Unions say wage gap continues to widen

Lampart (left) and Rechsteiner hope a minimum salary will prevent further pressure on low wage earners Keystone

To coincide with Labour Day on Sunday, the Swiss unions have issued a report, based on official data, showing that wage inequality has grown in Switzerland.

Employers have relativised the findings, saying an influx of foreign firms has had an influence on the statistics.

Switzerland is growing richer from year to year. Yet many people seem to have less money in their pockets at the end of the month.

It was widely assumed that the salaries of the top income earners had increased disproportionately in comparison with others in the past ten to 15 years.

The Swiss Trade Union Federation salary distribution report, published this week with analysis of current data, appears to lend weight to this assumption. Most of the figures come from the Federal Statistics Office.

According to the study, the best paid ten per cent of the workforce saw their salaries increase 10.3 per cent, adjusted for inflation, between 1998 and 2008. In the case of the so-called super earners – the top half per cent – the increase was 28 per cent over the same period.

In contrast low and middle incomes increased by just two to four per cent over the ten year period.

Trade Union Federation chief economist Daniel Lampart sees the problem as being “about 20,000 managers and specialists enriching themselves at the expense of the majority of workers”. He mentions that the number of people taking home an annual salary of one million francs has increased by roughly a factor of five in the past ten years.

“Structural effects”

For Thomas Daum, the director of the Swiss Employers Association, the increase is mainly due to structural changes. “In the past five to ten years we have had a big influx of international firms. That naturally influenced the statistics,” he told swissinfo.ch.

“If we look at other countries, the wage gap in Switzerland is still modest,” Daum said, adding that those who earn good salaries also pay higher taxes and social contributions.

Paul Rechsteiner, the president of the Trade Union Federation and a Social Democrat member of parliament, blames the taxation policy for the widening salary gap.

“Taxes have been reduced for those with high earnings and large fortunes. Hereditary tax has been broadly abolished and cantonal wealth taxes have been lowered,” he told swissinfo.ch.

Bonuses blamed

One finding of the report is particularly striking: the wage gap is particularly wide in those sectors of the economy that use bonus systems for rewarding staff, namely banks and insurers.

“The bigger the bonus as part of the total salary, the more pronounced the wage gap,” said Lampart.

But Daum defends the bonus system. “If we got rid of bonuses now, that would simply result in a large part of the highest salaries being converted into fixed salaries. Firms would then lose the considerable leeway they have to react when business is bad by reducing the variable component, that is the bonus.”

The wage distribution report also highlights a positive findings that the wage gap in the retail trade and in the hospitality branch has reduced. And in branches with “good” labour contracts and an active minimum wage policy, it had been possible “to prevent the top salaries pulling far ahead of the middle and low salaries”.

Minimum wage

The Trade Union Federation is calling for a change in wage policy where it is insisting on the introduction of a minimum wage. “This would prevent further pressure on the lowest wages,” said Rechsteiner.

The federation is pushing for a minimum of SFr22 per hour, or SFr4,000 a month ($4,583), as contained in its recently launched minimum wage initiative, for which it is currently collecting signatures to force a nationwide vote on the issue.

It is also calling for a 13th monthly salary to be paid out instead of bonuses.

The Trade Union Federation also wants to strengthen existing labour contracts. “And there needs to be general wage increases, real increases in autumn for all, to stop income inequality growing.”

Daum of the employers association rejects this demand. “We believe that setting minimum wages as high as the federation wants in its initiative would lead to more jobs being lost than help individuals increase their earnings.”

Salary millionaires

According to the Trade Union Federation, basing its calculations on information from the Statistics Office, the number of “salary millionaires” increased from 510 to 2,824 persons between 1997 and 2008.

The 40,000 best earners saw their real salaries increase by over 20%, while lower and middle incomes rose by 2%-4%.

The salary report says that in 1997 the wealth of the richest 4.3% of the population was equal to that of the rest of the population combined. In 2007, the 2.2% per cent richest accounted for the same volume of wealth.

(Translated from German by Morven McLean)