In January 2023, millions of people protested in France against President Emmanuel Macron. These protests were accompanied by strikes where millions of people also refused to show up for work, and caused France’s economy to virtually shut down, as there were few workers who could uphold the services in the French economy. The cause of these riots: France’s new pension reform that would raise the retirement age from 62 to 64. The pension reform has made Macron and his party very unpopular, with Macron receiving an overwhelming 70% disapproval rate from the French people. Despite these revolts against the pension reforms, Macron is refusing to back down. You may ask why we, American citizens, should care about such affairs in France? Unfortunately, France’s problems that caused Macron to raise the retirement age are not unique: almost all advanced economies are facing decreased fertility rates and a rapidly aging population. This means that in advanced countries like the U.S., workers will be outnumbered by retired people, meaning that there will not be enough money in federal pension systems to support all of the retired people. While France is currently the epicenter of the rioting, dissatisfaction may soon spread to other advanced countries in Europe and North America. In order to understand this aging problem and its effects on the world, one must understand why Macron’s pension reforms are so unpopular. 

In 2021, France spent 400 billion euros, or 14% of its GDP, on pension payments. Its pension system is one of the most generous in the world, with its retirees making 50% of their 25 highest earning years. The system itself is funded by payroll taxes, where every month, roughly 24% of workers’ paychecks are deducted and go to the retirement fund and other government programs. The high tax rates in France have  made it hard for French companies to hire workers, causing slow economic growth and high unemployment rates in France during the last decade. Macron promised to bring France’s economic growth up in 2019, which included raising the retirement age among other things. The French people were not happy with these changes and protested in 2019 just like how they are now. However, these protests and this pension reform bill were put on hold after the 2020 COVID-19 pandemic broke out. This past march, Macron was re-elected as French president, and felt that he had enough stability to incorporate his pension reform bill once again. Yet, the result of rioting and protests remained the same today as it did in 2019. If Macron knew that the bill would make him unpopular, why did he go through with it anyway?

Unfortunately, the problem stems from the structure of France’s retirement fund: it is essentially set up as a Ponzi scheme that is meant to fail. The structure of France’s retirement fund, as well as a plethora of other countries’ pension systems, is that workers contribute money to the pension while they are working, but get to live off of the pension when they are retired. However, the workers’ money that goes into the pension is immediately paid off to existing retirees: this means that the number of contributors to the pension has to outnumber the number of existing retirees. But, since fertility rates are going down in developed countries and life expectancy is going up, the number of contributors is outnumbered by the number of retirees, essentially setting up the pension for failure. These types of payroll pension systems benefited the first two or so generations of contributors and benefactors, but are ultimately set up for failure. Furthermore, when politicians founded these systems, they did not account for government support lasting 25 years like it does today. Despite this, the world’s current governments are left in a quandary; leaving the two options of reforming the system and facing riots as France did, or letting the retirement fund run out of money.