Swiss middle class enjoying rare income stability

UBS also partly credits Switzerland's system of apprenticeships with the stability of middle class incomes. Keystone

A UBS study has found that Swiss middle class incomes have escaped the stagnation felt by other industrialised nations as a result of globalisation…thanks in part to the strong franc and its dual educational system.

Switzerland’s largest bank said in the study released on Tuesday that middle class household incomes in many industrialised nations have “stagnated” over the last 30 years, as the trend toward globalisation has led to increases in labour mobility and capital, which have moved value creation and jobs toward emerging markets.

UBS reports that this trend has left middle income groups in other nations feeling “threatened” and like the “relative losers” of globalisation – adding that these sentiments have resulted in increasing political polarisation and populism.

Meanwhile, Switzerland has enjoyed relatively stable income development and distribution, the report says. In fact, even though the share of income before tax for Swiss middle class households has decreased, looking at the share of income for this group after accounting for government redistribution via taxes and social security contributions shows a slight overall increase.

The study attributes this finding in part to minimal inflation and the strong franc, which have allowed income from employment as a proportion of GDP to rise steadily. At the same time, corporate earnings have fallen as a result of the strong franc. The upshot, the study says, is that the lowest wages in Switzerland have been seeing the greatest percentage increase since 2008.

UBS says Switzerland’s dual education system has also played a role in middle class income stability, because higher education offered in parallel with professional apprenticeships affords many more training opportunities for employees, which “guarantees direct access to the labour market”.

Despite this good news for Switzerland’s middle class, UBS says that it does not expect a full economic and labour market recovery from the “frankenshock”, when the Swiss franc was unpegged from the euro in early 2015, until 2017-2018.