How The Flemish Social Democrats Fight Unemployment

Frank Roels

Frank Roels

The Flemish party Sp.a redefined its principles and values at a congress held in Leuven on 8th June. The heir to the glorious Belgian socialist party  – which now uses the denomination ‘social democrats’[i] – began the process by posting all 103 pages of its draft resolutions online open to comment from anyone – even non members. Then, local party branches discussed and voted on amendments before a resolution committee evaluated and approved changes.

Throughout the new manifesto, the need for quality jobs for everyone is stressed repeatedly, and the German concept of mini-jobs is firmly rejected. In the chapter ‘A more social Europe’, the text states:

The mandate of the ECB is too restrictive; its goals of price stability should be extended to goals of maximum employment and moderate interest rates over the long term (…) In order to counter social dumping we want European legislation that guarantees that the same work within a member state receives the same wage. At the next change of the European Treaty, we want to write down that social rights are equivalent to (…) economic freedom.

But where will these new jobs come from? The private sector has a major role to play and the text states explicitly that there is no contradiction between entrepreneurship and socialist principles. In addition public authorities should take two initiatives: a) every public tender should guarantee that the financial return is subsidiary (subordinate) to the durable creation of quality jobs; b) a new public investment bank should support small and medium sized companies, which today experience restricted financing from the banking system. In the second proposal no mention is made of job creation or maintenance. Finally, the government should continue the (expensive) subsidies to the successful ‘service cheques’ that create jobs for lower educated.

Innovation, investment, cooperatives

Cooperative enterprises formed the foundations of the socialist movement in Belgium, the pharmacy COOP, created in 1880, being the most successful example. The party wants to promote this formula in many fields following examples from abroad. It states that investment in small and medium-sized businesses should be facilitated, for example, by borrowing from the public at large (‘peoples loan’). Yet, with the emphasis on job creation, there is surprisingly no mention of how many jobs these policies could create.

All will depend on consumer interest and purchasing power. The recession has finally reached the Belgian economy and we should bear in mind that in the Eurozone it has already lasted for six quarters. Most businesses have seen decreasing demand and orders. They do not hire but lay off. This is predicted to be represented in the employment figures for this year and next.

Unemployed need more training

SP.a’s new manifesto gives a lot of attention to job training better adapted to the present day needs of companies. School programs, as well as courses for the jobless, must respond to job vacancies, for many of which there are no candidates it is said. The message is that each citizen has a responsibility to be fit for the kind of work that is available.

This notion has been around for several years, in the press and in programs of most parties. Employers pray for suitable candidates and blame schools and governments for not providing them. In this rhetoric, it is always forgotten that the number of unemployed is five times the number of actual vacancies, some of which are fake[ii].

In contrast to the focus on the responsibility of the unemployed an amendment was approved and found its way in the final resolution:

Often applicants are not taken into consideration because experience in a specific task is required. The employer should avoid this handicap by offering training during probation. An employer who does not invest enough in the future of his employees, can be held financially responsible.

For years, trade unions have been complaining about a lack of training on the job, the new manifesto will work to shift more responsibility to the company that is hiring.

Reducing labour costs

The authors of the party manifesto are firmly convinced that the high labour costs in the region hamper employment. There is definitely a so-called wage handicap, in comparison to surrounding countries, they say[iii]. Therefore the party wants to lower the social security contribution paid by the employer, and exempt the lowest paid from income tax to increase earnings for employers and employees and create more jobs.

The commercial media immediately aired this draft proposal and employers’ representatives praised the party[iv]. Of course it was realized that the formula will diminish social security funding and the text proposes compensation by a novel tax primarily on income from property and financial assets but also on employees advantages that are not taxed at present.

Yet, purchasing power needs to be maintained. Hence, the reduced employers contribution to social security was amended as follows: ‘on condition of a prior binding agreement with the employers about the number of jobs that are preserved or created‘. This was voted by the party branch of Ghent, the university town with a socialist majority.

Notional interest subtraction

In Belgium, corporations that book investments made from their own capital (instead of borrowing) are permitted to subtract from their earnings a notional interest. This system is used predominantly by large corporations and offers a great advantage as it can strongly reduce corporate tax[v]. When this tax law was introduced in 2006, it was promoted as a means to stimulate job creation. This was not the result. Instead, the state loses billions of Euros of tax every year.

Naturally, trade unions have demanded the annulment of the system but Sp.a now wants to preserve it whilst narrowing its application (for example by excluding the financial reserve that banks have to keep anyway) and fixing a minimal tax rate for large corporations. On the other hand, small and medium sized companies should benefit from a higher subtraction rate. But this paragraph was amended, again making jobs a condition for the subtraction. A more extensive phrasing required that the number of jobs be related to the amount of the tax favour, taking into account the real labour costs for the company. But this arithmetic addition was omitted.

Jobs no priority

Both amendments that require jobs in exchange for financial benefits were approved by the Ghent party branch but rejected by the resolution committee and were not put to vote in the plenary congress. The argument used in the commission (according to a credible source) was that increasing fiscal revenue was more important and less complex to implement. The argument was brought forward by the Federal Secretary in opposition to tax fraud (who is a member of Sp.a). It remains unclear why this could not be combined with the demand for jobs.

Removing the amendment illustrates that the explicit protection and creation of jobs isn’t a priority for the party leadership (or at least for the one or two people who hold the pencil). If they believe that reducing costs for the employers will increase the number of jobs, why not include a guarantee in the rule? Such a paradox is not new: years ago when Frank Vandenbroucke was Minister for Work, he said in a party commission: ‘you cannot make demands on corporations’. So if you can’t, why give the employers such enormous advantages? Is it for love? Such a view of society is actually not so different from the corporate interests defended by conservative parties and the commercial media.

Freedom for entrepreneurs is the essence of the free market. Someone said from the floor during the discussion: ‘not all employers are crooks or criminals’. Of course, they aren’t. But why then not ask them for jobs in exchange for both tax and social security relief?

Two more amendments were rejected from the very beginning: ‘under certain circumstances labour hours might be reduced in order to keep jobs‘; and ‘as long as youth unemployment persists, young employees should be engaged by priority instead of extending the career of older ones. In times of high unemployment a vacancy can be filled up only once‘. In fact reduced labour time has been applied under the Belgian legal formula of ‘temporary unemployment’ and resulted in preservation of contracts for a number of months.

The fate of the novel party text probably reveals the dilemma the party has always been struggling with: its entry into coalition governments weighs upon its values and proposals. The principle ‘the party is one affair, the government is a different one’ is far from reality. Party officers are planning their careers. They absorb dominating ideas from the media, the business world and from other experts and politicians and they forget their origin.



[i] Its sister party in Brussels and Wallonie, to which Belgian prime-minister Elio DiRupo belongs, has preserved the name ‘Parti Socialiste’.

[ii] In Brussels city the number of vacancies for which lower educated can apply, is 1/112. Since there are so many applicants, a selection sometimes used is the street or neighbourhood where they live, according to the Brussels Observatory for employment. Figures in 2011: http://www.dewereldmorgen.be/artikels/2011/05/24/frank-vandenbroucke-voor-een-europees-sociaal-investeringspact

Fake vacancies are due to: a) not withdrawn after closure; b) meant for personnel inside the company; c) advertisement; d) the same vacancy in several data banks.

[iii] The so-called wage handicap is contested by the trade union ABVV-FGTB, by calculating the cost per product, i.e. taking productivity into account. In a report dated January 2013, it is shown that Germany and France have higher labour costs, based upon EU data of 2010. http://issuu.com/fgtb/docs/fgtbbarometre?e=1434904/2838824

Such figures ignore the large differences between industries, and within the labour force; however, this critique also holds for the claim that Belgian costs are highest. The trade union ABVV-FGTB was historically very close to the party. Although they were not mentioned in the draft, the party must have been aware of the trade union figures on labourcosts, since an amendment referred to them.

[iv] The Flemish Christian Democrats (CD&V) are also re-writing their program. They too are looking for ways to lower labour costs – this idea is in the air. This party supplies the Flemish prime-minister Kris Peeters, and the Belgian minister of Finance Koen Geens. Kris Peeters was previously head of the federation of small and medium sized  corporations UNIZO.

[v] such as AB Inbev, Arcelor Mittal, Distrigaz, GDF Suez Cc, Exxonmobil Petroleum, GlaxoSmithKline, Solvay, Telenet, Umicore. The true corporate tax rate paid in Belgium decreased over the years, to an average of 11,8% for large industries (2010). But some paid hardly any corporate tax:  http://dirkvandermaelen.spa.openminds.be/2008/een-stuwmeer-van-12-miljard.html

http://www.pvda.be/fileadmin/users/nationaal/download/2011/11/111130_top50_2011_nl.pdf

  • http://lib.ugent.be/bibliografie/801000072304 Frank Roels

    In the paragraph on cooperatives, the phrasing ignores their historical success in Belgium in many fields, such as retailing and supermarkets, banking (“The Bank of Labour”), textile industry, metallurgy and shipping, theatre and movie buildings, even investments in Africa. The movement started by baking bread for subscribers who paid a small advance. The great depression together with mismanagement lead to heavy debt, bankrupty and privatizations. The COOP pharmacies have survived, and the 1913 building Vooruit in Ghent has developed into a cultural temple and brasserie for young and old. http://vooruit100.be/en/

  • http://www.facebook.com/frank.roels.14 Frank Roels

    REDUCE LABOUR TIME: in contrast to Sp.a, the president of the
    Parti Socialiste, Paul Magnette, is in favour of the lowering of the number of
    labour hours. He calls it a truly left idea that he would implement. He adds: “Part of the population is completely overworked, an other part is unemployed. From the viewpoint of the collectivity, this is not good. To cite Marx: we make an army of jobless. Because productivity of the population at work increases continuously, while the number of labour hours stayed stable”.
    In my understanding of economy, this is perfectly correct.

  • http://www.facebook.com/frank.roels.14 Frank Roels

    REDUCING LABOUR COSTS: the principle announced in the new
    manifesto is already being applied by the Belgian coalition government.
    Minister of Work, Monica De Coninck (Sp.a) announces a law that reduces labour
    costs for the employer by 1000 euro a month, for each unskilled under 27 hired,
    during 3 years. The measure is entirely financed by the federal social security
    fund. It is an extension of an existing one, that is limited to personnel under 25, and lasts only 15 months. Nevertheless, youth unemployment has been on the rise. It should be remembered also, that since many years labour costs are reduced when employers hire someone over 55. Recent figures indicate that employment increases for the latter category (more so for women than men), while youth UNemployment climbed faster (+4.5%). Those under 25 receiving unemployment benefits rose by 11,2% since May 2012. The rise is more pronounced in the Flemish region, than in Brussels and in Wallonie (data from Social Security, and from the federal government). The fundamental question seems to me, whether any jobs are created or preserved by these benefits the employers receive from the government.