How about a minimum wage of €18 an hour or €3,291 a month?

Switzerland votes on whether to approve what would be the world’s highest minimum wage

Swiss national flags hang from buildings in a shopping district in Zurich. Photographer: Chris Ratcliffe/Bloomberg

Swiss national flags hang from buildings in a shopping district in Zurich. Photographer: Chris Ratcliffe/Bloomberg

Mon, Apr 14, 2014, 16:01

Jasmin Eicher has already axed her sole full-time employee to keep afloat her shop selling cards, candles and paper in a Zurich suburb. If Switzerland approves what would be the world’s highest minimum wage, she says the only option would be to close her door.

The Swiss will vote in a national referendum May 18th on whether to create a minimum wage of 22 francs (€18) per hour, or 4,000 francs (€3,291) a month.

While about 90 per cent of workers in Switzerland already earn more than that, employers say setting Switzerland’s first national wage floor would push up salaries throughout the economy.

When adjusted for currency and purchasing power, it would be the highest minimum in the world.

“We couldn’t pay it,” said Eicher, standing behind the counter in her shop in Schlieren. The employee she let go earned 3,500 francs a month. Now she’s by herself, working 10 hours a day, six days a week, and her hopes of hiring a cheaper helper would be dashed if the proposal passed.

“Of course I understand about people not earning enough, but not everyone is worth 4,000 francs. Here in Switzerland we’re already so well-off,” she said.

The chief backers of the proposal are Switzerland’s biggest trade unions, which argue that pay levels need to reflect the country’s prices - among the world’s highest. A poll by researcher gfs.bern released April 11th said 52 per cent of voters were likely to reject it, while Leger research firm last month found the same percentage would vote yes.

About 10 per cent of Switzerland’s full-time workforce receive a pre-tax wage of less than 4,000 francs, according to a statistics-office report for 2010. When adjusted for purchasing power, the Swiss proposed wage would amount to $14.01 (€10.13) an hour. That’s more than the minimum wages in Luxembourg and France, at $10.60, and Australia at $10.20, according to 2012 data from the Organization for Economic Cooperation and Development.

With income inequality growing among developed economies, according to the OECD, minimum wages are on the table in other countries as well. In the UK, prime minister David Cameron has increased it to £6.5 (€7.87) per hour, the first time it has been raised more than inflation since 2008.

In the US, president Barack Obama is pushing for an increase in the $7.25-an-hour federal minimum to $10.10, while German chancellor Angela Merkel’s cabinet backed a national minimum of 8.50 euros.

George Sheldon, professor of economics at the University of Basel, said the Swiss proposal would be counterproductive.

“Unemployment among the unskilled is increasing,” he said in a phone interview. “The solution to their problem can’t be to make them more expensive.”

National referendums, a key element of Switzerland’s political system, are held four times a year. In a country that’s home to about 300 banks, voters often side with employers. In 2012, for instance, they voted down a proposal to require employers to offer six weeks of paid vacation.

Last year, though, voters approved the so-called fat-cat initiative, which gave shareholders a binding vote on managers’ pay and blocked big severance packages. They did reject a measure to limit executives’ pay to 12 times that of junior employees.

Despite being home to multinational corporations such as KitKat-candy-maker Nestle and drugmaker Novartis, Switzerland gets two-thirds of its employment from small and medium-sized enterprises. The Association of Swiss Cleaning Companies, Allpura, opposes the minimum wage, saying it would lead to job cuts and worse working conditions. It says employees in the sector earn between 18.50 francs and 26.50 francs per hour.

Big companies including Nestle, Novartis and Swatch Group are against the measure too, saying it will hurt the economy.

“State intervention in the liberal economic system also goes against the market economy principles of our society that have been so successful to date,” Novartis spokesman Dermot Doherty said.

Bloomberg