He stressed the need for the IMF to review its strategy to reduce
employers' social security contributions, which seriously limit the resources of the social protection system and negatively impact its sustainability.
Total labour costs consist mainly of wages and salaries (81%) and
Employers' Social Security Contributions (18.4%).
Labour costs include wages and salaries and non-wage costs, such as
employers' social security contributions. The share of non-wage costs in the whole economy was 23.7% in the EU27 and 26.1% in the eurozone, and ranged from 8.2% in Malta to 33.6% in France.
Measures included a reduction of 5% in
employers' social security contributions and the ending of direct income support for farmers, instead offering them product price support.
In a primetime interview broadcast on six television channels, Sarkozy, who is expected to seek re-election in April, said the tax hike, which increases the higher VAT rate to 21.2 per cent, would help pay for a cut in
employers' social security contributions.
The adjustment can be speeded up by keeping public sector wages at bay to encourage economy-wide wage restraint and shifting taxation from
employers' social security contributions to consumption (and property) taxes.
The calculated labour income is liable to employees' Social Security Contributions and central government income surtax, as other wage income (the SSC rate is slightly higher for the self-employed, but on the other hand they do not pay
employers' Social Security Contributions on the calculated labour income).
After deduction of
employers' social security contributions (35 per cent), employees' social security contributions (13.07 per cent) and personal income tax (45 per cent, the most representative bracket) adjusted for surcharges (7.5 per cent on average for the local income tax, 1 per cent in 2002 for the additional crisis surcharge), the employee has 33.0 (33.0 = [100/1.35] * [1-0.1307] * [1-0.45(1.085)] "in the hand".
Inter alia, it provides for new "making-work-pay" measures to encourage part-time employment; reduced ceilings for the weekly overtime at the employers' discretion; increased premia for overtime; a scheme of working time annualisation while reducing the agreed workweek from 40 to 38 hours; and a 2 percentage points reduction of the
employers' social security contributions for low-wage workers.
Government measures to increase demand for older workers, like cutting
employers' social security contributions for them - with the size of the cuts possibly increasing with the age of the worker - may be acceptable as a second best policy only to the extent that inflexible seniority based wage scales cause a problem.
The law allowed a five-year reduction in
employers' social security contributions [8] for any firm cutting its employees' working hours by at least 10 per cent.
Thanks to the global plan -- notably the reduction in
employers' social security contributions -- the international competitive position of Belgium is expected to stabilise, and exporting firms should progressively reduce their losses of market shares and thus better benefit from the acceleration of international trade.
