It is known that there is a gap between Flanders and Wallonia in terms of employment and prosperity. But there are still differences that receive less attention: a difference in the size of the public and private sectors, a substandard Walloon education system and structural long-term unemployment and poverty, according to a study by Voka.
38,182 euros. According to Statistics Flanders, this is the economic activity per capita in Flanders in 2021. That is 40 percent more than in Wallonia with 27,246 euros, but less than in Brussels with 64,204 euros per capita economic activity. That picture is distorted by the commuters in the capital region. With a correction in the commuter flow, economic activity would fall to EUR 38,555 per person. Flanders and Wallonia then clock in at 40,821 and 30,928 euros respectively. In each scenario, the wealth gap between Flanders and Wallonia remains large. The causes are known. The lower Walloon employment rate (64.4%) maintains the difference with Flanders (74.7%). Despite European support measures and Marshall Plans, Wallonia still carries with it the legacy of the languishing heavy industry since the 1960s. In recent decades, Flanders has been able to surf the waves of globalization as an open economy with important ports.
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38,182 euros. According to Statistics Flanders, this is the economic activity per capita in Flanders in 2021. That is 40 percent more than in Wallonia with 27,246 euros, but less than in Brussels with 64,204 euros per capita economic activity. That picture is distorted by the commuters in the capital region. With a correction in the commuter flow, economic activity would fall to EUR 38,555 per person. Flanders and Wallonia then clock in at 40,821 and 30,928 euros respectively. In each scenario, the wealth gap between Flanders and Wallonia remains large. The causes are known. The lower Walloon employment rate (64.4%) maintains the difference with Flanders (74.7%). Despite European support measures and Marshall Plans, Wallonia still carries with it the legacy of the languishing heavy industry since the 1960s. In recent decades, Flanders has been able to surf the waves of globalization as an open economy with important ports. Between 1955 and 2019, the Flemish economy grew by an average of 2.9 percent per year, the Walloon economy by 2 percent and the Brussels economy by 1.9 percent. It would be wrong to focus solely on employment as the cause of the wealth gap. In a new study, Voka chief economist Bart Van Craeynest points to other economic differences between the three regions and between Flanders and Wallonia in particular. The public sector in Flanders accounts for 18.1 percent of the added value of the regional economy. In Wallonia this is 27.4 percent. “This puts Flanders close to the European average, while Wallonia is one of the regions with the heaviest weight in the public sector,” says Van Craeynest. “That also implies an underdeveloped private sector.” That weighs on growth and prosperity. The number of starters is lower in Wallonia than in Flanders: 11 versus 15 per 1,000 inhabitants of active age. For some time now, Flanders has been concerned about the deteriorating PISA scores on the quality of education. Rightly so, but that makes you forget that the situation below the language border is dramatic. The average Walloon PISA scores for mathematics, science and reading have fluctuated around 490 points for years. Flanders is at 510 points, although the gap is narrowing, because in 2003 the north of Belgium peaked at 540. In Wallonia, almost 20 percent of 20 to 24-year-olds have no higher secondary education diploma. This has consequences for the labor market with a fairly large share of young people who do not work and are not in education. In Wallonia this concerns 15 percent of 18 to 24 year olds, “a group that is in danger of being permanently lost to the labor market”, according to Van Craeynest. “The fact that the mismatch in the Walloon labor market is leading to a shortage, while 35 percent of Walloon 20 to 64-year-olds are not in work, points to an unlikely policy failure.” At the end of the 1990s, the difference in the employment rate in Flanders and Wallonia was just above 7 percent. Today that has increased to 10 percent. In 2020, the unemployment rate in Flanders was 3.3 percent. In the top European regions this was 2.5 to 3 percent, the European average was 6.9 percent. Wallonia has a problem with an unemployment rate of 7.2 percent. Only a quarter of Flemish job seekers have been unemployed for more than twelve months. In Wallonia, more than half of the jobseekers have been in this situation for more than a year, which points to an important structural problem (see graph Forgotten Flemish-Walloon differences). One in five Belgians is at risk of poverty or social exclusion. That risk is determined by variables such as income that is less than 60 percent of the median income, inability to pay expenses such as rent, heating or unexpected costs and households with little work. The national figure masks large regional differences. The risk of poverty and social exclusion is 24.6 percent in Wallonia and 37.8 percent in Brussels. In Flanders this is 13.2 percent. According to Bart Van Craeynest, poverty often coexists with not working. “The phenomenon of the working poor is less common here than in other countries. The unemployed in particular run a higher risk of falling into poverty. In this sense, the high poverty rates in Wallonia and Brussels are inextricably linked to the difficult labor situation in both This is also illustrated by the number of people living in households with a very low work intensity. In Wallonia this is 17 percent of the people, in Brussels 24 percent. In Flanders their share is limited to 7.4 percent.” The economic divide is not without danger, writes Van Craeynest. It has implications for the economic and political cohesion of the country. “A natural dynamic of convergence is not forthcoming, and policy is also failing to ensure the reversal.” The Voka economist comes up with proposals that are not so new at first sight. He argues for more policy flexibility at regional level, certainly in labor market policy. Van Craeynest also makes proposals that are still taboo: the regions should decide on access to and the modalities of benefits and more regionally determined wage formation. Despite the important differences in the employment rate and productivity, wage growth is the same in the different regions, he argues. Between 1995 and 2019 there was barely a 0.05 percentage point difference in the average annual growth in compensation per employee. In Flanders it was 2.29 percent per year, in Wallonia at 2.24 percent and in Brussels at 2.25 percent. This is a consequence of our centralized wage setting system with automatic indexation. “Both the wage norm and indexation are determined at the national level, which leaves too little room to adapt wage dynamics to the labor market situation in each region. In this way, the economically weaker regions are saddled with too strong wage dynamics,” says Van Craeynest. “For example, unit labor costs in Wallonia are about 6 percent higher than in Flanders, which implies a wage cost handicap for Wallonia. Wage formation at the national level prevents the economically weaker regions from building up a competitive advantage through relatively lower wages.”
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