GENEVA The proposal by Swiss unions to raise the minimum wage has sparked debate as to whether the initiative offers a durable option for the country. By increasing it to CHF 4,000 a month, Switzerland will have to adapt its fiscal policies accordingly. This in turn will affect Swiss businesses. They will have to contend with changes in overall labour costs that could jeopardize competitiveness. Its repercussions on unemployment levels are also a factor. The initiative ignores the indirect consequences that would emerge from such a systemic rise.
The CHF 4,000 benchmark is more than double France’s SMIC (minimum wage) and triple America’s mandatory baseline. In real terms, some studies suggest that the long-term impact outweighs the short-term benefits. An increased minimum wage may not only mean a surge in production costs, creating a vicious cycle of higher retail prices and decreasing consumerism, but may also threaten job security among poorly qualified personnel. The adaptation cost for Switzerland is estimated to stand at CHF 1.6 billion, according to economist Beat Baumann. Notwithstanding that a non-negligible part of the working population would benefit, the Left’s tendencies to view such initiatives as ubiquitously beneficial may highlight a lack of economic insight.