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Harbinger of Things to Come?
Ray Johnson, CFP
April 2006
France has been in the news lately. Students have taken to the streets to violently protest new laws designed to make it easier for companies to both hire and fire young employees. It seems that in France, employees are literally guaranteed life-long employment once hired by a company. In this environment, companies have been reluctant to hire new employees whom they may not want or need long-term. This has resulted in high unemployment of about 20% among young French citizens and a national economy that is mired in slow growth.
Jobs are viewed by the citizens of France as life-time entitlements with little flexibility by companies to hire and fire employees. The irony is that the new laws designed to provide more jobs for young workers were viewed as a loss of job security which they had been promised by society. The outcome, as most of us know by now, is that the French government backed off implementing the new laws and returned to the status quo.
French society has grown accustomed to short work weeks, long vacations, guaranteed jobs, and good retirement benefits. Competition in the global marketplace is putting financial stress on their society as they attempt to adapt to a more competitive envirnoment. Right or wrong, the government was trying to address these changes but was recently forced politically to back off due to violent protests of the younger generation who felt a disporportionate loss of the job and retirement entitlements
Can't happen in the United States, you might think? Let me ask you this question: What is fundamentally different politically between the job entitlement challenge in France and the challenges that we face with Social Security and Medicare entitlements in America? Now, try to envision what the Main Streets of America might look like when the time comes to reduce the younger generation's expectations for future Social Security and health care benefits while at the same time we are increasing their payroll taxes to fund the continuation of baby boomer benefits?
Many of us may remember Dan Rostenkowski being chased down the street by an angry group of senior citizens the last time the US Congress passed a law making Medicare benefits less of a universal entitlement and more needs based. As in France, this law was quickly repealed.
Most of us have long known that the longer we wait to fix Social Security and Medicare, the more dramatic those changes must be. Last year at this time, President Bush campaigned heavily on the Social Security crisis and the need to fix it quickly. Maybe I am Rip Van Winkle and have been asleep for the past twelve months, but I have not heard a peep about Social Security for a long time. Did they fix this crisis while I was asleep?
When the time comes for American politicians to step up and face these inter-generational entitlement issues, should we be surprised when the youth of America takes to the streets to protest? Oh well, another day down and another day closer to retirement we get.
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