Belgium: Changes to wage-setting mechanisms in the context of the crisis and the EU’s new economic governance regime

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The economic crisis hampered industrial relations in Belgium: social negotiations are more difficult and in some respects the social partners missed the opportunity to develop new forms of social dialogue in order to work out their own regulation implementing the new European requirements on macro-economic developments. The government did not hesitate to take measures itself in order to satisfy the European requirements of the New Economic Governance. The clearly more centralised nature of the latest social negotiations is a turning point compared to the pre-crisis trend of creating extra margin for sectoral bargaining.

Section 1: Mapping changes in wage setting mechanisms in the private sector

For each aspect of wage setting mechanisms indicated below, please indicate:

1.1 whether there has been any recent change (since mid-2008). If there have been changes in many sectors, report the most prominent examples. 1.2 in which year any such change(s) occurred. Report for the most prominent examples if there have been changes in many sectors. 1.3 If any changes, briefly summarise the change(s) which have taken place and illustrate with prominent examples.

a) Main level(s) of collective bargaining onr wages (collective wage setting), where a main level under single-tier bargaining is one that accounts for at least one-fifth of employees covered by collective bargaining or under multi-tier bargaining is a level that accounts for a non-trivial element of collectively agreed pay

During the last years before the crisis, the Belgian wage bargaining was rather indicative on centralized level, with margins for negotiations on sectoral level. During the crisis, no abrupt changes were made in the wage setting mechanisms, although a continuously trend of centralising and a shift from bipartite discussions towards decisions at tripartite or even government level is noticeable. The two-yearly centralized negotiations on an Interprofessional (= intersectoral) Agreement (IPA) illustrate this trend very strong. The negotiations between employer and employee representatives on the IPA 2009-2010 were difficult and only successful thanks to the financial mediation of the government (BE0809019I). Negotiations on the IPA 2011-2012 even failed: the proposed agreement was rejected by the members of the Federation of Liberal Trade Unions of Belgium (CGSLB/ACLVB) and the Belgian General Federation of Labour (FGTB/ABVV), so the government decided to impose the draft-IPA. As a consequence, the norm is no longer indicative as in the periods before but imperative. The bargaining is becoming more centralized, with a larger impact of the government and less independence of the social partners (BE1108011I, BE1102011I and BE1301011q). The period 2013-2014 is the actual low point: there wasn’t even a draft agreement and the government decided itself not to allow extra wage increases above the automatically wage indexation.

b) mechanisms governing coordination between different levels of collective wage setting, under 2- or multi-tier arrangements (for example, rules implementing the ‘favourability principle’ under which lower levels can only improve on wage standards agreed at higher levels, or rules governing the respective of competence of levels on different aspects of wage setting)

No changes since 2008

c) formal and informal practices of coordination across bargaining units at the same level, such as pattern setting arrangements and/or which settlement sets the pattern, either between sectors (under multi-employer bargaining) or between companies (under single-employer bargaining)

Not applicable in Belgium

d) the relationship between wage setting in the private and public sectors, for example over which (if any) sector establishes a pattern or benchmark for the other

The public sector has an entirely separate legal structure for conducting social dialogue. The collective labour agreements that are reached in the National Labour Council (Conseil National du Travail/Nationale Arbeidsraad, CNT/NAR) are not applicable to the public sector and thus have no influence here. The law regarding trade union status of 19 December 1974 governs social dialogue within the state sector (BE0611089I).

e) extension mechanisms

No changes since 2008

f) number and nature of opening clauses in sector and multi-sector agreements

Theoretically it exists in some sector (agreements). No changes since 2008

g) opt-out clauses in sector and multi-sector agreements

No changes since 2008.

h) duration of agreements

No changes since 2008

i) number of agreements

The year 2009 showed an increased number of collective agreements, probably as a result of the various anti-crisis working time reduction and temporary lay-off measures introduced by the government. The legal framework of the measures is worked out by the federal government but had to be concretized by collective agreements on central, sectoral or company level (BE130111q).

Traditionally, the number of registered sectoral collective agreements on wage evolution is high in each start year of a new IPA: 167 registered sectoral agreements in 2009 and 193 registered sectoral agreements in 2011. However, at the end of November 2013, no more than 22 sector- CAO’s on wages are registered at the FOD WASO). The decision of not allowing wage increases above the automatically indexation system is hampering the sectoral negotiations.

j) continuation of collective agreements beyond expiry

No changes since 2008; it is a common practice in Belgium to conclude agreements with an indeterminate time frame (until one of the parties wants to stop the agreement).

k) extending bargaining competence beyond trade unions to other types of workforce representative

Not applicable in Belgium

l) indexation mechanisms

Due to the recent economic crisis and the need to strengthen the competitiveness of the Belgian economy, the question on whether or not to keep the system revived in 2012. In addition, the European Commission stipulated that steps should be taken to reform the wage indexation. The government decided in November 2012 to retain the automatic wage index, but to change the composition of the index basket in order to temper the effect (for example taking into account temporary price reductions) (BE1211031I, BE1303021q).

m) minimum pay setting arrangements, including the relationship between, and respective roles of, collective bargaining and statutory mechanisms in setting minimum wages

In January 2013, the Belgian social partners agreed to gradually upgrade the lower minimum wages for minors younger than 20 years old (whose minimum wage is now determined following a degressive scale depending on age), in order to eliminate the age-based difference in 2015 (CNT – CAO43terdecies and BE1303021q).

n) reconfiguration of existing sector agreements, establishment of new sector agreements, termination of existing sector agreements

/

o) other aspects of wage setting, for example integration of agreements covering blue- and white-collar workers in the same sector

In 2013 an agreement on the harmonization of statutes was finally found on the harmonization of blue collar and white collar workers (see the submitted BE1310011I)

If there have been relatively few changes (less than four), please explain why there has been relative stability in wage setting mechanisms in the private sector since mid-2008.

Section 2: Sources of change to wage setting mechanisms

For each type of change that has occurred (except c) d) i) o)), please indicate the main source(s) of the change. Note that more than one of the following sources may have been influential to a change. Please provide brief details in the relevant rows in the table below.

2.1. externally imposed or required (e.g. by the European Commission, ECB and/or IMF)2.2. externally influenced (e.g. via Country Specific Recommendations under the EU’s new Economic Semester governance arrangement) 2.3. imposed by national government 2.4. negotiated/concerted between cross-sector social partners, with or without government involvement2.5. negotiated between social partners at sector level 2.6. other (please specify)

Section 3: Factors influencing changes in wage setting mechanisms

For each type of change identified in Section 1 (except i) and o)), please indicate the main factors or rationales which have been influential. Please provide brief details in the relevant rows in the table below.

3.1. Macro-economic, e.g. wage moderation, uncertain economic outlook 3.2. Micro-economic, e.g. increased variability in competitive circumstances of companies, financial hardship, business restructuring 3.3. Economic organization, e.g. emergence of new business activities which increase diversity within existing sectors and/or blur boundaries between sectors and/or create new sectors; and/or growing recourse to outsourcing, which blurs boundaries between sectors and creates structural tensions according to position in the supply chain within sectors 3.4 state policies and/or requirements from the European Commission, ECB and/or IMF involving weakening or strengthening of state supports for collective bargaining, e.g. changes to extension mechanisms, changes to indexation mechanisms, changes to the favourability principle, authorising workforce representatives other than trade unions to conclude agreements, changes to the boundary between statutory determination and collective bargaining

Section 4: Influence of the EU’s new economic governance regime

Have any aspects of a) wage setting arrangements b) other features of industrial relations been the subject of country specific recommendations under the European Semester system which took effect as from 2011 i.e. in 2011, 2012 or 2013?

4.1 Please check the Table summarising country specific recommendations attached to the questionnaire, and indicate any changes or amendments that are needed.

The European Semester Cycles insisted during the three years 2011-2012-2013 on taking steps to reform the system of wage bargaining and wage indexation in order to make wage setting responsive to productivity developments and reflecting sub-regional differences in productivity and labour market conditions and providing automatic corrections when wage evolution undermines cost-competitiveness.

4.2. If Yes, specify any changes to a) wage setting arrangements b) other feature of industrial relations that have been implemented following the recommendation(s)

The system of wage negotiation is not been changed but the European recommendations have probably stimulated the government to take over the negotiations on the Interprofessional Agreement 2011-2012 and 2013-2014 after the failure of the social partners in finding an agreement and to implement the wage moderation by law. The bargaining is becoming more centralized, with a larger impact of the government and less independence of the social partners.

In the same way, the reform of the wage indexation is among others stimulated by the European Commission stipulating the system should be reformed.

4.3. If Yes and changes, were these required by the European authorities, required by the IMF or recommended but not required?

Recommended but not required

4.4. Have there been changes in any formal or informal mechanisms aimed at cross-border coordination of wage setting, for instance in response to the new economic governance regime?

If yes, please provide brief details.

Not officially (we see increased attention to German situation and ETUC activities around collective bargaining)

Section 5: Perspectives of the social partners

What are the views of employers’ organizations and trade unions on:

5.1 The desirability of the changes to wage setting arrangements introduced

The imposed wage moderation by government is supported by the employer organisations (FEB-VBO), referring to the importance of reducing the wage gap with the trading partners. In contrast, employee organisations emphasize that eroding the employee incomes is not the correct instrument to handle the economic crisis.

The changes in the automatic wage indexation system is supported by both parties. Employers stressed the importance of keeping Belgian companies competitive, meaning reduced wage costs and thus an adaptation of the automatic wage index system. Trade unions insisted on the importance of the wage stability and thus keeping the automatic indexation (BE1211031i).

5.2 The effects / impact of the changes to wage setting arrangements introduced

FEB-VBO announced to strictly apply the wage moderation imposed by government for the period 2013-2014.

In contrast, the trade unions wondered whether cross-sectoral social dialogue still makes sense in Belgium, as the government’s intervention is growing and is not leaving any margin to negotiate wage evolution, the main part of the social bargaining (BE1211031i).

As a result of both opposite points of view, the social negotiations at sectoral level are difficult and the number of sectoral agreements at the end of 2013 is lower than usual in the first year of a new IPA-period.

5.3 The main factors or rationales influencing changes to wage setting arrangements

The economic crisis hampered the social dialogue in Belgium, as the margins of negotiations are very limited. Moreover the government took measures itself in order to meet the European Country-specific Recommendations. As the measures focus especially on restoring the competitiveness of Belgian enterprises, the employer organisation FEB-VBO supports the measures. The trade unions declare they are also concerned about the Belgian economic competitiveness but stress this may not affect the purchasing power of the employees (BE1211031i).

Sources: Euro plus Pact Commitments in 2011 - Background on the Euro Plus Pact, European Commission; European Semester recommendations – European Commission, 2011a, 2012, 2013.

Caroline Vermandere & Guy Van Gyes, HIVA – KU Leuven