Do you earn enough? Looking at one’s own wage, it could, of course, always be better. Yet, Switzerland has the reputation of a classic high-wage country. Wages are undeniably high, at least at first glance. But then, how can our country assert itself as one the most advantageous economic locations in Europe?
Somebody once said that it is because the Swiss wake up an hour earlier. Switzerland is counted among those countries with the longest working hours. Once non-wage labour costs, productivity and peaceful labour relations are added to the equation, the location of Switzerland starts to look extremely competitive. When viewed in this way, maybe Switzerland does have low wages on an international scale. Let’s take a closer look.
Direct wages – non-wage labour costs – unit labour costs
Upon superficial observation, Swiss wages are among the world’s highest. That is a known fact. They are third after Denmark and Norway. However, what counts to an employer is not what is in the pay package, but what the total employment costs are. This means that non-wage labour costs must be included. In that regard, Switzerland only comes eighth. Italy is at the top with 95 per cent. There, an employer must pay the welfare state an amount of non-wage costs almost equivalent to the employee’s gross salary. In Switzerland, the ratio is 53 per cent; in the US, it is 43 per cent. In terms of labour costs being the sum of direct wages and non-wage costs, a study by the German Institute for the Economy in Cologne concluded that Switzerland comes fourth after Norway, Belgium and Germany (as of 2006). In the end, it is not the wage costs but the unit labour costs, which include labour productivity, that are crucial for competitiveness.
Thanks to high productivity, unit labour costs in Switzerland are considerably lower than in competing economic spaces. They have also risen only slightly since 1995. That is a competitive advantage for Switzerland. The expensive labour is compensated for. In terms of competitiveness, Switzerland moved up to second place in 2007 (source: WEF), right after the USA and before Denmark, Germany and other countries.
In Switzerland, most people are employed
According to an OECD study, Switzerland has the highest proportion of people between the ages of 15 and 64 who are earning a living. The average rate of employment between 1994 and 2005 was 83 per cent in Switzerland, despite low economic growth. In the USA and Germany, it is 70 per cent; in Italy and Poland, merely 55 per cent. The average of all OECD countries is 66 per cent. Unemployment is relatively low – at just over two per cent. This keeps the volume of government unemployment payments lower than in other countries. As a result, taxation is more favourable.
A good social climate between employers and employees lowers costs
Employment relations in Switzerland are characterized by mutual trust. Peaceful labour relations are a tradition; labour conflicts are rare. Legal regulations are limited to basic structural conditions. Many key issues are treated in a decentralized manner, that is, on the company level, between the social partners. Employees’ legal rights of co-determination are minimal. In companies employing more than 50 people, employees can elect a representative.
However, the representative merely has a right to information and to involvement in matters of work safety and health care. The representative must also be consulted in the case of pending mass layoffs. An actual legal right of co-determination does not exist. Work day losses for sickness and work hour losses for strikes are few. In an international comparison, Switzerland’s number of paid holidays is rather low at 31. As a result, the number of yearly work hours is considerably higher. In Zurich, employees spend an average of 1,850 hours at work. In Berlin and Paris, it is up to two months less. An average work week is 42 hours. Work assignments between 6 a.m. and 11 p.m. require no consent. This allows for consent-less dual shift operation. Overtime requires no consent, but is limited to between 140 and 170 hours per year. Maternity leave is 16 weeks.
The labour law is business-friendly
The Swiss labour law is liberal. The period of notice is a maximum of three months. The employer is not required to justify dismissals. Protection against wrongful dismissal is limited to a few cases such as pregnancy. The labour law allows for flexible night, shift, Sunday and overtime work. Companies are mostly free to employ staff, amend contracts and organize flexible work hours. The low density of labour market regulations limits a company’s risk when investing and has an employment-friendly effect.
Switzerland is an SME country
The rising trend towards a service economy goes hand in hand with a trend towards smaller companies as a result of increasing division of labour. However, the predominance of small and medium-sized enterprises (SMEs) has always been a prominent structural characteristic of the Swiss economy.
More than 99 per cent of companies have fewer than 250 full-time staff. The employees’ close commitment to and sense of responsibility for the company are, thus, key characteristics of our economy.
A country of professionals produces quality
For a country lacking raw materials, such as Switzerland, a high level of education of the workforce is a crucial location factor. The Swiss education system is counted among the best in the world. The public schools enjoy an excellent reputation. Of all OECD countries, Switzerland spends the most on public education. This produces a highly skilled and multilingual workforce on all levels. Yet, the proportion of the population with a college education is relatively low. Our vocational training system is tuned to the labour market and delivers superior work skills. A large proportion of workers have served an apprenticeship with a professional specialization and receive continuous training throughout the course of their careers. Thanks to its well-trained and enthusiastic professionals, Switzerland is taking the lead in Europe in the field of innovations. On the global markets, the Swiss industry offers quality advantages, which compensate for the higher price with high added value. With 62 per cent of exports going to international markets, quality and innovation are decisive factors of competitiveness. Of those exports, 93 per cent have effective quality advantages, such as medical devices, pharmaceuticals, and mechanical engineering. Hence, Switzerland is well positioned in high-tech markets. The Swiss industry is highly specialized in the fields of scientific instruments (precision measuring devices, medical instruments, precision clocks), pharmaceuticals and chemicals as well as machining tools. However, we are less present in other fields such as aeronautics and astronautics, electronics and computers.
The Swiss are well paid for work well done. By comparison, their income is taxed relatively low. They take home more than others. That is why Swiss employees are, for the most part, hi