Swiss vote: Europe’s creaking sense of self-worth

Is Switzerland in danger of becoming a victim of its own success?

A man arrives to cast his ballot during a referendum in Switzerland [AFP]

Too close to call? Far from it. On May 18, long before polls closed, it became clear that the Swiss would overwhelmingly vote against a proposal to raise the minimum wage to 22 Swiss Francs an hour or just under $25, corresponding to a monthly salary of $4,500 – the highest in the world. Indeed, 76 percent of voters said “no” and Luxembourg kept the top spot with a minimum hourly wage of $10.7, followed by France with $10.6.  

Crisis-hit Europe was transfixed by the referendum but the Swiss themselves on the same day were more concerned with whether to buy military aircraft from Sweden, this time voting against it by a tight majority of only 53.4 percent. Wikileaks even published a supposed US diplomatic cable which provided background on the sale, adding to the furore.

What were the Swiss up to with this vote on establishing such a high minimum wage? Didn’t they get the memo that there’s still a crisis in Europe? Haven’t they noticed there’s low growth and everybody’s either freezing or slashing wages? 

Switzerland prides itself on its well-functioning welfare system, meaning that those making less are taken care of. The majority of the country’s eight million citizens therefore decided that establishing a minimum wage would do more harm than good.

Moreover, Switzerland is actually booming. The unemployment rate is a mere at 3.2 percent which is the second lowest in Europe after Liechtenstein. The country’s economy is not simply based on making chocolate and providing services such as banking and tourism, as most of us believe. There is a very strong manufacturing sector, such as world class pharmaceuticals, and the median Swiss wage is a remarkable $37 an hour.

The only real hitch for Switzerland is that it essentially was forced to agree to greater transparency in its banking sector, as other developed nations are clamping down on tax evasion and tax avoidance, activities where the Swiss have a less than stellar record. They of course are not the only ones.

More harm than good?

So if the economy is booming, why the need for an official minimum wage? Isn’t the market supposed to take care of itself? And why did so many then oppose the proposal?

The referendum process was initiated in 2012 by the Swiss Trade Union Federation, to “protect equitable pay”. People working in menial jobs like house-cleaning and agriculture find it hard to get by, given the high cost of living. In cities such as Zurich and Geneva, the situation is even harder. And despite a recent building boom, jobs in the construction industry are not that well paid either. But given that these sectors are less competitive, raising wages would mean that businesses would either close or need to fire workers.

On top of this, Switzerland prides itself on its well-functioning welfare system, meaning that those making less are taken care of. The majority of the country’s eight million citizens therefore decided that establishing a minimum wage would do more harm than good.    

The issue of a minimum wage is a contentious one even in privileged Europe. In Germany, there is no minimum wage. Only recently have measures been taken to introduce one, as part of a deal in establishing a governing coalition between Chancellor Angela Merkel’s Christian Democrats and the Social Democrats, after last September’s national elections. This deal-making dimension was perhaps embarrassing for a state that presents itself as a paragon of rationality. Is this why some German media took a somewhat patronising view of the Swiss referendum? In any case, the German minimum wage will be $11.72 an hour for all industries and will start to be implemented from 2015 onwards, possibly becoming the highest in the world.

Interestingly, Ed Miliband, the head of the UK’s main opposition Labour party, chose May 18 to leak to the press details of his rather nebulous plans to reinvigorate the minimum wage in his country, as part of his 2015 national elections campaign.    

Of course, one cannot but associate the Swiss minimum wage referendum to an earlier one which again had to do with jobs: Last February, Switzerland voted in favour of reintroducing immigration quotas for European Union countries, drawing the ire of France and Germany. Such a measure would go against the EU’s so-called four freedoms of movement: goods, services, people and capital.

Quality of life

Switzerland is not part of the EU nor of the European Economic Area, which includes the EU along with Norway, Iceland and Liechtenstein. However, half of Swiss exports go to the EU and a great part of the Swiss work force comes from surrounding EU countries such as Italy, France and Germany. Among them, many each day cross the border to go to work and in the evening return home to their respective countries, as they cannot afford to live in Switzerland. They do enjoy the same benefits and rights as the Swiss, though.

Obviously, the decision to reintroduce immigration quotas in great part has to do with a growing sense of financial insecurity across Europe. The Swiss seem eager to protect the quality of life of their working population, whereas other European countries seem less so.

But is a minimum wage all that it is made up to be? Does it automatically translate to what across the world is being called a “living wage”, i.e. making enough money as to get by without getting into debt? First of all, we need to learn more about the way economies and societies function. H-J Chang’s excellent new book explains in plain language how the gears and levers and processes of the economy work, so that citizens learn to see past the witchdoctor antics of politicians and economic experts, which have become the norm in our post-2008 crash world.     

As for wages specifically, a report by the United Nations’ labour agency finds that adequate wages have a key role to play in confronting inequality, promoting growth and limiting economic instability. Keeping wages down apparently is not the good medicine we are told it is.  

Given all this, is Switzerland in danger of becoming a victim of its own success? Are its EU neighbours and partners trying to make it adopt policies that would go against the interests of its economy and those of the Swiss people? Perhaps the Swiss should think again about buying those Swedish fighter jets.

Menelaos Tzafalias is a freelance journalist and producer based in Athens, Greece. He has worked as an associate producer on the documentary “Palikari: Louis Tikas and the Ludlow Massacre”, a story about migrants and labour relations in early 20th century America.