The FEB sees that Belgian competitiveness is quickly going in the wrong direction. An index jump is not yet necessary, but creative solutions are required to prevent the wage slippage.
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Pieter Timmermans, managing director of the employers’ federation VBO, does not shy away from big words about the six-monthly economic outlook. ‘If we don’t intervene now, Belgium will once again become the sick man of Europe’. Timmermans fears that the high inflation affecting the whole world will hit Belgium much harder.
According to him, this is due to the automatic indexing. ‘The interprofessional agreement for 2021-2022 assumed a 2.85 percent wage increase to compensate for inflation. Due to the high inflation in that period, we may arrive at a wage increase of 7 to 8 percent. The safety margin of 0.5 percent is absolutely not sufficient. As a result, our wages rise much faster compared to those in neighboring countries. We expect the wage cost handicap to rise from 10 to 14 percent in two years’ time.”
The FEB also expects inflation to exceed the estimates of the National Bank or the Planning Bureau. ‘There are still a lot of price increases to come in all kinds of sectors. These are not yet available because old supply contracts are still in progress. When they expire, it will lead to even more inflation.” In addition to higher wages, according to the FEB, companies are also seeing their energy and raw materials bills exaggerated, which is why Timmermans speaks of a ‘cost explosion’ at the companies.
Avoid Index Jump
Timmermans does not go so far as to call for an index jump. ‘In the past, we had to intervene heavily in Belgium every fifteen years through index jumps, devaluations or wage blocks to prevent job losses at companies. This was because the problem of a wage slippage was recognized too late. Let us not make the same mistake now and intervene now, so that we can avoid harsh measures such as an index jump, which I myself do not consider social’.
The FEB CEO remained vague about how we can keep wage costs under control. ‘Indexation should be given value within the social dialogue. Because now it is as if Sinterklaas pays those wage increases and people forget that companies have to pay for the increased wages through extra turnover or higher prices. In addition, we must also strictly adhere to the Law of ’96’.
Timmermans hopes that the unions, who want to get rid of the Law of ’96 because it keeps wages in too strict a framework, but still stick to automatic indexation, will now respect that Law. As a result, the extra wage increase in the interprofessional agreement of 2023-2024 can be partly absorbed. He also hopes for creative solutions, such as converting part of the indexation into other forms of remuneration, such as pension savings.
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