High inflation undermines the competitiveness of Belgian companies. In question: the automatic indexation of wages, a mechanism that does not exist among our neighbors.
Belgian companies are faced with an unprecedented increase in their wage costs. The Federal Planning Bureau predicts that hourly labor costs in the private sector will increase by 5.4% in 2022 and 9.3% in 2023. In two years, companies will thus see their payroll costs increase by 23 billion euros compared to 2021. And everything suggests that these salary costs will increase significantly in 2024. The Flemish employers’ organization Voka is thus counting on a jump of 21%, or 32 billion euros, in these personnel costs for the period 2022-24.
In September, the health index, which serves as a benchmark for wage indexation, rose 11.25% year-on-year.
The surge in these costs is due to soaring inflation and automatic wage indexation. In September, the health index, which serves as a benchmark for this indexation, rose by 11.25% from one year to the next.
The timing of rising labor costs varies from sector to sector. The social secretariat SD Worx expects that employers of some 1 million employees will have to index wages by 10.4% in January. This concerns companies that adjust their remuneration once a year to the progression of the smoothed health index. Many other companies use a central index and adjust wages more quickly, with smaller increases.
Salary norms
Wage costs are therefore rising much faster in Belgium than in our neighbors where automatic indexing does not exist. Last week, the Central Economic Council argued that our labor costs will have increased between 2020 and 2024 by 4.6 percentage points faster than in Germany, France and the Netherlands. The wage norm stipulates that wages cannot increase faster than in neighboring countries. There is therefore no margin for an increase in real wages.
Only half of companies are able to pass on their increased costs to their customers.
Companies do not have the possibility of fully passing on the increase in their labor and energy costs in their selling prices. The National Bank had indicated in May that companies manage fairly quickly to pass on an average of 60% of the increase in their costs to their customers. “But one can wonder if they can still today”, asks Gert Bijnens, one of the authors of the study. Only half of the companies are able to do this, observes the Voka on the basis of a survey of 600 Flemish companies.
In the past, industry had more freedom than the service sector to raise prices. Colruyt warned on Wednesday that high food inflation will cause its profit to fall significantly in 2022. There is little doubt that companies’ gross profit margins will shrink in 2022 and 2023, after reaching a record high in 2021. .