If the following is true, then the Eurozone is doomed:
President Hollande’s proposal would restore the retirement age to 60 for individuals who have contributed to the pension system for 41 years. Mothers with three or more children would also be able to retire at 60, as would the elderly unemployed. Proposals to lower the pension age for other categories of workers are said to be under consideration. The first step alone will cost E1.1 billion in 2013, rising to E3 billion a year by 2017.
The government proposes to cover the expense by raising payroll taxes for employers and employees.
This is completely ridiculous. There is no way France’s economy will withstand something like this.
As it is, I find the idea of a payroll tax to be incomprehensible (I mean the one that is paid by the employer, not the pay-as-you-earn witholdings from salaries.) My sister, for example, has her own business. She is employing several people. In a difficult economy, she keeps creating new jobs for people. And for some completely incomprehensible reason, she has to give a significant portion of her profit as payment for providing this important social service and letting people earn their livings*. Is this meant to be a discouragement for job creation or what? I honestly have no idea how this makes sense. I’m all in favor of paying taxes on what I earn. But why do employers pay twice, both from their profit and for each employee, is a mystery. Is the goal to ensure that the employers saddle their existing employees with more and more work to avoid hiring new people? Is it an incentive to outsource jobs? At least, small businesses should get some relief here, don’t you think?
I’m also bothered by “mothers with three or more children”, if that’s what the proposal actually says, as opposed to “people with three or more children.” What about single fathers? How are they less entitled to the same consideration? Besides, it would seem to me like people with children really need help when the children are small or in college, not when they are 60. Wouldn’t abundant and free daycare facilities and free college education be more helpful to such people?
The entire proposal looks like a populist gesture with no meaning.
* My sister also will be deprived of her right to a maternity leave that all Quebecois women who are not small business owners enjoy. In spite of getting her profits taxed so heavily, she isn’t entitled to getting something back in exchange because she creates jobs. The only people that the government of Quebec hates more than small business owners are professional, successful women.
Clarissa's Blog 
This is part of the reason why Merkel is against EU obligations : everybody knows it’s just another form of leeching on German economy.
And what is the retirement age in France nowadays ? In Poland it just got “upgraded” to 67 years for both men and women. Yay.
LikeLike
Nowadays in France it’s 62, I think.
The question is why the German economy is the only one that produces anything in Europe.
LikeLike
“The entire proposal looks like a populist gesture with no meaning.”
It is totally a populist gesture, very popular with those it applies to, less for people like me who have to pay for it but can expect to retire at 70 mainly because we went to university so didn’t enter the workplace early.
LikeLike
That’s a good point! People who chose to get educated will get punished for that.
LikeLike
Here (Norway) you can retire from 62, but with reduced benefits. It’s somewhat popular and it doesn’t seem to have hurt the economy that much. But then again we have lot’s of oil so our economy could power through most things so that’s not really an argument that it’d work elsewhere
LikeLike
Finally, I have a reader from my favorite country ever!
Yes, Norway can afford its welfare system, which makes it special.
LikeLike
The “payroll taxes” (Social Security taxes in the U. S.) are shared between the employer and employee as a way to make the tax burden on lower income workers slightly less. The amount paid in Social Security taxes by the worker is taxable income to the worker. The amount paid by the employer is not taxable income to either employer or employee. As I understand it, if the burden were shifted to the workers, the employers would end up having to pay their workers the difference, and the workers would get no more net income, but would have to pay more taxes.
Setting the retirement age at 60 would in effect just mean that all workers would be paid less during their working years and take a larger fraction of their earnings as deferred retirement income. I would myself prefer to work longer and have more money now. (I am 68 years old and still working; prior to Reagan, I would have been forced to retire at 65. This is the only good thing President Reagan ever did as President.)
LikeLike
Thanks for the explanation, David. Clearly, I’m not a very clear thinker when it comes to taxes.
LikeLike
Reagan made retirement age fluid? Was it obligatory before that?
LikeLike
Yes. Retirement at 65 was mandatory for almost everyone prior to Reagan’s action. I dreaded it.
LikeLike
We have discussed this before:
https://clarissasblog.com/2011/02/08/on-reagan/
LikeLike
Wow, you have such a great memory! And I don’t. Do you train your memory in any special way?
LikeLike
I’ve missed your provocative style.
The provision for ‘mother of three or more children’ is, I think, an ‘adjustment’ for the time mother have to take off work — in most cultures across the globe — while their children are growing up, to fulfil those parental responsibilities that are still largely the maternal domain. For someone with three or more children, the cumulative time spent in nurturing these future citizens would be considerable.
Now, a father who stays home with a sick child or takes the child to all its extracurriculars or to the doctor’s, and performs all the other duties necessary for a child’s all-round development might object strongly against this new proposal, and it would be a fair complaint. But it wouldn’t change the fact that (a) these responsibilities are still overwhelmingly assigned to and carried out by the female parent, and (b) the number of single fathers are disappearingly small as compared to the number of single mothers, thus making them a comparatively insignificant variable in policymaking.
So, insteading of jumping on the ‘male and female roles must be exactly equal in all situations irrespective of actual sociocultural norms’ wagon, I would like to ask the French government this question: Why should the state favour women (and their male or female partners) who wish to bring more children into this overpopulated world, and therefore, in comparison, penalise those who are more sensible about being fruitful and multiplying?
LikeLike
If this money went to creating an abundant number of daycare facilites that would be free or if the money paid for a free nanny for each new child, I’d be extremely supportive of that. This measure, however, makes very little sense.
LikeLike
About Canadian taxes: My understanding of this ’employer tax per employee’ situation that you describe is that it applied to only companies (or perhaps businesses making above a certain cutoff in annual profits). It was put in to ensure a reasonably fair sharing of profits amongst those that create it, and not let it pool amongst those who provided their initial capital (which is what happens in the US, for instance). I could, of course, be entirely wrong in my understanding of the law, but that was my reading of it. I am surprised it applies to a small business owner who doesn’t do very well.
On the other hand, I am not at all surprised at the ‘absence’ of maternal leave from your sister’s job description. State-mandated leaves apply only to employees of formal organisations, otherwise owners of these organisations could subject them to a wide variety of whims and inequalities. Business owners, however, have the ability to take time off any time they want. Now, they may not *want* to do so, either because it might harm business or because they do not trust their employees to work without supervision (and they may not want to incur the expense of a part-time supervisor), but the have the freedom of choice, which employees don’t.
LikeLike
My sister’s business is very tiny. Even when she had just one employee, this tax existed.
Nobody will convince me that a person who pays taxes more than most other people is not entitled to get something back for them because somebody arbitrarily decided that being a business owner means she can live on air while she gives birth and breastfeeds.
LikeLike
“On the other hand, I am not at all surprised at the ‘absence’ of maternal leave from your sister’s job description. State-mandated leaves apply only to employees of formal organisations, otherwise owners of these organisations could subject them to a wide variety of whims and inequalities. Business owners, however, have the ability to take time off any time they want.”
Technically business owners certainly have the ability to take as much vacation as they please (show me a small business owner that actually does though). The issue is that as a small business owner you are not entitled to any PAID maternity leave, which is ridiculous. I pay as much in taxes, if not more, than my employees, yet I do not see how I profit from the social system.
As a small business, we are taxed on each employee. The exception for personal income tax in Quebec is for those who make under about $20,000 a year. I think that there is a widespread notion that if you have a business it automatically signals incredible wealth. For a small business that is starting out and making a good profit (that obviously goes to paying qualified employees and investing in a wide range of expenses to continue growing the business and adding more vacancies), the tax bracket in Quebec is unreasonable.
LikeLike
“Technically business owners certainly have the ability to take as much vacation as they please ”
– This should not be relevant at all. If people contribute by paying taxes, they should all be entitled to the same services. Imagine not allowing some people to be treated for free at a Canadian hospital because they have a hypothetical technical opportunity to cure themselves by magic incantations.
LikeLike
Mothers with three or more children would also be able to retire at 60, as would the elderly unemployed.
Allow me for a moment to take a very cynical view of this:
On the one hand is meant to appease the far right as wholesome French women are being rewarded for producing more wine drinking, tourist snubbing French people. On the other hand, this is, in practice, a vote winner with immigrants, since a subset of them are the only ones having three kids per family.
So every one walks away happy and Francois Hollande looks like a friend of labour rights.
LikeLike
That’s a brilliant analysis of what is happening, I think. Very witty, too.
LikeLike