Results of the third wave of the survey on wage-setting in Belgium

The article presents the main results for Belgium of the 2014 survey on firms’ wage- and price-setting practices in the period 2010-2013, within the framework of the Wage Dynamics Network (WDN),an ESC B research project network. The results are generally in line with known characteristics of the labour market in Belgium and provide interesting insight into firms’ perception of that market and on their reactions during the crisis. Firms indicated that customers’ ability to pay and the level of demand had the strongest negative effect on their activity in the 2010-2013 period. Although credit constraint was not mentioned as a preponderant source of negative effects, it is still a significant factor, especially for some smaller firms. Even though the survey reveals relatively wide autonomy in price-setting, it is in practice limited by the strong effect of competition. Firms therefore have to use various adjustment channels. The survey confirms that the use of temporary lay-offs was also an important tool that explained the relative resilience of employment in Belgium. Moreover, firms highlight high taxes and high wages as major obstacles to hiring, together with uncertainties about economic conditions. A large proportion of firms – though not the majority – seem to share the perception that the labour market has become less flexible, which is intriguing as it cannot be directly related to labour market reform or institutional changes. In contrast to most other European countries, a specific feature of wage formation in Belgium is that, notwithstanding the wage moderation policy, there have been almost no wage cuts, and this is confirmed by the survey.