Macroeconomics

22 April 2014

Switzerland's minimum wage 

On May 18, Swiss voters will decide whether their nation should have the world’s highest minimum wage.

If passed, the measure would set the nation’s minimum wage at 22 Swiss francs (€18) per hour, or 4,000 francs (€3,300) per month, more than double France’s minimum of €9.53 per hour and far beyond Britain’s €7.65. The proposed Swiss rate would reportedly be the world’s highest.

Home to many leading wealth managers as well as prominent multinationals like Nestlé and Novartis, Switzerland has a strong economic foundation. However, two-thirds of Swiss companies are small or medium-sized, and some business owners say they will feel pinched if a mandatory minimum wage obliges them to raise the pay of significant numbers of employees.

An estimated one-tenth of Swiss citizens earn less than the proposed minimum, so the impact could be limited if the vote passes. Switzerland’s unemployment rate, 3.3% in March, is among the lowest in Europe and statistically close to full employment, suggesting strong demand for workers and weakening the risk that the measure could lead to job losses.

Deciding key issues via referendum is an essential component of Swiss society. In previous initiatives, voters declined to impose limits on executive pay but did agree to limit immigration. Recent polls on the minimum wage proposal have shown no clear trend for or against.

Swiss law makes it relatively easy to put sweeping proposals before the nation’s voters, but persuading them to adopt such proposals is much more difficult. Whatever the outcome, the vote may provide significant insights into the consequences of putting voters in direct control of key economic policies.