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This fall’s Interprofessional Agreement is crucial for Belgium’s competitiveness

The government’s recovery plan for the Belgian economy will be heavily influenced by this fall’s developments in the social issues on the negotiation table. All stakeholders, such as the Fédération des Entreprises de Belgique/Verbond voor Belgische Ondernemingen (FEB/VBO), should be aware of the importance of a balanced Interprofessional Agreement (IPA). With a loss of 8% on the international share market over the last decade, Belgium has some tough nuts to crack in what is predicted to be a “hot fall”.

With the start of the biennial negotiations for the new IPA this September, the government has assigned the social partners the task of drafting an agreement which aligns all stakeholders, having the employers, unions and the government agree on a strategy for revitalizing Belgium’s business environment.

The Belgian economy is in a fragile state. Labor costs are rising, and external shocks tend to have more impact on our salaries than those in neighboring countries. Moreover, productivity in Belgium has hardly increased over the last decade. A recent report from PwC shows the ratio of Western European human capital return on investment as 1.11 on average (the figures for the individual countries are not given), which is a lot less than, for example, the Central and Eastern European countries (1.57). The Federal Planning Bureau has revised its inflation forecast up to 2.9%. The threshold index, which equals the highest level inflation is allowed to reach before the government applies indexation to salaries, is likely to be exceeded in November.

Other Western European countries are raising their salaries more than usual, a fact which gives Belgium a “golden chance” to improve its competitive position, as long as a good IPA is achieved. “A good IPA” would mean a balanced combination of measures taken by the government to increase purchasing power and a decent strategy to get a handle on salary costs.

Some, like Pieter Timmermans of FEB/VBO, plead for a so-called inflation forecast instead of the current system, which is unpopular with employers. A two-year outlook on inflation is how for example Germany decides on its social agreements. After two years, when a new IPA needs to be discussed, the situation as it has developed during that period is evaluated and new indexation measures can be taken if necessary. Defenders of the system are convinced the indexation system should take inflation into account, but want to disconnect it from inflation as such.

AmCham Belgium’s position

AmCham Belgium recommends a system of limited indexation, proposing that the minimum wage is used as a reference level when adjusting salaries below a lump sum amount which is agreed at a national level. Belgium is the only country with an unrestricted application of indexation, which implies a larger impact on social costs than in other countries. AmCham is convinced of the benefits of an adjusted system, and hopes the government’s intentions to change the system are a step toward an improved entrepreneurial climate. In order to read more on AmCham’s position on this matter, please see the Priorities for a Prosperous Belgium.