Employers’ fears as Switzerland gets set to vote on world’s highest minimum wage

Balloton the world's highest national pay floor divides voters, with businesses claiming it will send salaries soaring and cause unemployment

PUBLISHED : Monday, 14 April, 2014, 10:06pm
UPDATED : Monday, 14 April, 2014, 10:06pm

Jasmin Eicher has already sacked her only full-time employee to keep afloat her shop selling cards, candles and paper in a Zurich suburb.

If Switzerland approves what would be the world's highest minimum wage, her only option would be to close her door.

The Swiss will vote in a national referendum on May 18 on whether to create a minimum wage and set it at 22 francs (HK$195) per hour, or 4,000 francs a month.

While about 90 per cent of Swiss workers already earn more than that, employers say setting Switzerland's first national wage floor would push up salaries throughout the economy.

Even adjusted for purchasing power, it would be the highest minimum wage in the world.

"We couldn't pay it," said Eicher, standing behind the counter in her shop in Schlieren.

The employee she let go earned 3,500 francs a month. Now she is by herself, working 10 hours a day, six days a week, and her hopes of hiring a cheaper helper will be dashed if the minimum wage is approved.

She said: "I understand about people not earning enough, but not everyone is worth 4,000 francs. Here in Switzerland we're already so well-off."

The main backers of the proposal are Switzerland's biggest trade unions, which argue that pay levels need to reflect the country's prices, which are among the world's highest.

A poll by researcher gfs.bern found that 52 per cent of voters were likely to reject it, while the Leger research firm found last month that the same percentage would vote "Yes".

About 10 per cent of Switzerland's full-time workforce receive a pretax monthly wage of less than 4,000 francs, a statistics office report showed in 2010.

Even if adjusted for purchasing power, the proposed minimum wage would amount to HK$109 an hour.

George Sheldon, professor of economics at the University of Basel, said the Swiss proposal would be counterproductive.

"Unemployment among the unskilled is increasing," he said. "The solution to their problem can't be to make them more expensive."

National referendums, a key element of Switzerland's political system, are held four times a year.

In a country that's home to about 300 banks, voters often side with employers.

In 2012, for instance, they voted down a proposal to require employers to offer six weeks of paid vacation. The median gross wage paid to the least qualified workers was 4,627 francs per month in 2010, according to the statistics office report.

That is modest in a country where the average two-person household spent 2,643 francs a month on taxes, social insurance and health insurance, plus 5,498 francs on food, rent, clothing and transport.

The multi-party federal government is opposed to a national minimum wage, saying it will do more harm than good and lead to higher unemployment.

The jobless rate as measured by the International Labour Organisation was 4.1 per cent late last year, compared with 11.9 per cent in the euro area.

But the Swiss Federation of Labour Unions said a minimum wage wouldn't lead to higher unemployment because it would mostly affect domestically oriented sectors where outsourcing isn't possible.

"In economic terms it's short-sighted" for the government to allow people to be poorly paid, said Paul Rechsteiner, a Social Democrat member of parliament and a member of the initiative's committee.

"It's just a bad situation if wages are being paid on which you can't live in Switzerland."

But Economy Minister Johann Schneider-Ammann warned: "A minimum wage won't stop poverty. This could be counterproductive."

As for Eicher, she said the proposal had one bright side. If it is passed and her shop closes, she could imagine working somewhere else - with a guaranteed minimum income. "It'll be great to be an employee," she said.