This morning, in his column devoted to the economy and consumption, Bruno Wattenbergh mentioned the level of wages in Belgium.
Belgium would have the highest salaries: is it a myth or a reality?
A reality. Belgium still has one of the highest labor costs in Europe. We are, as for years, on the podium, in 3e place following Denmark and Luxembourg. But beware, this is the salary cost, not the net salary paid to the worker.
What does this change?
Two things. First, if the wage cost is high, the social and tax burdens melt the net wages paid to workers. In the name of solidarity. This is the cost paid for our social security, which is one of the best in the world. It works on the condition that enough people are working. And in Belgium, especially in Wallonia, the employment rate is too low to finance this social security. The objective to ensure this funding is an employment rate, whereas if it is possible for Flanders which is at 75%, Brussels is stagnating at 61% and Wallonia at 65%.
Then, the problem is that the cost of this labor is significantly higher than that of our neighbours. For countries whose growth and wealth comes from exports, this is a risk that needs to be seriously monitored.
And these labor costs are expected to increase further with inflation?
Yes, inflation should be above 7% this year due to the sharp increase in energy prices and many products, such as cereals for example. And this inflation is gradually affecting wages, via automatic indexation. We are therefore really confronted with a threat of spiraling wage costs. Which will of course weigh on competitiveness.
How much are salaries expected to increase in the coming months?
The National Bank of Belgium came out yesterday with new figures. In two years, the hourly wage would rise by more than 10%. In three years, up to and including 2024, wage costs will even increase by nearly 13%.
What can we expect in the longer term?
Inflation does not subside in a few weeks. Taking current futures into account, headline inflation would still be over 5% at the end of this year. Current forecasts do not, however, point to a long-lasting price-wage spiral either: inflationary pressure would ease in the next two years, and that is rather good news.
