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Adynamicandinclusiveeconomy

153Economicandfinancialdevelopments ❙ ADYNAMICANDINCLUSIVEECONOMY ❙

6. Adynamicandinclusiveeconomy

6.1 Belgium:achangingeconomy

Globalisation and new technologies are fundamentally altering the structure of the advanced economies...

Theglobaleconomyhasundergonefar-reachingchangesin recent decades. As well as reducing transport costsanddismantlingbarrierstodataexchange,technologicalprogress has transformed modes of distribution and value creation,andevencustomerrelationships.Thishasbeenaccompaniedbyfundamentalrestructuringofproduction

systems,both locally, through the increaseduseofout‑sourcing,andworldwide,viathereorganisationofglobalvalue chains.

Thesechangesclearlypresenteconomicgrowthopportu‑nitiesfortheadvancedeconomiesbycreatingnewneedsand through increased demand from the emerging na‑tions.Atthesametime,however,theyaredrivingafun‑damental reorganisation of economic structures : entire segmentsof activityhavebeen shiftedworldwide–notonly within industrial production chains, but to a largeextentintheservicessectortoo.

CHART 72 SHARPFALLINEMPLOYMENTSINCE2000 ININDUSTRY,AGRICULTUREANDFINANCIALSERVICESANDMARKEDINCREASEINNETEMPLOYMENTCREATIONINBUSINESSSERVICES,HEALTHCAREANDGOVERNMENT

(changesinthousandsofpeoplebetween2000 and 2015)

–150 –100 –50 500 100 150 200 250 300 350

Business services

Health and social work

Public administration

Construction

Information and communication

Real estate activities

Trade, transport, accommodation and food service activities

Other services

Financial and insurance activities

Agriculture

Industry

Source:NAI.

154 ❙ ECONOMICANDFINANCIALDEVELOPMENTS ❙ NBB Report 2016

… resulting in a substantial reallocation of employment between sectors and businesses

In Belgium, these changes have translated over recentdecades into considerable job destruction in a range ofsectors, includingindustry,agriculture,andfinancialandinsurance activities. On balance, just over 140000 jobswere lost between 2000 and 2015 in industry and22000 inagriculture. In industry,thiscontinuedatrendthat began in the mid-1970s, while the process hadbeen under way for much longer in agriculture. Some19000 jobswerelostinfinancialandinsuranceactivitiesin the same period.

These changes are brought home to the population bythe corporate restructuring that accompanies them. There werenumerousexamplesin 2016oftheimpactsuchre‑structuringcanhaveonemployment.Throughout 2016,125 businessesembarkedon collective redundancypro‑cedures, affecting over 12000 employees; the loss of5500 jobs in this way was announced in Septemberalone,morethaninthewholeof 2015.

Reallocation of resources promotes economic growth

These developments took place, however, against thebackdropofanemploymentmarket inwhichhalfamil‑lionnetjobswereaddedbetween2000 and 2015.Afur‑ther59000 newjobswerecreatedin 2016.Thispatternisinkeepingwithaneffectivelyfunctioningemploymentmarket, inwhich jobs aredestroyedand createdall thetime. According to DynaM, statistics drawn up on thebasisofNSSOdata,justover205000 jobswerecreatedin 2014alone,with180000 beinglost.

Viewed more generally, the reallocation of resourceswithin an economy is a reflection of economic dyna‑mism: the transfer of employment and capital fromwaningsectorsandbusinessestoonesthataregrowingdeliversproductivitygains,theonlysourceofsustainablegrowth.

Other thanduringtheeconomicandfinancialcrisis, thereallocation of resources from the least efficient to themostefficientbusinesses–especiallythoseclosesttothefrontiersoftechnologicalefficiency–hasbeenshowntoraiseaggregateproductivityinBelgium.Butthissourceofgrowthhasremainedvery limitedsince2010.The influ‑ence of a relatively small number of businesses on thepatternofaggregateproductivityisdecisive:theprimarysource of growth comprises productivity gains recordedbybusinesses close to the frontierofefficiency,definedasthe5%mostproductivebusinesses.Bycontrast,otherfirms that to some degree lag behind technologically

contributenegativelytoproductivitygains,whichmeanstheirhandicapisgenerallygettingworse.

Theinternalcomponentofproductivitygrowthisexcep‑tionally important in manufacturing industry, telecom‑munications and IT services sectors. The reallocation ofresources to the best businesses makes the biggest con‑tribution to strengthening economic results in trade and other market services.

Public increasingly concerned

changes to the economic fabric and the organisation ofproductionhavean impacton theentirepopulation,althoughnoteveryoneisaffectedinthesameway.

Globalisationandtechnologicaldevelopments,forinstance,arebringingaboutmajorchangesinthedemandforem‑ployment in Belgium, as in other advanced economies.Demand for highly-skilled employees has grown at theexpense of that formedium-skilled positions. Low-skilledoccupationshave,inturn,beenlessseverelyaffected:thekindofworkperformedinthiscategoryisdifficulttotrans‑fer,sinceitfrequentlydisplaysastronglyrelationalcontentand is associatedwith geographical proximity. There is agenderdifferencehere:thepercentageoflow-skilledjobshas increased amongwomen,while it has fallen amongmen. Employment demand has become more stronglypolarisedasaresult.Apartialshifttoflexibleemployment

CHART 73 GROWTHINTOTALFACTORPRODUCTIVITYANDREALLOCATIONOFRESOURCES

(averagespersub-period,inpercentagepoints)

1997-2000 2001-2005 2006-2010 2011-2013–2

–1

0

1

2

3

4

5

Internal growth

Reallocation

Frontier businesses Other businesses

p.m.: Growth in total factor productivity

source : NBB.Basedonindividualdataforbusinesseswithatleastoneemployee,registeredwiththeCentralBalanceSheetOfficebetween1996 and2013.Afrontierbusinessisamongthe5%mostproductiveenterprisesinitssector.


contracts(fixed-termandinterim)attheexpenseofperma‑nent contracts has also been observed.

Sinceallchangeisasourceofuncertainty,thelattermayhave been intensified by the less than rosy economicenvironment and the perception that the benefits of

prosperity arenotbeing sharedequally. This appears tohave led toquestioningof the social contractonwhichoursocietyisbased,especiallybypeoplemostvulnerableto these developments.

Average per capita purchasing power in Belgium roseby0.1%between2005 and 2015–yearsthatsawthegreatrecessionandtheeuroareacrisis,butalsopartofthe preceding phase of rapid expansion and the sub‑sequentperiodofweakgrowth.Thisfigurewas0.5 ofa percentage point less than per capita GDP growth.This difference results from a transfer of income from Belgium to the rest of the world due to deterioratingterms of trade, combined with a contraction in theproportion of net income from investment flowing toprivate individuals.Theshareofwages inGDP,bycon‑trast,returnedtoitsearly-2005 levelin 2015.Ithadrisenduringthecrisis,butcontractedin 2014and 2015duetowagemoderation.Theshareaccountedforbysocialbenefitsrose.

The incomespread inBelgiumnarrowedslightlyduringthisperiod,incontrastwithmanyothercountries,whereit widened. Inequality is measured as the ratio of thetotaldisposableincomeofthe20%ofpeoplewiththehighestincometothatofthe20%withthelowest.Thefigures are adjusted to take into account the composi‑tionofthehouseholdtowhichanindividualbelongs.

TheEuropeanpovertyindicatorusedfortheEurope 2020strategy shows the percentage of people exposed to

CHART 74 TRENDINEMPLOYMENTBYQUALIFICATIONREQUIREMENTINTHE2000-2013 PERIOD

(shareoftotal,changesinpercentagepoints)

BE

–8

–6

–4

–2

0

2

4

6

8

Highly-skilled jobs

Medium-skilled jobs

Low-skilled jobs

EU15

Source:EC(LFS).

CHART 75 AVERAGEPURCHASINGPOWERANDINCOMEDISTRIBUTIONSTABLEINBELGIUMINTHEPASTTENYEARS

IT ES NL UK BE FR DE FI DK SE FI BE NL SE DK FR DE UK IT ES0

1

2

3

4

5

6

7

8

2015

2005

–1.5

–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

Gross disposable income at constant prices per capita

GDP by volume per capita

REAL DISPOSABLE INCOME AND GDP BY VOLUME(average annual percentage change, 2005 to 2015)

INCOME INEQUALITY(inter-quintile income ratio S80 / S20)

EU27EU

source : Ec.


at least one of the following risks: monetary poverty,material deprivation and low work intensity. One adultin five in Belgium faces poverty or social exclusion. Theproportion in Sweden, France and the Netherlands issignificantly lower. Belgium’s position in the middle ofthe ranking chiefly reflects the less favourable situationofunemployedpeopleandthelatter’sheavierweightingamongthepopulationaged18 andabove.

Brokendownbyagegroup,youngpeopleareatgreatestriskofpovertyorsocialexclusion,andthatpercentageissteadilyrising.Thisgrouphasbeenadverselyaffectedbythefinancialcrisis,whereasforpeopleaged65 andoverthe riskofpovertyor social exclusionhas reduced since2013.

In response to thesevariouschanges, thereare signsofa growing temptation of reverting to protectionism inthe advanced nations. But protectionism does not offer a long-termsolution.Aneconomyrunningatfullpotentialisessentialtotheabilitytoabsorbfundamentalchangesintheeconomicfabric.Thisrequiresavarietyofinstrumentsthat allow rapid and efficient reallocation of productiveresources, and above all more inclusive growth. Theseinstruments must help create the appropriate conditions for rapid entry into the labour market, especially foryoungpeople,butalsoforthedevelopmentofeconomicactivityandemployment.Thiscallsformeasuresaimedatpromoting innovationandbusinesscreation,while limit‑ingfactorsthatstandinthewayofadaptation–allwithaviewtostimulatingtotalfactorproductivity.

6.2 Raisingtheeconomy’sdevelopmentpotentialbyfacilitatingreallocationof resources

Heterogeneous businesses and low entrepreneurial dynamism

As is thecase inmostotheradvancedeconomies,busi‑nessproductivityinBelgiumvariessharply.WhileBelgiancompaniesare,onaverage,amongthemostproductiveinEurope,thelevelofapparentlabourproductivityworksoutbelowthisaverageatalmost70%ofbusinesses.

The productivity league table is generally topped by largecorporationsthataredirectlyinvolvedinglobalvaluechains,whetherasexporters,importersormultinationals.Thishand‑fulofcompaniescontributesubstantiallytothecreationofaddedvalueandemploymentinBelgium.Theyalsoaccountforaverylargeproportionofcapitalspending,bothtangi‑ble,inbuildingsandequipment,andaboveallintangible,insuchareasasR&D.In 2014,forinstance,the2%ofBelgianbusinesses that belong to international groups generated 47%oftheprivatesector’saddedvalueand38%ofitsem‑ployment.Theywerealsoresponsiblefor42%oftangibleand 74%of intangible investment. In otherwords, thesebusinesses,whichalreadyboastasubstantialtechnologicallead,investthemostinimprovingtheirefficiency.

Less efficient companies chiefly include firms that takenopartwhatsoever intheprocessofglobalisation.Thesebusinesses,ofwhich85%areactivesolelyinthedomestic

CHART 76 RISKOFPOVERTYORSOCIALEXCLUSIONINBELGIUMBELOWEUROPEANAVERAGE,BUTHIGHERTHANINNEIGHBOURINGANDNORDICCOUNTRIES

0

5

10

15

20

25

30

2005

2007

2009

2011

2013

2015

10

12

14

16

18

20

22

24

26

28

30

SE FR NL FI AT DK DE BE UK EU ES IT

RISK OF POVERTY OR SOCIAL EXCLUSION : INTERNATIONAL COMPARISON(in % of the population aged 18 and over, 2015)

RISK OF POVERTY OR SOCIAL EXCLUSION IN BELGIUM, BY AGE GROUP(in % of the corresponding age group)

25-49 50-6418-24 65and over

source : Ec.


economy,deliverjust30 to35%ofaddedvalueandem‑ployment,40%oftangibleinvestmentandbarely11%ofintangibleinvestment.Theyareliabletofallfurtherbehindtechnologicallyandtoseetheirfinancialresultsstagnate.

oEcD research (1) suggests that agrowingproportionofbusinesses are managing to survive in the market even though their results are such that they ought to ceasetheiractivities,becausetheiraddedvalueorearningsarenegative,forinstance,orbecausetheirrevenuesarenotsufficient to cover their financial costs over a given pe‑riod.Zombiefirmslikethisaresaidtoaccountforalmost10% of businesses active in Belgium, compared to amuchlowerproportioninothercountries(justunder2%inFrance,4%intheUnitedKingdomand5%in Italy).Researchshowsthat,bycontinuingtooperate,businessesofthiskindlaidclaimtoalmost15%ofjobsandcapitalstock inBelgium in2013.Thisphenomenon reveals theless-than-optimumoperationofthecountry’sgoodsandservices markets.

The closure of the poorest‑performing businesses com‑bined with the growth of the best performers or thecreation of new businesses contributes to the ongoingreallocation of inputs. Eurostat data show that businesscreation and closure rates have both been very low in

CHART 77 DISTRIBUTIONOFAPPARENTLABOURPRODUCTIVITYINBELGIUM(1)

(in€thousandsperFTE, 2014)

500 100 150 200 250 300 350 400

10090

80706050403020100

Average

Cumulative distribution

Productivity

Perc

enta

ge o

f co

mpa

nies

source : NBB.(1) Sampleofbusinesseswithatleast20 employees.

CHART 78 GROSSBUSINESSCREATIONINBELGIUMREMAINSLOWESTAMONGEU15(1)

(in%, 2014)

J

J

J

JJ

J

J JJ

JJ

J

J

J

J

PT UK DK NL LU FR ES FI SE DE IT AT IE BE

–4

0

4

8

12

16

20

–4

0

4

8

12

16

20

Gross business creation rate (2)

Business closure rate (3)

Net business creation rate (4)

EU15

source : Ec.(1) EU15,excludingGreece.(2) Businesses created in tdividedbyactivebusinessesint.(3) Business closures in tdividedbyactivebusinessesint.(4) Differencebetweengrossbusinesscreationint and business closures in t.

(1) SeeAdaletMcGowanM.,D.AndrewsandV.Millot(2017),The Walking Dead ? Zombie Firms and Productivity Performance in OECD Countries,OECDEconomicsDepartmentWP1372.


Belgium for a very long time, comparedwithneighbour‑ing countries as well as the average for the EU15. This,combined with the greater prevalence of zombie firms,indicatesastructural lackofdynamisminthereallocationofresources.Thenumberofnewbusinesses–bothlargeand small – needs to be raised and the resources taken up bythepoorest-performingfirmsneedtobereleasedifthemanyjob-seekersmaderedundantbyrestructuringaretoberedeployedintheemploymentmarketandsustainableeconomic development is to be supported. More recent data,althoughonlyforBelgium,neverthelesssuggestthatbusinesscreationacceleratedin 2016.

One way for individuals to return to the employmentmarket is to set up their ownbusinesses.At themacro-economiclevel,businesscreationbasedoninnovativepro‑jectsisanothersourceofhigh-qualityjobcreation.Analysisof data from the Global Entrepreneurship Monitor suggests that despite the low rate of business creation, entrepre‑neurship in Belgium is more strongly growth-oriented,thankstofactorssuchasthedevelopmentofnewproductsand the internationalisation of activities.

Creating the conditions for a more robust economy and more efficient allocation of resources

strengthening the different aspects of non‑cost competitive‑nessisessentialwhenaneconomyisintransitiontoraiseitsgrowthpotentialandallocateresourcesmoreefficiently.Forexample,theinnovativecharacterofaneconomycanonlybebolsteredwhenitsenvironmentisfavourable.Giventhemanyfactorsthatplayarolehere,particularattentionmustbepaidtothewaythesefactorscomplementeachanother.

Aligning regulations with current and future needs

The regulatory framework is crucial to the optimumoperation of the wider economy, as it determines thegeneral environment inwhichbusinesses and individu‑alscandevelopandadapt.Anoverlystrictframeworkisthought to hinder the optimum allocation of resources byundulyshieldinginefficientbusinessesfrompotentialcompetition from newcomers. Where existing compa‑nies are less subject to competition, it is argued thatthey alsohave less incentive to innovate andhence tocatchuptechnologicallywherenecessary.Theoptimumlevel of regulation is, of course, open to discussion: abalancemustbefoundbetweenessentialprotectionforconsumers, employees and businesses, and the degreeofflexibilityneededformarketstofunctionsmoothly.Aclear regulatory frameworkmustalsoprevent thecrea‑tionorpersistenceofaclimateofuncertaintythatdetersinvestmentandhencepotentialgrowth,whilealsocor‑rectingflawsinthemarketandavoidingcertaintypesofdetrimental behaviour.

The various aspects and patterns of regulation can be assessed from an international perspective using a range of indicators. Generally speaking, the regulatory frame‑workinBelgiumseemstohavedevelopedpositivelysince2009. Belgium performed better than the EU averageand France in 2015, but less well than Germany, theNetherlandsandtheNordiccountries,whichtoppedtheinternational rankings. This improvement occurred against thebackdropoffar-reachinginstitutionalchanges,withawholeseriesofpowersrecentlytransferredtothefeder‑atedentitiesinthewakeofthesixthStatereform.

CHART 79 RELATIVELYFAVOURABLEDEVELOPMENTOFREGULATORYFRAMEWORKSINCE2009…

(syntheticindexforregulation;highervaluesreflectasituationmoreconducivetoeconomicactivity;EUaverage(1)in2009 =0)

JJ JJJJJJ J J J J JJ JJ J J

J JJ J J J JJJJ J J J J J J J J

J

J J J

J

J

J

–7 –6 –5 –4 –3 –2 –1 0 1 2 3 4 5 6 7 8

HR

BG

SI

HU IT EL

RO SK

ES CZ PL AT PT EE UK FI

SE

DK LU IE

HR RO

EL

IT BG PL ES SI SK HU CZ PT

EE

UK AT IE LU SE FI DK

FR DE NL

FR

DE NL

BE

BE

2015

2009

J JJ

J JEU

EU

Sources:IMD,WEF,NBBcalculations.(1) EU,excludingCyprus,Malta,LatviaandLithuania.


The Regions have taken various initiatives to align the regu‑latoryframeworkwiththenewneedsoftheeconomy.TheBrussels-CapitalRegion’s2025 strategicplan,forinstance,provides for the gradual introduction of various measures such as the small Business Act and reducing the admin‑istrative burden for businesses, especially SMEs, in areassuchasthetransferofbusinessownership.Aplantocutred tape has also been introduced inWallonia, focusingon initiatives such as developing a range of online services forbusinesses.InFlanders,lastly,thegovernmentaimstoensurethatalladministrativetransactionswithbusinessesareoffereddigitallyby 2020.AnumberofexistingDecreeswillalsobecombinedinasingleAdministrativeDecree.

This positive general trend has the effect, however, ofdisguising contrary developments in several elementsofBelgium’sregulatoryframework.

WEF and IMD surveys of business leaders reveal, forinstance, that Belgian regulation is still viewed asmorebinding than elsewhere, especially in terms of admin‑istrative obligations. What is more, the legislative andregulatoryframeworkisgenerallyseenasnotadequatelystimulating the creation of commercial activities and as disadvantageoustobusinesscompetitiveness.Lastly,gov‑ernmentpolicyisoftenviewedasinsufficientlyadaptableinresponsetosignificantchangesintheeconomy.

These real or perceived limitations can adversely affectthe adaptability of the economic agents in the currentenvironment. Measures are therefore needed to align the legalandregulatory frameworkwithnewdevelopmentsintheeconomy,especiallyininnovativesectorswithsub‑stantialgrowthpotential.

Various reforms have also been approved recently atfederallevel.Inthisregard,administrativesimplificationisakeyelementofthefederalgovernment’sSMEplan.Anotherobjective is the introductionofamorefavour‑able framework for the development of e-commerce,by amending regulations on night work and the shar‑ing economy and setting out an appropriate fiscalframework.

In other respects, the situation in Belgium is more fa‑vourable than elsewhere. Belgian regulation is such, forinstance, that the economy has been extremely opento international tradeformanyyears. Ithasalsoprovedhighlyconducivetoinvestmentandthelocationofmulti‑nationals,bothofwhicharecrucialtothelocaldissemina‑tionoftechnology.

Improving public governance

In addition to an appropriate regulatory framework, ef‑ficientgovernmentandeffectivelyperforminginstitutionscontribute to an environment favourable to sustainable and robust economic development. The World Bank’sgovernanceanalysisfocusesonfivedimensions:govern‑ment effectiveness (1),politicalstability,ruleoflaw,controlofcorruption,andvoiceandaccountability(2).

(1) Governmenteffectivenessmeasuresperceptionofthequalityofgovernmentdepartments,thequalityofthecivilserviceanditsdegreeofindependencefrompoliticalpressure,theimplementationofpolicy,andthecredibilityofgovernmentcommitment.

(2) Voiceandaccountabilityrelatetothedegreetowhichthecitizensofacountrycanchoosetheirgovernment,andtofreedomofexpression,associationandthe press.

CHART 80 …BUTNOIMPROVEMENTINGOVERNANCERESULTS

(syntheticindexforgovernance;highervaluesreflectasituationmoreconducivetoeconomicactivity;EUaverage(1)in2009 =0)

J JJ J JJ J J J JJ JJ JJ J JJJJ

J J J J J JJJ JJ J JJ J J J J JJJ

J J J

J J J

J

J

J

J

–5 –4 –3 –2 –1 0 1 2 3 4

2015

2009

BG

RO

EL

HR HU IT

SK ES

PL SI CZ PT

EE UK

IE AT

DK

LUSE FI

RO BG

HR

EL IT

HU

SK PL ES CZ EE SI

PT UK

IE AT LU SE DK FI

FR DE

NL

FR DE NL

BE

BE

EU

EU

Sources:WorldBank,NBBcalculations.(1) EU,excludingCyprus,Malta,LatviaandLithuania.


The indicator aggregating these five aspects has notchangedmuchforBelgiumsince2009,andisabovetheEUaverage.Belgiumscoreslowerthantwoofitsneigh‑bours,GermanyandtheNetherlands,butalsolowerthantheScandinaviancountries,whichrecordthehighestrat‑ings. Analysis of the individual components shows thatthescopeforimprovementisgreatestintheruleoflaw,possiblyduetoBelgium’scumbersome legalprocedures.ItisalsointhisregardthatBelgiumdeviatesmostsharplyfrom its neighbours.

High-quality infrastructure to support economic activity

The presence of high-quality transport and communica‑tioninfrastructuregoesalongwaytowardsdetermininga country’s economic attractiveness. It also enhancesproductivity. Infrastructure investment benefits labourmobility, the physical flow of goods and the exchangeofdata,makingitimportanttothesmoothandefficientadaptation of the economy and, more generally, to anoptimum allocation of resources.

AlthoughBelgiumboastsa verygoodharbourandair‑port infrastructure, enabling it to play a central role inEuropeanvaluechains,andscoresabove theEuropeanaveragefor infrastructurequality,certaintransportnet‑work links have deteriorated in recent years, especiallycomparedwith its threeneighbouringcountries.This isparticularly the case for the railwayand roadnetwork,which regularly reaches saturation point – especiallyaroundthecountry’smajorcities–andhasgrownworseinrecentyears.

certain parts of the infrastructure have reached their op‑erationallimitsandasolutionneedstobefound.Indoingso, the emphasismust be on the essential complemen‑tarity of any investmentmade. Past policies – especially

taxation – must be adjusted to make public transportmore attractive, reduce traffic congestion and protecttheenvironment.Newtechnologiescanalsobedeployedto make more effective use of existing infrastructure.Mobility issuesdonotendatadministrativeboundaries,so initiatives in this area must also be coordinated to some degreetomaximisetheirimpact.

The authorities, meanwhile, need to create a stableregulatory framework that will enable the relevantpartiesto investasrequired inan infrastructurethat isalignedwithdevelopmentsintheenergymarketsandisdeliveredonanadequatescaleandwithintherequiredtime-frames. Examples include converting Belgium’slow-calorific gas network (L gas) into a high-calorificnetwork (H gas) by 2030. This will mean physicallyconverting some 1.5 million connections, while alsoensuringthatlow-calorificDutchgasisreplacedbygasofadifferentorigin, toguaranteecontinuityofsupplyfor affected customers.

Turning to the electricity market, the ambition is forBelgium to become a low-carbon economy, thanks tohigher renewable energy production andmore efficientdemand,forinstance.Thiswillrequireinvestmentintheelectricitymarkettoadapttheinfrastructureviawiderdig‑italisation to achieve a more decentralised and responsive distributionnetwork.Greatereffortmustalsobemadetoadjustnetworksatcross-borderlevel,tosecurethesupplyofelectricitywithintheEuropeanmarket.

Lack of entrepreneurship culture chief obstacle to reallocation of resources via creation of new businesses

A flexible and efficient regulatory framework, adequategovernance and good-quality infrastructure are neces‑sary, though not sufficient, conditions for the optimum

CHART 81 INFRASTRUCTURERESULTSCONTINUETOLAGBEHINDNEIGHBOURINGCOUNTRIES

(syntheticinfrastructureindicator;highervaluesreflectasituationmoreconducivetoeconomicactivity,averages2012-2015,EUaverage=0)

–7 –6 –5 –4 –3 –2 –1 0 1 2 3 4 5

RO

BG

PL

IT

HR

HU

SK

EE

SI LT CZ IE ES PT UK AT LU SE

FI

DK

DE FR

NL

BE

Sources:EC,IMD,WEF,NBBcalculations.


allocationofresources.Entrepreneurshaveaparttoplayinthistoo,althoughtheyarerelativelythinonthegroundin Belgium.

Entrepreneurial dynamism is clearly influenced by agreat many factors, over and above the innovativenatureof theeconomy.These factors canbebrokendown into five categories: the regulatory frame‑work,marketconditions,accesstofinance,entrepre‑neurial skills and entrepreneurship culture. A recent study(1)setouttoascertainhowBelgiumperformsinthesefive categories comparedwith the EU15 coun‑tries. Analysis of the results shows that, between2009 and 2015, Belgium scored lowest among theEU15 onentrepreneurshipculture.

Belgium rated above the European average for the other fourdeterminants. Its best relativeperformancewas in market conditions, for which Belgium camefourth out of 15, after the Netherlands, the UnitedKingdom and Ireland. The country performed slightlybetter thanaverage in termsof regulatory frameworkand entrepreneurial skills.

There is scope for improvement in each determinant,and so in 2015and 2016 thegovernment approved aseries of measures to promote entrepreneurial dyna‑mism.Theseincludetheintroductionofataxshelterforstart-upsandthesimplificationofvariousadministrativeburdens as part of the federal sME plan. Progress has been made, moreover, on harmonising employee andself-employed status. The country’s three Regions arealso pursuing various strategies to stimulate business creation.These includeencouragingsynergiesbetweenthe different bodies that support business start‑ups.

Given the large number of factors that weigh in here,however,itisimportanttoensurethatstimulationmeas‑ures complement each other and that actions in the dif‑ferentpolicyareasarealigned.

Since the weakness of the country’s entrepreneurshipculture appears to be the principal obstacle to entre‑preneurshipinBelgium,itisessentialtopresent“beinganentrepreneur”inapositive light.Thisshouldreducethe fear and stigmatisation of failure, foster creativ‑ity and risk-taking, and ensure that startingup abusi‑ness isviewedasanexceptionallyattractiveandusefulchoiceofoccupation, for individuals and for society atlarge. Kindling an entrepreneurship culture requires adeterminedapproachviaarangeofchannels,including

(1) SeeDeMulderJ.andH.Godefroid(2016),“HowtostimulateentrepreneurshipinBelgium?”,NBB,Economic Review,September,pp.65-83.

CHART 82 THEWEAKESTENTREPRENEURSHIPCULTUREINEUROPEBETWEEN2009 AND 2015

(Belgium’spositionandthatoftheEU15 countriesinthefivecategoriesofentrepreneurshipdeterminants:highervaluesreflectasituationmoreconducivetoeconomicactivity,averages2009-2015;EU15 average=0)

–6 –5 –4 –3 –2 –1 1 2 3 40

JJJJJJJJJJJ

JJJJJJJJJJJ

JJJJJJJJJJJ

JJJJJJJJJJJ

JJJJJJJJJJJ

JJJ

JJJ

JJJ

JJJ

JJJ

J

J

J

J

J

FI

UK

IE

SE

DK

LU

ATPTESITEL

UKIELUFIDKSEITPTESELAT

SEFILUDK

UK

ATIEESITPTEL

DKFISELUIEUKATPTESELIT

FIIE

DK

UKSEATLUESPTITEL

NL

DE

FR

NL

FRDE

NLDEFR

NLDEFR

NLFRDE

BE

BE

BE

BE

BE

Regulatory framework

Market conditions

Access to finance

Entrepreneurial skills

Entrepreneurship culture

Sources:EC,ECB,GEM,IMD,IMF,OECD,WEF,WorldBank,NBBcalculations.


schools and the media. Regional action plans have also been developed recently with the goal of introducingsecondary school students to entrepreneurship. Theintroductionof“student-entrepreneur“ status is a stepin this direction.

On top of R&D spending, the innovation ecosystem needs to be encouraged

Ifthepositivedynamismgeneratedbythecreationofnewbusinessesistobemaintainedandstrengthened,avarietyofconditionsmustalsobemettoensureitssubsequentdevelopmentthroughinnovation.Innovationenablesnewbusinessesand,moregenerally,establishedcompaniestodistinguish themselves and move closer to the frontiers of technology.

Innovation contributes to more efficient productionprocesses, is likely to bring down production costs andenhancesthequalityofthegoodsandservicesoffered.Italsohelpstocreatenewproductsandhencetorespondto newneeds in newmarkets. Investment in intangibleassetsandespeciallyspendingonR&Dareamongthekeydriving forces behind this process.

The upward trend in Belgian R&D spending that begansome years ago has persisted, reaching about 2.5%ofGDP in 2014. This is above the EU15 average for R&Dinvestment, and is also higher than in neighbouringcountries,withtheexceptionofGermany.However,the

figure still falls short of the 3% of GDP set out in theEurope 2020strategy.

The proportion of R&D spending accounted for bythe public sector is smaller in Belgium (28.5%) than

CHART 83 BELGIANR&DSPENDINGABOVETHEEU15 AVERAGE…

(R&Dspendingin%ofGDP; 2014,unlessotherwisestated)

SE FI DK AT DE BE FR NL UK IE IT PT LU ES EL

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Private sector

Public sector

p.m. 2006 total

EU15

source : Ec.

CHART 84 …BUTR&DSPENDINGBYTHEPUBLICSECTORREMAINSRELATIVELYLOW…

(R&Dspendingpersectorin%oftotalspending,2013)

0

10

20

30

40

50

60

70

80

90

100

Private sector

Public sector

EU15 BE Brussels Flanders Wallonia

source : Ec.


the EU15 average (35.7%) and, moreover, conceals asharp divergence between the country’s three Regions,sincethepublicsectorshareofR&Dinvestmentis lowerintheWalloonRegion.

Aside from these two findings, the performance ofBelgianbusinesses in the areasof innovation andR&D

is relatively heterogeneous. This reflects the fact thatR&D spending is chiefly carried out by large corpora‑tions, including subsidiaries of multinationals, and isconcentrated in two specific sectors: pharmaceuticalsand chemicals.

This investment is stimulatedbymeasures includinganattractive tax framework. While the aggregate level isencouraging,morebusinesses,especiallypurelydomes‑ticfirms,oughttobeencouragedtoinvestinR&Dandinintangibleassetsgenerally.EffortsinR&Dinparticularshouldbeexpanded,withaspecificfocusonSMEs.Theway that research efforts are currently concentratedmeans that the majority of Belgian businesses do notprofitdirectlyfromthepositiveeffectsofan innovativebehaviour;theyonlybenefitthroughtheirrelationshipswith corporations that do innovate. This concentrationdissipates the spillover impact of innovation.

R&Dspendingisimportantbutdoesnotinitselfpaintafullpictureoftheinnovationecosystem.TheEuropeanInnovation Scoreboard published by the EC annuallyassesses the aggregate results of Member states using a synthetic indicatormade up of eight fields: humanresources, researchsystems,financeandsupport,firminvestments, linkages and entrepreneurship, intel‑lectual assets, innovators, and the economic effectsof innovation.

The synthetic indicator shows that Belgium’s positionstrengthened overall between 2009 and 2015, and thatthe innovation ecosystem is more strongly developedin this country than for the EU15 average. The score‑boardshowsBelgiumtohavebeena“stronginnovator”

CHART 85 …ANDINVESTMENTININTANGIBLEASSETSSTILLCOMESCHIEFLYFROMLARGECORPORATIONS,OFTENMULTINATIONALS

(in%oftotalinvestmentinintangibleassets,averages2008-2014)

28%

9%

63%

Companies with foreign direct investment (parent company and subsidiaries)

Companies without foreign direct investment but linked to companies with foreign direct investment

Purely domestic companies

source : NBB.

CHART 86 BELGIANINNOVATIONRESULTSOUTPACETHEEU15

(innovationindex,scalefrom0 =weaklyinnovativeto1 =stronglyinnovative)

ES

EL

PT

IT

AT LU

UK IE FI DK SE

EL ES

IT

PT UK IE AT

DK

LU FI SE

FR NL

DE

FR NL DE

BE

BE

2015

2009

0.35 0.4 0.45 0.5 0.55 0.6 0.65 0.7 0.75

EU15

EU15

Source:EC(EuropeanInnovationScoreboarddataset).


in 2015,althoughitsresultsfellshortofthoseof“innova‑tionleaders”suchasSweden,Denmark,Finlandandtwoof our neighbours (Germany and the Netherlands). TheNetherlandsovertookBelgiumbetween2009 and 2015.It is therefore essential to maintain and foster the im‑provement currently detected in the Belgian innovationecosystem.

Variousconclusionsmaybedrawnfromthepatternofthedifferentgroupsofdeterminantssince2009 forBelgium,itsimmediateneighbours,theEUaverageandthecoun‑tries that were most advanced in terms of innovationin 2015.

Belgium’sresultshaveimprovedsince2009 inthehumanresources, research systems and linkages categories andalsoforfirminvestments,whichareestimatedbasedondatasuchasprivatesectorR&Dspending.Althoughtheeconomicimpactofinnovationalsoincreasedsomewhat,Belgiumscorespoorlyinthiscategorycomparedwiththeotherdeterminants.Allthesame,itiscruciallyimportantto turn an innovative attitude into new products andproductionprocesses,sothatthewidereconomystandsto gain.

Financeand support,measuredby factors including theshareofR&Daccountedforbythegovernmentsector,isthe determinant for which Belgium’s score deteriorated

most sharply between 2009 and 2015. “Intellectual as‑sets”–ayardstickforaseriesofaspectsrelatingtothedevelopmentofpatents–and“innovators”–theestimat‑ed percentage of corporations that achieve innovations in termsof products, processes,marketingor organisation–alsoshowedanunfavourabletrend.

This scoreboard can be used to draw a general pictureofBelgium’sstrengthsintheareaofinnovation.Belgiumoutperforms the EU15 and its neighbours on humancapital and research systems, but also in terms of col‑laboration.Thelatterrelatestocollaborationbetweenin‑novativeSMEs,forinstance,andtopublic-privateresearchpartnerships. The greatest scope for improvement, bycontrast, isfoundintheeconomiceffectsof innovation,patentsandfinance.

Like Belgium as a whole, the country’s three Regionsare rated as “strong innovators”. Although the dataare not available in full for all the determinants of in‑novation,avarietyofdifferentdevelopmentshavebeenidentified.

More specifically, the overall result for theBrussels-Capital Region declined by 11% between2013 and 2015. The Innovation Scoreboard showsthattheRegionneverthelessscoreswellforcollabora‑tionbetween SMEs, human capital and the export of

CHART 87 DETERMINANTSOFINNOVATION

(scalefrom0 =unconduciveto1 =highlyconducivetothedevelopmentofinnovation, 2015)

1

1

1

1

1

1

1

1

0

Human resources

Research systems

Finance and support

Firm investments

Linkages

Intellectual assets

Innovators

Economic effects

Belgium Neighbouring countries Nordic countries EU15

Source:EC(EuropeanInnovationScoreboarddataset).


medium‑ and high‑tech products. There is still scope for progress,however,forR&Dspendingbyboththepublicand private sectors. The aggregate result for innovation alsodroppedby11%inWallonia inthesameperiod.PrivateR&Dexpenditureandtheexportofaverage-andhigh-quality goodswere higher than the EU average,but organisational and marketing innovations tended tobelesswelldeveloped–whichwasalsothecaseforgovernmentR&Dspending.Flanders,bycontrast,keptupits2013 results.Innovationinproductsandproduc‑tionprocesseswasratedparticularlywellthere,aswascollaborationbetweenSMEs.Nevertheless,governmentR&D spending ought to be greater, as in Wallonia,along with innovation in the areas of marketing andorganisation.

WhilebothR&Dexpenditureandthesynthetic indicatorarehigher inBelgium than theEU15 average, thisdoesnot diminish the fact that progress on innovation is still possible.Withtheexceptionofcertainfiscalaspects,mostpowersinthisrespecthavebeentransferredtothecoun‑try’s three Regions, which therefore need to take freshmeasures topromoteR&Dspendingandspread innova‑tionmoreevenlyacrossthewidereconomy.Aninnovativeeconomy is,afterall,betterable toreapthebenefitsofchangeandbetterplaced todeploy the largestpossiblenumberofemployeesinthelabourmarket.

Seizing growth opportunities in foreign markets

Globalisation ought to be viewed not only as a threat,but also as an opportunity. For a small, open economylikeBelgium,takinggreateradvantageofincreaseddyna‑mismincertainforeignmarkets–especiallythoseintheemerging countries – is an important lever for adapting andexpandingthecountry’seconomy.

The development of these markets provides an oppor‑tunity forBelgianexporters,whether theyareactive inthem directly or benefit from them indirectly throughtheir integration in global value chains. Globalisation thusoffersBelgianexportersagrowthopportunitythatis both extensive, if able to enter new markets, andintensive, through higher exports to their traditionalmarkets.

Analysisofmicroeconomicdataallowsustobreakexportgrowthdownintothesedifferentmargins.Threesourcesofextensivegrowthareidentified:theappearanceofnewexporters,enteringnewdestinations,andexportingnewproductstoexistingmarkets.

Theintensivemarginhasplayedthemostimportantpartin Belgian export trends since 1995, delivering 60%ofexport growthbetween1995 and 2015. This sharehasactually risenashighasalmost80% in recentyears. Inother words, products already sold on foreign marketshave accounted for the majority of growth in Belgianexports.Newproductsaccountedforthelargestshareoftheextensivemarginsfrom2011 to 2015.Thefigureforthecontributionofcompaniesexportingforthefirsttimewasbarelypositiveinthisperiod.

6.3 smoother and faster transition into workforamoreinclusivelabourmarket

Job insecurity, income inequality and risk of poverty limited in Belgium for workers...

Thebreakdownofpovertyriskshighlightstheimportanceoflong-termlabourmarketparticipation,accompaniedbyhigh-qualityjobsandgoodpay.

WorkingpeopleinBelgiumareatverylowriskofpoverty,wherepovertyisdefinedasanincomebelowthepovertylevel. In 2015,4.5%werecategorisedaspoor.TheonlyEUcountrywithaneven lowerpercentagewasFinland,at3.5%.The threatofpoverty ismuchgreater for job-seekers(40.4%)andinactiveindividuals(31.5%).Despitethegreatrecession,therelevantindicatorhasbeenfairly

CHART 88 INTENSIVEMARGINSDELIVERLARGESTCONTRIBUTIONTOBELGIANEXPORTS

(growthinexportsandcontributionoftheintensiveandextensivemargins–goodsbyvalue,cumulativecontributiontogrowth,unlessotherwisestated)

1995-2000 2001-2005 2006-2010 2011-2015

–20

0

20

40

60

80

100

120

–2

0

2

4

6

8

10

12

New businesses

New destinations

New products

Intensive margin

Growth in exports (average year-on-year, 1995-2015)

Growth in exports(average year-on-year for each sub-period)

(left-hand scale)

(right-hand scale)

Sources:NAI,NBB.


stableinBelgiumoverthepasttenyears.Onlyamongtheunemployed has the risk of poverty increased since thebeginningofthecurrentdecade,duetofactorsincludingthefinancialcrisis,morestringentfollow-upofjob-seek‑ingbehaviourandreformstounemploymentinsurance.

Elements generally factored into any assessment of thequalityofajobincludenotonlythepayreceived,butalsotheperceivedpaylevelsofotherworkers.Belgiumscoreswellinthisrespecttoo,asincomesfromlabourarehighinthiscountry–grossmedianhourlypayintheprivatesec‑torwas€17 in 2014–andtherangeislimited.Theratioofhourlypaybetweentheninthandfirstdecilesstoodat2.4 in 2014,whichiscomparablewiththefiguresfortheNordic countriesand slightly lower than those inneigh‑bouring countries.

The proportion of low-paid employees – those whosepay is less than two-thirds of the national median grosshourlywage–is,incidentally,oneofthelowestinEuropeat less than 4%. This figure is virtually identical formenandwomen,whereas theEUaverageshowsawidergapto thedisadvantageofwomen.The sharpdecline in thatsharewhichoccurredinBelgiumbetween2006 and 2014reflectstheabolitionofthedegressiveminimumwageforemployeesunder21,whoareoverrepresentedinthelow-paid group. The government considered reintroducing the degressiveelementin 2016.

Moreover,labourmarketinsecurity–whichtheOECDesti‑matesbasedonacombinationoftheriskofunemployment,

the anticipated duration of unemployment and the re‑placement rateofunemploymentbenefits relative to thepreviouswage – is low in Belgium, at 3.6%. This partlyreflects the relatively limited loss of income in the eventof unemployment, other than for highly-skilled people.Jobinsecurityismuchgreater,however,foryoungpeople,menandthelow-skilled.Educationandtrainingthereforehelpnotonlysmootherbutalsolonger-termentryintothelabour market.

… but traditional organisation and functioning of the labour market have been altered by growing need for flexibility

Theorganisationoflabour,however,seemstobebecom‑ingmore flexible, due inter alia to the development ofnewtechnologies.Thefinancialcrisisandtheassociateddifficultyofenteringthetraditionallabourmarket,alongwith the unemployment insurance reforms, have alsocontributed to this increased flexibility. This flexibility issupportedforworkers through, forexample,permissiontocombineearnedincomeandpension,andalsothroughtheopportunitiesofferedby“self-employedinsecondaryoccupation”status.Workers’needtobalance theirpro‑fessional and private lives is another contributory factorhere, as is the feminisationof the labourmarket, giventhatwomenaremorelikelytoworkpart-time.Althoughtraditional, salariedemployment–definedasa full-timejobwithapermanentcontract–remainsthemostcom‑monpattern,anincreasingnumberofnewformsofem‑ploymentareemerging.Theseeitherfollowonfromeach

CHART 89 MUCHLOWERRISKOFPOVERTYFORBELGIANWORKERS

(in%ofthepopulationaged18 to64)

2005

2007

2009

2011

2013

2015

0

5

10

15

20

25

30

35

40

45

50

2005

2007

2009

2011

2013

2015

0

5

10

15

20

25

30

35

40

45

50EU

(1)BELGIUM

Employment UnemploymentTotal Inactivity

source : Ec(1) ExcludingCroatia.


otherduringaperson’scareerorareactuallycombined.More and more people are combining different activities in this way, possibly with different statuses: employeewithatemporaryemploymentcontract,full-timeorpart-timetemporaryworker,student,student-entrepreneur,orself-employedinaprimaryorsecondaryoccupation.

According to figures from theNational Institute for theSocialSecurityoftheSelf-employed(NISSE),thenumberof self-employed inaprimaryoccupation rose11%be‑tween2005 and 2015.Thenumberofself-employedinasecondaryoccupationrose39%and55%morepeopleremained active after retirement.

CHART 90 PROPORTIONOFLOW-PAIDEMPLOYEESAMONGLOWESTINEU

(employeesearninglessthantwo-thirdsofthenationalmediangrosshourlywage,in%, 2014)

DE NL AT FR DK FI BE SE0

5

10

15

20

25

0

5

10

15

20

25

2014 2006 Men Women

EU EU BE

source : Ec

CHART 91 LABOURMARKETINSECURITY(1)ISLOWINBELGIUMANDDECLINESASEDUCATIONALLEVELANDAGEINCREASE

(in%,2013)

AT DK FI DE NL FR SEBE

0

2

4

6

8

10

12

14

16

0

10

20

30

40

50

60

70

80

0

1

2

3

4

5

6

7

B

J

15-2

9

30-4

9

50-6

4

INTERNATIONAL COMPARISON BELGIUM

Risk of unemployment(left-hand scale)

Labour-market insecurity

Unemployment insurance (right-hand scale)

Hig

h

Med

ium

Low

Wom

en

Men

Educational level Age Gender

source : oEcD.(1) Definedasanticipatedlossofincomeintheeventofunemployment.Thislossdependsontheriskofunemploymentandthegenerosityoftheunemploymentbenefit.(2) Definedastheriskofbecomingunemployedandtheanticipateddurationofunemployment.(3) Definedbasedonthereplacementandcoverageratios,namelythepercentageofunemployedjob-seekersentitledtounemploymentbenefit.


Some workers who have difficulty securing permanentemployment–youngpeopleandthoseofforeignorigin,forinstance–canaccessthelabourmarketmorereadilythrough contracts of this kind. others opt for them be‑causeofthehighdegreeofflexibilityandautonomytheyoffer.Theyentailgreater risk,however, thanpermanentsalaried employment. Self-employed in secondary occu‑pation status canmitigate that risk,which undoubtedlyhelpsexplainitssuccess.

Although the proportion of temporary employmentcontracts remained fairly stable (anaverageof8.5%ofsalaried employment between 2000 and 2015), that ofshort-termemploymentcontracts(lessthanoneyear)rosefrom75%ofthetotalnumberoftemporarycontractsin2005 to82%in 2015.Theproportionofveryshort-termcontracts(threemonthsorless)roseinturnfrom31%to36%. Temporary employment ismore common amongyoung people: in 2015, the figure for 15-24-year-oldswas 37% of salaried employment, compared to 9%for 15-64-year-olds. These numbers back up the datafor labour market uncertainty, which is much greaterforyoungpeople.

These types of employment contract, along with self-employedstatus,canoffersmootheraccesstothelabourmarket than traditional salaried employment, wherecompetitionwithexperiencedemployeesismoreintense.All the same, the growth in temporary employment

contracts chiefly affects the low-skilled, complicatingtheirworkingcareersand limiting their socialprotectionrights.Householdswithmodestor irregular incomesarealsoexposedtoagreatercreditrisk.Variousgovernmentschemesprovideeasieraccesstofinance,particularlyforthe purchase of a home.

Thesenseof jobsecuritydependsonnumerous factors.The risk of losing one’s job, the time needed to findanother and the future terms of employment all needto be factored in. Belgium scoreswell in terms of bothemploymentstabilityandemploymentconditions,butthelikelihoodofre-enteringthelabourmarketislowerthanin other countries.

A feature of the Belgian unemployment insurance sys‑temisthat it isnottime-limited,unlesstheunemployedperson receives a sanction. Long-term unemployment(over36 months)isproportionatelyhigherinBelgiumonastructuralbasisthaninothercountrieswhereseparaterulesapplytothe long-termunemployed.Sincetherateoftransitionamongthe long-termunemployed is lower,internationalcomparisonisunfavourableforBelgium,asno account can be takenof the duration of unemploy‑mentbasedontheharmoniseddata.Allthesame,transi‑tionintoworkmustbefacilitatedusingthevariouslevers

CHART 92 GROWINGSUCCESSOFSELF-EMPLOYEDSTATUS

(inthousandsofpeople)

2005 2007 2009 2011 2013 20150

200

400

600

800

1 000

1 200

Primary occupation

Secondary occupation

Activity after retirement

Source:NISSE.

CHART 93 GROWINGNUMBEROFTEMPORARYEMPLOYMENTCONTRACTSOFSHORTORVERYSHORTDURATION

(in%ofthetotalnumberoftemporaryemploymentcontracts)

2005 2007 2009 2011 2013 20150

10

20

30

40

50

60

70

80

90

100

Maximum 3 months

From 4 to 6 months

From 7 to 12 months

Over 12 months

source : Ec.


– initial and lifelong learning, guidance for job-seekersand creating opportunities for them thanks to new jobopenings infirms,whichwillgohand inhandwithsus‑tainableeconomicgrowth.

Initial training : the cornerstone of young people’s entry into the labour market

Entry intothe labourmarket foryoungpeoplewhodonot yet have any professional experience depends pri‑marilyontheirbasictraining.Some12%of15-24-year-olds in Belgium are not in employment, education ortraining, a higher percentage than in neighbouringcountries. The Netherlands, Denmark, Germany andSweden are the best performers in this respect, withrateshalf as low. Substantial differences exist betweentheRegions:Flanders,withafigureof less than10%,is doing better than the two other Regions (15% inWalloniaand17.5%inBrussels).Partoftheclearpro‑gress that was achieved between 2000 and 2008 hassince been lost. These young people do not have suf‑ficientwherewithaltoenterthelabourmarketonasus‑tainablebasis.Theyexperiencegreaterdifficultyduringeconomic slowdowns, when theymust competemorethaninnormaltimeswithother,betterqualifiedyoungpeople or with experienced employees. This situationentails high individual and social costs in the short term and,asworkingcareersbecomelonger,aboveallinthelong term.

Certain groups are over-represented among youngpeopleat riskofbeingexcluded fromtheemployment

CHART 94 TRANSITIONFROMUNEMPLOYMENTTOWORK:INTERNATIONALCOMPARISON(1)

(in%ofthenumberofpeoplewhowereunemployedoneyearearlier, 2014)

DK SE UK FR DE BE ES20

25

30

35

40

45

50

55

source : Ec.(1) Estimatedtransitionrateforasinglemanaged35-39 ofaverageeducation.

CHART 95 12%OFYOUNGPEOPLEINBELGIUMARENOTINEDUCATION,EMPLOYMENTORTRAINING(1)


2001

2003

2005

2007

2009

2011

2013

2015 N

L

DK DE SE FI FR

0

5

10

15

20

25

30

0

2

4

6

8

10

12

14

16

18

20

BE

Flan

ders

Wal

loni

a

Brus

selsEU

BE EU

Flanders

Wallonia

Brussels

EVOLUTIONINTERNATIONAL AND REGIONAL COMPARISON (2015)

source : Ec.(1) NEET.


market,particularlynon-Europeanforeigners.ThisisnotatypicallyBelgianphenomenon,butitisespeciallypro‑nouncedinthiscountry.Youngnon-EUcitizensarelesslikely to have followed nursery education, their schoolresultsaresubsequentlylessgoodandtheireducationallevel remains lower on average than that of Belgians,eveniftheywereborninBelgium.Thesedifferencesareattributable to factors such as language barriers and cul‑turalobstacles,aswellasthefactthatteachersarenotadequately trained to dealwith an increasingly diversepopulation.

Generally speaking, Belgium’s education system tendsto perpetuate socio-economic inequalities. Despite itslow tuition fees and the availability of student grantsforlow-incomehouseholds,segmentationexistsamongeducational institutions. The most disadvantaged schools havetoofewresourcestoattractandretainexperiencedteachers.What ismore, students are channelled at anearlystagetoschoolsforgeneral,technicalorvocationaleducation.Inviewofthesechallenges,theCommunitiesrecently began to encourage participation in nurseryeducation–especiallyfortheunder-representedgroups– to improve the social and culturalmix in schools, topostpone streaming and to provide better guidance at thatpoint,andtolimitthenumberofstudentsretakingasecondaryschoolyear.

Technical and vocational education are also being increas‑inglyvaluedandsupportedbygovernmentandbusiness.These shorter streamsallow faster entry into the labourmarket. They can also respond more effectively to the

constantlychangingneedsofbusinesses.Apprenticeships,forinstance,offerconsiderablecareeropportunities.Thisform of education seems, moreover, to be spreadingto all industries and levels of education. Apprenticeship contracts have yet to establish themselves in Belgiumas firmly as in countries such as Germany, Austria orDenmark, where the formula has proved very success‑ful.Vocationallyorientedstudiesarestilloftenasecondchoice in Belgium.

CHART 96 NON-EUCITIZENSNOTSUFFICIENTLYINEDUCATION

0

5

10

15

20

25

0

10

20

30

40

50

60

70

80

90

100

Belgians Other EU Non-EU

NEET BY NATIONALITY (2015)

Nat

iona

l citi

zens

Oth

er E

U

Non

-EU

Belg

ians

Oth

er E

U

Non

-EU

EU BEBE

BELGIUM : EDUCATIONAL LEVEL (population aged 30-34, in %, 2015)

Low-skilled

Medium-skilled

Highly-skilled

source : Ec.

CHART 97 APPRENTICESHIPSPOORLYESTABLISHEDINBELGIUM

(in%ofthepopulationaged15 to29, 2014)

DE AT DK FR FI BE SE NL0

2

4

6

8

10

12

14

source : Ec.


At the same time, more and more young people aretaking up higher education. In 2015, almost 43% ofthepopulationaged30 to34 heldahighereducationqualification,8 percentagepointshigher than in2000.Amongthemostrecentcohorts,morewomenthanmenholdadiplomaofthiskind:foreverytwomalegradu‑ates there are now three female ones. Consequently,their career prospects are better too. Sufficient avail‑able and affordable childcare and personal services also contribute to a balanced distribution of employmentprospectsbygender.

Fewer higher education graduates in Belgium holdscientific or engineering qualifications than the EUaverage. Yet these are rewarding specialisations thatarecloselyalignedwithmany“hard-to-fill vacancies”.DespitetherequirementsoftheeconomyandtheneedtofostertheinnovativepotentialofBelgianbusinesses,thepercentageofgraduatesinthesesubjectsdeclinedbetween2005 and 2015.Thismismatchbetweencho‑sen subject fields and the needs of themarketmightexplain why the employment rate for highly-skilledpeople fell from 84.4% in 2000 to 81.8% in 2015.Nowadays,holdingadegree isno longer sufficient tofindajob:thechoiceofcourseisalsoakeyfactor.

Thatchoicecontinuestovarybygender:womenareover-representedoncoursesrelatingtoeducationandhealth,but under‑represented in engineering studies and the sciences. These choices are also expressed inwagepat‑ternsandexplainsomeofthepaygapbetweenmenand

women.ThedifferenceingrosshourlypayinBelgiumwas6.6%in 2014,oneofthelowestintheEU.Yet,womenstillmovelessreadilyintomanagementpositions,inboththe private and public sectors.

CHART 98 BELGIUM’SGROWINGNUMBEROFYOUNGPEOPLEWITHHIGHEREDUCATIONQUALIFICATION


2001

2003

2005

2007

2009

2011

2013

2015

0

5

10

15

20

25

30

35

40

45

50

SE DK NL FI FR BE

DE

0

10

20

30

40

50

60

EU

BE

Brus

sels

Flan

ders

Wal

loni

a

EU

EVOLUTIONINTERNATIONAL AND REGIONAL COMPARISON (2015)

source : Ec.

CHART 99 TOOFEWSTUDENTSOPTFORSCIENCEORENGINEERINGCOURSES

(highereducationgraduatesbysubjectareaandgender,in%oftotalnumberofgraduates, 2014)

BE BE0

5

10

15

20

25

30

H

Sciences, maths and IT Engineers, process industry and construction

Men

Women

Total

EU EU

source : Ec.


Smoother transition from unemployment to work thanks to active policy and efficient unemployment benefits

Training is not only important for young people: longerworkingcareersandtechnologicalchangemeanthatwork‑ersmustbeable to acquire the skills needed for them toconsiderswitchingjobsorsectorsthroughouttheirworkinglives.Lifelonglearningisessential.Allthesame,barely7%ofworking people between the ages of 25 and 64 tookanytrainingin 2015.ThisfigureplacesBelgiumwellbehindDenmarkandSweden,wheretheproportionwasjustunderathird,butalsosubstantiallybelowtheEUaverage.

Certain groups, most notably the low-skilled and over-55s,undertakeverylittletraining.Participationintrainingbyjob-seekers,bycontrast,isclosetotheEuropeanaver‑age in Belgium, reflecting the numerousmeasures thathavebeentakenbypublicemploymentservices.

Analysisofthetransitionfromunemploymenttoworkre‑veals several important factors in addition to educational level:thebusinesscycle,theperson’sageandhowlongthey have been unemployed. The longer a person hasbeen jobless, the less likely they are to findwork. Thisnegativecorrelationisgenerallyattributabletothegradualdeteriorationofunemployedpeople’shumancapitalortoa sense of demoralisation resulting in a less active search forwork. Itcanalsobetheresultofagradualselectionprocess:peoplewhoremainoutofworkforlongermaybeviewedonaverageaslessemployablethanthosewhohavequickly foundnewwork. These explanationsneednot,however,bemutuallyexclusive.Sinceitisharderforthe long-term unemployed to find another job, efforts

aremade toassist job-seekers at anearlier stage,whilestill maintaining a degree of selectiveness. To this end,publicemploymentservicescandrawonprofilingmodels,whichuseobjectivecriteriatodeterminewhichindividualsrecentlyregisteredasunemployedareatgreatestriskofremainingjobless.Themostvulnerablejob-seekersarethelow-skilled,theelderlyandnon-EUcitizens.Employmenthistoryandhealthmustalsobetakenintoaccounttosup‑portunemployedpeopleefficiently.

CHART 100 LIFELONGLEARNING:EDUCATIONLEVEL,AGEANDSOCIO-ECONOMICSTATUSINFLUENCEPARTICIPATIONRATE

(in%,25-64-year-oldswhohaveundertakentraininginpastfourweeks, 2015)

0

5

10

15

20

BE

25-34 35-44 45-54 55-640

5

10

15

20

0

2

4

6

8

10

12

14

Low Medium High

EDUCATIONAL LEVEL AGE

Working Unemployed Inactive

SOCIO-ECONOMIC STATUS

EU

source : Ec.

CHART 101 OUTFLOWINTOWORK(1)REDUCESWITHAGEANDEDUCATIONLEVEL

(in%ofpeoplewhowereunemployedoneyearearlier, 2014)

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-640

10

20

30

40

50

60

Highly-skilled

Low-skilled

Medium-skilled

source : Ec.(1) Estimated transition rates based on Belgian data according to a multivariate

model,forasingleman.


4

Keeping over-50s in work and providing jobs for a larger proportion of unemployed in this age group

The likelihood of finding a new job falls off sharply for50-64-year-oldscomparedtoallyoungeragegroups.Thisageeffectispartlyattributabletothecorrelationbetweenageandlengthofunemployment:thereare,onaverage,more long-term unemployed among older people thanyoungerpeople.Sincepayriseswithexperience,olderjob-seekersfrequentlyearnmorebeforelosingtheirjobsthanyoungpeopledo.Thispushesuptheirreservationwage,sothattheyrespondlesstovacanciesandremainunemployedfor longer.Replacement incomeinallunemploymentsys‑temsisbasedonpreviouspay.Olderpeoplearethereforeentitledtohigherbenefits,atleastinitially.Somecountries,moreover, have introduced rules that make the systemevenmoregenerous,withafixedsupplementaryallowancefor over-50s, for instance, or by extending the durationof the benefit. Belgiumhad a systemof this kind in theshapeof“seniorityincrements”,whichwereabolishedon1 January 2015. Higher unemployment benefits like thistendtoresultinaloweraverageoutflowintowork.

Other institutional features besides unemployment ben‑efit parameters also affect the outflow of older peopleintowork.Inthepast,forexample,itwascustomaryatatimeofbothrobustgrowthintheworkingagepopulationandeconomicweaknesstopromoteearlyretirement.Thiswasdoneeitherby introducingaspecific regime–suchasthe“pre-pension” inBelgium–orbyadjustingexist‑ing regimes (unemploymentor disability insurance). Theindividualsinquestionmightnolongerbeobligedtoseek

work,forexample,whilestillreceivingbenefitsequivalenttothoseofunemployedjob-seekers.Thesemeasureshavebeengraduallytighteneduporabolished,asmentionedinchapter2 ofthispartoftheReport.

Demand for experienced employees is another decisivefactor, in addition to those relating to the supply of la‑bour, institutions and policymeasures to promote earlyretirement. In Belgium in particular, it can be expensiveforabusinesstorecruitolderemployees–evenallowingfor productivity – because the seniority element plays asignificantpartinpayincreases.Whatismore,apropor‑tionoftheexperiencebuiltupduringtheperson’scareerwillbeofaspecificcharacterthatmightnotbeusefultonew employers. The latter could also be put off by theindividual’srelativeproximitytoretirement,whichmeansthat theperiod inwhich the employer can recoup theirinvestmentmightbeshorterthaninthecaseofayoungeremployee.Lastly,agediscriminationinrecruitmentcannotbe ruled out in some cases.

Thanks to legislation to promote “workable and flex‑iblework”,asdiscussed inchapter2 of thispartof theReport., employers and employees ought to be able toadapt their employment conditions more smoothly, forinstancebytakingaccountofthecareerdimension.

Lastly, thesevarious instruments toboostentry into thelabourmarketought tobe viewedas supplementary tothemeasurestakeninrespectoflabourcosts,sincereduc‑ing the fiscal and parafiscalwedge boosts the financialstimulitothesupplyofanddemandforlabour.

Box7–SupplementaryindicatorsforBelgiuminadditiontoGDP

Thisboxsummarisesthemainresultsofthesupplementary indicators inadditiontoGDP,ofwhichtheFederalPlanningBureau(FPB)publishedthefirstannualupdateatthebeginningofFebruary2017.InaccordancewiththeLawof14March2014,thisseriesofindicatorsisintendedtomeasurequalityoflife,humandevelopment,socialprogressandthesustainabilityoftheBelgianeconomy.

Theindicatorswerecalculatedusingasimilarapproachtothemethodadoptedforthefirstpublicationin2016.67indicatorswereselected,whichprovideinformationonthreedimensionsofsustainabledevelopment:“Hereandnow”,“Later”and“Elsewhere”.Whererelevant,theindicatorswerebrokendownbygender,age,incomeandeducationallevel.Internationalcomparisonsweremadefor56indicatorsforwhichthenecessarydatawereavailable.Fordetailed informationregardingthemethodologyusedtoselect thethemesand indicatorsandtoperformthebreakdowns,seetheFPB’sreportofFebruary2016(1).

(1) Seehttp://www.plan.be/publications/publication-1541-fr-indicateurs+complementaires+naast+pib


Trends in the indicators

Thediversenatureofthesupplementary indicators inadditiontoGDPmeanstheyofferrelevant informationona largenumberof themes. For thepurposesof thisReport, they complementanalysisof thepositionofindividualsinsocietyandinthelabourmarket,aswellasthatofthepublicdebtorthefinancialpositionoftheeconomy.

Theindicatorsalsoenableafewpreliminarygeneralobservationstobemadeaboutthepatternandsustainabilityofwell-beingandhowsociety isdeveloping.Basedon theprinciples setout in theFPB report, thisevaluationexclusivelyexaminesthedevelopmentofthe indicatorsand,morespecifically,whethertheyhavemovedclosertoordeviatedfromthetargetssetformostofthem.Theseobjectivesaredeterminedbygovernment,eitherinBelgium or at European or global level.

Thisevaluationshouldbeinterpretedwithcaution,asithasnothingtosayaboutthecurrentleveloftheindicatorsortheirpaceofdevelopment.Norhasitbeeninvestigatedwhethertheobjectivesarescientificallyrelevant.Whatismore,thedataarelimitedforroughlyhalfoftheindicators,duetoalowfrequencyofobservationorbecausetheinformationhasonlyrecentlybecomeavailable.

The“Hereandnow”dimensioncomprises38indicators,whichcananswerquestionsaboutBelgians’well-beingandhowthisisdeveloping.Nosystematictrendcouldbeidentified.

– Subjectivewell-beingremainedstablebetween2002and2014.– Most of the indicators relating to the “Health” and “Education and training” themes showed a positivedevelopment.Theonlydeteriorationwasintheindicatorforpostponementorcancellationofmedicaltreatmentforfinancialreasons.

SELECTIONOFSUPPLEMENTARYINDICATORSINADDITIONTOGDP(1)

2001

2003

2005

2007

2009

2011

2013

2015

0

10

20

30

40

2001

2003

2005

2007

2009

2011

2013

2015

0

40

80

120

160

2001

2003

2005

2007

2009

2011

2013

2015

1

2

3

4

5

6

7.1

7.2

7.3

7.4

7.5HERE AND NOW

70

74

78

82

86

0.2

0.3

0.4

0.5

0.6

0.7

Trust in institutions (score at least 6 out of 10, in % of the population over 15 ; right-hand scale)

Satisfaction with life (average score out of 10 ;left-hand scale)

Life expectancy, women (years at birth ; left-hand scale)

Greenhouse gas emissions (in million tonnes carbonequivalent ; right-hand scale)

Life expectancy, men (years at birth ; left-hand scale)

Domestic use of fossil fuels (tonnes per capita ; right-hand scale)

Official development aid (in % of GNP ; left-hand scale)

LATER ELSEWHERE

source : fPB.(1) TheindicatorsconsideredhereforeachofthethreedimensionsofthesupplementaryindicatorsinadditiontoGDPwereselectedtoavoidoverlapwithseriesused

elsewhereinthisReport.

4


4

– Incomeinequalitydevelopedfavourably,buttheotherindicatorsforthe“Standardoflivingandpoverty”themedeviated further from their targets.

– Formostofthe indicatorsrelatingtothe“Workand leisure”theme,the improvementsdetectedsince1990werepartiallyreversedbycontrarydevelopmentsinthepastfiveyears.

– Threeofthefivefinalindicatorsforthe“Hereandnow”dimension(PM2.5 and Noxemissionsandroaddeaths)movednearertheirtargets,whilethoserelatingtoenergydependencedevelopednegatively.Theindicatorforvictimsofnaturaldisastersistoovariableforanysignificantconclusionstobedrawnfromit.

The“Later”dimensionismadeupof35indicatorsrelatingtothecapacityofBelgiansandofsocietytomaintainandeven improvewell-being in the future.Most indicators for this dimensionmoved closer to their targetsduringboththeperiodsince1990andthefivemostrecentyears.Themostnoteworthyexceptionsaresetoutbelow:

– Lifeexpectancyingoodhealthhasdeclinedinthepastfiveyears.– Anegativepatternisalsofoundintheproportionofyoungpeoplenotineducation,employmentortraining,forstressatwork,andthepercentageofpeoplewithhighereducationqualifications.

– Theindicatorsforthemeadowbirdpopulationandsustainablefisheries(“Landandecosystems”)–twooftherareindicatorsforbiologicaldiversitythathavebeenavailableoveralongperiodoftime–deviatedfromtheirtargets.

– Withinthe“Economiccapital”theme,thepublicdebtindicatorhasbeendeviatingfromitstargetsince2007.– Withinthe“Mobilityandtransport”theme,theshareofroadtransportinfreighttransportdeviatedfromitstargetfrom1990onwards,buthasbeguntomoveclosertoitagaininthepastfiveyears.

The “Elsewhere” dimension incorporates eight indicators that help answer the question: “How does thedevelopmentofsocietyinBelgiuminfluencethecapacityofothercountriestodevelopandthewell-beingoftheirpeople?”.

– The indicators for the“Natural resources”and“Climateandenergy” themes relate toglobalenvironmentalcapital,suchastheclimatesystemandrawmaterialsresources.Theseindicatorsconvergedwiththeirtargets.

– TheshareofGDPdevotedtoofficialdevelopmentaidwashigheronaverageinthe2000-10periodthaninthe1990s.Ithasdeclinedsince2010,dippingbackbelowthe1990levelin2015.

Takentogether,theindicatorsforenvironmentalaspectshavegenerallydevelopedmorepositivelysincetheeconomicandfinancialcrisisof2008thanhavethoserelatingtosocialthemes.Thisreflectsthefactthatthegreatrecessionandthesubsequentprolongedperiodofweakgrowthadverselyaffectednumeroussocialindicators,includingtheriskofpovertyorsocialexclusion,whiletheeconomicslowdownsomewhateasedpressureontheenvironment.

Internationalcomparison

Comparisonof the indicatorswith theEuropeanaverageorwithneighbouring countriesgenerally shows thatBelgiumhas performedwell on the social indicators, but poorly on those relating to the environment. This isattributable,ontheonehand,tothefactthatBelgium’ssocialsecuritysystemismoreadvancedthanthatofmanyotherEuropeancountrieswhile,ontheother,pressureonthelivingenvironmentinBelgiumishighduetoitshighpopulationdensityandthespecialisationofBelgianindustryinintermediaryactivities,whicharemorepollutingthan the average.


Breakdownoftheindicators

27ofthe67supplementaryindicatorsinadditiontoGDPwerebrokendownintorelevantpopulationcategories.Breakdownbygendershowsthatmanyofthedifferencesbetweenmenandwomenarenarrowing,despiteafewpersistentinequalities.Thedetecteddifferencesintermsofeducationallevelremainandhaveactuallywidened.Lastly,asdescribedatthebeginningofthissection,thesituationofyoungpeoplehasdeteriorated,whilethatofolder people has improved.

Breakdownbyincomelevelrelatestoindicatorsforfourthemes:“Subjectivewell-being”,“Standardoflivingandpoverty”,“Health”and“Society”.Analysisoftheseshowsthatthesituationismorefavourableforthehighestincome categories :

– The“Subjectivewell-being”theme,for instance,showsthatsatisfactionwith life increaseswith income.Theconfidenceintervalscalculatedinthisregardarerelativelylarge,however,andthistrendhasyettobeconfirmedbyotherobservations.

– Withinthe“Standardoflivingandpoverty”theme–theindicatorsforpovertyorsocialexclusion–verylowworkintensityandseriousmaterialdeprivationareveryhighamongthequintilewiththelowestincome,andthreetofivetimeslowerinthesecondquintile,whereastheyareextremelysmalloreffectivelynon-existentinthethreeotherquintiles.

– When the indicators for “Health” were broken down by income, this too showed that the proportion ofsmokersandpeoplesufferingfromobesityordepressiondeclineswithrisingincomelevels,asdidpostponingorcancellingmedicalcareforfinancialreasons.

– Within the “Society” theme, general confidence, sense of security in public spaces and trust in institutionsincreasewithincomelevel.Theindicatorforcontactwithfriendsandrelatives,bycontrast,doesnotchangebyincome.Thevictimofcrimeindicatorgenerallyincreaseswithincome,albeitnottoaverypronounceddegree.

Thoughts for the future

Thesupplementary indicators inadditiontoGDPwillbeupdatedannuallyandmaybeadjusted inresponsetonewideasanddebatesinsociety.

TheFederalPlanningBureauwillcontinuetoworkonthesupplementaryindicatorsinadditiontoGDPintheyearsaheadwithaviewtoaddingnewindicatorstotheexistingseriestoimprovetheirconvergencewithsustainablede‑velopmentindicators–withaparticularfocusonthefollow-upoftheUN’sSustainableDevelopmentGoals –andresearchingthecompositeindicatorsingreaterdepth.Tothisend,theFPBwillexplorethepossibilityofdevelopingspecificcompositeindicatorsforBelgiumforthethreemaindimensionsofsustainabledevelopment.

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