Introduction

In 1993, the tide began to turn in Belgium. The government and the social partners would introduce a new social pact. The former pact, which dated from 1944 and constituted the Belgian welfare state, proved to be no longer tenable. The new pact would restructure the social security system and prepare it for the twenty-first century.

The old system was unsustainable because systemic contradictions had accumulated over time. Every open-ended social policy commitment by the government needs an effective gatekeeper to assure that only the truly needy have access to benefits. Gatekeeping can be performed by those who administer the benefits, or those who need to activate and check the work-willingness of the beneficiaries. In Belgium, neither has a profound interest in strictly applying the rules and in limiting access to the benefit system.

In a residual social security system, benefits are means-tested and very low, which guarantees that only those with absolutely no other possibility for making a living receive benefits at the survival level. Occupational social insurance systems, by contrast, are based on acquired rights since contributions have been paid to ensure the worker an earnings-related compensation for income loss. In the Belgian case, the price of insurance rose to free market levels, whereas the benefits dropped to the residual level. Collective social insurance plans are arrangements designed to overcome market irregularities and economic downturns. Since the Belgian system was overcharged, it seemed to cause market irregularities, and consolidate economic downturns by absorbing yet another segment of the labor population. The costs of social security were reflected in contributions on income, causing the lower-educated to be priced out of the market first, inducing a spiral of increasing social insurance costs and unemployment growth.

The mounting problems called for drastic reform, but a tradition of incrementalism had come to define the boundaries of future retrenchment. The fragmentation of the system required adjustments on several fronts for each policy change. The legislative process by Royal Decrees also marginalized the scope of reforms. The increasing complexity made it difficult to keep an overview and to pursue reform with a consistent vision on what social insurance in Belgium should offer. The many potential vetoes along the road of each of the reforms assured an elaborate compromise with many exceptions and compensations for each restriction.