Social partners advocate tax credits to help unemployed find jobs

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In February 1999, Belgium's bipartite National Labour Council and Central Economic Council jointly backed a proposal to increase the net pay of workers earning the national minimum wage by means of tax credits. The aim is to encourage unemployed people to take up low-paid jobs.

At a joint meeting held on 10 February 1999, the bipartite National Labour Council (Conseil National du Travail/National Arbeidsraad, CNT/NAR) and Central Economic Council (Conseil Central de l'Economie/Centrale Raad voor het Bedrijfsleven, CCE/CRB) agreed a joint opinion backing a proposal to increase the value of the national minimum wage by means of tax measures. The minimum wage (the "guaranteed average minimum monthly income") is set by intersectoral collective agreement among the social partners. The partners are now proposing that the government table a bill granting a maximum monthly tax credit of BEF 1,000 to workers paid the minimum wage - currently BEF 43,343 gross per month, equivalent to between BEF 33,000 and BEF 36,000 of taxable income. The credit would decrease in stages and no longer be granted on taxable income above BEF 40,000.

The trade union and employers' representatives who negotiated the 1999-2000 intersectoral agreement, signed on 8 December 1998 (BE9811252F), had suggested that the CNT/NAR and CCE/CRB consider such a measure. The intention is to increase the gap between the net amount paid as unemployment benefit and the minimum wage, in order to encourage job seekers to accept low-paid jobs (BE9901161F).

The CNT/NAR and CCE/CRB joint opinion differs from a recent proposal by the Higher Council for Employment (Conseil Supérieur de l'Emploi/Hoge Raad voor Werkgelegenheid), which aims to reduce personal social security contributions in order to increase net wages without increasing wage costs. For its part, the 1998 report of the Ministry for Employment and Labour maintained that a tax credit would be costly to public finances and would slow down wage increases (BE9812254F).

Unions are hostile to new cuts in social security contributions but employers are refusing to accept a rise in the minimum wage. Both sides consider that the proposed tax credit would not constitute a huge burden for the state budget, amounting to less than BEF 2.64 billion. Estimates for the number of people potentially covered vary between 105,000 and 290,000.