High labor productivity has afforded Belgians the luxury of working shorter hours and retiring earlier than do most other Europeans while still enjoying a standard of living in line with the EU average. As a result, only 26 percent of Belgians aged 55 to 64 years still work. This sweet trade-off cannot last. Like most Western countries, Belgium faces a demographic squeeze as fewer workers contribute to GDP and to the government's coffers at a time when the burden of supplying older people with costly pensions and health care needs is growing. Persuading more Belgians to work longer and creating more jobs will be vital if the country is to support its aging population, a study shows.1
Compared with the rest of the European Union, Belgium is particularly vulnerable because it already has one of the lowest employment rates—just 61 percent—and citizens who do have jobs work five days less each year than the EU average.2
The productivity of Belgian workers is 10 percent higher than that of their US counterparts and 20 percent better than the EU average, but productivity growth is waning (Exhibit 1) and won't be enough on its own to tackle the demographic challenge....