Editor’s note: This article was first published in April 2014, before the Swiss minimum wage vote. In the referendum of 18 May 2014 voters rejected the 4,000-franc minimum wage by a wide margin; the 3,288-euro conversion, poll figure and worker counts are 2014 figures.
There are different ways to change a country’s course. On the one hand, there are the measures applied in Greece: wage cuts and tax rises plus austerity. On the other, there is “Brand Switzerland”, whose policy is low taxes and rising wages. On top of that, Switzerland is considering giving a cheque to every resident of the country over the age of 21. Let’s say Switzerland does not believe in austerity, and its measures have certainly produced better results than the policies Merkel imposed in Europe.
Now Switzerland wants to raise its minimum wage to 4,000 francs, which at the current exchange rate would be about 3,288 euros. This would make Switzerland the country with the highest minimum wage in the world. Of course, the measure is not free of controversy. In fact, it will be put to a referendum on 18 May, and according to Bloomberg 52% of voters could reject it, since they believe business competitiveness could suffer and some companies could leave the country.
Even so, an estimated 90% of Swiss workers already earn more than 4,000 francs (3,288 euros), although supporters of the measure say raising the minimum wage would help the more than 330,000 low-income workers (mostly women struggling to make a living in this high-cost country).
Switzerland’s economy minister thinks the measure would hurt the economy, although the truth is that the same thing has been said for more than 50 years, and so far Switzerland has remained a solid economy with one of the lowest unemployment rates in the world.
When Washington and California raised the minimum wage in 2013, people also said many companies would flee to other cities. Not only did that not happen, but there was also a 3% increase in new businesses, according to the Puget Sound Sage report.
The other day I was watching an interview with Rafael Bengoa, a health adviser to Barack Obama’s administration, on laSexta’s El Gran Debate (a Spanish TV debate programme), and he made a rather sensible argument, using as an example the United States, which has followed a completely different policy from Spain’s.
Bengoa said that we know from history how long it takes to get out of an economic recession, but in Spain, austerity, spending cuts and tax rises have caused a social recession. And unfortunately, nobody knows how long it takes to get out of a social recession.
In short: if you apply the measures of the United States and Switzerland, you may end up looking like the US and Switzerland. If you apply the measures of Greece, you will end up looking like Greece.
Further reading
- Singapore will replace Switzerland as a tax haven
- Economics is not a science. It is politics in disguise
Featured image: "Axel Tschentscher", CC BY-SA 4.0, via Wikimedia Commons.
