A graduate of HEC, Sylvain Catherine is an economist.
To discover
PODCAST - Listen to the club Le Club Le Figaro Idées with Eugénie Bastié
Retirement pensions, which constitute a quarter of public spending, deserve to be at the heart of the debate on the nation's accounts. The need for economic growth and the concern for a fair sharing of the efforts required of the country require a contribution from retired generations and a reduction in taxation which weighs on working people. The historic level of public debt, the legacy of the deficits accumulated each year since 1974 and transmitted to future generations, also requires financial participation from the generations who contracted it.
Our economic growth is discouraged by the levies which weigh on wealth creators and in particular employees. Investment in human capital and effort are no longer sufficiently rewarded due to the taxation of work. According to the OECD, compulsory contributions absorb 47% of salaries, or 12 points more than the average of the organization's countries. This taxation limits our ability to attract international talents who promote innovation in other countries such as the United States, Canada, Switzerland or the United Kingdom, and encourages the expatriation of our young talents where the ideas, researchers and entrepreneurs from around the world.
Also read: Jean-Pierre Robin: “The indexation of retirement pensions reignites the generational war”
In France, wealth creation is not only discouraged by the average rate of compulsory withholding tax. The marginal rate, which determines the share taken by the State from each additional euro paid by the employer, has an equally harmful disincentive effect. In fact, marginal tax rates discourage our engineers as much as less qualified workers. Around the minimum wage, INSEE estimates that an employer must pay three euros to increase an employee's purchasing power by one euro. Thus, compulsory deductions financing pensions and health benefits for retirees contribute to the economic sclerosis of the country. However, the reduction of public deficits will be all the less painful if it is accompanied by a return to growth. This return must be facilitated by the reduction of social security contributions across the entire salary distribution.
The gloomy situation of active workers contrasts with that of current retirees who benefit from exceptional circumstances. According to INSEE, retirees enjoy a slightly higher standard of living than the rest of the population and a significantly lower poverty rate. This situation is as unique in the world as it is temporary in France. In the 1980s, the standard of living of retirees was 20% lower than that of workers. The pension steering committee's projections foresee a return to this situation by 2060. This transitional generosity is not justified by the contributions paid. According to the committee, the generations of 1950-1960 will receive 1.40 euros of pension per euro contributed, compared to 1.10 euros for the cohorts born after 1980. Thus, equalizing the recovery rate between generations would imply a 20% reduction in pensions. current. In short, the historical parenthesis we are going through costs 60 billion euros per year and represents 2,000 euros in social security contributions per employee.
Through pension contributions, those from poor families help those from wealthy families. Those who cherish meritocracy and equal opportunity should rise up against this reactionary system.
Sylvain Catherine
More than acquired rights, the generosity of pensions and the taboo surrounding it reflect the electoral weight of a large generation who assiduously go to the polling stations. In public debate, small pensions are used to serve as a shield for large ones. It is imperative to guarantee the protection of the most vulnerable retirees. However, their difficulties should no longer mask the fact that the average amount of pensions exceeds the needs of many beneficiaries.
An observable consequence of this phenomenon is the absence of a reduction in the median wealth of households after their retirement. In other words, rather than helping wealthy retirees to consume, the high level of pensions preserves the inheritance intended for their descendants. This wealth is already historically high due to the evolution of asset prices, and in particular real estate, over the last forty years. Retirees bought assets at low prices whose value appreciated more quickly than salaries, due to changes in interest rates since the 1980s and restrictions imposed on the expansion of housing stock. On an individual level, many retirees are acutely aware of the comfort of their own financial situation as well as the economic challenges their children face. Faced with this reality, they organize the transmission of this heritage during their lifetime. These retirees are rightfully proud to help their children and grandchildren.
However, this system is neither fair nor healthy. It is not healthy because it would be preferable if workers could help themselves by working more or by training, something difficult as the fruits of these efforts are absorbed by social security contributions. It is unfair because only wealthy parents can help their children. This implies that, through pension contributions, those from poor families help those from well-off families. Those who cherish meritocracy and equal opportunity should rise up against this reactionary system. Taxing inheritances will always be a subject of contention but subsidizing them should meet unanimous opposition.