Belgium reviews policies on older workers

The participation rates of older people on the labour market across Belgium are low by European standards. This phenomenon is often blamed on generous early retirement schemes. There has been considerable debate for and against early retirement schemes and pressures on the government to increase participation amongst the older age groups. However, research published in May 1999 reveals that many employees in Flanders see early retirement as a right. This seems to suggest that reversing the trend might not be an easy task.

Belgium and its regions, Flanders and Wallonia, have, compared with other European countries, low activity rates and employment rates - as the table below shows. Activity rates indicate the number of people presenting themselves on the labour market as available for work, expressed as a percentage of the total population of working age, whilst employment rates indicate the number of people actually employed. These problems affect particularly the 15-24 age bracket (owing to trends towards increased and longer education) and the 50-64 age bracket (linked to increasingly early departure from the labour market).

This is a recurrent point of criticism in Organisation for Economic Cooperation and Development (OECD) reports on Belgium (BE9705209F) and also recently in the annual report of the Belgian Higher Council for Employment (Hoge Raad van de Werkgelegenheid/Conseil supérieur de l'Emploi). Furthermore, the May 1999 labour market forecasts from the Federal Planning Bureau (Federaal Planbureau/Bureau Fédéral du Plan) for the 1999-2004 period predict, other things being equal, a decline in the number of unemployed people by about 208,000 over that period (Vooruizichten arbeidsmarkt, 1999-2004). However, the Bureau states that in order to prevent tensions on the labour market, the government will have to "activate" latent labour reserves, especially older people. This is a renewed appeal to give opportunities to older employees and unemployed people who have been deemed "unavailable" for work over the recent past.

Activity and employment rates by age (Belgium, Flanders, Wallonia and EU 15), 1998
Activity rates
Age group EU 15 Belgium Flanders Wallonia
15-24 45.1% 31.6% 33.6% 30.1%
25-49 81.9% 83.9% 85.2% 81.9%
50-64 50.2% 37.2% 36.2% 37.5%
Employment rates
15-24 34.3% 25% 29.8% 19.5%
25-49 73.9% 77.1% 81% 72%
50-64 46.8% 33.4% 35% 35%

Source:"Jaarboek over de Arbeidsmarkt in Vlaanderen", Steunpunt Werkgelegenheid, Arbeid en Vorming, 1998 edition.

The following conclusions may be drawn from the figures in the table above:

  • labour market participation in Belgium is strongly concentrated in the 25-49 age bracket, which is true for both activity and employment rates; and
  • in the 50-64 age group, only about one in three Belgians present themselves on the labour market as available for work and only about one in three is actually working. Compared with the EU 15 average, these are very low percentages.

Early retirement the culprit

The most important explanation for low activity rates amongst the over-50s is the system of early retirement. Early retirement benefits older employees who have been made redundant by their employer. The employer pays additional compensation over and above unemployment benefit until the employee officially retires. The government has also created a certain preferential status for this group of unemployed people. Those affected are considered as "not fit/available for work" and so they cannot be required to seek or accept employment.

This early retirement scheme has been very successful over the years. Between 1985 and 1995 the number of beneficiaries increased from 96,000 to 130,000. The obligation to replace the older employee by a new one has been met in only about half the cases.

In addition to the early retirement system, the government has also created a few other schemes allowing or facilitating early exit from the labour market. These include part-time early retirement (122,000 beneficiaries in 1996) and career break schemes (12,000 beneficiaries in 1996).

For and against early retirement

Those who favour early retirement schemes point out that the system was initially perceived as a "barter" system to promote intergenerational redistribution of available employment: older employees would move aside for younger employees. Also, early retirement has become the principal social measure to accompany large-scale economic restructuring exercises, which has contributed to the fact that the obligation to replace employees taking early retirement has often been ignored. Complaining about the high cost of early retirement seems, therefore, two-edged: non-compliance with the requirement to replace an employee is actually doubling costs.

Supporters also point out that the generation mostly benefiting from early retirement generally started work at a relatively early age and without many qualifications. It worked and lived without many of the comforts and luxuries taken for granted today. The fact that this group would like to enjoy a rather comfortable early retirement scheme seems normal after 40 years at work. They conclude that this may change for the current generation of employees in their 50s, as they have enjoyed a different working career. However, this vision seems to be contradicted by recent research carried out by the Centre for Economic Studies at the Catholic University of Leuven (see below) which indicates that early retirement is now perceived as an acquired right.

Opponents of early retirement schemes point out that the costs for the employer are high if early retirement does not fit into the context of a company closure or an economic restructuring. There is a loss of know-how and experience, and a possible trickle-down effect in terms of demotivation for employees aged between 40 and 50. In addition, the system is expensive, given non-replacement (even though in theory it is compulsory). A final and important argument is that it is very expensive in view of the ageing of Belgian society and the costs that this implies for the social security system.

Some sectors, such as construction, are already taking action to cut back on early retirement. It recently signed a collective agreement that provides an extra premium for older employees who forgo the option of early retirement at 58 and instead remain active until the age of 60.

Employees attached to early retirement

Recent research by the Centre for Economic Studies, based on a survey of 700 professionally active Flemish people, reveals that 85% plead for retirement at an even earlier age (Enquête over pensioneringsvooruitzichten, May 1999). They wish to reduce the current retirement age of 65 to an average of 57, which happens to be the age at which most employees can exit the labour market through one or other early retirement scheme. Furthermore, this ideal of early retirement is found not only amongst older employees, but also amongst young employees, who express the wish to retire at the age of 56.4 on average. Not only high-income earners but also - and even more so - low-income earners would like to see the retirement age lowered.

Barely 10% of the employees surveyed are in favour of increasing the age of retirement as a possible solution for the increasing costs of the ageing of Belgian society. Six in 10 prefer an increase in contributions to the pension system to pay for additional costs and to maintain current opportunities for early retirement.

However, all of this squarely contradicts the ideas of policy-makers. They claim that retirement before the age of 60 will have to become the exception. Those working beyond the age of 60 will receive markedly higher pensions. The current system of early retirement will have to disappear and will be allowed only under very special conditions.

Older employees still wanted

Those over the age of 50 have not been eligible for active labour market measures, given their preferential status in the light of generational problems on the labour market. Recently, however, Flemish Minister for Employment Theo Kelchtermans has proposed renewing efforts to support this group and to offer them jobs again (BE9902262N). This proposal must be understood in the light of certain bottlenecks on the labour market. It is currently very difficult to find qualified people for a number of job vacancies. For these jobs, older unemployed people will not be in competition with those who are younger. The Minister is also considering using the experience of these early labour market leavers to assist in the job search programmes aimed at younger unemployed people, who could use the experience and insights of the older generation.

Employers claim that the early exit of so many older employees is a form of social and intellectual "dumping". Given the longer time spent on education and training and earlier departures from the labour market, the "useful" time during which knowledge and experience can be applied has become very short. Also, opportunities for intergenerational exchanges within companies are seriously hampered because of their unnatural age structures. This prompts the employers to plead for a conscious policy of age management as part of personnel management. In cooperation with the King Baudoin Foundation (Koning Boudewijnstichting/Fondation Roi Baudouin) a manual on this issue for personnel managers has been developed (Leeftijdsbewust ondernemen, 1999). By means of a checklist, human resources managers can get better insights into the age structure of their company. A number of measures are also suggested to increase the productivity and employability of older employees.

Commentary

The low rates of activity and employment of older employees remain a point of serious concern for policy-makers and employees, especially in view of certain shortages and bottlenecks on the labour market. From those two angles, pleas have been made to cut back the early retirement schemes and to foster an age-conscious company policy. Policy-makers stress the need for active measures for older unemployed people and to increase the "normal" age of retirement again to 60. However, it is clear that this goes against the current feelings amongst the active population, who have "learned" to look at their professional life as an increasingly shorter part of their life as a whole. It seems clear that the debate on early retirement and older employees is far from over. (Steunpunt WAV)

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