05-10-09 Wage adjustments January 1st 2010
Acerta takes a closer look at the wage index forecasts for January 1st 2010 based on the Federal Planning Bureau’s prognoses for the coming year.
- Fixed moment in time
- Inflation & deflation
- The prognoses
- Government’s pivotal index not crossed in 2009
Fixed moment in time
The past few years a lot of sectors seem to have changed their index mechanisms from adjusting wages when inflation reaches a previously defined point (e.g. 2% above the previous point of adjustment), to adjusting their wages at a fixed moment in time. Adjusting wages according to previously defined moments in time, implies that at those moments an evaluation is made of how much inflation has increased or decreased compared to the previous point of adjustment. Several sectors, including the largest white collar worker sector ¬– PC 218 and more recently the sector for transport of goods – PC 140.040, chose January 1st as their wage adjustment moment.
Inflation & deflation
Notice the neutrality of the term ‘adjust’ as opposed to increase or decrease in the previous paragraph. Most CAO’s use the term ‘adjust’ or ‘change’. When the index rises (inflation), wages increase and when the index drops (deflation), wages decrease (= negative indexation). Some CAO’s make a provision for negative indexation. Here a first negative indexation is neutralized to then be deducted from the first following positive indexation. Social partners have the possibility of using this option ad hoc even when no mention is made of it in their agreed indexation mechanism. The basic assumption here, however, is that negative indexations also need to be applied, which according to the CAO text for PC 218, will be the case for a negative indexation January 1ste 2010.
The prognoses
This brings us to the prognoses for January 1st 2010. The four-monthly average of the health price index, which is used in calculating the wage index, was lower for august 2009 (110.65) than for august 2008 (110.73). If a sector were to have applied a yearly index on the first of September (which they did not), this would have led to a negative index and in consequence, a decrease in wage of 0.07%. This already indicates that the indexation on January 1st 2010 will be a lot lower than the increase on January 1st 2009 (4.51% in PC 218 on January 1st 2009.)
The Federal Planning Bureau’s prognoses confirm this: -0.30% on January 1st 2010 for PC 218; -0.32% for the sectors using the four-monthly average on November 30th (amongst others the food industry); and finally -0.28% for the sectors using the four-monthly average on December 31st (e.g. agriculture and horticulture.)
Government’s pivotal index not crossed in 2009
The difference between wage adjustments at a fixed moment in time and adjustments according to a fixed percentage, already came up in the introduction. The private (profit) sector tends to mostly adjust wages at a fixed moment in time, while the governmental sector mostly adjusts the civil wages with a fixed percentage. When the four-monthly average crosses the pivotal index (which is 2% above the previous pivotal index,) wages are increased by 2%. In 2008 the pivotal index was crossed 3 times; in 2009 the chances of the pivotal index increasing are quasi non-existent. According to the Federal Planning Bureau’s current prognoses, the pivotal index for “the social benefits for civil office” (112.72) will only be crossed in December 2010.
The low index we are currently experiencing and today’s four-monthly average of 110.65 makes it so that a staying beneath the in 2008 crossed pivotal index of 110.51 is not ruled out. The Federal Planning Bureau’s prognosis of 110.51 also comes close to staying beneath the above mentioned index but does stay right above it seeing as they predict an all time low as soon as September 2009 of 110.55. Civil wages and related social benefits and compensation will in consequence also be affected.
Source: prognoses Federal Planning Bureau: www.plan.be “Consumer price index & Inflation forecasts”(Prognoses published 1 September 2009)
1 PC = paritair comité – paritair committee
2 CAO = Collectieve Arbeidsovereenkomst – Collective employment agreements
