Wage Indexation and International Competitiveness in Belgium: An Uneasy Coexistence: Belgium

March 2, 2023

Preview Citation

Format: Chicago

André Geis. Wage Indexation and International Competitiveness in Belgium: An Uneasy Coexistence: Belgium, (USA: International Monetary Fund, 2023) accessed March 24, 2025

Summary

Belgium is one of a small group of euro area countries that maintains indexation of wages to inflation as part of its wage setting framework. With intensified price pressures since late 2020 driving inflation to record levels, the tension between compensating workers for purchasing power losses while maintaining international competitiveness have again been highlighted. To improve the performance and viability of the current setup, several avenues of reform could be envisaged. In particular, the scope for excluding price increases in highly volatile components, like energy and food, from the indexation basis should be explored to less the need to restore competitiveness by prolonged periods of real wage restraint. Moreover, options to widen the flexibility of the indexation regime should be contemplated to alleviate the burden of firms at times of large and multiple shocks, thereby also preserving investment and employment. Finally, productivity trends should also be accounted for to capture deviations of labor costs between Belgium and its key export markets.

Subject: International organization, Monetary policy

Keywords: Collective bargaining, Inflation, Inflation indexation, International competitiveness, Price setting, Wage formation, Wage indexation, Wage setting

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Selected Issues Paper No. 2023/015
Stock No:

SIPEA2023015
ISBN:

9798400235306
ISSN:

2958-7875

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