French protests about raising retirement age.

[Flo]

It's the spoiled child effect. For years mommy would give her precious angel everything he asked for, but now mommy's piggy bank is empty and precious angel can't get everything he wants.... waaaah! Waaaaaah! Waaaah! etc.

Those naughty Frenchies are really spoiled rotten, expecting something in return for their taxes or even their work ...

 

[WildCat]

Those naughty Frenchies are really spoiled rotten, expecting something in return for their taxes or even their work ...

It would be fine if they got something, problem is they want more than what they put into it.

It's easy to start a pyramid scheme, much harder to make it work in the long run.

 

[Francesca R]

I'm sure a tax hike would go over real well.

The only way to fix it is to reduce benefits, delay benefits, or increase taxes. And I'm not so sure there's much room left for a tax increase in France's case.

Fixing this with tax rises is (i) a net increase in inter-generational unfairness, and (ii) a drag on pre-tax national income (so it suffers diminishing returns).

Fixing it with a later retirement age (i) reduces the inter-generational ripoff, and (ii) is positive for economic growth (so it yields increasing returns).

So I rather hope Sarko doesn't bouteille-it. Morally and economically, there is no contest between the two.

 

[Puppycow]

So opposition to increased working age--apart from the obvious self-interested one--arises because making old people work longer strikes some Europeans as a backing away from the relentless progress to civilisation.

But once you realize that "the relentless progress to civilisation" has allowed people to live longer, one ought to be able to see why one should also work longer. If I expect to live to 70, I would like to retire by 60, but if I expect to live to 80, I am happy to work until 62.

 

[DC]

It would be fine if they got something, problem is they want more than what they put into it.

It's easy to start a pyramid scheme, much harder to make it work in the long run.

evidence for this claim?

 

[excaza]

Fixing this with tax rises is (i) a net increase in inter-generational unfairness, and (ii) a drag on pre-tax national income (so it suffers diminishing returns).

Fixing it with a later retirement age (i) reduces the inter-generational ripoff, and (ii) is positive for economic growth (so it yields increasing returns).

So I rather hope Sarko doesn't bouteille-it. Morally and economically, there is no contest between the two.

I was being sarcastic.

If they're going this bananas over an increase in retirement age, they'd probably be shooting planes out of the air and hurling trains if a tax hike was proposed instead.

 

[Francesca R]

Those naughty Frenchies are really spoiled rotten, expecting something in return for their taxes or even their work ...

Continuing with retirement @ 60 (or whenever) is effectively expecting something from somebody else's taxes and work.

 

[WildCat]

evidence for this claim?

The system in bankrupt. This wouldn't happen if it had been properly funded.

 

[DC]

i also would refuse to work longer if the state plans dont change. when you work for a state owned company like SNCF, you can retire at 55 or even earlier.

 

[DC]

The system in bankrupt. This wouldn't happen if it had been properly funded.

that does not back up your claim in any way.

backup the claim or retract it.

like i said, those with the least knowledge about it are those with the loudest mouth.

 

[Francesca R]

But once you realize that "the relentless progress to civilisation" has allowed people to live longer, one ought to be able to see why one should also work longer. If I expect to live to 70, I would like to retire by 60, but if I expect to live to 80, I am happy to work until 62.

You don't understand. Cake is nicer when it's eaten and had concurrently.

 

[WildCat]

that does not back up your claim in any way.

backup the claim or retract it.

like i said, those with the least knowledge about it are those with the loudest mouth.

Dude, the fact that the system is bankrupt is proof it was underfunded.

Or are you contending the government cooked the books?

 

[DC]

Dude, the fact that the system is bankrupt is proof it was underfunded.

Or are you contending the government cooked the books?

Dude, that was not your claim, you claimed the frensh want more from the system than they are willing to put into it.

problem is they want more than what they put into it.

 

[ddt]

I'm sure it's no different from the bankrupt pension systems we have here in the US.

The only way to fix it is to reduce benefits, delay benefits, or increase taxes. And I'm not so sure there's much room left for a tax increase in France's case.

This is an inherent problem with defined benefit plans, especially in the public sector (and it was also a big problem in the private sector, which is why most use a defined contribution plan instead). There's all kinds of incentives to underfund the pension now (to pay for other things), or overestimating the growth of the funds, figuring that by the time the problem manifests itself you'll have been out of office for years or dead of old age. That's why Illinois has $80 billion in unfunded pension obligations today. It's far too easy to kick the problem down the road for Someone Else to worry about.

Problem in France is it can't be kicked down the road any longer, and Someone Else is the guy in the mirror.

The system in bankrupt. This wouldn't happen if it had been properly funded.

Tell that to Petain. He switched it from a funded system to a pay-as-you go system. Then you get the demographic problems like now: a large generation (of baby boomers) retires and a small generation as to pay for their pensions.

That has very little to do with the difference between "defined benefit" and "defined contribution" plans. Both of those are funded systems, where Joe's pension is paid out of the contributions that Joe paid when he worked. When properly administered and controlled, "defined benefit" plans are also solid. The administrators of a defined benefit plan just have to apply a little bit more math for arriving at the right height of the contributions in relation to the promised defined benefit.

 

[WildCat]

Dude, that was not your claim, you claimed the frensh want more from the system than they are willing to put into it.

Which is prety much the definition of underfunding, isn't it?

 

[WildCat]

Tell that to Petain. He switched it from a funded system to a pay-as-you go system. Then you get the demographic problems like now: a large generation (of baby boomers) retires and a small generation as to pay for their pensions.

As I said, the urge to cheat now because the problems won't manifest themselves until much later is a major flaw of defined benefit plans. Assuming human beings run them, of course. Maybe Vulcans could do better.

That has very little to do with the difference between "defined benefit" and "defined contribution" plans. Both of those are funded systems, where Joe's pension is paid out of the contributions that Joe paid when he worked. When properly administered and controlled, "defined benefit" plans are also solid. The administrators of a defined benefit plan just have to apply a little bit more math for arriving at the right height of the contributions in relation to the promised defined benefit.

A defined benefit plan requires the ability to predict the future, the ability to resist using the funds for other things, the will to pay now for a future benefit, the ability to properly account for changing demographics. It's a tall order, even for a Vulcan. For mere humans, especially politicians, it's sheer fantasy.

Far, far easier to administer a defined contribution plan. Nowhere near the amount and scope of potential errors along the way.

 

[excaza]

I'm having a hard time trying to figure out exactly what the French unions want. I understand a lot of this stems from overall dislike of the current administration, but the reaction confuses me.

The pension system is running out of money, and reform is needed. Ok, they don't like the prospect of changing the retirement age (which I don't understand, the retirement age shouldn't be static, it should follow life expectancy changes), so they're rioting. What do they think their alternatives are? The only alternatives I can think of are a reduction in benefits or a tax increase, both of which I'd imagine are going to go over about as well as the age change is.

Something about the pension system is going to change, that is inevitable. What exactly are they looking for?

 

[Francesca R]

What exactly are they looking for?

[ . . . ] the unions and centre left opposition are determined to defend the right to retire at 60 and insist that it could be paid for with higher taxes on business and the wealthy

FT (7 Sept)

 

[ddt]

As I said, the urge to cheat now because the problems won't manifest themselves until much later is a major flaw of defined benefit plans. Assuming human beings run them, of course. Maybe Vulcans could do better.

You're conflating two separate issues.

One issue is how the pensions are paid out: out of current income, or out of the past contributions.

The other issue is how you determine the height of the pensions: "defined benefit" means defining them in terms of the number of years you worked, the salary you earned etc. "defined contribution" means in terms of the contributions paid.

You're equating "defined benefit" with "paying out of current income". That's not true. For example, the big Dutch pension funds - ABP, Philips pension fund, Shell pension fund, etc. - pay the pensions out of the past contributions, but also have "defined benefit" plans. You build up rights to 1.7% to 2% of your average income per year you worked (and paid contributions).

A defined benefit plan requires the ability to predict the future, the ability to resist using the funds for other things, the will to pay now for a future benefit, the ability to properly account for changing demographics. It's a tall order, even for a Vulcan. For mere humans, especially politicians, it's sheer fantasy.

Any plan requires, in a sense, the ability to predict the future: how long will you have to pay out after retirement, i.e., how long will people live? A defined benefit plan merely adds to that a solid analysis of people's behaviour during their professional lives. Demographics doesn't come into it - again, you're conflating the two separate issues I outlined above. Your issue about resisting the urge to use the funds for other means is yet another separate issue. Make the pension fund a separate company, and you've solved that.

Far, far easier to administer a defined contribution plan. Nowhere near the amount and scope of potential errors along the way.

The amount of manpower and computer power needed for the extra calculations is really dwarfed by the amount of administrative manpower to keep track of the changes of the customers.

 

[excaza]

FT (7 Sept)

Are they naive enough to think that will actually happen?