face of it has a progressive tax system, tends to tax lower middle class households more heavily than the wealthiest once all social insurance premiums, tax deductions, inheritance tax, differential treatment of investment income, etc… are taken into account. It is misleading to focus solely on marginal income tax rates – as income increases it can be moved around, transformed into wealth or investment, set off against expenses … There are many ways income can legitmately be taxed less, provided one has enough of it to invest and purchase tax advice. Furthermore, the heavy burden of regressive deductions on earned incomes (such as employment insurance and health costs which hit lower to middle income earners hardest) mean that marginal taxation rates do not reflect the actual burden of contributions. Note that employment insurance is treated as general tax income by the federal government: it is effectively a regressive tax on employment income.