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Wage hikes: Swiss unions and employers have radically different expectations

Published on August 20, 2024

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Wage hikes: Swiss unions and employers have radically different expectations — Swiss workers have seen pay rises eaten up by inflation Keystone / Christian Beutler

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Swiss trade unions are calling for pay rises of up to 5% to compensate workers for years of rising consumer, energy and healthcare prices. Are these demands justified in high-price Switzerland, where worker salaries are already the envy of the world?

This content was published on August 20, 2024 - 17:09

When not covering fintech, cryptocurrencies, blockchain, banks and trade, swissinfo.ch's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz. 

Employers are already objecting to the wage increase demands, which signals potential friction during wage negotiations with unions.

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SWI swissinfo.ch takes a look at the opposing arguments and the possible outcome for workers and companies.

The demands

The trade union Travail Suisse is calling for wages to rise by between 2.5% and 4% next year to make up for the fact that inflation has eaten away the entire value of salary hikes since 2021.

Swiss wages increased an average 1.7% in 2023, but a 2.1% rise in the cost of living resulted in a -0.4% loss in real annual income.

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The Swiss Commercial Association (Kaufmännische Verband) uses the same argument to justify pay rises of up to 5%.

The Swiss Employees’ Association (Angestellte Schweiz) argues for a more modest 2.2% rise.

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Negotiations between trade unions representing hospitality workers and their employers broke down in July and are now headed towards an arbitration tribunal.

The Swiss Trade Union Federation wants everyone who has completed an apprenticeship to earn at least CHF5,000 ($5,785) per month.

The justification

All trade unions are citing the effects of high inflation to justify their wage demands.

Travail Suisse speaks of “historically weak wage developments” over the last few years owing to the effects of inflation. “While the economy has grown by over 7% in real terms since 2021, real wages have fallen by more than 3%,” says Thomas Bauer, head of economic policy.

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The union also accuses companies of keeping the profits of productivity growth to themselves while workers face growing difficulties meeting their living costs.

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Consumer prices have not risen as much in Switzerland as in the rest of the world. Swiss inflation stood at 2.8% in 2022 while global inflation peaked at 8.7%, according to the International Monetary Fund.

But Swiss citizens are also being hit by spiralling health insurance costs that have risen 31% in the last decade while wages increased by only 6%.

And there is annoyance at the widening gap between the ultra-wealthy in Switzerland and those on lower incomes.

Real wages on the rise in several sectors in Switzerland in 2024

This content was published on Nov 20, 2023 Swiss union Unia reports that general pay rises in excess of 2.5%, and even above inflation, have been achieved in several sectors in Switzerland for 2024.

The Trade Union Federation warns that inflation hits low earners harder because basic costs, such as heating and lighting homes, forms a larger proportion of their budget than for the wealthy.

“Low- and middle-income earners have less money to live on today after inflation than they did a few years ago. Conversely, the situation has sharply improved for top earners. They have up to CHF3,000 francs more per month at their disposal, even after inflation is deducted,” the union’s chief economist Daniel Lampart told Swiss public broadcaster, SRF, in April.

The counter arguments

Industry groups have criticised union wage demands. Swissmem, which represents the electrical, machine building and metal industries, called them “dangerous and unrealistic”.

The lobby group also rejects union arguments that companies are getting fat from improved economic conditions at the expense of workers.

In the first three months of 2024, exports declined by 8.5%, sales by 5.4% and new orders by 2.3% for Swissmem’s 1,250 companies compared to the same period last year.

“Trade unions are turning a blind eye to the difficult situation that the Swiss technology industry has been facing for quite some time,” Swissmem stated.

The Swiss Employers’ Association has called wage demands “excessive”, arguing that such hikes could put the survival of some companies at risk.

There is also evidence that conditions are improving for the Swiss workforce. Inflation is falling from the 2.8% peak in 2022 and is expected to weigh in at 1.3% this year and 1.1% in 2025.

In November, Unia boasted that it had negotiated pay rises above 2.5%, and in some cases even above inflation, in several industry sectors for 2024. “Wages are once again keeping pace with inflation,” the union said at the time.

Possible outcomes

Annual wage increases averaged 1% between 2014 and 2024, according to a UBS bank report from last November. Wages rose 2.3% in 2023 to compensate for a huge hike in inflation the year before, but pay rises fell back to 1.7% last year.

A recent survey of 4,500 companies by the KOF Economic Research Institute revealed an average expected nominal wage increase of 1.6% over the next 12 months across a range of sectors.

The retail trade expects the lowest increases of 1.1% while the hospitality industry predicts 2.7% wage growth. Mechanical engineers (1.3%) can expect lower pay rises that IT workers (1.8%), according to the survey.

However, the same companies also expect higher inflation than the 1.3% forecast by the Swiss National Bank. Survey respondents predict an inflation rate of 1.6%, which would cancel out the average wage hike.

Edited by Reto Gysi von Wartburg/ts

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