The Impact of Pension Reform on the Labor Market

In the coming years, the labor force—which includes both employed and unemployed people—is expected to grow more sharply than anticipated.
 

A changing landscape awaits the French workforce, according to projections from INSEE, which recently unveiled a fascinating outlook on the future of the labor force. The main driver of this upheaval? The impact of raising the legal retirement age. In the coming years, the labor force—which includes both employed and unemployed individuals—is expected to grow more sharply than anticipated. According to figures published by INSEE in late June, France will reach a peak of 31.2 million workers in 2036 (compared to 30.1 million in 2021), before declining and stabilizing at around 29.8 million in 2070. These projections, presented to the Pension Policy Council (COR) in early summer, are based on a set of demographic assumptions formulated during the preparation of the 2022 annual report.

According to INSEE, the significant increase in the number of working-age people stems in part from the flagship measure of the pension reform, which introduces a gradual increase in the retirement age, beginning as early as September 2023. This measure is coupled with an extension of the minimum duration for long careers, as well as an acceleration of the 2014 Touraine reform, which aims to increase the contribution period from 42 to 43 years for a full pension by 2027, instead of 2035.
600,000 Additional Workers
 

By 2070, the labor force is projected to include approximately 600,000 more people than had been forecast prior to the pension reform. The labor force participation rate—that is, the ratio of the number of people in the labor force to the total population—for those aged 55–69 would increase by 4.5 percentage points. Even more striking is that the labor force participation rate for those aged 60–64 would rise by 10.9 percentage points. However, INSEE notes that the labor force participation rate for workers aged 25 to 54 would remain unchanged between these two periods.

According to these projections, France would have no fewer than 29.8 million people in the labor force by 2070. INSEE also indicates that workers aged 55 and older are expected to account for 24.8% of the labor force, representing a 1.4-point increase compared to projections made prior to the pension reform. Overall, INSEE concludes by noting that “the total population would see a slight increase by 2070, but would continue to age.” The number of people aged 70 and older is projected to increase by 5.2 million, while the number of people under 70 is projected to decrease by 3.1 million. This demographic shift points to a constantly evolving future for the French labor market.