2023-11-18 11:00:13
The monitoring committee estimates the federal budget deficit in 2024 at 18.5 billion, or 3.1% of GDP. Transfers from Flanders to Wallonia are estimated between 5 and 6 billion euros per year. We might solve both problems together by reaching an employment rate of 80%. Realistic?
Today (2nd quarter figures), we are at 71.4%. To achieve the 80% target, 581,000 Belgians who are currently looking for a job, in vocational training or with long-term illness status, still have to find work. To reach 80% in the three regions, 115,000 Flemings additional inactive workers must find their way into the labor market, as well as 130,000 Brussels residents et 335,000 Walloons.
If this objective were achieved, more than half a million Belgians who today benefit from an allowance or other would no longer depend on public spending. On the contrary, they would contribute to the budget through social contributions of the employer and the employee, as well as income tax natural persons.
Today, the average cost of an unemployed person is estimated at 13,000 euros per year and the associated loss of income at 27,000 euros.
Today, the average cost of an unemployed person is estimated at 13,000 euros per year and the associated loss of income at 27,000 euros. Substituting the status of unemployed for the status of active therefore brings in 40,000 euros per person in government. Clearly, if we managed to achieve an employment rate of 80% in the three regions, this would mean a budgetary impact of 23 billion (€40,000 x 581,000) and the budget would therefore be in balance. This is a huge challenge, especially for a ageing population, characterized by an inverted age pyramid. The real question is therefore: is this realistic in a Belgian context?
Impossible? No not at all…
Compared to other European countries, the participation rate remains very low. The share of people participating in the labor market remains 4 percentage points lower than in the EU and 14 percentage points lower than, for example, the Netherlands. The length of working life is one of the lowest in Europe, or 34.5 years. And, to be honest, many European countries have already reached the 80% target. This is the case for Germany, the Netherlands, Hungary, Estonia, Malta and Sweden, to name just a few.
So what do these countries have in common? Firstly, strict controls on people who do not want to work, which contrasts sharply with the lax policy of Forem, for example. Secondly, the time limit on unemployment compensation. In the Netherlands, for example, the maximum duration is 24 months, but this is only obtained if you have worked for 24 years (one month per year worked). In Germany it is 12 months, with a maximum of 24 months for elderly people. In Estonia it is seven months and in Malta only six months. The contrast is striking with the unlimited duration which prevails in Belgium… Thirdly, payment is made by a public service. The “Ghent system”, as it is called in international literature, in which unions pay unemployment benefits, is quite exceptional (only in force in Belgium and the Scandinavian countries) and leads to a high degree of unionization which gives the illusion of power to the unions, which also results in multiple strikes. Fourth, a low tax burdenespecially on the lowest salaries.
It is socio-economic policies, and not community policies, which can put an end to transfers.
In reality, what is seriously lacking to achieve this objective, in a country where there are as many vacant positions as unemployed people, is the political courage to take these four socio-economic measures yet necessary. And for those who consider this approach “asocial”, work is the best way to fight poverty and at the same time the best way to ensure the sustainability of social insurance financing for those in need.
The end of transfers
In addition to the objective of a balanced budget, achieving this ambition would also mean a drying up of transfers from Flanders to Wallonia. Because if we look more closely at the transfers to Wallonia, we see that 90% of these transfers concern the lower contributions of Walloons and Brussels residents to income tax on the one hand, and the charge of allowances on the other hand. If more Walloons and Brussels residents worked, this would automatically reduce social spending and increase income taxes.
Add to this the faster aging of the Flemish population, and there will be no more transfers. In short, it is socio-economic policies, and not community policies, which can put an end to transfers. Implement the four measures mentioned above will certainly be easier than dividing the country or making a ninth community reform. What’s more, it doesn’t even require a two-thirds majority.
Rudy Aernoudt
Professor of economics at UGent
1700369586
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