Belgium has been among the world’s most productive countries for years. Only Norway, Luxembourg and Ireland have a higher national output figure per hour. However, since the late Nineties Belgian productivity has been on the slide and the fall is sharper here than elsewhere.
A report from the US think-tank ‘The Conference Board’ recently claimed that Belgian labour productivity even fell in 2018. OECD chief José Angel Gurria says Belgium is now paying the price of low productivity growth, especially in the services industry. The slow growth in productivity also meant that unions and management had little leeway for wage increases: hourly wages rose 0.5% over the past decade if index rises that top up wages in line with inflation are ignored.
The OECD believes that Belgium’s position as a highly productive country with high wages is coming under pressure. It fears that if the trend persists it will lead to economic, regional and political tensions. Productivity levels vary widely between the regions. The organisation identifies Brussels as the most productive region. An hour’s work here yields 19% more for the economy than in Flanders and 38% more than in Wallonia. The gap between Flanders and Brussels grew smaller, while that between Wallonia and Brussels only grew worse.
The OECD’s recipe to combat productivity loss includes: increasing competition between businesses, investing in research and development and making venture capital more attractive. Employees should be able to switch jobs more easily. Wage negotiations should be staged per sector and seniority should play a lesser role.
Belgium should also invest more in transport, the digital infrastructure and universities. The OECD recommends a reduction in tax incentives for home owners as well as cuts to taxes on buying a home to encourage people to switch jobs more readily.