How Wages in Switzerland Are Being Eaten Up by Inflation


It is no longer surprising to anyone that inflation — even though it is very low in comparison with other countries — is ‘eating’ into Swiss salaries. But how much of your income are you actually losing?

As The Local reported on Wednesday, Swiss households are faced with higher fixed expenses, whether for rent, health insurance premiums, electricity, or public transport.

To make matters even worse on the financial front, the association of Swiss Trade Unions (USS), now warns that any pay raises that employees received in 2023 are eaten up by inflation.

Basing its calculations on the wage index of the Federal Statistical Office (FSO), the USS found that in many sectors, real wages have fallen sharply, sometimes plummeting to the same level at which they were 10 years ago.

‘Real wages’ means income expressed in terms of purchasing power rather than actual money received.

This is particularly the case for employees in the transport and logistics sector, as well as postal service workers.

In these branches, real wages are now significantly lower than they were in 2016. Even calculated across all branches, the real wages have fallen.

But by how much exactly?

According to the USS, the real wage loss now amounts to around 2,000 francs per year for the average Swiss salary of 6,600 francs a month —which means that at present, people earning this salary have over 166 francs less each month to spend.

“It’s quite a large sum for many people,” said Daniel Lampart, chief economist at the USS.

Wage negotiations for 2023 “have been substantial, even if the real wage is temporarily negative due to inflation,”  Simon Wey, chief economist at the Swiss Employers’ Union, pointed out.

In the long term, this phenomenon could have repercussions on Switzerland’s economy, Lampart said, because as people have less money to spend on products and services, consumption will slow down, affecting, through the domino effect, branches such as retail. 

This situation is relatively new for Switzerland’s population, who, until 2022, was not accustomed to tackling inflation.

But now, “we have to get used to thinking in terms of inflation, and not just in terms of nominal wages, said Michael Siegenthaler, labour market expert at the Economic Institute of Swiss Federal Institute of Technology Zurich (KOF).

Is there a way to offset the loss of the purchasing power?

To compensate for all the real wage losses of recent months, “the salaries would have to increase to historic proportions,” Siegenthaler said.

Source : TheLocal