France’s Labor Paradox

President Nicolas Sarkozy may have triumphed over the millions of protesters and strikers who opposed his effort to raise the retirement age in France by two years. But his law to keep people working longer and paying into the pension system longer won’t succeed unless he persuades French bosses to play along; they have a nasty habit of dumping employees older than 50. Bonne chance, Mr. President (age 56).

Virtually no one in France contests the logic of the law, which Sarkozy signed Nov. 10, raising the minimum retirement age to 62 and the age required to qualify for a full pension from 65 to 67. France’s pension system is deficit-plagued now and will be swamped when a glut of baby boomers retire. But while Sarkozy’s solution is a no-brainer, it is also poorly adapted to French labor reality. Barely 40% of French people ages 55 to 64 are in the workforce — one of the lowest participation rates in the developed world. That pales in comparison with the OECD average of 54%, the G-7’s 57% and the E.U.’s 46%. The U.S. and British levels are around 60%.

(See pictures of Sarkozy visiting the U.S.)

Worse still, the attitude among employers that older employees are handicaps rather than assets continues to harden. A 2007 survey of French bosses found that fully 50% said they considered 45-to-55-year-old workers already old. (A more charitable 35% placed the over-the-hill mark at 55.) That thinking was evident in a recent poll in which most human-resources directors admitted that they frequently cease training and promoting employees once they reach 45.

The HR heads believed older workers couldn’t retain new information as well as their younger colleagues. As a result, many people approaching 50 are marginalized with busywork by employers. “Aging employees don’t want to stop working, but when they see more than a decade of dead-end activity awaiting them in a place that wants them gone, most accept some sort of agreement terminating their job in exchange for a payout,” says Sorbonne sociology professor Anne-Marie Guillemard, whose recent book The Challenges of Aging: Age, Employment and Retirement examines the topic around the globe. “Finding another job in France is difficult after 50 and virtually impossible after 55,” she says, so these workers collect unemployment and other assistance until they reach pension age.

(See the Five Big Questions of Retirement.)

The state itself is partly to blame for this situation because of its past policy of subsidizing early retirement for older workers at restructuring companies — an incentive meant to dissuade firms from laying off larger numbers of lower-salaried younger employees. That strategy had to be abandoned as the unemployment rate for older people soared to nearly 70% without an offsetting decrease in joblessness among French youths, who face a jobless rate of 25%.

What has remained constant is that French businesses look to cast off 50-somethings whenever possible. That explains why France’s average real retirement age — when people definitively leave the labor market — is 59.4 years. That’s almost three years short of Sarkozy’s new minimum retirement age, when people can qualify to collect pensions and thus stop living off state aid.

(Read: “French Judges Strike to Stop Sarkozy’s Meddling.”)

So how can older French workers stay on the job later in life and save the pension system when France Inc. wants to shut them out of the labor market in midlife? One answer, according to Guillemard, may be found in Finland. When faced with the same dilemma a decade ago, Finland showed companies that older workers can be useful if kept on. “Finland encouraged increased training of aging workers and changes to the work environment to adapt to their needs — both of which made older employees more efficient and motivated,” she says, noting that the number of Finns ages 55 to 64 in the workforce increased from 42% in 2000 to 56% in 2009. “That activist labor policy has been embraced by many companies, where older Finnish workers are now actually valued for the experience they have.”

Guillemard says France’s huge public sector — providing more than 20% of all jobs — represents an ideal place to introduce what would be an initially voluntary program to make the workplace more hospitable and productive for older workers. The problem with that picture? Slashing the bloated rolls of public employees is the aim of another Sarkozy reform.

See 10 Smarter Ways to Reach Your Retirement Goals.

Read: “Can France Fix Its Conflict-of-Interest Problem?”