France Wants to Have, Eat Its Gateau

Yesterday, the new French President, Francois Hollande, brought the country's minimum retirement age down from 62 to 60. It's a fairly restricted group of people who are eligible for retirement at this age; you have to have been working since you turned 18 or be a mother of three or more, but the change will cost the government an extra 3 billion Euros or more a year by 2017.

Hollande was fulfilling a popular campaign promise, of course, so the move was largely expected. Unfortunately, the move rolls back one of the better decisions of the previous government. France, like much of the rest of Europe has an aging population thanks to falling birth rates, better healthcare, and an aversion to immigration. It also has a pay-as-you-go social security system, in which current contributions to social security fund current payouts. It's not hard to see that this combination is unsustainable. And when you factor in the state of French public finances and the euro zone's growth prospects the move looks positively perverse. Almost the only argument you could find for it would be to suggest that putting more people on the pension roll might free up a few more jobs today for younger people, who are struggling disproportionately to find jobs in the current environment. But it's a pretty inefficient way to do that.

It's the sort of decision that makes you really worry about Europe. A 62-year minimum retirement age is hardly a hardship. A lot of people might actually want to stay in work well past that age. What's going on?

The short answer is that it's about the droits acquis. Many French place a premium on their rights, especially the workers' rights that are considered to have been hard-won. Working practices in state-owned industries, such as the railways, are largely determined by a calculus of rights and obligations on the part of workers and managers. This is fair enough, until you realize that the rights and obligations are predicated on the industry conditions of the 1940s and 1950s, when working in the railways was dirty, unhealthy, and even dangerous.

The trouble is, if you regard your rights as the result of a hard-fought struggle against an exploitative elite then it's going to be hard to contemplate giving them up.

And this is why I worry about France. The fuss about the retirement age is very like the fuss about an attempt some years ago (by Dominique de Villepin) to introduce a special first-time employment contract (contrat première embauche). The idea was that if you made it easier to lay young people off if they didn't work out, you'd encourage companies to employ more young people. That would at least give more young people real job experience. French unions and students hated the idea because they thought it made it made first-time job seekers in some way second-class citizens.

Both the measures would have represented fairly painless but very useful changes to France's institutional framework. If the country struggles so much with these types of reforms, you really have to question whether they have the appetite for the sort of measures that will be involved in maintaining the euro.