The economy is growing – the wage is not – News Economy: Economy

The following year is paid out earnings according to the "monitor" that was presented yesterday Credit Suisse rise by 1 percent. Fewer the inflation of 0.7 percent expected for 2019, only a purchasing power increase of 0.3 percent remains. In the "Monitor", the economists of the big bank regularly publish research into economic development.

The wage forecast of CS is considerably lower than the wage requirements of employee representatives. The Swiss Confederation of Trade Unions considers a wage increase of 2 to 2.5 per cent as appropriate, which is justified in part by the excellent economic situation in Switzerland.

That the Swiss economy is hot at the moment also confirms the Credit Suisse economists. In the current year they expect an increase of the gross domestic product of 2.7 percent. This is twice as high as in 2015. By the end of the year, the number of registered unemployed should be only 2.3 percent. The trade unions complain that wages have developed poorly. It is now important to close the gap.

Benefited from the Swiss franc exchange rate

Crucial for the assessment of wage developments in recent years is the difference between the nominal wages (these are the wages paid out) and the real wages. The latter show the evolution of the purchasing power of wages. The growth of real wages roughly corresponds to nominal wage growth less inflation.

The nominal wage growth in Switzerland has been extremely low over the past decade. On average, since the financial crisis they have increased by less than 1 percent per year and last year by only 0.4 percent. Thanks to the recently considerably expensive franc, the picture for real wages is much better, because the exchange rate has led to lower import prices and therefore a falling price level in Switzerland. Adjusted for purchasing power, wages in Switzerland rose in the period from 2009 to 2016 more than in the 1970s. This is over with the return on low inflation in the past year. In 2017, real wages also fell on average.

Even with higher growth rates and falling unemployment, wages hardly move.

The data presented by the CS economists argue against a clear turnaround towards significantly higher wages. Even in the decades before the financial crisis, they have risen considerably every time unemployment fell. The reason: in the case of low unemployment, employees are more difficult to find for companies, and therefore they can enforce higher wages. But this connection has largely disappeared – this is also evident in other countries. Even with higher growth rates and falling unemployment, wages hardly move.

Several statements are discussed by economists around the world as the cause of employees' weaknesses in enforcing higher wages: technological development, globalization with competition from foreign workers or the weakness of trade unions.

Desired wage payment

According to the Credit Suisse study, there are few indications that these reasons are decisive for the development in Switzerland. So far, technical progress has created new jobs in the sector of high wages. Outsourcing jobs abroad would be less attractive for companies in the light of rising wages in emerging markets, and high-paid jobs would remain in the country anyway. All in all, these developments have little influence on the average wages. For individual employees, especially in the lower income sector, the picture may look very different.

The CS economists justify weak wage growth in Switzerland with "long-term and systematic wage moderation". Employees consciously do not use their leeway to reduce the risk of unemployment. For study authors, this is a major cause of persistently high employment growth in Switzerland since the financial crisis – despite the recession and the shock of the franc. (Editors Tamedia)

Created: 18.09.2018, 23:13 clock

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