Lower salary cost and create jobs, says KU Leuven study

Cutting the costs of employing personnel by 5% in the construction, transport, electrical and retail sectors could lead to the creation of up to 28,500 jobs, according to a study by two professors from the University of Leuven, Joep Konings and Stijn Vanormelingen. The study was presented by Unizo, the organisation that represents the self-employed.

The sectors involved are all labour-intensive, employ a large proportion of young people and unskilled workers, and together represent a third of all private-sector employment. They have also seen salary costs rise since 2007 by between 10% for the transport sector and 16% for the retail sector. At the same time, productivity rose more slowly, by only about 5%, thus increasing the salary cost handicap in relation to other neighbouring countries.

The number of loss-making businesses has risen as a result to one in three, with small companies with fewer than 10 employees the hardest hit.

The reduction of salary costs, in the form of various social benefits paid by employers, would cost the state €1.17 billion, the study says. In return it would earn back in the form of taxes paid by the newly employed, and economic growth in general. The study estimates the returns to be about 40-50% of the cost, meaning each new job would constitute an investment of €20,000. 

Photo: Michael Rieger