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COST OF LIVING

‘Extraordinary measures’: What could Switzerland do to ease soaring cost of living?

Switzerland's National Council is starting to debate ways to counteract the inflation and increase the declining purchasing power of Switzerland’s consumers.

Published: 21 September 2022 11:16 CEST
'Extraordinary measures': What could Switzerland do to ease soaring cost of living?
Swiss MPs debate emergency measures to cut the rising cost of living. Photo by Fabrice COFFRINI / AFP

Although, at 3.5 percent, Switzerland’s current inflation rate is much lower than across the eurozone (where it is about 9 percent), prices of many consumer goods and services have gone up and are expected to increase further.

This situation is prompting MPs to come up with measures to ease the inflation woes in a country whose economy is normally stable and robust.

“Extraordinary situations require extraordinary measures”, said Philipp Matthias Bregy, leader of the Center parliamentary group.

The MPs will focus mainly on three issues that are particularly prone to price hikes and are likely to affect Swiss consumers the most:

Old age pension (AVH / AVS)

Normally, these pensions are adjusted every two years, taking into account the development of wages and prices. But as salaries have hardly increased, while inflation is now higher than usual, pensioners risk losing their purchasing power in 2023. 

To avoid this situation, the centre-left alliance is pushing for full compensation of this price increase, by raising the minimum monthly pension by 30 or 40 francs.

The increase would not only benefit the 2.5 million pensioners in Switzerland, but also the beneficiaries of invalidity pensions and supplementary benefits.

READ MORE:  EXPLAINED: How does the Swiss pension system work – and how much will I receive?

Health costs

The costs for Switzerland’s healthcare system have been soaring in the past few years, and he current higher-than-normal inflation is making the situation worse.

Based on the information released by Santésuisse, an umbrella group for health insurance companies, an overall increase of around 4 percent for 2023 will be the norm.

Unfortunately for the consumers, premiums for compulsory health insurance will likely rise by an average of 5 percent in the fall, according to online price comparison site, Comparis.

And many people could even see their premiums soar by more than 10 percent in 2023 — the sharpest hike in premiums in 20 years.

The center-left alliance in the National Council is urging the government to contribute 30 percent of the expected hike, to help low and middle-income families shoulder the higher costs.

However, the right-wing faction in the parliament is opposing this move, proposing instead that health insurance premiums be fully deducted from direct federal tax; this would, however, favour mostly high-income individuals.

The government has already set a plan to cut the spiralling health costs, which includes coordinated care networks, faster and cheaper access to medicines, and electronic invoicing.

READ MORE: EXPLAINED: How Switzerland wants to cut soaring healthcare costs

Energy

With the prices of gas, electricity and fuel oil expected to soar considerably in 2023, political right and left have come up with their own proposals on how to mitigate these costs.

READ MORE: Swiss government confirms ‘sharp increase’ in electricity prices

The right-wing Swiss People’s Party says the government should temporarily waive its share of the tax on mineral oils, worth more than 1 billion francs.

The Greens, on the other hand, are pursuing a different approach: they are asking for a temporary “energy supplement” for low-income households.

This supplement would benefit those who are affected by high energy prices the most.

What is the next step?

On Monday, the Council of States will decide on similar measures, including also the motion filed by Social Democrats asking for the government contribution of up to 260 francs per adult to ease the effect of the higher costs.

However, this motion is not expected to pass, experts predict.

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SHOPPING

REVEALED : Are ‘discount’ supermarkets in Switzerland really cheaper?

Lidl, Aldi and Denner claim their prices beat those of large Swiss retailers. But is this really the case?

Published: 18 April 2024 11:40 CEST
REVEALED : Are ‘discount’ supermarkets in Switzerland really cheaper?

Common consumer goods (except one) are typically more expensive in Switzerland than in neighbour countries — sometimes by much.

This includes food.

READ ALSO: Why Switzerland is the most expensive country in Europe

That is especially the case of largest Swiss chains, Migros and Coop, while Denner, Lidl, and Aldi say their food prices are significantly lower.

To find out whether this claim is actually true, journalists from RTS public broadcaster’s consumer programme went shopping in each of these supermarkets. 

They purchased the same 30 products in each of the five supermarkets on the same day, to ensure that the price comparison is as accurate as possible.

Not what you’d expect

In each of the stores, the investigators purchased only the lowest priced items from the supermarkets’ budget lines.

It turned out that most money was spent at Denner, widely considered to be one of the lowest-priced supermarkets.

The total for the 30 items came to 181.67 francs — more than was spent at the country’s more expensive stores, Migros and Coop, where identical basket of goods cost 170.37 and 167.82 francs, respectively.

(That, in itself, is surprising as well, because Migros typically has lower prices than Coop).

As for the other two supermarkets, these purchases cost 166.59 francs at Aldi and 162.05 at Lidl.

So the difference in price between Migros and Coop versus Aldi and Lidl is minimal. But what is even more surprising is that the cost of groceries at ‘cheap’ Denner is actually highest of the lot, by between 11 and nearly 20 francs.

Migros and Coop performed quite well in the comparison survey because most of the items purchased in those stores came from their budget lines, M-Budget and Prix-Garantie, respectively, both of which were introduced to compete with Aldi and Lidl.

But how important is price? Patrick Krauskopf, a professor of anti-trust law, told RTS: “German, French, English, Spanish and American consumers pay a lot of attention to price. In Switzerland, consumers place more emphasis on quality of service. Price is almost secondary.

“Distributors have realised this and have stopped competing fiercely on price.”

Big versus small

While this particular analysis focused on supermarket chains, another survey, conducted at the end of 2023, looked at prices in small grocery shops. 

Common logic has it that it is cheaper to shop in supermarkets than a local corner store, because big retailers purchase products in large quantities, which means lower prices for consumers.

However, prices in some local shops were found to be “up to 30 percent cheaper than Migros and Coop.” 

The reason is that in order to cut costs, small grocers may buy their products from the most cost-effective suppliers, a tactic which includes importing some items.

Another reason for lower prices is that unlike major supermarkets, which ‘pretty up’ their stores for better presentation of products, these small retailers are ‘no-frill’ shops. This means little money is invested in décor, so there are no extra costs to pass on to consumers.

 READ ALSO: Why it might be cheaper to avoid the big supermarkets in Switzerland
 

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