Copyright © BusinessAMBE 2023
Key takeaways
- The rigid wage system in Belgium, characterised by legal restrictions on wage increases and automatic indexation.
- According to the National Bank of Belgium, this hampers the ability of companies to adapt to changing economic conditions.
The National Bank of Belgium stresses the need for more flexibility in the country's wage-setting system to promote productivity growth. The bank's annual report highlights that while recent measures to boost employment are in the right direction, further action is needed.
"Too rigid"
The governor of the National Bank criticises the current wage system for being too rigid. He points to legal restrictions on wage increases and automatic wage indexation as factors preventing companies from adjusting wages in line with industry performance.
The report acknowledges that wage adjustment is a sensitive issue, but stresses its importance in strengthening Belgium's economic dynamism.
Moderate regulation
Although the Belgian economy experienced modest growth in 2025, with falling inflation and rising employment, the National Bank expresses concern about the sustainability of job growth, which is concentrated in self-employment and non-market services. The bank also points to a deterioration in Belgium's competitive position due to negative contributions from residential investment and net exports.
In addition to wage rigidity, the National Bank sees excessive regulation as a major obstacle to economic adaptability. This regulatory burden, which mainly affects small and medium-sized enterprises, hampers innovation and competitiveness.
Centralised wage system
The centralised wage system, while contributing to low wage inequality, also limits labour mobility and hinders workers' transition between sectors with different productivity levels. This ultimately slows the growth of promising firms and hampers overall economic dynamism.
Comparison between Europe and the US
The governor compares Europe to the United States, pointing out the persistent gap in economic growth and technological progress. He attributes this difference to the fact that the US offers a more favourable environment for talent and innovation, unlike Europe, which is more risk-averse and over-regulated.
The governor concludes by advocating a balanced approach that promotes greater European integration while reducing unnecessary regulatory burdens.
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