Job Retention Support in Belgium During the Pandemic

 The evolution of job retention support in Belgium during the COVID-19 pandemic was characterized by a rapid scale-up of a pre-existing system, followed by a period of prolonged emergency measures and a gradual return to a modified version of its original framework.

Pre-Pandemic Foundation

Before the pandemic, Belgium already possessed a well-established but fragmented "temporary unemployment" system. This system comprised several sub-schemes to address different circumstances, such as economic difficulties (primarily for blue-collar workers), force majeure events (unpredictable outside events), and bad weather (crucial for the construction sector).

Crisis Evolution: The "Simplified" Scheme

In March 2020, the government responded to the pandemic by rapidly evolving the existing framework into a "simplified" force majeure coronavirus scheme. Key evolutionary changes included:

• Administrative Streamlining: Administrative procedures were simplified, notification periods were shortened from seven to three days, and the requirement for workers to submit monthly "control cards" was removed.
• Expanded Eligibility: Firm-level eligibility was granted to any company affected by lockdown measures, and worker-level requirements were loosened so that employees did not need to meet the usual minimum contribution history for unemployment benefits.
• Increased Generosity: The income replacement rate for workers was raised from 65% to 70% of gross earnings, supplemented by a daily payment from the National Employment Office (ONEM/RVA).
• Harmonization: The scheme removed many of the historical distinctions between blue- and white-collar workers, applying the simplified rules similarly to both groups.

Persistence and Delayed Phase-Out

A defining feature of Belgium's policy evolution was the long duration of these emergency measures. While many other OECD countries began reducing the generosity of their schemes as the first waves of the pandemic subsided, Belgium maintained its simplified framework with only minor adjustments.

• September 2020 Attempt: A brief attempt was made to restrict the simplified scheme to "severely impacted" sectors, but this was reversed by October 2020 as virus cases resurfaced.
• Extension to 2022: The simplified crisis scheme remained active until June 2022, significantly longer than similar programs in most other OECD countries.

Post-Pandemic Transitions and Future Directions

Following the expiration of the simplified scheme in mid-2022, Belgium began a phased return to its pre-pandemic framework, though some "transitional measures" remained in place until July 2023.

Recent and Proposed Evolutions:

• 2024 Adjustments: As of January 1, 2024, the replacement rate for temporary unemployment (except for force majeure) was lowered to 60%, and new daily employer supplements were introduced (EUR 5 for white-collar and EUR 2 for blue-collar workers).
• Structural Recommendations: The sources suggest the system should further evolve to include experience-rated employer contributions to discourage structural dependence and mandatory training incentives, as the Belgian scheme notably lacked the training components found in other countries like Germany or France.
• Simplification: Experts recommend fully eliminating the fragmented distinction between blue- and white-collar workers for economic temporary unemployment to modernize the system.

Take-up patterns of job retention support in Belgium during the COVID-19 pandemic were characterized by an unprecedented scale of participation, shifting worker demographics, and a strong correlation with firm productivity and prior experience.

Aggregate and Sectoral Trends

Belgium reached an unprecedented peak in April 2020, with nearly 30% of salaried employment (roughly one in three jobs) supported by the temporary unemployment scheme. This was significantly higher than the OECD average of just under 20%.

Usage was heavily concentrated in specific sectors:

• Historically High-Usage Sectors: Before the pandemic, support was primarily used for seasonal or cyclical reasons in construction, manufacturing, and administrative services.
• Pandemic-Impacted Sectors: During the crisis, take-up surged in sectors exposed to containment measures, most notably accommodation and food services, which saw massive spikes despite minimal pre-pandemic reliance on the scheme.
• Low-Usage Sectors: Sectors such as public administration, education, and finance saw minimal take-up.

Firm-Level Selection

Participation varied significantly based on firm characteristics, specifically productivity and history:

• Productivity: Less productive firms were much more likely to use the scheme. During the pandemic, 16.6% of workers in the least productive firms were placed on support, compared to only 6.4% in the most productive firms. This suggests that liquidity and financial constraints were major drivers of adoption. (Notably, the accommodation and food sector was an exception where more productive firms were more likely to use support, likely due to a desire to retain highly skilled staff in larger establishments).
• Prior Experience: Previous familiarity with the system was a strong predictor of pandemic use. 51% of firms with a history of using temporary unemployment (from 2017–2019) utilized the scheme during the crisis, while only 14% of new users did so.

Worker Demographics

The pandemic triggered a major shift in the types of workers receiving support:

• Shift to White-Collar Workers: Pre-pandemic, blue-collar workers accounted for over 90% of recipients. At the crisis peak in Q2 2020, however, white-collar workers comprised 43% of all recipients. While this share declined as the pandemic subsided, it remained higher than historical levels, suggesting some firms became more accustomed to placing white-collar staff on the scheme.
• Educational Attainment: Take-up was starkly divided by education. In 2020, 20% of low-educated workers received support compared to just 3% of highly educated workers.
• Other Characteristics: Support was also more prevalent among men (reflecting their concentration in construction and manufacturing) and workers with foreign nationalities.

Drivers of Take-up and Persistence

The primary driver of take-up across OECD countries was the stringency of containment measures (lockdowns). However, design features also played a role. In Belgium, the absence of direct employer co-financing for hours not worked likely contributed to both the high volume of claims and the persistence of usage.

While most OECD countries saw take-up drop to negligible levels (less than 1%) by late 2022, Belgium’s take-up remained elevated at around 2–3%. This persistence is attributed to a "structural dependence" where some firms use the scheme as a regular flexibility tool rather than an emergency response.

The impact assessment of Belgium’s job retention support during the COVID-19 pandemic reveals a system that was highly effective at its peak in preserving employment but also one that eventually dampened labor market dynamism and productivity-enhancing reallocation due to its prolonged duration.

1. Effectiveness in Job Preservation

The primary success of the Belgian scheme was its ability to avert massive unemployment during the acute phase of the crisis.

• Scale of Impact: At the peak of the pandemic (Q2 2020), the scheme is estimated to have averted an employment loss of 12.9% in Belgium. This was significantly higher than the cross-country average of 8%.
• Efficiency Ratio: For every 100 workers placed on the scheme in Belgium, 55 jobs were preserved.
• Targeting by Occupation: The impact was most pronounced in non-teleworkable occupations, which were most vulnerable to lockdowns. In contrast, the scheme had negligible effects on teleworkable occupations, which were less exposed to containment measures.

2. Impact on Productivity and Reallocation

While successful in the short term, the sources highlight significant concerns regarding the scheme's impact on the "normal functioning" of the labor market as the crisis subsided.

• Disruption of the "Job Ladder": Before the pandemic, Belgium’s labor market grew by reallocating workers from low-productivity firms to high-productivity firms through voluntary "job-to-job" mobility. The job retention scheme disrupted this by reducing separations in less productive firms.
• Dampened Growth: Because less productive firms were the primary users—covering 16.6% of their workers compared to 6.4% in the most productive firms—the scheme effectively kept workers "stuck" in less productive roles.
• Persistence Issues: This suppression of productivity-enhancing reallocation lasted well into 2022, even as job vacancies reached record highs. The sources suggest this likely hampered aggregate productivity growth during the recovery phase.

3. Deadweight Effects and Cost

The "deadweight effect"—defined as support given to jobs that would have been retained anyway or were not viable regardless of support—is estimated at 45% for Belgium. This is considered moderate and is comparable to historical data from the Great Recession, though slightly higher than more recent estimates for similar schemes in Spain (25%).

4. Demographic and Firm-Level Impacts

The impact of the scheme was not uniform across the economy:

• Education Gap: The scheme supported 20% of low-educated workers in 2020, compared to only 3% of highly educated workers, highlighting its role in protecting more vulnerable labor market segments.
• Firm Productivity: There was a clear negative correlation between firm productivity and take-up; the least productive firms used the scheme much more intensively, driven largely by liquidity constraints.
• Delayed Phase-Out: Because Belgium was slower than other OECD countries to scale back generosity, the continued high take-up eventually had small negative effects on employment as pandemic restrictions were lifted, as it hindered necessary labor market adjustments.

Based on the sources, the key recommendations for refining Belgium's "temporary unemployment" system focus on balancing immediate crisis protection with the need to maintain a dynamic and productive labor market. The sources identify four main pillars for future policy evolution:

1. Modulating Costs to Discourage Structural Dependence

A primary recommendation is the introduction of experience-rated employer contributions to reduce what the sources describe as "structural dependence" on the system.

• Addressing High Baseline Take-up: While most OECD countries saw take-up drop below 1% post-pandemic, Belgium’s usage remained at 2–3%, suggesting some firms use the scheme as a regular flexibility tool rather than for emergency response.
• Linking Usage to Contributions: By linking the use of the scheme to increases in future social security contributions, firms that frequently rely on temporary unemployment for seasonal or predictable fluctuations would contribute more to its financing.
• Targeted Incentives: Following models used in France or the United States, this system would discourage the use of public funds for predictable business patterns without re-enforcing liquidity constraints for firms facing genuine, unexpected shocks.

2. Timely Removal of Crisis-Related Generosity

The sources recommend more strictly aligning the generosity of the scheme with the severity of the crisis to avoid disrupting normal labor market functions.

• Phasing Out Emergency Measures: Belgium maintained its "simplified" crisis scheme significantly longer than other countries, which may have contributed to persistent take-up and slowed the reallocation of workers to more productive firms.
• Re-introducing Requirements: Policymakers are encouraged to re-introduce firm eligibility requirements (such as proof of declining turnover) or sector-specific restrictions earlier in the recovery phase to ensure support is targeted only to viable jobs at risk.

3. Simplifying and Unifying the System

To modernize the framework, the sources suggest simplifying the fragmented nature of the different sub-schemes.

• Eliminating Worker Distinctions: A major proposal is to fully eliminate the historical distinction between blue- and white-collar workers for economic temporary unemployment.
• Administrative Efficiency: Unifying these rules would reduce administrative complexity for employers and align the system with broader Belgian efforts to harmonize labor market statuses.

4. Embedding Training and Upskilling

The sources highlight that periods of reduced working hours represent a "missed opportunity" for investing in human capital, particularly for low-educated workers who were over-represented among recipients.

• Incentivizing Training: Future reforms should create a clear framework where prolonged support could be made conditional on training participation, similar to programs in Germany, France, and Austria.
• Long-Term Employability: Integrating training incentives can signal the viability of jobs while ensuring the workforce acquires in-demand skills that provide added value once they return to full capacity.

Comparing Belgium's job retention support to other OECD countries during the COVID-19 pandemic reveals a system that was unusually high in participation and persistent in its duration, though it ranked lower in financial generosity for average earners due to its specific targeting.

1. Scale of Take-up and Participation

Belgium saw an unprecedented surge in the use of its "temporary unemployment" scheme, significantly exceeding international averages.

• Unprecedented Peak: At the height of the crisis in April 2020, Belgium supported nearly 30% of its salaried employment, which was notably higher than the OECD average of just under 20%.
• Structural Persistence: While most OECD countries saw take-up drop to negligible levels (less than 1%) by late 2022, Belgium's participation remained elevated at 2–3%. This suggests a "structural dependence" where some Belgian firms continue using the scheme as a regular flexibility tool rather than for emergency shocks.

2. Generosity and the Synthetic Indicator

To compare across nations, the sources use a synthetic indicator measuring eligibility, work-sharing, and government generosity.

• Lower Initial Ranking: At the pandemic’s peak, Belgium’s "effective generosity" ranked in the lower third of OECD countries. This was primarily because Belgium's benefit cap resulted in a replacement rate of only 45% for average-wage workers, compared to the 71% OECD average.
• Targeting Low-Wage Workers: Conversely, the scheme was well-targeted for more vulnerable groups; for low-wage earners (67% of average wage), Belgium's replacement rate was 74%, closer to the 81% OECD average.
• Reversed Ranking by 2022: Because Belgium maintained its emergency measures while other countries scaled back, by the end of 2022, its scheme was among the most generous and widely used in the OECD.

3. Policy Evolution and Phase-Out Timing

A major point of divergence was the duration of emergency support.

• Delayed Normalization: Most OECD countries began reducing scheme generosity or phasing out temporary programs as the first waves subsided in 2021. In contrast, Belgium maintained its "simplified" crisis scheme until June 2022 and only fully returned to pre-pandemic rules in July 2023.
• Co-financing: Similar to many OECD peers at the start of the pandemic, Belgium removed direct employer co-financing for hours not worked. However, the absence of these requirements for a prolonged period likely contributed to the scheme's persistence compared to countries that re-introduced firm-level costs earlier.

4. Employment Effectiveness

Despite the high cost and persistence, the Belgian scheme was highly effective in its core mission.

• Jobs Saved: Belgium is estimated to have averted an employment loss of 12.9% at the pandemic's peak, significantly better than the 8% cross-country average.
• Efficiency and Deadweight: For every 100 workers on the scheme, Belgium preserved 55 jobs (compared to an average of 52 across other countries). The estimated deadweight effect (supporting jobs that would have been kept anyway) was 45%, which is considered moderate and slightly lower than the 48% average across the 22 European OECD countries studied.

5. Training: A Missed Opportunity

One area where Belgium lagged behind its neighbors was the integration of upskilling.

• Absence of Incentives: Unlike Germany, France, and Austria, which successfully integrated training incentives or requirements into their crisis schemes, Belgium’s temporary unemployment system did not include any direct training components.
• Barriers to Implementation: This was largely due to administrative fragmentation between national benefit payment bodies and regional training services.