An Assessment of Job Retention Support During the COVID‑19 Pandemic and its Aftermath in Belgium

Executive summary

Job retention support played a major role in preventing job losses during the COVID‑19 crisis in Belgium, with almost one in three jobs supported at the crisis peak. Even though Belgium’s scheme has shown to be highly effective, this report highlights some concerns related to the continued and elevated use of job retention support well after the COVID‑19 pandemic subsided.

Job retention support was scaled up rapidly but its phase out was delayed

Belgium entered the pandemic with a well-established job retention support system (“temporary unemployment”). To address the COVID‑19 crisis, the government rapidly introduced a “simplified” scheme which streamlined administrative procedures, removed notification periods, aligned access for blue‑ and white‑collar workers, and increased income replacement rates. While this rapid scale‑up of the system effectively averted large scale job losses, these emergency measures remained in place long after the peak of the pandemic. As OECD countries began reducing generosity or phasing out schemes as the main pandemic waves subsided, Belgium returned to its pre‑pandemic framework only in mid-2022.

Support was concentrated among less productive firms

Job retention support was highest in sectors particularly exposed to containment measures (e.g. accommodation and food) as well as those with high historical usage, such as construction and manufacturing. Less productive firms used the scheme far more widely (17% of workers) than firms of higher productivity (6%). At the same time, 51% of firms with a prior history of job retention support used the system again during the crisis, compared to just 14% of new users. Combined with baseline take‑up rates well above the OECD average, this suggests that many firms rely on job retention support for structural reasons driven by seasonal fluctuations rather than just unexpected shocks.

Job retention preserved employment, but may have dampened productivity-enhancing reallocation

While the scheme averted an estimated 13% loss in employment at the pandemic’s peak, this job preservation may have slowed down productivity-enhancing job reallocation at later stages of the COVID‑19 crisis. By reducing separations in less productive firms well beyond the acute crisis phase, the persistent use of job retention support likely slowed the reallocation of workers to more productive firms. While job reallocation effectively contributed to productivity growth before the pandemic, its slowdown may have hampered overall productivity growth well into 2022.

Containment measures drove take‑up, while the absence of co-financing contributed to persistence

A cross-country analysis suggests that, while the severity of lockdowns was the primary driver of take‑up, the design of the job retention schemes played a role as well. Specifically, the cost to firms for hours not worked was an important determinant of high take‑up. In Belgium, such direct financial contributions from firms were largely absent during the crisis. This lack of cost-sharing, combined with the extended duration of the simplified scheme, likely contributed to the prolonged use of job retention support compared to countries where firms were required to contribute to the costs of job retention support.

Key Recommendations

Despite the relative success of job retention during the acute phase of the COVID‑19 pandemic in Belgium, this report identifies several options that could help strengthening the effectiveness of job retention support in crisis times without undermining the normal functioning of the labour market.

Modulating the costs of job retention support to firms over time

Experience‑rated employer contributions could reduce structural dependence on job retention support through seasonal and recurrent usage patterns. By linking the use of the scheme to future social security contributions, firms that frequently use temporary unemployment would contribute more to its financing. This would discourage the use of public funds for structural dependency, which is particularly prevalent in construction and manufacturing, without constraining liquidity-constrained firms during genuine crises.

Removing crisis-related increases in the generosity of support when the crisis subsides

Removing crisis-related increases in the generosity of job retention schemes once the severity of the crisis and its impact on the labour market have subsided is essential. This ensures that large employment losses are averted without disrupting normal labour market functioning. This could involve re‑introducing firm eligibility requirements (e.g. a proof of declining turnover) earlier in the recovery phase, or adjusting firm eligibility requirements to specific sectors particularly exposed to the crisis (as attempted in September 2020).

Simplifying the fragmented menu of temporary unemployment schemes

A consolidation of the scheme by eliminating the distinction between blue‑ and white‑collar workers for economic temporary unemployment would reduce administrative complexity and make the scheme more fit for purpose in a modern labour market. This would simplify the landscape for employers and align Belgium with the practices of other OECD countries.

Embedding training as an element of job retention support

Periods of reduced working hours offer a valuable opportunity to invest in human capital. Combining job retention schemes with training incentives, as in some OECD countries during the COVID‑19 pandemic (e.g. Austria, Germany, France) can signal the long-term viability of jobs while effectively upskilling the workforce. Future reforms should ensure that workers acquire in-demand skills that provide clear added value during their absence from the workplace, potentially by making prolonged support conditional on training participation.