Not shy about retiring: strikes in France

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Hello and welcome to the Intelligence from the Economist. In New York, I'm John Fastman.

And in London, I'm Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world.

Earnings season is underway with manufacturers, tech and consumer goods firms and American banks all reporting dreary results. Where else can you expect gloom? And where will you find the bright spots? Stay tuned.

And traditional marriage vows often include a promise to forsake all others, to be faithful to one person forever. But monogamy isn't for everyone, and increasingly people are finding ways to make lifelong commitments to more than one partner. First up, though, Today workers are going to pour onto France's streets, around a million of them. It's the second such protest in the space of two weeks. We need to be heard, said the head of one workers union after the first protests 12 days ago, suggesting even more people would turn out today. At issue again, or still are, some seemingly modest changes to the country's complicated and creaking pension system. But in France, trying to tweak that is a dangerous game.

Well, after a very successful round one on January 19, France's eight main trade unions have organized another one day mass walkout and day of protest.

Sophie Petter is our Paris bureau chief.

We've got workers from transport, from education, from the fuel refinery sectors and many more who are joining today's industrial action. What they want to do is to stop the pension reforms that have been proposed by President Emmanuel Macron. And in a lot of ways, I think that the fate of these measures are going to be a test of his ability to continue to modernize the French state during his term in office.

So tell me a bit more about these reforms, what it is that's got all these unions riled up.

Well, the pension reform was unveiled by the French Prime Minister, Elisabeth Bonne on January 10th, and there's a raft of measures. For example, there's an increase of €100amonth for the minimum state pension. There are some extra credits for those who have physically demanding jobs or those who started to work when they were very young. But the centrepiece of this reform is the raising of the minimum legal retirement age from 62 years to 64. And this will take effect by 2030. This is in line with Macron's campaign promise when he was re elected last year. But the measure is deeply unpopular, not.

Least, I gather, with the unions.

Well, outside Macron's party and his support base, the unions, but almost everyone, if you look at polls, got 68% of the population against this reform, and that figure has not changed since the first day of strikes. You've got three quarters of the working age population between 35 and 49 are against it as well. Every single one of the country's powerful trade unions and pretty much all the opposition parties as well. And that goes from Marine Le Pen's National Rally on the Nationalist right to Jean Luc Melanchon's Unsubmissive France on the hard left. Both of them want to lower the retirement age, at least for some workers, to the age of 60.

So if it is so hugely unpopular, why is Mr. Macron pushing so hard for it?

Well, it was a core part of his manifesto, and it's absolutely central to his identity as a reformer. He's been promising to unblock or to transform France since he was first elected back in 2017. He tried to do pension reform back in 2019, and that prompted the longest strike since 1960. So it was shelved during COVID in fact. But a more pressing reason is demographic. France's life expectancy has actually grown, and it's one of the highest. At the same time, birth rates are coming down and the ratio of taxpayers to pensioners just doesn't add up anymore. The average age at which Frenchmen actually retire, so when they leave the labor market is 60 and for women, it's 61, and that is the third lowest in the OECD. And because of the high life expectancy, this means that the average retired man then spends 23 and a half years in retirement and a woman 27. That's the second longest. France spends 14% of GDP on public pensions. That is nearly double the OECD average. And if you ask Bruno le Maire, the French Finance Minister, he'll tell you that by 2030, the deficit in the French pension system will reach 14 billion euros. France simply can't afford to keep paying for all of this.

So clearly these reforms central to Mr. Macron's presidency now, and he's determined to do it in the way he wants to do it. What are the chances he'll get it through this time?

The new rules are going through Parliament right now, but Macron doesn't have a majority anymore. He lost that at legislative elections last year. So his best hope is to secure the support of some of the centre right Republican Party. They themselves, when they were in power, actually increased the retirement age as well. So they ought to be in favor. But of course, they're not too keen to hand Macron easy victory. And there will be a full debate in the National assembly on February 6. Already, opposition parties have submitted 7,000 proposed amendments to this bill. Now, if Macron's government can't find a majority in Parliament, it may just have to resort to an article of the constitution that would allow it to force it through Parliament. But the risk was that it could prompt a no confidence motion in government and then possibly fresh elections.

But what about the effects on the streets? With literally a million people coming out against this, do you think those protests will have any effect on how this pans out?

Well, I think this is the key issue, that the opposition in Parliament is one thing, but the really tough opposition, as often in France, is going to be on the streets and it will put further pressure on Macroy. It depends a little bit who wins the war of attrition. He has only an approval rating of 36%. So far, the administration is sounding pretty tough. Elizabeth Bonne, the Prime Minister, has said once again that the pensioning changes are not negotiable. And so has the French Transport Minister, Clement Beaune. But as always, protesters on streets can present a formidable challenge for French governments, even if they're perhaps not quite as formidable as the challenge of an aging population for France.

But viewed from the outside here, it's clear that the numbers don't add up. It seems like the reforms are actually pretty modest, just a change of a couple of years of retirement age. Why is it that there is so much opposition? Why is it that we keep talking about this very problem?

I think that pension age in France touches a really central part of the national identity. If you think Back to the 1980s, Jason, it was Francois Mitterrand, the Socialist president, who brought down the retirement age from 65 to 60. And I think the French to this day consider it a part of progress towards a better society. It's not just about demographic, it's not just about national accounting. It's about what kind of a society they want to create. And this is why it's such a tinderbox whenever any government tries to conduct pension reform.

Thanks very much for joining us, Sophie.

Oh, it's always a pleasure. Thank you, Jason.

It's earnings season.

All right. A number of earnings today after the Bell, Teradine, csx, SL Green or this.

Week'S earnings season kicking off with the.

Banks messy results from some of the country's biggest players.

We're going to bring you all the details.

Every quarter, the largest public companies announce how well or how poorly they've done. And the first Earnings season of 2023 is in full swing. Leading banks have already reported gloomy results. Later this week, it's the turn of the tech giants Meta Alphabet and Amazon will reveal their products performance. It's a temperature check on the state of business in the economy. And for investors, this time it's also turning out to be something of a reality check.

There is a sense of optimism at the moment. China is reopening. Inflation is easing.

Thomas Bennett is the Economist's global business correspondent.

But if the market's expectations are anything to go by, we can brace for the first year on year decline in corporate earnings for large American firms since 2020.

And what have we seen so far? Tom?

Well, the banks reported first and six large American banks reported together a 20% fall in their profits. The pain wasn't distributed evenly. The fortunes of dealmakers who earn most of their revenues from advising on large transactions and trading and deposit takers who make their money through consumer deposits, diverged. Particularly hard hits were Goldman Sachs, who also announced layoffs of around 3,000 of their workers in January. Earnings season is now in full swing. Microsoft reported a particularly gloomy outlook for the full year 2023.

So I'd like to pick up on that. To what extent do you think Microsoft's gloom is indicative of the tech sector more broadly? It seems like every week there's A fresh round of job losses.

I think one of the things we're seeing in this earnings season is that tech is cyclical after all. So tech enjoyed a massive bounce at the start of the pandemic as demand for their products and services ticked up due to everyone working at home. However, those demand levels are starting to normalize and tech firms are starting to cut costs as a result. We saw Microsoft announce that about 10,000 workers being laid off. And in very quick succession, Alphabet, which is Google's parent company, also announced that they were laying off 12,000. These layoffs don't quite reverse the frantic pandemic hiring of the large tech firms, though. They are significant and represent a structural change in the way bosses are running tech firms from a focus solely on growth to also a focus on margins and cost cutting.

What's driving these layoffs and stock slumps?

It's really a renewed focus on cutting costs. The demand for tech services and products is starting to normalize, and as a consequence, bosses are starting to focus on paring back some of the excessive costs they've incurred during the pandemic. And one of those is hiring. They hired enormous numbers of people during the pandemic.

And what about consumer sentiment and consumer facing businesses? Are they suffering similar travails?

Well, those who sell products to consumers, particularly discretionary items, are facing some pretty significant challenges this year. Inflation was in general a good thing for these firms. Their prices of their products were increasing faster than their costs, which resulted in record profit margins last year. However, now the ability to pass on cost to consumers is waning and we can expect their profit margins to drop this year. Recent economic data showed that retail sales in the US declined just over 1% over Christmas, which gives some indication of dampening consumer demand, especially for discretionary items. Consumers are beginning to trade down more and firms are beginning to cut prices as they try and shift excess inventories.

So these businesses, it sounds like, are facing a troubling presentation. What about future plans? Should we expect them to dampen their capital spending and investment as firms start.

To lay out their spending plans for the year? This is a really crucial question. So just at the point where profit margins are going to come under pressure. So the megatrends of business digitization, a decoupling of America and China, green technology, all demand massive capital spending from firms. And there is a tension that at the same time, profit margins are going to become increasingly under pressure as a consequence of slowing economic growth.

So this really is a very gloomy picture you're painting. Tom, are there any Positives. Any signs of health from this earnings round?

There is. There's always positive surprises in earnings season. The airlines in particular have had a good earnings season and demand has held up well. Netflix posted seven and a half million new subscribers aided by their new ad interrupted service. There will also be positives from the reopening of China though. Chinese sales account for only about 7% of the S&P 500 sales.

So, Tom, we've discussed immediate and near term prospects. How long do you think the picture remains gloomy?

Well, many analysts are forecasting a light recession if we see a recession at all. However, looking further ahead, there seems to be real structural headwinds which might dampen corporate profits which reached a record percentage of GDP in America last year. Two major tailwinds to corporate profits have been low corporate tax rates and high leverage. Both of these are under a threat. There is less appetite for deficit funded tax cuts for corporations and money is no longer free. As a consequence, we can expect both of these long term tailwinds to subside over the coming years which could present an additional challenge to corporate profits.

All right, Tom, thanks so much for joining us today.

Thank you very much.

I'm Nate.

I'm Ashley.

I'm Eric.

How do we label ourselves?

How do we label ourselves? I typically don't use the word polyamory or any such things. We are in a relationship. We are married.

We are three people who are in love and committed to each other and to raising our children.

We liked monogamy so much, we did it twice.

According to the saying two is company. But for Ashley, Eric and Nate, three have a better time.

Eric and I have been together since we were in our mid teens.

We started playing D and D and we had a good time.

We had at the time our daughter and I was pregnant with our second. And so we said, oh, that's great. After kid bedtime, we can have a campaign.

Life happened and we kept playing. We just all got along more and more. And eventually me and Ashley said it was, you know, we're starting to have feelings for this guy. Let's have a serious discussion about this. Ashley proposed to me and I like lost my mind. We started thinking, you know, what does this look like, right? Let's figure out this wedding, right? Is it a wedding? Well, it's not a wedding.

And while the throuple were prepared to share a promise, they found themselves at a disadvantage compared to couples who do the same.

Technically, when you have a commitment ceremony that doesn't come with any of the legal protections I want to be a father of the children. I want to be a permanent forever partner. But being in a polyamorous relationship, we didn't know what that looked like legally.

Before proposing, I had already started to investigate what are the legal protections for polyamorous relationships? You know, can you have legal protections for more than two committed partners? You know, the answers at the time, even though that was only a couple of years ago, were very, very different than they are now.

Every state bans bigamy or polygamy, so multiple people can't legally get married to each other.

Kennet Werner writes about America for the Economist.

Marriage gives a lot of benefits. The biggest ones are federal tax benefits. The other big one in America is health insurance. Insurers are required to extend health coverage to the spouse of the primary person on the plan. So that's a big thing that say the third or fourth person in a multi person relationship would miss out on. There are also privileges when it comes to hospital visitation in the emergency room. And another big one is immigration. You can sponsor your spouse for a green card if they're not an American. And you can't do that for, say, if you were kind of in a three or four person relationship.

Are there moves being made to expand rights in this area?

Yeah, these are mostly going on at the local level. This city called Somerville, outside of Boston in 2020, it was the first city in the country to offer multi partner domestic partnerships. It doesn't confer that many benefits, but kind of it was a landmark thing nonetheless. Another example of kind of states offering more rights and kind of recognizing the rights of polyamorous people is the fact that about a dozen allow triple parent custody of children.

How widespread are polyamorous relationships?

We don't really have data on that, but we know some things about what's called consensual non monogamy. And so this is an umbrella term that covers polyamory. It also covers relationships that are more kind of sexual in nature but involve multiple people. And so that could be things like swinging and open relationships. Whereas polyamory kind of emot implies that there's some kind of love and commitment. And so we know that about 1 in 20 people who are in a relationship are in a consensually non monogamous one. That means that there's agreement among all the parties that they can have multiple sexual romantic partners outside of that two person relationship. And then we know in terms of past prevalence that one in five people will have participated in a consensually non monogamous relationship over the course of their life. And this all comes from kind of survey data by Amy Moore, who's a psychologist at Chapman University.

Kenneth, those numbers are higher than I was expecting. Do you know if the number of people in these sorts of relationships is growing or is it just growing awareness? Are people just becoming more comfortable to admitting to being in these sorts of relationships?

So we don't really know about whether it's getting more common, but we definitely know that views are changing. And that's largely, I would suspect, because there are more media portrayals and there's more visibility. And so in terms of kind of how attitudes are changing, in 2020, a fifth of Americans told Gallup that they think polygamy is morally acceptable. And that's a big jump. It's a fourfold jump since 2006. And we also know that millennials are more inclined towards non monogamy. Two in five tell pollsters that they prefer that arrangement over monogamy.

So are people falling out of love with the idea of monogamy, with the idea of just being with one person for their whole life?

Yeah, I think you could say that. I mean, something that really struck me in researching this story is that a fifth of people in monogamous relationships have admitted in anonymous surveys to having cheated. So I guess you could say that monogamy doesn't work out so well for everyone.

Kenneth, thanks so much for joining us today.

Thanks for having me.

That's all for this episode of the Intelligence. Let us know what you think of the show. You can get in touch@podcastseconomist.com and you.

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Sam.