Inequality in Belgium: 1985-2020

Capéau, B., Decoster, A., De Rock, B., Vanderkelen, J., Vanheukelom, T. (2023), Inequality in Belgium: 1985-2020, Institute for Fiscal Studies, Country Studies: Inequalities in Europe and North America, A parallel study to the IFS Deaton Review.

Employment, wages, hours and individual earnings
The era of the end of the last century and the beginning of this century is mainly characterised by an increase in the employment rate, especially among older persons (60+) and women of prime working-age (25–60). This is partly due to the rising education level, especially among females. Since the early 2000s, there have been relatively more highly educated females than males in the prime working-age population. But the gradual equalisation of the legal pension age of females to that of males from 60 to 65 years, , between 1997 and 2009, and the restriction of early leavers’ schemes (see Section 2.2) for older unemployed people, have also contributed to the rise in employment rates. Employment among younger persons (16–24) is declining, however, most probably because they are spending longer at school. Neither the Great Recession nor the first year of the COVID crisis seem to have had a substantial impact on employment. This may be due to the massive use of temporary unemployment schemes, which allowed employees to keep their job after the lockdown, or allowed them to look for a job in another, less vulnerable sector.
Real hourly wages rose considerably during the 1980s and 1990s. While they declined somewhat during the first decade of the twenty-first century, they rose again in the period 2008-2015, be it less strongly than in the previous century. From 2015 to 2018 real wages stagnated. Until today, there remains to be a gender gap in real wages. There is no indication, however, that, overall, wages have become more unequal. If anything, wage inequality seems to have decreased between 2005 and 2017. The mean number of hours worked has remained quite stable during the last two decades, around 36–37 hours per week. This is somewhat lower than during the 1990s, when it was 38–39 hours a week.
Gross earnings rose substantially during the 1990s, but stagnated in the 2000s. The average impact of the Great Recession on gross earnings was small. During the first year of the COVID crisis earnings fell considerably, due to the lockdowns. There is, however, no indication that gross earnings inequality has risen significantly during the twenty-first century. On the contrary, there is a slight tendency of declining earnings inequality.
The number of self-employed persons is lower in the current century than at the end of previous century, but it has been slightly rising again during the last decade. The self-employed are predominantly found in the lower earnings deciles.

Labour market institutions
Collective wage bargaining is a structural component of the Belgian economic system. A collective agreement between employers and employees on maximal real wage growth is concluded biannually. There is a system of sectoral committees of employees and employees, represented by unions, where, among other things, sector- and profession-specific minimum wages are negotiated.
In Belgium, most social benefits are taxable. The ratio of gross benefit to gross income (earnings, other income plus benefits) of the lowest quartile of the equivalised household disposable income distribution has been between 40% and 50% during the first two decades of the twenty-first century. This is higher than it was at the end of the 1990s (between 20% and 35%). The ratio of taxes to gross household income of the bottom quartile of the equivalised disposable household income distribution has approached that of the second quartile during the last decade and is about 25%.

Household incomes
Real equivalised disposable income rose substantially throughout the whole period 1995–2020. The gap between education levels has, however, been increasing during the last two decades, as equivalised disposable household income of the lowly educated is stagnating, and even fell between 2008 and 2015, but seems to have recovered since then. Overall, the dip caused by the financial crisis was small and short. Inequality of equivalised disposable household incomes exhibits a slightly decreasing tendency during the first two decades of the twenty-first century. The incidence of poverty increased at the same time, in accordance with the widening of the education gap of equivalised disposable household income, which mainly affects the bottom 10%. This might explain the common opinion that income inequality has also risen in Belgium, which is at odds with the statistics, but may be due to a confusion between inequality and poverty.
There is redistribution from gross earnings towards households in which nobody is working. Nevertheless, the gap between equivalised disposable household income of persons living in households in which nobody works and those living in household with at least one person working is increasing over time.
Another persistent inequality is that between natives and migrants. Despite being quite well represented among the highly educated, the employment rate of migrants remains lower than that of natives. This is also reflected in lower earnings and equivalised disposable incomes. Despite the increase in the employment rate of migrants during recent years, their incomes relative to those of natives are still decreasing.
There is a positive correlation between earnings of partners, and this correlation seems to be increasing slightly over time. This, in combination an increasing education gap in earnings, might exert an upward pressure on inequality of household incomes in the longer term, though we have not found any empirical evidence so far in this sense.