In 1999, social expenditure in Switzerland was CHF 13,370 per resident. By 2019, the same figure had reached CHF 21,300, a rise of nearly 60%.
Over the same period, total inflation was around 11%. Applying inflation to CHF 13,370 brings the figure to CHF 14,480. So why has the cost risen beyond this and how has the extra spending been funded?
One of the key drivers behind the rise in social expenditure is increased spending on pensions as Switzerland’s population ages. In 1999, 15% of the population was 65 or older. By 2019, this percentage had grown to 19%.
Another key driver is rising medical expenditure, something also associated with an ageing population. In addition, Switzerland has seen a rise in social spending on unemployment since 1999.
In 2019, 47% of Swiss social payments were pension related and 24% were allocated to medical expenditure. The remaining 29% was spread over a large range of items including disability payments (5%), family support (3%), accidents (3%) and unemployment payments (3%).
How has the difference been funded?
Between 1999 and 2019, Switzerland’s nominal GDP rose by around 35%. This economic growth has funded much of the difference. If CHF 13,370 is increased to reflect nominal GDP growth of 35% it comes to around CHF 18,050, leaving a gap of CHF 3,250. This remaining gap has largely been funded via tax increases, at a cantonal and municipal level in particular, and higher health insurance premiums, which have risen sharply.
Compared to other European nations, Swiss social spending of 24.6% of GDP is close to the EU average of 26.5%. However, the per capita amount of social payments made to the population in Switzerland is higher than the EU average in monetary terms. Only Norway and Denmark spend more than Switzerland. Germany (CHF 20,431), France (CHF 18,977), Sweden (CHF 18,251), Italy (CHF 14,910) and the UK (CHF 14,449) all spent less per capita than Switzerland (CHF 20,795) in 2018. Germany (28.4%), France (31.4%), Sweden (27.7%) and Italy (27.9%) all spent more than average in GDP percentage terms however, while Switzerland (24.6%) and the UK (25.5%) came in slightly below average.
Compared to the rest of Europe, Switzerland spends more heavily on pensions and healthcare and relatively less on families and social housing.
Increased social spending, which is closely associated with ageing populations, has become the norm across much of Europe including in Switzerland. Without increases in pension ages it is a trend that is set to continue across the continent.