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4000.- Swiss francs minimum wage: a solution against poverty?

A solid middle class with only moderate differences in income is an important success factor and anchor of stability of an economy. Prime examples often used by economists are the Scandinavian countries, Germany, Austria and Switzerland. However, in the Swiss Confederation there are three petitions running on, that are mostly supported by the left-wing political camp and which horrify their opponents: the “1:12” initiative for a limit of executive pay, the general push for standardized and higher minimum wage as well as the application for a national inheritance tax. The objective of the minimum-wage-initiative objective will be realized by special labor contracts and in form of a minimum wage of 22.- CHF per hour. This is equivalent to a full time job and around 4000.- CHF a month.

The question is how far the minimum wage initiative could eliminate poverty. The best protection against poverty are employment and education. Particularly affected by poverty are also single parents. This was confirmed by the Swiss Federal Office of Statistics published results of the Swiss income households. However, a workplace by itself is no guarantee against poverty. According to the figures in 2011 were approximately 130 000 people affected by poverty despite employment

The above mentioned data from the Federal statisticians allows no direct conclusions. But there is a special analysis of the Labour Force Survey 2012 by the State Secretariat for Economic Affairs (Seco), which gives some hints in this respect. Accordingly to this report just 13% of the household group with the greatest risk of poverty have earned less then the required minimum of 22.- CHF. But 7% were one-person households and 80% multi-person households with more income from employment. Another notable figure of this evaluation: over one third of the low-wage earners live still in parents-house. The Seco-analysis shows that a minimum wage regime in terms of poverty reduction would be at best equivalent to a shotgun: there may be some hits, but most of the “ammunition” would miss the target.

However, the methapor of the shotgun is likely to provide still a too positive impression of the minimum wage initiative. Because a national minimum wage in the required amount of around 4000.- CHF per month would most likely cost jobs and thus weaken one of the most important shields against poverty. The negative employment effect of the minimum wage initiative could thus negate or even overcompensate the positive effects from the perspective of poverty reduction.

Stefan Goettgens




Author: studentnovasbe

Master student in Nova Sbe

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