Swiss have higher salaries but less buying power

The Swiss look set to have less money to spend in 2004, despite higher salaries Keystone

The Swiss can expect a salary rise next year of on average 0.9 per cent, according to a UBS survey.

But experts say the nation’s purchasing power is likely to diminish in 2004, as a result of higher taxes and spiralling health insurance premiums.

A recent wage survey of companies in 19 industry sectors, published by Switzerland’s largest bank, UBS, predicted that nominal wage levels would rise by just under one per cent in 2004.

Above-average increases are expected in the telecom, IT and energy sectors, but only small rises are anticipated in printing and graphic design, and the watch and automotive industries, which have been hit hardest by the economic downturn.

But Yves Flückiger, a professor of economics at Geneva University, insisted that purchasing power would remain low, despite the promise of higher salaries.

“If the assumed inflation rate of 0.6 per cent for 2004 is taken into account, only 0.3 per cent of the increase in nominal wage levels is left,” said Flückiger.

“But this doesn’t take in account higher obligatory household expenses for health and pension insurance, which will diminish purchasing power further,” he added.

Flückiger’s predictions of lower purchasing power would seem to be borne out by the Swiss Federal Statistics Office.

Predictions

According to its 2001 survey, the average amount of money spent per household rose by 3.6 per cent compared with the year before, and was three times more than the average rise in salary of 1.2 per cent for that year.

The Federal Statistics Office also found that households spent 36.6 per cent of their money – SFr2,899 ($2,103) – on obligatory expenses such as insurance premiums and taxes in 2001.

This figure stood at SFr1,923 per household in 1989, meaning that obligatory expenses have risen by almost 50 per cent in eleven years.

Flückiger stressed that the UBS forecast for salary increases was an average figure and that differences between sectors had to be taken into account.

He explained that the restaurant, construction and retail trades typically saw lower salary increases compared with other sectors of the economy.

Flückiger added that an upturn in the economy – predicted for mid-2004 – would not automatically result in increased purchasing power. He said the cost of living would also rise, leaving households with less money.

He also pointed out that better economic conditions did not always translate into increased salaries for all.

Flückiger cited the case of salary hikes in 2001, which were mainly the result of the economic upturn of 1998.

swissinfo with agencies

Key facts

UBS predicts 0.9% average increase in salaries in 2004.
In telecom and IT, it is higher at 2.2% and 1.9% respectively.
A 2% increase is expected in the energy sector.
Smaller rises are expected in printing and graphic design (0.4%), the watch(0.5%) and automotive (O.5%) industries.