Belgian labour cost rising faster than of the Eurozone’s

Labour costs are rising significantly faster in our country than in our neighbouring countries. This becomes a problem for many companies, which in the long run will inevitably be reflected in fewer investments and jobs. Against this background, taking action for even stronger wage increases shows little sense of responsibility.

Last week, the unions organized a day of action for higher wages. In doing so, they rather easily overlooked the fact that, according to the latest forecasts, gross hourly wages in Belgium will increase by 21 percent in 2022-2024. This increase is almost entirely attributable to the automatic wage indexation, whereby wages in Belgium are adjusted to higher inflation with a limited delay. According to the unions, this indexation is evident, and cannot even be regarded as a wage increase. That’s why they demand ‘real’ wage increases on top of that. They invariably confuse wage increase and purchasing power increase. The increase in wages due to indexation, of course, must also be paid.

The fact that this indexation is not at all evident is evident throughout the rest of Europe. Only in Belgium, Luxembourg, Malta and Cyprus is there such a system of wage indexation (and in Luxembourg, for example, it was already put on pause this spring). In the rest of Europe, and indeed in the rest of the world, there is no automatic wage indexation. In our neighbouring countries, the total wage increase is always negotiated, i.e. the real wage increase and the compensation for inflation in one package. In the current situation, the unions are also trying to force stronger wage increases in response to higher inflation, but there is usually also more attention to the broader picture. For example, the gloomy economic outlook is also being taken into account more. The realization that too strong wage increases would cause additional job losses during a recession dampens wage demands. As a result, wage increases in neighboring countries remain somewhat more within limits. In this way, the external energy price shock is somewhat partially absorbed by the companies and the employees (while in Belgium it ends up mainly with the companies).

The September estimates of wage increases by the various national authorities illustrate the clear differences between Belgium and our main trading partners. According to the latest estimates, wage costs per employee in Belgium will increase by 7.9 percent and 9.2 percent respectively in 2022 and 2023. This represents an increase of 18 percent over those two years. In Germany, France and the Netherlands, that would be 11 percent, 11 percent and 6 percent, respectively. Across the Eurozone, wage costs would increase by an average of 9 percent in 2022-2023. In this way, wage costs in our country will rise on average 9 percent faster in two years than in the rest of Europe.

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