Debate focuses on pay increases in times of economic growth

Download article in original language : BE0008323FFR.DOC

With the Belgian economy experiencing rapid growth, trade unions are keen to ensure that workers receive their share of the bounty. The question is how this is to be achieved, given that statutory wage restraint has been in place since the slump years. For its part, in July 2000 the government drafted a legal framework for the financial participation of workers in the fruits of growth, which has met with a mixed response from the unions.

Since 1999, the various national and international bodies that monitor economic trends have been revising their growth estimates for Belgium upwards. The National Bank (Banque Nationale de Belgique/Nationale Bank van België) forecasts 3.9% GDP growth in 2000 and 3% in 2001, while the the Federal Planning Bureau (Bureau Fédéral du Plan/Federaal Planbureau) expects 3.8% growth in 2000. The current economic upswing has focused attention on Belgium's system of wage restraint, which dates from the years of economic slump.

Brief history of wage restraint

The competitiveness of Belgian enterprises deteriorated in the wake of the first "oil shock" in the 1970s. At the time, one of the factors put forward to explain the impairment of the fundamental balance of the Belgian economy was that labour costs were rising faster than those of the country's foreign trading partners. The government hence stepped in to regulate wage rises, which had traditionally been the province of the social partners. After several wage freeze laws, legislation was enacted in 1996 that imposes preventive limits on wage increases. The law on "employment promotion and preventive safeguarding of competitiveness" provides for the alignment of wage increases in Belgium to estimated trends for its principal trading partners, France, Germany and the Netherlands.

Concretely, under the law's provisions, the bipartite Central Economic Council (Conseil Central de l'Économie/Centrale Raad voor het Bedrijfsleven, CCE/CRB) prepares a yearly technical report on the maximum permitted nominal labour cost increase margin, on the basis of expected pay trends in the reference countries. Every second year, based on the technical report by CCE/CRB, the social partners determine the maximum permitted labour cost increase margin within the framework of the national intersectoral agreement. The sum total of wage-indexation payments, pay-scale increases and other wage benefits negotiated at the various levels may not exceed the maximum permitted margin expressed in terms of nominal labour costs per full-time equivalent worker. If the social partners fail to reach an agreement, the government formulates a mediation proposal. If at the end of this procedure an agreement still cannot be reached, the government makes the final decision.

In 1996, the government unilaterally set the maximum permitted wage increase margin at 6.1% for 1997 and 1998. CCE/CRB had set the figure at 6.5%, but the government judged it more prudent to lower the upper limit for this first application of the new law. In 1998, on the eve of negotiations over a new intersectoral agreement between the social partners, CCE/CRB's technical report mentioned a maximum wage increase margin of 5.9%. The social partners agreed on this figure as the upper limit for wage increases during 1999 and 2000 (BE9811252F). In 2000, negotiations for the new intersectoral agreement are scheduled to begin in September. The trade unions have already expressed their intention to challenge the existence of a wage norm.

Trade unions and the wage norm

Barring unexpected circumstances, all economic forecasts are rosy for the next two years. The unions therefore want workers to share the fruits of growth, which requires adapting the 1996 "employment promotion and preventive safeguarding of competitiveness" law.

The Federation of Liberal Trade Unions of Belgium (Centrale Générale des Syndicaux Libéraux de Belgique/Algemene Centrale der Liberale Vakbonden van België, CGSLB/ACLVB/) has requested an amendment to the 1996 legislation and demands full autonomy for the social partners in negotiating the 2001-2 intersectoral agreement. "CCE/CRB's report provides a benchmark, but it should not be binding (...) How can we explain to workers that they must continue to make efforts?" asks Guy Haaze, president of the liberal trade union organisation.

Since the "social elections" of workplace employee representatives in May 2000 (BE0006316F), the socialist Belgian General Federation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV) and the Confederation of Christian Trade Unions (Confédération des Syndicats Chrétiens/Algemeen Christelijk Vakverbond, CSC/ACV) have joined the liberal union in voicing this demand. FGTB/ABVV opposes wage increases being constrained by a statutory norm and wants to negotiate freely, "giving priority to solidarity, ie favouring the intersectoral and sectoral levels" (reported in the L'Écho newspaper on 5 July 2000).

CSC/ACV goes even further, denouncing the current situation as "social nonsense" (quoted in the Le Soir newspaper on 5 July). The Christian union organisation claims that a strict application of the 1996 legislation would, strictly speaking, curtail bargaining on wage increases at sectoral or company level until the end of 2002. According to Josly Piette of CSC/ACV, France - one of the reference countries for setting the wage norm - "has reduced employers' social contributions on low wages by FRF 100 billion. That is such a hefty drop that it appears from the OECD tables that French wages have not risen at all. That is wrong. It is just that the drop in employers' contributions overshadows wage increases". The general secretary of CSC/ACV adds that: "France partly corrects rising wages by a drastic cut in employers' contributions. It would thus hardly be judicious to compensate for these cuts in contributions carried out abroad through wage deceleration here. In comparison, Belgian wages have increased too fast and an adjustment needs to be made over the following years to maintain our competitiveness. Hence the nonsense."

CSC/ACV would rather amend the legislation than abolish it altogether. According to the Christian union, the law should take into account not only labour costs but also training and employment, and it should be indicative rather than mandatory. "Workers should also be able to benefit from the economic upturn," CSC/ACV states forcefully. To avoid obstacles in the way of wage formation and collective bargaining, CSC/ACV asks the CCE/CRB to elaborate, as quickly as possible, indicators on trends in costs, investments and the development of society and of the economy, in order to take into account the wider reality.

For its part, the Federation of Belgian Enterprises (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO) does not see the problem the same way. It has launched a plea for the greatest prudence. A restraining wage norm, along with reduced taxation, remains - according to FEB/VBO - the best way to stimulate the competitiveness of enterprises and promote employment.

Prospects of profit-sharing?

Despite the favourable new economic climate, international bodies such as the OECD advise countries such as Belgium to exercise caution, in view of their fragile competitiveness arising from high cost factors. To increase workers' purchasing power, they recommend alternatives such as profit-sharing schemes. In this respect, the Belgian cabinet reached an agreement in July 2000, which would finally provide the legal framework for such schemes which has so far been lacking in Belgium.

According to the relevant cabinet press release, employers will be able to introduce a profit-sharing scheme either through a collective agreement or, for enterprises that are not covered by an agreement, through a "participation deed". There are two possibilities: profit-sharing through a cash bonus or equity-sharing through a stock-option plan. Benefits received within the framework of a profit-sharing scheme will be limited to 10% of paybill, in order to avoid the pitfall of excessively variable total remuneration. The government has announced that revenues from such financial participation schemes would not be counted in the sum total of pay that is subject to wage norm restrictions.

Differing trade union reactions

CGSLB/ACLVB has applauded the speed with which the government reached an agreement on profit-sharing. This was one of the demands formulated by the liberal union in a memorandum addressed to the new government in May 1999.

CSC/ACV has already let it be known that profit-sharing is not "its cup of tea". In particular, profit-sharing may not be taken into account in calculating pension entitlements, which are based on end-of-career remuneration (with upper limits). For a worker, remuneration is a matter of the work performed, not of the number of shares held, the union states. CSC/ACV is moreover wary of the recent controversy over profit-sharing in the GIB retail group (BE0006314N), asking how profits can be determined and monitored in the case of large corporations that show profits at the overall level but not at the level of some subsidiaries.

FGTB/ABVV stated that it would take all steps to avoid company-level agreements on profit-sharing encroaching on the solidarity obtained through sectoral agreements: "The government intends not to take into account the cost of such schemes in calculating pay trends. Thus, a strict wage norm would continue to apply to the least privileged workers or those in the weaker sectors or enterprises, whereas workers in the stronger sectors and enterprises could benefit from the fruits of economic growth, without limits and with preferential fiscal and parafiscal rates." For FGTB/ABVV, this is unacceptable.

Commentary

The current situation involves two debates, which unfortunately overlap because of present circumstances.

On the one hand, the legalisation of profit-sharing for workers is a welcome development, considering that Belgium still lacks a legal framework in this respect. The government is thus belatedly filling a gap, although there are points that still need to be cleared up - eg which financial reference figures should be used when large groups are involved. At this point, the legislation is at the draft bill stage; it still needs to be voted on by parliament and cleared by the State Council before it becomes operational. However, the bill's primary purpose is not to allow workers to share the fruits of economic growth.

On the other hand, growth prospects and rosy economic forecasts are finally allowing trade unions to negotiate meaningfully on pay, whereas employment had been the primary concern of workers since the economic crisis of the 1970s. It is a rude awakening for the unions, whose freedom has been shackled by a legal framework put in place during the lean years. Have they dallied too long, allowing themselves to be surprised by an unhoped-for upswing? The report by CCE/CRB due in September 2000 is the next stage, unless the government enacts urgent measures in the interim. Matters will develop further in the autumn as negotiations for the new intersectoral agreement get underway. (Catherine Delbar, IST)