Retire at 62? Sacre Bleu!

In Cameron Mackintosh’s theatrical version of Victor Hugo’s Les Miserables, the first act ends with the thrilling spectacle of Parisian citizens preparing to launch a dramatic revolution against a powerful government. Sadly, most of the revolutionaries end up dying on the ramparts during the second act, albeit in a glorious and inspiring manner.

The French people, of course, first won their freedom from tyrannical King Louis XVI during the Revolution of 1789, an event that began with a street protest that grew into the mob that stormed the Bastille. Throughout modern history as well, the French people have expressed their political views by taking to the streets to stage public marches.

Last week, in fact, the entire French economy ground to a halt as a labor strike paralyzed the nation. But what were the people protesting? An unpopular war, perhaps? Or a stifling new tax of some sort?

Protecting (Very) Early Retirement

Believe it or not, the strikers were protesting plans by the French government to eliminate early retirement. Or, more accurately, to eliminate very early retirement. To be sure, the government was not suggesting that the national retirement age be lifted to what Americans would consider a “normal” age of 65; instead, it was merely proposing that the age be increased from 60 to 62.

Had the French government suggested raising the retirement age all the way to 65, as the government of Greece did several months ago, Paris may have suffered through the same level of violent rioting that swept through Athens. At the time, street mobs of Greek protestors smashed office windows, overturned motor vehicles, and even committed several grisly murders by fire-bombing a downtown bank during business hours.

Lost in these controversies, though, was an interesting question regarding the comparative fiscal budget deficits of Europe and the United States. Namely, how can French (and Greek) government officials believe that they can restore fiscal solvency by establishing a retirement age in the low-to-mid-60s, while the United States faces a fiscal black hole even though its Social Security retirement age for its youngest baby boomers has already been lifted to 68?

Actuarial Science

The solution to that question is a complex actuarial matter, not one that can be defined easily on the basis of a single issue. On the one hand, it’s true that a later (i.e. older) retirement age tends to reduce a nation’s fiscal deficit, not worsen it. But there are many other factors that drive up the cost of providing income and services to retirees in the United States, factors that simply don’t impact European nations to the same extent.

One factor, of course, is the clinical cost of health care services. The United States’ health care expenditures per capita is far higher than France’s expenditures, greatly due to policy differences between the nations. For instance, America refuses to permit its own Medicare regulators to negotiate with pharmaceutical companies and other providers for lower fees. Thus, even though American senior citizens begin to receive government health benefits far later in life than French citizens, the annual cost of those services is far higher in the United States.

Another factor is the cost of administrative complexity. In the United States, Medicare is not the sole insurer of health services for seniors. Many citizens also rely on retiree health benefits provided by their former employers, or on the MediGap private insurance plans that are sold in the commercial sector, to pay for services that fall outside of Medicare’s coverage limits. Furthermore, each state in the United States establishes its own Medicaid coverage policies for long term care functions, which are terribly costly services that are provided near the end of one’s natural life.

Finally, there are cultural factors that impact American populations far more than French populations. Although the French citizenry does encompass various cultural groups, the American citizenry constitutes a mind-boggling diversity of languages, cultures, and ethnicities. Although many believe that this diversity represents a core strength of American society, it also complicates the government’s efforts to distribute a uniform set of benefits across its entire population.

What To Do?

So what is the United States to do? How can the nation manage the many factors that are driving the budgetary costs of retirement benefits far beyond the comparable costs of peer nations?

Although it may be very difficult for America to address the cultural factors, it can undoubtedly accomplish much by tackling the clinical and administrative costs of services. Program administrators, for instance, can address clinical costs by negotiating volume discounts with medical providers. The federal government can address administrative costs by encouraging or mandating the adoption of electronic health records in standardized formats. Such common-sense activities can go far towards supporting an American retirement age that would satisfy most citizens in the United States, even though it may enrage the populace elsewhere.