What France’s First-Round Election Results Mean for Pension Reform

Emmanuel Macron and Marine Le Pen emerged as the two top performers of the first round of the French presidential election this past Sunday. Macron led the race with 27.8% of the vote while Le Pen had 23.1% of the vote. The two will face each other again in a runoff on April 24^th to decide the final outcome of the election.

Pension reform has become one of the biggest issues in the race for French voters. Macron and Le Pen are known for their competing stances on the issue. While the current national retirement age in France is 62 years old, Macron initially wanted to raise it to 65. Le Pen, on the other hand, has proposed lowering the age to 60 for those who start working before the age of 20 and keeping it at 62 for all other workers.

Both agree that payments to retirees should be increased, with Macron proposing a $1,190 (€1,100) minimum and Le Pen proposing a $1,082 (€1,000) minimum.

Macron’s position on increasing the retirement age has prompted much political backlash. In December 2019, Macron’s failed attempt at pension reform led to the longest strike in modern French history.

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France has a pay-as-you go pension system, which operates by directly using money from younger workers to pay retirees without investing it. This is in contrast to American public pensions or 401(k) programs, which generally invest the money paid in by workers for decades. With retirement benefits accounting for 13.8% of GDP, France spends more on its pensions than all other OECD countries aside from Greece and Italy.

Macron has long worried about the financial health of the pension system, according to Hervé Boulhol, a senior economist at the OECD.

“The problem is that he fears with new generations coming into retirement, the system will become financially unsustainable,” says Boulhol.

Yesterday, however, Macron hinted that he would be willing to compromise, even suggesting he would change the target retirement age to 64 from 65.

“I am ready to change the timeline and say we don’t necessarily have to do the reform by 2030 if I feel that people are too worried about it,” Macron told multiple journalists who followed him in Northern France.

Le Pen reacted to Macron’s statement yesterday, suggesting that it was just a ploy to win more votes.

“The French are very smart. Everyone knows this is a ploy by Emmanuel Macron to try to win over—or at least mollify—left-wing voters,”, said Le Pen on France Inter radio. “The reality is retirement at 65 is his obsession. It’s all he has ever talked about.”

As the candidates continue to spar over retirement age, neither appear to be considering the OECD’s recommendation, according to Boulhol.

“Whatever age you choose, it makes sense to at least peg the age to average life expectancy,” says Boulhol.