Maxime Sbaihi: “We need to ask pensioners to make an effort not to drown out today’s assets”

Posted January 17, 2023 1:00 PM

What are France’s demographic prospects today?

The peculiarity of France’s aging is that the age pyramid is deformed from below and above. In 2014, for the first time in our history, the share of people over 60 in the population of France exceeded those under 20. It’s been relatively overlooked, but it’s a revolution. The French birth rate is certainly better than our neighbors, but it’s also about half.

At the same time, the baby boom wave turned into a grandfather boom of 25 million people. And this aging will accelerate. The proportion of people under the age of 20 in the population will continue to decrease. It should rise from a small quarter now to 20% by 2050. On the other hand, those over 60 should make up 33% of the population in 2050, compared to 26% today. According to INSEE forecasts, 270,000 centenarians should live in France in 2070, ten times more than today.

What are the consequences of this development?

They are many and will be many. But we have no historical precedents to predict what the real impact will be. Optimists hope for the development of the Silver Economy, which will benefit the economy by creating jobs. That remains to be seen.

The most pessimistic believe that this will put severe pressure on public spending – on health care, pensions, but also on real estate, as the market is so monopolized by retired owners in big cities that access to housing for new generations is blocked.

Finally, aging creates gerontocratic political pressure. Election demand is aging and priorities are also changing.

Maxime Sbaihi, economist and director of the GenerationLibre think tank and Brunswick Group.Hannah Assouline

What is the impact of this aging on economic growth?

First, there is an impact on productivity, as aging leads to a capital substitution effect for labor. In addition, there is a strong concentration of assets among the oldest. In France, those over 60 own 60% of assets. Aging has led to a constitution of abundant savings, but not necessarily fruitful, because with us it is mainly placed in Livret A or life insurance. This weakens economic growth.

What about the social security system?

Our social protection system is unbalanced and in danger because demography is the engine of division. In 1975, France had 4 million pensioners and four contributors for every pensioner, today we have more than 17 million pensioners and less than two assets to finance the pension.

Faced with aging, the pressure on assets to finance health, pensions, and dependency will become increasingly intense. All this is very expensive for the society, it was not budgeted in time.

How can a country with a minority of youth and no longer go to vote prepare its future?

France has less than 20% young people. What problems does this cause?

We are in a situation we never knew. Demographic dynamism has long been France’s economic and geopolitical strength. Today, such a question arises: how can a country whose youth is a minority and who no longer go to vote properly prepare its future?

You regret that the executive power did not plan for pensioners to contribute to the pension reforms. Why?

An aging population comes at a cost. This cost must be shared among all generations, not just those working today. France is one of the very few countries where pensioners have a higher standard of living on average than the rest of the population or even the working population, given that more pensioners own homes than they do.

Our pension system now undermines solidarity: its beneficiaries are richer than the contributors who fund them! This is unprecedented and raises the issue of intergenerational justice. This discussion should be held.

France is a paradise for retirees

You believe pensioners are treated better than others…

Yes, France is a paradise for retirees. Even the wealthiest of them are entitled to a CGS rate lower than that of assets. This is an aberration. In 2017, Emmanuel Macron clearly defined the problem and even put forward a duty of solidarity between generations, aligning the CSG ratio with the asset ratio. Then he refunded everything and even refunded the overpayment, which is exceptional.

This rare attempt to better share financial efforts between generations was sacrificed at the altar of election. This is one example among many others. Did you know that pensioners who pay income tax also benefit from a 10% discount on professional expenses? This is one of our most unfair and costly tax loopholes.

Can the pay-as-you-go pension system withstand demographic changes in France?

This is a real question. For this to continue, we will have to work longer and also find a way to energize our active population, which will start to decline from 2040 if we believe INSEE projections.

To correct this, we must support the birth rate or rely on immigration. The Germans are currently preparing an immigration law that would allow mass hiring for skilled positions abroad.

In the meantime, we should also ask the pensioners not to stifle the active people of today, who will, in any case, retire much later and less generously than them.

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