Belgian businesses particularly hit by rising labour costs, inflation

Belgium’s labour costs rose by almost double the average EU increase, resulting from the combination of inflation, wage indexation, and labour shortages, according to Eurostat studies published in recent years that were confirmed in a new report published on Tuesday.

The latest report from Eurostat shows that in the fourth quarter of 2023, hourly labour costs (an important indicator for monitoring inflation risks) rose by 4% in the EU compared with the same quarter of the previous year.

A labour cost is the total of all wages paid to an employee, as well as the cost of employing them including benefits, taxes, and other fees shouldered by the employer.

While the largest labour cost increases were recorded in Eastern European Union countries such as Romania (16.8%), Hungary (16%), and Poland (13.1%), Belgium, similarly to Luxembourg, recorded a rise in hourly labour costs that was well above the eurozone average increase of 3.4% with 7.9% and 7.8% respectively, while neighbouring countries France, the Netherlands and Germany scored closer and even lower than the eurozone average.

In terms of labour costs, Belgium, Luxembourg, and Denmark had the highest hourly labour costs, with €50.7 per hour in Luxembourg, €46.8 in Denmark, and €43.5 in Belgium. France and the Netherlands were close behind, at €40.8 and €40.5 per hour, respectively.

In Romania, Hungary and Poland, where the highest wage increases were recorded at the end of 2023, annual labour costs are significantly lower, at €9.5 per hour, €10.7 and €12.5, respectively. By comparison, the EU country with the lowest rate in 2022 is Bulgaria, at just €8.2 per hour.

Belgium, Luxembourg, and Malta are the only EU countries that apply a wage indexation system (in both the public and private sectors), whereby wages are adjusted upwards to protect citizens and their purchasing power from rising inflation. During the energy crisis, Belgium was an EU member state where citizens saw their purchasing power fall the least.

However, wage costs are not sufficient to determine an estimate of the average net wage received, particularly as real wages—which take into account inflation—have actually been declining in the last two years, as reported by Euractiv.

In 2023, the Belgian High Employment Council reported that the country is facing one of the most severe cases of labour shortages in the EU, affecting the vast majority of EU countries – something that further weakens the situation of Belgian companies.

Belgium, which has held the six-month EU presidency since January, has prioritised tackling this crisis.

(Claire Lemaire | Euractiv.com)