The Government must continue its efforts to make Belgium’s labor market more competitive by turning towards the future and embracing transformation.
Belgium boasts a talented, highly skilled and multicultural workforce, but the exceptionally high cost of employing people in this country is and remains the top concern of our member companies. Worse still, workers’ take-home pay is relatively low compared to total employment costs – Belgium has the highest ‘tax wedge’ in the OECD at 54% (vs. the OECD average of 36%). Easing the tax burden on labor would not only help reduce costs for employers but also put more money into the pocket of employees.
In its first full-year in office, the Michel Government passed two significant reforms aimed at reducing labor costs: the index jump (a temporary freeze on automatic wage indexation) and a package of measures to shift the tax burden away from labor to other sources. As part of this tax shift, employers’ social security contributions are gradually being reduced from 33% to 25% by January 2018, in line with AmCham Belgium’s longstanding recommendation. These reforms are yielding some returns, decreasing the wage gap in relation to Belgium’s main trading partners. According to Eurostat, labor costs increased by only 0.2% in Belgium between 2015 and 2016, whereas neighboring countries saw an average increase of 1.2%.
In addition to cost competitiveness, this Government has also made efforts to address workplace transformation and the changing organization of work. Currently, Belgium ranks 117th out of 138 countries for labor market flexibility in the World Economic Forum’s Global Competitiveness Index. The adoption of the so-called Peeters Law (Travail faisable et maniable/Werkbaar en wendbaar werk) in February 2017 will improve flexibility for workers and employers alike. This new law introduces the ‘annualization’ of working hours, which allows companies to more easily adapt work schedules to productivity cycles, and it also establishes a legal framework for nightwork and occasional telework.
In the end, talent is key to a healthy economy. To improve its attractiveness to foreign investors, Belgium needs to further reduce the cost of labor and encourage international mobility and labor market flexibility.
Throughout the month of November, we will be focusing on different aspects of the labor market, as presented in our 2017 Priorities for a Prosperous Belgium.