Unions react to the OECD Economic Survey of Belgium


The OECD has released its Economic Survey of Belgium today. TUAC's Belgian affiliates weigh in on the state of the economy and assess the OECD recommendations from a labour perspective:

Belgium & the crisis

When looking at growth and unemployment, Belgium is one of the countries that – until now – survived the crisis in a better way compared to many countries in Europe.

TUAC affiliates believe that the most important reason for this, is the existence of ‘automatic stabilizers’ in Belgium during the peak of the crisis:
  • a decent minimum wage
  • a wage indexation system
  • and a well-designed social protection system for the unemployed, for retired people and the ill.
When the crisis started, these automatic stabilizers helped protecting the purchasing power of the people. And, therefore was able to support economic growth. It is important to note that next to Germany, Belgium is one of the only countries in the EU, in which the GDP level is now higher than before the crisis.

The current government has taken severe measures that will diminish the force of the automatic stabilizers and puts the burden of fiscal consolidation on working people:
  • The unemployment benefits will decrease over time and young people leaving school will be left without benefits when they cannot find a job after leaving school.
  • People will have to work longer (until 67) and harder to get their full pension rights.
  • The government is cutting the yearly growth rate of the healthcare budget.
  • The indexation system will be suspended for the coming 2 years.
  • Although the government has announced a tax shift from labour to ‘less disturbing taxes’, all the burden has to be borne by citizens. Measures of the former government to raise a fair tax on the capital of enterprises that stop their activity, and on undue cost payments have been annulated; as a result, there is even less taxation on capital gains under the present government, compared to the former one.
This is unacceptable to TUAC affiliates: that is why they have organized a series of very successful strikes over the whole country and a general strike on the 15th of December 2014. Following this, the government decided to let social partners take up their role in social dialogue.

Belgium & competitiveness

The European Commission and the ECB are demanding these reforms as ,in their view, Belgium has a “competitiveness problem”. However, TUAC affiliates strongly belief that this approach to competitiveness is very limited and poses several risks.

A recent study by the Belgian planning agency showed that cost factors only determine 1/3rd of the national export performance. 2/3rds are determined by non-cost factors, the so called ‘structural competitiveness’: The non-cost factors are: the innovative character of products, the markets towards which Belgium is oriented, the quantity of R&D investments, the education level, etc.

By ignoring these structural competitiveness factors entirely, we never see recommendations from the European Commission on how to implement an effective innovation strategy or how to improve human capital. We only read recommendations on how to let people work longer, harder and for less money.

The alternatives proposed by the TUAC affiliates in Belgium:
  • We have to increase productivity by investing in R&D and training. The European target for R&D investments is 3% of GDP, we only invest 2% of our GDP. In Belgium, we agreed to invest at least 1,9% of the total wage mass in training. We only reach 1%. Investing more in these areas will allow us to upgrade our economies, to move up in the global value chains.
  • We need to explore other markets than our traditional trading partners. The emerging markets are in need for highly innovative products to increase their own production capacity.
  • We have to change our taxation systems. We should shift taxation from labour to capital and make companies pay their taxes. We notice that organizations like the OECD are finally engaging in this process (with the Base Erosion and Profit Shifting project).
  • The European policy to counter the crisis is not working: growth is lagging, unemployment is on a record high and debt is still rising. We do not support high debts, as decreasing debt should be a long term objective. At moments, when demand is low, the government should play its role by investing/consuming more.
  • Instead of looking for answers by upgrading our economies by investing in productivity, in innovation, in education, we are now using internal devaluation methods. We lower wages because we think this would improve our competitiveness. This is a wrong assumption. Wages are the engine of our economies. We should not underestimate the importance of the demand side of the economy.
  • Everyone in Europe should take their responsibility, in particular surplus countries like Germany. They should support their internal demand by increasing wages. The recently announced minimum wage is a first step in the good direction.
  • Finally, it is important to start structural reforms that really matter: in the financial sector. For now, the pace of the implementation of financial reforms is far too slow. 

Belgium & wage costs

When referring to wage costs, Belgium needs to be compared to neighboring countries. The wage predictions in those countries determine the ‘wage norm’ in Belgium for the coming years. In the past two years this wage norm was zero, there was a de facto wage freeze, except for the wage indexation. Without the wage indexation system people would be losing money in real terms. The wage gap between Belgium and the three neighboring countries was standing at 2,9% at the end of 2014, which is the lowest in the past few years.

What we also want to stress is that when discussing wage costs we should not forget that Belgian companies receive – next to the measures mentioned earlier – already a broad range of so called ‘wage subsidies’. In total, they receive more than 6 billion wage subsidies. In a recent study, the government finally recognized the existence of these subsidies, but unfortunately they have not decided yet, which subsidies will be taken into account.

To lower the wage costs the government has decided to attribute an extra 1,3 billion euros to the employers from 2016 onwards.

Importance of social dialogue

We notice that the social dialogue in Belgium is getting more and more unbalanced and this system, which is very fragile, is coming under danger.

For decades trade unions and employer organisations  were obliged to sit around the table, but now certain dynamics are putting this concept into question: international institutions like the European commission, the ECB, the IMF but certainly also the OECD by giving direct policy ‘advise’ have a direct impact on social dialogue. As a result, the employers often do not feel any need to come to the table anymore.

Therefore, the TUAC affiliates in Belgium would like to ask the OECD to approach social issues with care, so as not to distress a fragile equilibrium which is the result of decades of social dialogue.