Swiss salary illusion: precarious cost of living sets off alarm bells

Rising rents, apartment shortages, inflation and now an increase in health insurance costs: people living in Switzerland may receive high salaries, but what is left over at the end of the month is dwindling. © Keystone / Christian Beutler

“You’re from Switzerland, you must be rich!” The ability to pay bills and enjoy life. That is how Swiss salaries are seen from the outside world. However, the relentless increases to cost of living is driving normal families to food banks. Welfare advocates and economists are sounding the alarm.

While for many countries a monthly salary of CHF4,000 ($4,364) would be seen as a good salary, in Switzerland this would push individuals and families to the brink of poverty.  

Rising rents, apartment shortages, inflation and now an increase in health insurance costs: people living in Switzerland may receive high salaries, but what is left over at the end of the month is dwindling.

+Read more: The average Swiss salary is around CHF6,000: what does that get you in Switzerland?

‘We don’t talk about money’

Daniel Lauper, a sales manager at Caritas, an organisation which aims to prevent and alleviate poverty in Switzerland, says that since the Covid-19 pandemic the situation for many people and families has become precarious. 

The shame felt by those seeking assistance is painful. “In Switzerland, we don’t talk about money, or that we don’t have money,” Lauper says. However, almost 750,000 individuals are affected by poverty. 

KEYSTONE/Salvatore Di Nolfi

“I get a lump in my throat whenever I think about the many more families who are on the brink. That number is not measurable,” he says.

Lauper finds the precarious situation in which many families find themselves “almost dangerous” and worries what will come out of the frustration from the families who are not receiving the help they need. “We’re not even talking about what will happen next year,” he says. He expects even more individuals will seek assistance, as incomes next year will become significantly more stretched with rising health insurance premiums foreseen for 2024.

‘Desperate need of reform’

On Tuesday the outgoing health minister, Alain Berset, dropped a hammer on Switzerland. “I have bad news for households already plagued by inflation,” he said: health insurance costs are to rise by 8.7% in 2024.

KEYSTONE/Gaetan Bally

This translates to an increase of CHF1,000 spent on health insurance for a family with two young children per year, reports the Neue Zürcher Zeitung (NZZ).

In Switzerland, individuals can apply for a health insurance premium reduction, allowing people struggling with costs to receive lower healthcare premium costs. The cantons then subsidies the healthcare premiums for those individuals who qualify.

However, economists say placing the financial burden on the cantons is not a viable long-term solution. Currently, Switzerland spends CHF5.5 billion on health insurance premium reductions, the equivalent of the budget of the Swiss army.

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Tilman Slembeck, healthcare economist at Zurich University of Applied Sciences (ZHAW), told Swiss public radio, SRF, that without these health insurance premium reductions, Switzerland would have long had a “national uprising”. Slembeck says that the cost of health insurance premium reductions being the equivalent to that of the army budget shows that the healthcare system in Switzerland is in “desperate need of reform”.

‘Lack of solidarity’

Voices from all sides of the political spectrum are speaking out about these insurance spikes. Some are calling for a government-funded insurance system, paid for by taxes. However, Slembeck says that this is not a viable option for Switzerland as it goes against the Swiss culture.

A parliamentarian from the Green party says: “A person working in upper management pays the same healthcare insurance premiums as a construction worker. This shows a lack of solidarity.”

The left side of the political spectrum, particularly the Greens, are calling for an income-based healthcare cost system. However, Slembeck dismisses this as well, saying he sees “no benefits”. This would be putting a band aid on the problem, he says – it would relieve pressure on the government to undertake a much-needed reform of the Swiss healthcare system and, ultimately, would not solve the long-term issue.

Inflation and rent

To make matters worse, inflation, while lower than in most of Europe, remains high from a Swiss perspective and rent prices have been steadily increasing. 

+Read more: Not everyone agrees that rent prices are increasing 

The director of the Swiss Federal Office for Housing expects rents to rise by more than 15% between now and 2026. This as well as low vacancy rates, which fell from 1.72% in 2020 to 1.31% last year, and a growing population set to soon hit nine million are adding an additional strain.

+Read more: How many people are in Switzerland really? A global comparison

While inflation has dropped from the 3.4% high it hit at the beginning of the year to 1.6% in August, domestic goods still cost 2.2% more than in 2022.

KEYSTONE/DPA/Julian Stratenschulte

This drop in inflation is not felt back at welfare organisation Caritas in Bern. Caritas also helps to provide groceries and household goods at reduced prices, and Lauper says his Caritas shop in canton Bern has seen a 30% increase in families and individuals seeking assistance. “More families with children, like you and me, are coming to the shop. You wouldn’t expect it,” he says. His store is also experiencing more elderly individuals and more “working poor”.

However, Switzerland is not alone in feeling the burden of inflation. The European Union saw a peak inflation of 11.5% in October 2022. This resulted in 21.6% of the EU population being at risk of poverty.

KEYSTONE/Lukas Lehmann

Will there be a small reprieve this winter for people living in Switzerland? Last year, due to the Russian aggression in Ukraine, there were concerns of a sudden jump in energy costs, as much of the gas imports used to heat Swiss homes came from Russia. The situation this winter should be better, experts say. But they warn that Switzerland still needs to invest much more to ensure a long-term energy transition from fossil fuels to renewables.

+Read more: No energy emergency in Switzerland this year? 

As Switzerland faces federal elections on October 22, the spill-over effect of the increase in the cost of living is sure to be at the top of the voter agenda.