June 2, 2010

An Open Letter on Labor Costs and Flexibility

 

To the Leaders of Belgium’s political and economic future:

A prosperous Belgium with employment for all and a stable, vibrant business environment which encourages entrepreneurs to set up in Belgium and investors to fund them will revitalize the economy. AmCham Belgium’s advice to all political parties is to take bold, brave and innovative measures in tackling the challenges the country faces as it emerges from the economic crisis. We urge those elected to serve in government to immediately take steps to signal their determination to work with the business community to tackle some of the existing issues.

The US-Belgian business community’s message for the new government is loud and clear: The overall cost of labor in Belgium is too high, acting as a deterrent to investors and a disincentive to the creation of new jobs in Belgium. Belgium needs to shift its attention from “dividing the pie, to making and growing the pie”.

AmCham Belgium recommends that the new government:

• Lower employer social security costs to 29% - down from the headline rate of 35%, and signal that further reductions are likely once the economy recovers. Such a move sends a clear signal to business and investors that it wishes to see more jobs created in Belgium. The cost of such a measure could be offset by eliminating structural social security deductions (rate reduction/base broadening). The overall impact on business of this streamlining of the social security system would be significant. Creating jobs in Belgium rather than elsewhere would become a real possibility.
   
• Reduce the impact of automatic indexation of wages, beginning by announcing that only that part of wages below a lump-sum amount agreed at national level and with the base salary as a reference will be indexed. This would empower employers to reward excellence in the workplace and introduce a degree of flexibility to the labor market. Belgium has the most pervasive wage indexation regime in Europe, and it decreases Belgium’s competitiveness while driving up employment costs for the government and companies.

Bold measures such as these, having the potential to effect real change, are necessary. It is only by having the political courage to implement such measures that politicians can put an end to the steady flow of negative media reports which only serve to deter new investors from coming to Belgium. At the same time, companies already here are discouraged from expanding their operations in the country and instead consider relocating some of their activities elsewhere.

AmCham Belgium believes that implementing these measures is essential if the steady decline in foreign investment activity into and with Belgium, as outlined in AmCham’s October 2009 US Direct Investment report, is to slow and then halt. This decline has been confirmed in IBM’s 2010 Global Locations Trend annual report, which has been widely commented on in the media. The US-Belgian business community represents a significant percentage of the workforce. The US is and remains the most important source country for investment into Belgium, responsible for creating 22% of the jobs which resulted from new investments in 2009.

 

Scott Beardsley
President,  AmCham Belgium