In its annual report on the Belgian economy, the OECD insists that Belgium’s labor market has fared better than most OECD countries, although cost competitiveness remains a major issue.
Employment levels in Belgium are better than in most other European countries. This is due to the widespread use of reduced work time schemes which encourages labor hoarding. This is a high-risk practice for companies during a recession as it reduces profitability; however, it guarantees that talent remains in the company.
Additionally, the OECD predicts that reforms to the unemployment benefit system and special provisions for new graduates will improve the efficiency of the labor market.
Unfortunately, the report also points out that there are still many inbuilt factors which reduce the competitiveness of Belgium’s labor market. These include high taxes and the perverse effects automatic wage indexation has on salary growth. The OECD recommends that this mechanism be phased out and that wage growth be more closely linked to performance.Source: AmCham