National pay talks get underway amid economic crisis

Belgium’s highly coordinated wage bargaining system is organised on the basis of a bargaining round which takes place every two years. In mid November 2008, talks commenced between the national social partners on the pay settlement for the period 2009–2010. Due to the global financial and economic crisis, it is expected that the bargaining will be difficult. Nevertheless, the social partners seemed to adopt a more moderate position in the run-up to the negotiations.

Belgian banks face mounting pressure

The international financial crisis hit Belgium from September 2008 onwards. Two of the country’s largest banks – Fortis and Dexia – began to experience severe problems, which have been exacerbated by the financial problems of other banks around the world. The value of their stocks, as well as the stocks of most other Belgian companies, plunged. The government tried to control the situation by taking part ownership in the banks and guaranteeing their deposits. In early October, Fortis was split into two parts: the Dutch part was nationalised, while the Belgian division was sold to the French bank BNP Paribas.

Planned one-day national strike goes ahead

In the aftermath of these major financial events, the first big incident from a Belgian social dialogue and industrial relations perspective was a nationwide strike and protest day, which took place on 6 October 2008. The protest had, however, already been planned before the Belgian government was forced to intervene with its major rescue plans to save Fortis, Dexia and other banks. The day marked the culmination of a trade union campaign, which had already been initiated during the spring of 2008, in protest against the country’s deteriorating purchasing power. In the run-up to the scheduled biennial pay bargaining round and following a week of diverse protest action in June, the socialist trade union the Belgian General Federation of Labour (Algemeen Belgisch Vakverbond/Fédération Générale du Travail de Belgique, ABVV/FGTB) decided to organise a nationwide general strike. While the other unions – most notably the Confederation of Christian Trade Unions (Algemeen Christelijk Vakverbond/Confédération des Syndicats Chrétiens, ACV/CSC) – supported the action, they referred to it as a day of action and protest rather than a general strike. As the day of action came in the week following the sudden shocks experienced by Belgium’s leading banks, the whole event was nevertheless viewed in the context of the country’s deteriorating financial and economic situation.

The trade unions reaffirmed their calls for a government response to the rising prices and to curb inflation. ABVV/FGTB pointed to the fact that people were already waiting for a response in this regard for 15 months, while the banks had managed to receive billions of euro in government support almost overnight.

Not all of the trade union federations agreed to organise a strike – a notable exception being the Flemish socialist Federation of the Belgian Metal Industry (Centrale van de Metaalindustrie van België, CMB). The biggest success was observed in the public transport sector, where trains, trams and buses only operated on a sporadic basis during the protest. Workers in some shops and companies also went on strike, although only a limited number of stores and businesses closed on the day.

Relations improve between social partners

The organised day of strike and protest generated criticisms from the employer side, which accused the trade unions of being ‘irresponsible’ in these difficult times. Nevertheless, the series of critical events in the banking sector restored a more common understanding between the national social partners by mid October.

Talks were quickly resumed, and a collective agreement was reached and signed, raising the minimum wage by €35. In preparation for the 2009 federal budget, the Prime Minister, Yves Leterme, also engaged in talks with the social partners. The trade unions renewed their demand for measures to be taken to increase purchasing power. At the same time, the employers called for measures to relieve the tax burden on companies.

However, and most likely for the first time in months, the social partners seemed to adopt a more moderate and open position. In their statements, they recognised the fact that the government must work within limited margins given the international situation. Moreover, the trade unions did not plan any further protest action.

Policy reports set the scene for pay talks

As such, the ground for the impending biennial national pay bargaining round in the private sector was already prepared. This preparation was further enhanced in the first week of November following the publication of a number of important policy reports by the Federal Planning Office (Bureau fédéral du Plan) and by the Central Economic Council (Centrale Raad voor het Bedrijfsleven/Conseil Central de l’Économie, CRB/CCE).

Federal Planning Office study

According to the study (in Dutch and French) published by the Federal Planning Office, there is no room for wage increases during the next two years. The federal government had asked the National Bank of Belgium (Nationale Bank van België/Banque nationale de Belgique) and the Federal Planning Office, a public agency which conducts studies on economic, social and environmental policy issues, to carry out a study on the potential impact of the current financial crisis on the Belgian economy. The study was commissioned in the run-up to 5 November, when Prime Minister Leterme invited the regional governments and social partners to a meeting to discuss an action plan which sought to address the consequences of the impending recession.

The Federal Planning Office highlighted the lack of manoeuvrability for higher wages on top of the automatic indexation. In Belgium, almost all wages and benefits are linked to a corrected inflation index – the so-called ‘health’ index of consumption prices. The study also predicted that medium-sized companies will be hardest hit by the financial crisis, as they are the most dependent on bank loans. A rise in unemployment of between 20,000 to 40,000 people is also expected for 2009.

Central Economic Council forecasts

Since 1996, the CRB/CCE has been publishing an annual report on trends in Belgian salaries compared with the neighbouring countries of France, Germany and the Netherlands. The idea behind the survey, which is backed by a law of 26 July 1996, is to promote employment and prevent Belgium from losing its competitiveness with respect to its neighbours. This official report also constitutes the starting point for Belgium’s biennial wage negotiations.

Due to the economic uncertainty arising from the financial crisis, the CRB/CCE came up with two scenarios in its 2008 report (in Dutch, 917Kb PDF). Traditionally, the CRB bases its forecasts of possible pay increases in the coming years on the economic prognoses of the Organisation for Economic Co-operation and Development (OECD), which are published in June. These OECD estimates, however, still assumed an economic growth of 1.9% next year for Belgium. As a result of the crisis in the banking sector, these growth estimates have since been adjusted downward. As a result, the CRB/CCE cited two forecast scenarios on the wage increases of the neighbouring countries. These estimated wage increases are used as a benchmark for the Belgian pay talks. In the first scenario, wages in the neighbouring countries in 2009–2010 would rise by 6.4% and the Belgian inflation index by 5.6% (compare with the automatic wage indexation of the same percentage). In the revised scenario, however, wages in the neighbouring countries would increase over the coming two years by 5.1%, while indexation would also be expected to rise by 5.1%. Thus, in the latter scenario, there would be no room for additional wage increases above the automatic indexation.

The CRB/CCE also looks to previous years for its forecasts. Since 1996, wages in Belgium have increased by a rate of 4.1% more than its neighbouring countries. This labour cost ‘lapse’ has been strongest in the recent bargaining periods due to tighter wage moderation than expected, particularly in Germany. The pay gap grew by 1.5% in the period 2005–2006 and by 2.6% in 2007–2008.

In addition, the CRB/CCE report monitors other aspects like employment, social cohesion and innovation. In relation to the latter policy field, the report highlighted once again that the agreed targets for lifelong learning have not been met by Belgian companies. These agreed goals recommend that 1.9% of the total wage sum be invested in training and that one in every two workers participate in yearly training by 2010.

Although the CRB/CCE president, Robert Tollet, stated that, due to the current uncertainties, the conclusions of the report have to be interpreted as ‘beacons’ for the upcoming national social dialogue, both employers and trade unions had already expressed their different interpretations.

Demands of social partners

The employer organisations insisted that there is no room for an agreement providing for pay increases above the estimated automatic indexation of wages. In this regard, reference was also made to the recent German situation where the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall) settled for a 4.2% pay rise for the coming years.

A trade union spokesperson nevertheless refuted these claims, arguing that wages are not the only factor of competition and that inflation owing to high energy prices was the main cause of the increasing labour cost gap, as opposed to the ‘irresponsible’ actions of trade union negotiators. The unions also claimed that Belgian entrepreneurship is losing ground in the development of high-quality, innovative products. Investment in research and development (R&D) has stalled and agreed efforts to increase workers’ skills have not been put into effect. Nonetheless, top union officials also proposed solutions for the upcoming negotiations. Wage increases could be provided for through premiums – for example, by introducing an increase in employers’ compensation for home-work commuter costs. It is also expected that the federal government will play its part and facilitate the bargaining by developing tax benefits for employers – for instance, in relation to shift work – as well as by channelling more money into the social security system.

The President of ACV/CSC, Luc Cortebeeck, also recommended that other ‘pending’ issues should not be included in the upcoming pay negotiations, as the bargaining would already be complicated enough. In this regard, Mr Cortebeeck referred to the issue of harmonising the blue-collar and white-collar employment statute and to the current difference in opinion over the right to strike and picketing.

Factions from the employers’ side also proposed to limit the automatic indexation of wages to the net remuneration – that is, gross wages deducted by tax and social security contributions. This would limit the rise in labour costs, although the issue of revenue for the already deteriorating government budget would of course be more problematic. The trade unions responded by insisting that any change in the automatic wage indexation was non-negotiable.

Commentary

It is envisaged that the intersectoral pay bargaining round for 2009–2010 will be difficult. In this regard, the trade unions have already been rallying since the start of 2008 to improve the country’s purchasing power. As a result, the usual tactics employed by the social partners of denial and making strong claims in the press have been accompanied by increasing protest actions from the trade union side, which in turn have been roundly criticised by the employers. However, the financial crisis, which has also affected Belgium’s major banks, and the deteriorating economic situation seem to have eased tensions in the field of industrial relations. Therefore, although the national bargaining round is likely to be difficult, an agreement is still possible.

Guy Van Gyes, Higher Institute for Labour Studies (HIVA), Catholic University of Leuven (KUL)

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