A
number of economic policy measures provoke an almost instinctive rejection from a majority of French people. As if they were taboo, several reforms that could improve economic and social conditions can hardly be discussed without drawing public condemnation. Five stand out: introducing an element of capitalization in the pension system; shifting from job protection to protecting individuals and skills; reforming the education system; shifting some social security contributions to value-added tax (VAT); and a thorough reorganization of the public sector. Let us review them.
Capitalization
Of course, this does not mean abandoning the pay-as-you-go pension system (where the working population funds retirees' pensions) in favor of a fully capitalized system (where individuals save for their own retirement). The transition from one to the other would necessarily mean, at least initially, that workers must contribute twice: once to fund existing pensions and again to build up their own retirement savings. However, creating a mandatory "third pillar" based on capitalization, alongside the general and complementary systems, could significantly raise future retirees' standard of living.
The average real return on French equities, including dividends, since 1990 has been 6.9%, compared with annual economic growth of 1.4%. In this context, it is difficult to understand the widespread public opposition to introducing a degree of capitalization in the pension system.
