[Editorial] Learning from Macron for pension reform

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[Editorial] Learning from Macron for pension reform

The Emmanuel Macron government of France has proposed a very politically risky and unpopular pension reform scheme, raising the official retirement age from 62 to 64 to qualify for a full pension from 2030. To appease the public, the payout ratio will be raised to 85 percent of the minimum wage from 75 percent.

In a New Year’s address, Macron argued the government has a duty to hand down a fair and solid social system to the future generation because if not for an immediate action, the pension will build up a deficit of $20 billion by 2030, which means the public retirement program must be financed on credit. Prime Minister Elisabeth Borne in announcing the plan on Jan. 10 admitted the roadmap could unsettle the public, but she argued that leaving it unattended will be more irresponsible.

The second attempt on pension reform faces equally strong opposition. Eight major union groups declared a strike. Even milder unions are ready to join the protest. The disapproval rate is 72 percent. The last time Macron tried to change the money-losing pension system, he faced flaming protests in “gilets jaunes (yellow vests).” How France sees through its plan could be a good model for Korea also working on pension reform.

President Yoon Suk Yeol also has been gearing up for pension reform. The government will advance the announcement for the fifth long-term pension finance estimate slated for March to January. The third estimate in 2013 projected our national pension to run out of funds by 2060. The fourth in 2018 estimated the depletion to happen faster in 2057. Given the stubbornly low birth rate and fast aging, the timing could arrive faster in an upcoming report. Pension reform can no longer be put off.

The Ministry of Health and Welfare under the last president Moon Jae-in in 2018 proposed a reform plan, but Moon turned it down, saying the rise in premium could not be agreed to by the public. The ministry submitted four sets of reform packages to the legislature, but they were killed without a thorough study.

For pension reform to work, the ruling power must persuade the public and opposition parties to build up a social consensus. According to a joint poll by the JoongAng Ilbo and Gallup Korea in September last year, 43 percent favored the pension system to stay unchanged and only 25.2 percent agreed to a raise in payout age, 12.6 percent to a raise in premium rate, and 10.1 percent to a cut in payouts. Disapproval can increase when the government comes up with a specific outline.

The government needs to convince the public of the need for a revamp in the pension fund. The opposition must show bipartisanship instead of using pension reform for political gain.
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