The fiscal and distributional impact of the reform of unemployment benefits in Belgium

The employment rate in Belgium remains low, partly reflecting features of the tax and benefit system that weaken work incentives. More specifically, the benefit system in Belgium provided – until 1 January 2026 – unemployment benefits of unlimited duration, which made Belgium the only EU Member State in which unemployment benefits were not limited in time. As this feature may have discouraged benefit recipients from taking up work, the federal government adopted in 2025 a long-awaited reform introducing a maximum duration for unemployment benefits. Unemployment benefit recipients affected by the reform are expected to re–enter employment, while the most vulnerable long–term unemployed people can rely on minimum income support. Based on micro-simulations using the EUROMOD model, this economic brief analyses the budgetary and distributional effects of the unemployment benefit reform under different labour supply assumptions, taking into account the interaction with the minimum income support system. The analysis finds that, even in the absence of labour supply effects, the reform is expected to generate net budgetary savings. However, when potential labour supply effects are taken into account, the net budgetary savings are significantly higher (up to EUR 2.1 billion). The overall impact on poverty and inequality is expected to be limited due to the cushioning effect of the minimum income support system and the potential increase in employment.