Vincent Van Quickenborne (Open Vld), Minister of Entrepreneurship and Simplification, calls on the social partners to tackle the reform of the labor cost handicap, caused by automatic wage indexation, and take it into account as one of the priorities during the negotiations for a new inter-professional social agreement.

The minister reacts to the report of the Central Economic Council (CRB / CCE) on the wage evolution, which shows that the salary gap between Belgium and its neighbors slightly decreased. However, 3.3 percent remains a significant gap, which naturally impacts on the competitiveness of Belgian companies and on the choice for Belgium as a place to establish their business for foreign companies. Accordingly, Minister Van Quickenborne considers the reform of this system to be a priority.

While projections of the employment level show a decrease from 64.2 percent in 2008 to 62.1 percent in 2010, Van Quickenborne considers that reform is crucial to retaining existing jobs and creating new jobs, both in the aftermath of the economic crisis and during the upswing.

He also indicates that the current model of economic growth is no longer sustainable. Instead, the Belgian economy should become a knowledge economy. The Belgian economy needs to be leaner and greener.

AmCham Belgium’s position
AmCham Belgium recommends abolishing the system of automatic wage indexation, as it places businesses in Belgium at a disadvantage compared to businesses in other countries. Belgian businesses have to pay higher wages than their competitors in other countries, which means a substantial share of their current liabilities is spent on salaries. Automatic wage indexation weakens Belgium’s international competitiveness power.

Institutions and organizations such as the OECD and the European Central Bank have also repeatedly held that Belgium’s automatic wage indexation is a major obstruction to its business market. Abolition of this system will not only lead to economic growth and creation of jobs, but inflation will decrease too, leading to a healthier national financial situation, and provide opportunities to enhance Belgium’s business climate.

Furthermore, the indexation generally absorbs most budget available for wage increases, leaving little or no room for performance based increases.

Click here for more information about AmCham Belgium's Priorities for a Prosperous Belgium.