Social partners and government agree plan to boost economy
At the end of 2008, the Belgian government presented a stimulus plan to revive the national economy. In the meantime, the social partners negotiated their intersectoral agreement for the next two years, which seeks to strike a balance between companies’ competitiveness, purchasing power and employment in light of the current economic crisis. A substantial increase of net salaries and tax reductions for employers are among the proposed measures.
Sustaining purchasing power and company competitiveness
In December 2008, the then Belgian federal government under Yves Leterme announced a stimulus plan aiming to revive the economy in light of the current global economic crisis. The development of the plan coincided with the social partners’ negotiation of their biannual intersectoral agreement.
Every two years, the three main trade unions and the main employer organisations in Belgium negotiate an agreement that includes the measures that will be further developed through legislation or collective agreement in the following two years at cross-industry level and in the various sectors of the economy. The trade unions involved include the Confederation of Christian Trade Unions (Confédération des Syndicats Chrétiens/Algemeen Christelijk Vakverbond, CSC/ACV), the Federation of Liberal Trade Unions of Belgium (Centrale Générale des Syndicats Libéraux de Belgique/Algemene Centrale der Liberale Vakbonden van België, CGSLB/ACLVB) and the Belgian General Federation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV). The main employer representatives include the Belgian Federation of Employers (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO), the Federation of Belgian Farmers (Fédération des Agriculteurs Belges/Belgische Boerenbond, BB), the Flemish Organisation of the Self-Employed (Unie van Zelfstandige Ondernemers, UNIZO), and the French-speaking Union of the Middle Classes (Union des Classes Moyennes, UCM). The last interprofessional agreement was concluded at the end of 2006 for the years 2007 and 2008 (BE0701019I).
The 2009–2010 agreement (available in Dutch (1.24Mb PDF) and French (1.32Mb PDF)) is exceptional because it had to be negotiated in the context of an economic crisis and looming recession. Against this background, the social partners focused their demands on workers’ purchasing power and company competitiveness. The government’s plan thus includes provisions for the intersectoral agreement and the means to finance the proposed measures.
Content of new intersectoral agreement
The social partners insisted on the ‘exceptional’ character of the 2009–2010 intersectoral agreement on account of it being adapted in light of the current economic situation. The agreement aims to restore the confidence of workers and employers in the economy by finding a balance between competitiveness, purchasing power and employment levels. The first series of measures aim to increase workers’ net income by a maximum of €375 for the next two years without increasing costs for employers. This net increase will be realised through:
- an increase in the value of lunch vouchers;
- an increase in travel compensation (undertaken for work purposes);
- an increase for employers, from 60% to 75%, in the payment of public transport tickets for workers to travel from home to the workplace.
Automatic indexation of gross income remains unchanged. This mechanism, which exists in Belgium and Luxembourg, adapts automatically the incomes and social benefits of workers to changes in living costs. While employers are willing to introduce some improvements in this mechanism, the trade unions have rejected any modifications. According to the employers, automatic indexation incurs excessive labour costs and prevents Belgian companies from being competitive with their European counterparts, which has an extremely negative impact on the Belgian economy. On the other hand, the trade unions believe the system prevents major losses in workers’ purchasing power, which is essential to maintain the economy in good health.
A second series of measures ensures that social benefits, such as pensions and unemployment benefits, will follow the rise in the cost of living and will also be increased. Workers who are temporarily unemployed because of the economic crisis will receive higher benefits.
On the other hand, employers will benefit from tax reductions on labour costs and financial incentives in order to recruit long-term unemployed people.
The first part of the government’s stimulus plan documents the financing of those measures brought forward by the social partners in their agreement. The cost of these measures is estimated to be about €1 billion. The introduction of some additional taxes and stronger sanctions on fiscal and social fraud are considered as potential means of supporting the funding of the above measures.
With this plan, the previous federal government launched specific measures to stimulate the economy:
- a decrease in value added tax (VAT) from 21% to 6% will be applied in the construction sector. Additional incentives, such as tax reductions, will be proposed for ‘green investments’ with the objective of reducing energy costs;
- the construction sector will also benefit from some major public building projects;
- measures to reduce electricity costs will be developed.
Nevertheless, this plan will be costly for the government, particularly since it has exceptionally forecast a deficit of 1.8% in gross domestic product (GDP). Interestingly, Belgium has not recorded such a deficit for 10 years; however, the country’s government assures that this deficit will remain only temporarily.
Indeed, a protracted deficit will prevent the clearing of debts and the financing of future pensions.
Emmanuelle Perin, Institute for Labour Studies (IST), Catholic University of Louvain