Press release - Full employment, mismatches and labour reserve

In Belgium, there are half a million unemployed job-seekers, and the unemployment rate is well above the frictional unemployment rate (estimated at 2.7 % for 2017), which corresponds to a full employment situation. Nonetheless, the unemployment rate, which has fallen for the third consecutive year, has reached a historically low level (6.3 % in the 2nd quarter of 2018). It has dropped below the NAIRU (Non-Accelerating Inflation Rate of Unemployment, estimated at 7.2 % for 2017), implying the prospect of inflationary pressure.

Up to now, wage inflation has been restrained by factors such as wage moderation and the constraints inherent in the wage-setting mechanism (implemented in order to restore firms’ competitiveness).

Although the inflationary pressure has not yet materialised, there are nevertheless tensions on the labour market. Demand from firms shows no sign of slackening and increasing numbers of employers report that they are encountering recruitment problems. In view of the number of job-seekers, that may seem paradoxical. This situation is due to a combination of factors.

First, the skills that firms need do not necessarily correspond to the job-seekers’ skills. For some jobs there is actually a real shortage of talent; what is more, that shortage applies to all three Regions. But in many other cases, it is more just a matter of problems in matching supply to demand. The problems stem, for instance, from the working conditions offered, which workers consider insufficiently attractive (hours, arduous occupations, wages offered, etc.).

Second, compared to other countries, Belgium has a smaller labour reserve. The proportion of inactives in the population of working age is considerably larger. It seems that the financial incentives for employment are too weak, particularly in the case of low wages. Finally, mobility – which could provide an answer to the regional labour market disparities – is hampered by the high cost of commuting between home and work and the language barrier.