Economic Policy Reforms 2019

Belgium

Income per capita has been lagging that of the upper half of OECD countries and the gap has widened due to a decline in labour productivity growth. However, labour productivity levels remain amongst the highest in the OECD.

Income inequality is relatively low. Greenhouse gas emissions are around the OECD average, while exposure to air pollution is higher than the average in advanced economies.

Progress on past priorities has been modest. Taxation of labour is set to decline further, thanks to multiyear reforms decided in the past, but the tax wedge will remain relatively high. A reform of adult education has been adopted, and offers of training and validation of skills for newly arrived migrants have been introduced. Simplified procedures for retail establishment in Flanders and the Brussels Region entered into force from 2018.

Easing administrative burdens and simplifying entry regulation in professional services, retail and network industries and streamlining the insolvency regime would boost competition and productivity growth. Further reducing the tax wedge on labour, particularly for the low-skilled, would encourage employment. Improving teacher training and attracting the best teachers to schools with high concentrations of disadvantaged students would raise skills and reduce inequality.

Growth performance, inequality and environment indicators: Belgium

Source: Panel A: OECD, Economic Outlook Database; Panel B: OECD, Income Distribution and National Accounts Databases; United Nations Framework Convention on Climate Change (UNFCCC) Database and International Energy Agency (IEA), Energy Database; Panel C: OECD, National Accounts and Productivity Databases.

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Policy indicators: Belgium

Source: Panel A: OECD, PISA 2015 Results (Volume I): Excellence and Equity in Education, Annex B1.7 (tables): Immigrant background, student performance and students' attitudes towards science; Panel B: Adalet-McGowan, A. and D. Andrews (2018), "Design of Insolvency Regimes across Countries", OECD Economics Department Working Papers, forthcoming.

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Beyond GDP per capita: Belgium

Source: Panel A: OECD, Income Distribution Database, World Bank, World Development Indicators Database and China National Bureau of Statistics; Panel B: OECD, Environment Database.

Note: For the explanation of the sets of indicators above, please go to the metadata annex at the end of this chapter.

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Belgium: Going for Growth 2019 priorities

Improve outcomes and equity in education. Educational outcomes of socio-economically disadvantaged individuals and first and second-generation immigrants are comparatively poor.

• Actions taken: The implementation of the Pact for Excellence in Teaching in the French Community continued in 2018 with the recruitment of additional teaching staff and the establishment of a six year plan covering pupil performance. In 2018, the Flemish Community adopted a reform modernising secondary education from which will be phased in from September 2019.

• Recommendations: Improve teacher training and incentives to attract teachers to schools with a high concentration of disadvantaged pupils. Strengthen school-level social diversity programmes and promote the participation of immigrants’ children in early childhood education to reduce language handicaps. Assess systematically language proficiency in primary and secondary school and provide languages classes when needed.

Reform the wage bargaining system. Cost competitiveness is undermined by a wage setting system, which makes aligning wages with productivity difficult.

• Actions taken: No action taken.

• Recommendations: Assess the results of the 2017 reform of the wage formation system and consider additional reforms, for example, directly linking wages to productivity growth.

Increase product market competition and business dynamism. Business dynamism is low and excessive regulatory burden hampers competition and productivity growth.

• Actions taken: Simplified procedures for retail establishment in Flanders and the Brussels Region entered into force from 2018, with a monitoring system to assess its impact foreseen in Flanders. In 2018, the professional qualification requirements for craft professions were abolished for all 27 professions in Flanders and some in Wallonia, which is assessing the rest. In May 2018, the insolvency regime was reformed to expand the scope of the law to all businesses and introduce new preventative measures.

• Recommendations: Reduce regulatory barriers to entry and exit, including further reform of the insolvency regime. Strengthen competition in various professions, such as in accountancy, legal and architecture services by reducing barriers to entry and licencing requirements. Ease regulation of retail services, in particular the restrictions on large outlets, shop-opening hours and the protection of incumbents. Further simplify administrative procedures and licence requirements to start a business and establish a single regulator for each network industry.

Further reduce the tax wedge on labour and enhance financial work incentives. High taxes on labour discourage employment and reduce the labour supply of low wage earners.

• Actions taken: No action taken. Past reforms to lower taxes on labour, including those to reduce employers’ social security contributions are still being phased in.

• Recommendations: Continue reducing labour taxes beyond the measures already phased in, especially for low-skilled workers, as the tax wedge on labour earnings remains one of the highest in Europe. Implement a more gradual phasing-out of the reduced tax wedge as wages increase to reduce the risk of a low-wage trap.

Improve the integration of migrants. Immigrants have poor employment outcomes and are overrepresented in low quality jobs.

• Actions taken: Plan Formation 2020 of the Brussels Region is currently being rolled out. It includes a social, professional and linguistic assessment of migrants as well as specific offers of training and validation for newly arrived migrants. Regions adopted or updated plans to combat work-related discrimination focussing on awareness raising, self-regulation, reinforced monitoring and discrimination in hiring.

• Recommendations: Further engage social partners in firm-level diversity plans, including in the public sector where the share of immigrant employees is low. Narrow the scope of statutory public sector jobs for which EU citizenship is required. Further develop validation programmes for skills and degrees acquired abroad. Expand language course programmes adapted to workplace needs, notably by combining them with other forms of training.