Foreign in January of 2023, more than a million people took to the streets in France and the largest protests the country had seen in years. The protests were accompanied by a general strike that saw a similar number of people refusing to show up for work, forcing the Paris Metro System schools and many other public facilities to shut down. in February, The protesters came out again, this time numbering far in excess of 1 million, causing even more disruptions to Everyday Life The Catalyst Of these protests is President Emmanuel Macron's proposed pension Reform that will raise the retirement age from 62 to 64.. this means that French workers will have to work additional years before collecting their government-funded pensions.

The proposed pension reform has made the Macron regime extremely unpopular, with 70 percent of French voters now disapproving of him. Despite his rapidly declining popularity and the rapidly escalating riots, Macron is refusing to back down. You might ask, why are we covering France's pension reforms? Only 0.6 percent of this Channel's viewers are friends. Does this mean that the remaining 99.4 of people should stop watching this video? Unfortunately, No.

France may be the first country to devolve into chaos, but the problems they are facing are by no means unique. Almost all advanced economies are facing demographic crises. with decreasing fertility rates and a rapidly aging population. this is putting a massive strain on pension systems to the point where a comfortable retirement may be little more than a pipe dream by the end of the decade.

While France is currently the epicenter of the rioting, this satisfaction May soon start spreading to other advanced economies in Europe and North America In this video, we'll look at why Macron's pension reforms are so unpopular and what this means for the rest of the world. Foreign: France spent 400 billion euros or 14 of its GDP on pension payments. Its pension system is one of the most generous in the world, with retirees making 50 of their 25 highest earning years. The French have long prided themselves for providing the best benefits to retired people, allowing elderly people to live in dignity for the last segment of their lives.

The French pension system is funded by payroll taxes. Every month, seven percent of all wages are deducted from workers paychecks and the employer has to pay another 10 on top of that. Altogether, this adds up to 17. In addition, the employer is liable for Health Care taxes, unemployment insurance, and a few other miscellaneous taxes.

Altogether, French payroll taxes represent 24 of gross wages, which is one of the highest rates in any developed country. The high taxes make it very expensive to hire French workers, which makes the economy uncompetitive on the global stage. This has contributed to stagnant economic growth over the past decade and stubbornly high unemployment, which has remained above eight percent since 2008. In 2017, a former investment banker named Emmanuel Macron wanted to change those he ran for president, promising to reform the country's economic system and make France competitive with other economies.

Part of this entailed overhauling the country's overly generous pension system. In 2019, the Macron administration unveiled a pension reform bill that aimed to do just that. One of the key aspects of this reform was raising the retirement age from 62 to 64 to reduce costs. Despite having elected Macron just two years prior, the French people were not happy with the pension reform.

Labor unions organized massive strikes in protests which numbered 800 000 across the country. In 2020, the pandemic shut down the economy and the pension reform plans were put on hold. The last thing the government needed was civil unrest in these trying times. In 2022, Macron was re-elected for a second term.

He now felt that he had the political mandate to resurrect his pension reform, which he had been wanting to do for years. The terms of the pension reform were largely the same as his failed attempt back in 2019. the key provision was raising the retirement age from 62 to 64.. However, at the same time, France's economic situation was deteriorating.

The global energy crisis pushed inflation up to 40-year highs across the Eurozone including France. This had the effect of decreasing living standards for working-class people, many of whom were barely scraping by in the face of rising prices. The last thing the people wanted was a pension reform that would reduce the benefits to the elderly. Almost immediately after the pension reform was announced.

In January of 2023, over a million people took to the streets in protest. The protests turned violent, with some belligerence going so far as to throw heavy garbage cans at security forces. Despite the violent nature of the protests and the resulting disruption to Public Services, the majority of the population supports them. The Micron regime's popularity has also plummeted, with 70 percent of Voters now disapproving of him.

Macron certainly knew that the pension reform would make him unpopular with voters, so why did he go through with it anyway? Foreign. The most important thing to understand is that France's pension system, and almost all public pension systems for that matter, function as Government mandated Ponzi schemes. So what does this mean? The idea of a pension system is that while you are working, you contribute money into the pension. In the case of France, this amounts to 17 of the gross wage, so quite a significant amount in return for your lifetime of contributions, you get to take money out of the system when you retire.

In an Ideal World pensions would not be necessary. Theoretically, if everybody was financially responsible, they could save money on their own and retire comfortably without the help from the government. The problem is, a lot of people are not financially responsible. If left of their own devices, they would live paycheck to paycheck and save almost nothing.

Before public pension schemes were implemented, it was not uncommon for elderly people to live in extreme poverty, even in rich countries. To prevent this, governments implemented mandatory pension schemes whereby everyone has to contribute. In the 20th century, almost every advance economy implemented a mandatory public pension system, and they almost all function in the same way as workers contribute to the pension system. This money is immediately paid out to existing retirees.

By the time the worker retires, the money they contributed has already been spent. The only way they can receive pension payments is from the contribution of new workers. In this way, it functions almost exactly like a Ponzi scheme. An endless supply of new contributors is required to pay off the existing retirees.

Arguably, a more fair way to run a pension scheme is to lock up each worker's contributions so they can only be used to pay back that contributor once they retire. This way, each worker would be guaranteed to make back what they put in or even more if the money is invested. The problem is, when you first initiate this kind of scheme, it would only help existing workers. Once they eventually retire, it would do nothing for existing elderly people.

For a politician thinking about their short-term election cycle, the ponzi-like system is a much easier sell to the public because it benefits current retirees and immediately. that's why almost all countries chose to trade short-term gain for long-term pain and opted for the Ponzi system. In 2000, the French government set up the Pensions Orientation Council The Job of the council is to monitor the health of the country's pension system. In 2022, they conducted an analysis and the results were not good.

In 2022, the pension system is expected to roughly Break Even meaning the worker contributions will almost exactly equal the payments made to retirees. However, the situation will deteriorate significantly going forward. They have a few different scenarios based on labor productivity growth. If labor productivity increases rapidly, so too will wages, which will increase the level of contributions to the pension fund.

In all scenarios, the pension system will start running in deficit in 2024. In the most optimistic scenario of 1.6 annual productivity growth, the deficit will eventually turn into a surplus around 2060 as wages increase. In the most pessimistic scenario of 0.7 productivity growth, the deficit will continue to expand every year, eventually reaching 1.8 percent of GDP by 2068.. So which scenario is most likely.

Over the past 50 years French Labor productivity growth has been steadily declining. In the 1960s, it was growing at around five percent per year. By the late 2010s, this had decreased to about one percent per year. And it's not just France.

Most advanced economies have experienced similar declines during the 60s and 70s, and even the 80s, there were huge amounts of easy gains to be made. Factories could massively increase their productivity by adopting automation techniques such as conveyor belts, and Robotics By now, most factories already have significant amounts of automation. There is still some room to improve, but these improvements are happening much slower than they did in the past. If we take the one percent productivity growth scenario, the French pension system will start running a deficit next year and that deficit will steadily increase to one percent of GDP by 2040..

This would mean that the government would have to come up with an additional 30 billion dollars every single year. Realistically, they would have to increase payroll taxes to balance the budget. But remember that France already has one of the highest payroll tax burdens in the world. This will make the French economy even less competitive on the global stage and accelerate their relative economic decline.

We now see that France's pension system is unsustainable, but why is this happening now? After all, the system is almost a century old and there haven't been any problems in the past. These two charts tell you everything you need to know. The first chart is the fertility rate. In France it measures how many births there are per woman.

To maintain a stable level of population, you need at least two children per woman. Starting in 2014, the fertility rate has been decreasing and now sits at 1.8 At the same time, advances in medical technology are causing life expectancy to increase. France already has one of the highest life expectancies in the world. French women live to the age of 87 on average and French men live to the age of 83.

assuming they retire at the age of 60. this means their retirements are 27 years long for women and 23 years long for men. By 2070, the retirement length is expected to increase to 31 years for women in 29 years for men. This is a major disaster because longer retirements means greater expense for the pension system.

At the same time, the low birth rate means that there will be less young people to start contributing to the pension system. Currently, there are about 29 million French workers contributing to the system. Them in 17 million retirees collecting benefits over the coming decades, the number of contributors is expected to decrease gradually over the next decade, while the number of retirees is expected to increase by almost 50 percent. Macron's plan to increase the retirement age by two years will decrease the number of retirees and increase the number of contributors.

The hard truth is that while these reforms are unpopular, they are necessary to prevent the system from going bankrupt. The French protesters can't handle the truth, so they instead resort to assaulting police officers and burning down the streets of Paris Foreign is not the only country that I'll soon be seeing a pension crisis. Over the coming years, birth rates across all developed countries are steadily decreasing and have been below the minimum replacement rate since 1990. the percentage of the population over the age of 65 is also steadily increasing.

In the case of France, only 13 of the population was above the age of 65 in 1970. today, that has almost doubled to 21 percent. The main reason is that as women enter the workforce, many of them prefer to focus on their careers instead of raising families. As people of both genders focus more on their careers, the percentage of people living alone has increased dramatically in many countries.

currently. Japan is the world's oldest country, with almost one-third of the population being over the age of 65.. As a fertility rate continues to fall, the Japanese government has implemented increasingly Desperate Measures to encourage people to have kids. This includes generous tax credits to parents and even government-funded matchmaking.

Services None of these gimmicks have worked and the population continues to get older year after year. If you go to Japan and travel anywhere outside the tourist areas, you will be greeted by abandoned buildings and dilapidated infrastructure. And it's not just Japan and France. This same trend is unfolding at varying speeds in almost every developed country.

We have to view the world as it is not as we would like it to be. The reality is that young people today must be prepared to work hard and for longer than previous generations, There's no way around it. If the French protesters continue wreaking havoc on the streets of Paris, they may very well pressure the government to abandon the pension reform just like they did in 2019, But this would only delay the inevitable. Alright guys, that wraps it up for this video.

What do you think about the French Pension reform? Let us know in the comments section below. As always, thank you so much for watching and we'll see you in the next one! Wall Street Millennial Signing out.