Labour agreement faces social test

The Trade Union Federation wants collective bargaining agreements for all sales staff in shoe shops RDB

As support for the free movement of workers accord with the European Union is waning, Swiss employers and unions are agreed on combating labour market abuses and tightening controls. But they are at loggerheads over the issue of minimum wages.

A highly competitive labour market, full trains, overburdened roads, a lack of affordable housing and a population that recently passed the eight million mark are seen by some Swiss as the result of the recent arrival of more European workers.

“People are more sceptical about immigration and support for the free movement agreement has fallen,” admits Thomas Daum, head of the Swiss Employers’ Association. “The population isn’t necessarily judging the situation rationally. Emotions are running high, but they too should be taken seriously.”

Political campaigns aimed at curbing immigration are a sign perhaps of this underlying tension. Two separate initiatives are pending while Croatia is set to join the EU in July, further extending the free movement accord between Switzerland and the EU.

This is not without risk. If Swiss citizens decided to batten down the hatches and close the country’s borders, Brussels wouldn’t just call off the free movement agreement, but would cancel all its other bilateral treaties with Switzerland.

The cabinet recently decided to extend the so-called safeguard clause included in the free movement accord. This meant immigration quotas, introduced against eight mainly eastern European states a year ago, are also applied against the so-called EU-17 states, including Germany, France, Italy, Spain and Britain.

Whether this will be actually useful is up for debate. The restrictions are limited to one year, meaning that complete free movement will be reestablished in June next year.

Social standards

It is expected that when the two initiatives go to the vote, those in favour of free movement will argue that accompanying measures against salary abuses, bad working conditions and poor social standards can solve most problems.

The rules concerning independent foreign workers and salary declarations by foreign contractors were recently tightened. In a few weeks’ time, construction companies will also be held responsible if their sub-contractors do not respect minimum wages in the sector.

Unions and employers reckon it is too early to say whether these new measures will have an impact. “The number of checks planned by the government is too low,” warns Paul Rechsteiner, president of the Trade Union Federation.

For Rechsteiner, who is also a centre-left Social Democrat senator, the fight against wage dumping has to some extent failed, despite tighter rules and more checks. Sectors without a collective bargaining agreement (CBA) have suffered in particular.

“Even though ten per cent of checks have shown that salaries are too low, no German-speaking cantons have introduced standard employment contracts with minimum wages, unlike elsewhere in the rest of the country,” adds Rechsteiner.

“Salary problems are a major issue in the retail sector, where up to 90,000 people work,” he points out.

More wage abuse

There were more wage checks carried out in 2012 than in 2011 as part of the free movement accord accompanying measures.

These checks turned up more cases of abuse by foreign companies than in 2011. However, the number of workers from abroad also increased.

2012 figures:

203,000 workers from the EU were announced to cantonal authorities for contracts lasting less than 90 days. Nearly a quarter of them were self-employed.

152,000 workers and 40,000 firms were checked.

In sectors with a CBA, the inspectors found 42% of foreign sub-contractors did not respect minimum wages (+9%), while this figure fell to 23% (-1%) for Swiss firms.

In sectors without a CBA, 11% of foreign sub-contractors were guilty of wage abuses (-3%), as were ten per cent of Swiss firms.

Minimum wages

While Migros and Coop, the country’s two biggest retailers have CBAs, clothing chains such as H&M and Zara, whose owners are billionaires, don’t have any form of agreement in Switzerland.

Rechsteiner says this is a factor that has led the trade union federation to launch its own initiative demanding minimum wages for all.

The Travail Suisse umbrella group also wants guaranteed minimum salaries that go beyond what is set out in the government’s accompanying measures.

But its president Martin Flügel believes it is not up to the cantons to decide what is an acceptable wage, but to the federal authorities.

“It would be more advisable for the government to force the cantons to adopt minimum wages instead of waiting for multiple cases of dumping to be registered,” he said. “It would help create a certain transparency that could only be positive for foreign firms.”

Employers chief Daum for his part reckons the recent legal changes mean that there are enough checks. “We are against accompanying measures being used to promote salary policies and to provide social benefits.”

Ageing society

According to Flügel, an open work market is an important factor when you consider the number of retirees is increasing and the number of workers is stagnating. Switzerland must prepare for this demographic change, he says, and invest in infrastructure as well as adapt its housing and land use policies.

“In the long term, we cannot expect to have economic growth, improved infrastructure, high-quality healthcare and very low taxes all at the same time,” he points out.

George Sheldon, professor of labour economics and industrial organisation at the University of Basel, believes that accompanying measures are to some extent superfluous.

After studying the effects of the free movement accord with the EU-17, his conclusion is the agreement had almost no effect on salaries.

The only people affected were those with no qualifications living in Switzerland and originally from countries that are not members of the EU, mostly from the former Yugoslavia.

For the State Secretariat for Economic Affairs, wage evolution and spread remained surprisingly stable between 2002 and 2010 – a result Sheldon says is not that surprising.

“Switzerland is not a classic immigration country like the United States or Canada, where the labour market has to absorb new arrivals and therefore puts pressure on salaries.”

“Foreign workers who come to Switzerland are here because they were asked to, because there aren’t enough Swiss to do the job. That’s why they aren’t competing with locals for work,” he says.

Minimum wages

Accompanying measures include the possible implementation by the cantons of standard work contracts with minimum wages in sectors where no CBAs have been signed.

The cantons are allowed to intervene when there is repeated cases of wage abuse.

Minimum wage abuse cases were found for example in the landscaping sector in canton Aargau and the retail sector in canton Bern. Unqualified staff were earning less than CHF3,000 ($3,100). So far neither canton has reacted.

In 2010, the poverty level in Switzerland was defined by the Federal Statistics Office as CHF2,250 a month for a single person and SFr4,000 a month for a family of two adults and two children under the age of 14.

Only three cantons have made use of the standardised contracts: Geneva for cosmetics and housekeepers, Ticino for beauty salons, call centres and vehicle maintenance, and Valais for construction, maintenance and cleaning services.

(Adapted from German by Scott Capper)