Frenchonomics

I can’t even make this up . . .

Students in France are protesting again. A few years ago they protested AGAINST lowering the bar for employers to be able to hire students. Employers wanted to be able to pay less experienced people a lower rate. The minimum benefits an employer has to set aside for each employee makes taking on a student worker a very expensive option.

So instead of entering the workforce, students stay in school. Or they travel. Or maybe they munch on baguettes in cafes. The average age of a university trained student entering the workforce has shifted. Many are now 27 when they enter the workforce for the first time. Now they’re upset that the age to receive a full pension is moving from 60 . . . to 62.

Let’s do the math. Enter the workforce at 27. Retire at 60. The average lifespan is 81.52. So that’s 81.52 years of living, 33 years of working. Or in other terms, 27 years of “education,” 33 years of work, 21 years of loafing, making work 40% of the lifespan. Now let’s factor in the hours. Keep in mind, the French work 35 hours a week, 45 weeks/year for a total of 1575 hours/year.  So total portion of a French life spent toiling: 7.28%. With the additional 2 years of work, that bumps to 7.7%.

In all fairness, they are supposed to contribute to the pension for 42 years before receiving payments in full. That bumps the toil factor to 9.2%. One way to look at this is that they  have agreed to take care of each other for 91% of their lives. The other way to look at it is that they expect to generate an internal rate of return of 980% on each person. So the hurdle rate for making babies in France is 980%.

How likely is that as an investment scenario?

For more on students protesting the retirement age: Frenchonomics. Sadly Yahoo has broken this link with bankruptcy one too many times…. Sad to see that my tiny blog outlasts the links from a former powerhouse.