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WORKING IN SWITZERLAND

Do wages in Switzerland make up for the high cost of living?

Cities in Switzerland have once again been ranked among the most expensive in the world, but do salaries of workers there make up for the high cost of living?

Published: 14 June 2022 12:38 CEST
Updated: 10 August 2022 16:16 CEST
Do wages in Switzerland make up for the high cost of living?
Do salaries in Switzerland make up for high cost of living? Photo by Henrique Ferreira on Unsplash

It will not come as a surprise to anyone living in Switzerland that, globally, Geneva and Zurich were ranked in the third and seventh place, respectively in a new survey of 20 most expensive cities for international residents.

The Swiss capital of Bern was ranked 16th in the study was carried by a global mobility organisation, ECA International.
 
However, on the European scale, Geneva was placed in top spot, Zurich in third and Bern in fourth.
 
RCA’s cost of Living index is calculated using a basket of common goods and services, including food, clothing, housing, electronics, utilities and public transport.
 
“In its latest report, petrol and cooking oil prices have undergone some of the biggest increases of any items in the basket”, ECA said. 

This is not the first time Swiss cities rank among the most expensive in the world; in fact, it is a long-term and predictable pattern:

READ MORE: Why Zurich ranks as the world’s most expensive city once again
 
There is a number of reasons to explain the high cost of living; among the most often cited ones are protectionism and lack of competition, which are inter-related, as the former invariably leads to the latter.

This is done mostly to privilege domestic products and economy over imported goods.

However, there are other factors as well.

A study by the University of Applied Sciences of Northwestern Switzerland shows that foreign producers and suppliers impose large price increases in Switzerland, exploiting high salaries and consumers’ purchasing power.

This means that Swiss buyers are overpaying for their purchases by more than three billion francs, the study found. 

READ MORE : EXPLAINED: Why is Switzerland so expensive?

But a more relevant question is whether the (high) Swiss salaries make up for the (high) living costs — not only in Geneva, Zurich and Bern, but in other notoriously expensive areas around urban centres, including the Lake Geneva region, Basel and Zug.

The average gross income in Switzerland right now is of 6,555 francs per month, which means 50 percent of the working population earns less, and 50 percent earn more. 

The answer to this question depends, logically, on how high your wages are versus your fixed costs (rent / mortgage, health insurance premiums, food, transport, clothing, taxes, etc.), and also your overall spending habits on “non-essentials” such as entertainment, restaurants, travel, and leisure activities in general.

That, of course, applies to all countries, not just Switzerland.

READ MORE : What is the average salary for (almost) every job in Switzerland?

One way to look at the salaries versus the cost of living is through the purchasing power parity (PPP) — the financial ability of a person or a household to buy products and services with their wages.
 
An in depth analysis by a digital employment platform Glassdoor provides some interesting and no doubt surprising insights into Switzerland’s PPP in comparison with other nations.

“Taking not only income and cost of living into account, but also the effects of differences in taxation, it is possible to derive an indication of after-tax, local purchasing-power-based, standard of living”, the study reported.

“On this basis, the highest overall standard of living is found in the cities of Switzerland, Denmark, and Germany. Although the cost of living can be relatively high in these countries, so are average wages and purchasing power”.

The study concluded that “in Switzerland, Denmark, and Germany the average city-based worker can afford to buy 60 percent or more goods and services with his or her salary than residents of New York. »

Also, if you look at the ‘big picture’ — taking various factors into account — the cost-of-living situation is not as bad as many people believe.

“Various factors” in this context means the low inflation rate (in comparison with other countries), high employment, and a strong economy — all of which mean that Switzerland is outperforming other European nations on many fronts.

All this goes to say that if you analyse things from a different angle, Switzerland’s cost of living doesn’t look so bad.
 
READ MORE: EXPLAINED: Why Switzerland’s cost of living isn’t as high as you think 
 
 

Member comments

  1. “The average gross income in Switzerland right now is of 6,555 francs per month, which means 50 percent of the working population earns less, and 50 percent earn more.”

    “average” should be edited to be “median”. Otherwise the definition above of average is incorrect.

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For members

WORKING IN SWITZERLAND

The pitfalls of Switzerland’s social security system you need to avoid

In most cases, Switzerland’s social benefits system functions well. But there are also some loopholes you should know about.

Published: 24 April 2024 13:37 CEST
The pitfalls of Switzerland's social security system you need to avoid

The Swiss social security system has several branches: old-age, survivors’ and disability insurance; health and accident insurance; unemployment benefits, and family allowances.

This is a pretty comprehensive package, which covers everyone who pays into the scheme for a wide variety of ‘what ifs’.

As the government explains it, “people living and working in Switzerland benefit from a tightly woven network of social insurance schemes designed to safeguard them against risks that would otherwise overwhelm them financially.” 

But while most residents of Switzerland are able to benefit, at least to some extent, from this system, others don’t.

What is happening?

If someone becomes ill or has an accident, Switzerland’s compulsory health insurance and / or accident insurance will cover the costs.

However, a prolonged absence from work can become costly.

That is especially the case of people employed by companies that don’t have a collective labour agreement (CLA), a contract negotiated between Switzerland’s trade unions and employers or employer organisations that covers a wide range of workers’ rights. 

READ ALSO: What is a Swiss collective bargaining agreement — and how could it benefit you?

It is estimated that roughly half of Switzerland’s workforce of about 5 million people are not covered by a CLA.

If you just happen to work for a company without a CLA, your employer is not required to pay your salary if your illness is long.

You will receive money for a minimum of three weeks – longer, depending on seniority — but certainly not for the long-haul.

You may think that once your wages stop, the disability insurance (DI) will kick in.

But that’s not the case.

The reason is that DI can be paid only after a year after the wages stop. In practice, however, it sometimes takes several years of investigations and verifications to make sure the person is actually eligible to collect these benefits, rather than just pretending to be sick. 

In the meantime, these people have to use their savings to live on.

What about ‘daily allowance insurance’?

Many companies (especially those covered by a CLA) take out this insurance, so they can pay wages to their sick employees for longer periods of time.

However, this insurance is optional for employers without a CLA is place.

As a result, small companies forego it because it is too much of a financial burden for them.

And people who are self-employed face a problem in this area as well: insurance carriers can (and often do) refuse to cover people they deem to be ‘too risky’ in terms of their age or health status.

Critics are calling the two situations —the length of time it takes for the disability insurance to kick in and gaps in the daily allowance insurance—”perhaps the biggest failures of the social security system.”

Is anything being done to remedy this situation?

Given numerous complaints about the unfairness of the current system, the Social Security and Public Health Commission of the Council of States (CSSS-E) will look into the “consequences of shortcomings and numerous dysfunctions in long-term illness insurance.”

But not everyone in Switzerland sees a problem in the current situation.

According to the Swiss Insurance Association (SIA), for instance, “making daily sickness allowance insurance compulsory for employers would not have the desired effect. Due to false incentives, it would only exacerbate the upward trend in costs and premiums.”

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