Frozen salaries until 2014…then until 2018?

10th October 2013, Comments 0 comments

It’s frustrating for a union leader.

He goes to his boss, requests a raise for the personnel, and gets turned down, not because they don't deserve it, but because it's against the law.

This is how, since 2013, the salaried workforce in the private sector has been treated. This will continue to be the case in 2014.

And after that? This issue has been raising hackles within the federal majority for the past few days. There was no agreement as of Tuesday evening, "but we're still working on it," pointed out Elio Di Rupo, the Belgian prime minister.

In November 2012 the government decided to freeze salaries for two years and set a goal to eliminate this cap by 2018. Only indexed and scaled raises are allowed. But collective agreements cannot include any other kind of planned raises. The only option that remains is for an employee to negotiate his own raise.

The government put this measure in place because Belgian salaries were rising more quickly than in the three surrounding countries. According to the Central Economic Council, the gap is now at 5.1 %. A country with much higher wages doesn't sell as well. It's bad for its prosperity, or, at least, that's the reasoning.

The problem is that, in spite of a two-year freeze, the salary gap has not closed. Future measures will need to be brought in.

For the past few months, the deputy prime ministers of the Di Rupo government have been attempting to accomplish this by modifying the 1996 competitiveness law. The principle is to work an automatic mechanism into the law that would block salaries as soon as Belgium displays an increase when compared to its neighbors. There is, however, a major hurdle facing this decision: the socialists refuse to insert a blocking mechanism into the law. "The government agreed to absorb the salary gap for 2018, but there was never a question of inserting such a mechanism into the law," states a socialist source involved in this issue.

Is the party being influenced by the FGTB (General Federation of Belgian Labor), as deputy prime minister Didier Reynders (MR) maintains? "I don't blame him," answers Anne Demelenne, secretary general of the socialist union. "As soon as we reconvened after the summer break, we mentioned that any change to the 1996 law would be tantamount to a declaration of war. For us the salary gap is symbolic (0.5%), and if companies are having trouble exporting their products despite this small gap, it could be much more due to a lack of investment on their part."

The other main union, the CSC, is equally opposed to automatic salary freezes. "Salary negotiations are actually being favored by management and the unions. If the law requires a salary freeze, it will prohibit salary negotiations. This runs contrary to international conventions since it impedes collective bargaining. We're aware that there is a problem with salary gaps in some sectors. One way to solve this problem is to lower labor taxes and carry it over to capital, for example," states Claude Rolin.

Due to union pressure, the PS has resolved to oppose this automatic freeze. It seems that proposing a measure that is so loathsome in the eyes of both the unions and most of the PS electorate right before the elections would be suicidal for the socialists in the government. And the fact that neither the government agreement nor the November 2012 compromise envisaged a measure to reduce the gap gives the socialists the advantage.

Officially, the discussion is ongoing. On Wednesday, however, the parties in the coalition seemed to be considering delaying this thorny problem and dropping it in the next government's lap. "If the law does not remove the salary cap, we'll have to find another way of doing it," stated Reynders. "I just want to see it reduced. I don't even care to know how. As far as this goes, I think that the reduction of labor taxes, as was proposed on Tuesday, is a step in the right direction."

The deputy prime minister thinks that lowering the VAT on electricity, which has also been put off, could have a role in helping this along. A lower cost of electricity could stem the rise in the index, which would also control the rise in salaries. "This seems to be a good idea," said Reynders.

Unless there is a reversal on the part of the Open VLD, which seems to have given up, it seems that continuing the salary freeze until 2018 will be too tricky for this government. It will toss this very hot potato to its successors. Anyway, the latter will have to settle through law or through guidelines - the next salary negotiations between management and unions, which are due to take place at the end of next year. If the PS is not part of the government, a freeze is likely. The acrimony that has reigned over the past few days could well set the tone for the next legislature.



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