Belgian Premier Unveils Labor, Pension Reforms

Charles Michel emphasizes labor and pension reforms in his first speech as prime minister.

Belgium’s incoming prime minister Charles Michel emphasized labor and pension reforms in his first speech to parliament on Tuesday as head of a coalition of right-wing parties.

Alternating between Dutch and French, Michel, whose liberal Mouvement Réformateur is the only Walloon party in the new government, called for structural reforms in order to modernize Belgium. “To do nothing is to regress,” he said. “We reject fatalism and paralysis.”

For a country that hasn’t seen unemployment below 8 percent in two years, Michel can ill afford not to liberalize a jobs market that is far more rigid than those of its neighbors.

At €37 per hour, the average Belgian workers is more expensive than his counterparts in Germany and the Netherlands were labor costs are €30 and €32 per hour, respectively. Nonwage costs are also higher in Belgium at 27 percent, compared to 22 percent in Germany and 24 percent in the Netherlands.

Michel’s government promises to reduce social contributions for employers to at most 25 percent.

It will also introduce a savings vehicle — called a loopbaanrekening — that workers can tap into when they are confronted with a pay cut or dismissal. They will be able to use those savings to supplement their pensions as well.

A proposal from the Flemish nationalists to limit unemployment benefits and reduce the minimum wage for young workers did not make it into the coalition program. But those out of work will be called to perform two days worth of community service per week at the risk of losing their benefits.

Following other European countries, Belgium is also set to increase its retirement age. None of the parties in the coalition — which includes Christian Democrats and liberals from the Dutch-speaking north of the country besides the Flemish nationalists and Michel’s French-speaking liberal party — had promised such a raise in their election manifestos, prompting complaints from the left-wing opposition.

By 2030, the pension age should have been raised from 65 to 67. In the meantime, early retirement options will be curtailed. Exemptions for civil servants are due to be scrapped.

Like the Netherlands, Belgium plans to reverse years of budget cuts to defense although Michel’s speech was short on details. The country will remain a partner in the Joint Strike Fighter program to replace its aging fleet of F-16s with around forty new F-35 fighter jets. Six Belgian F-16s are currently involved in strikes against Islamic State militants in Iraq.