For roughly 15 years now the debate about minimum wages has been going on in various European countries, and in some countries of the European Union laws to that effect have been put into place. The main motivation and rationale of this is always fairness and social equality, achieved by a regularly adapted mandatory minimum wage. In Germany, minimum wage has been discussed on-and-off since the federal election campaign in 2005, first introduced by the Left Wing Party, and later picked up by the Social Democrats and the Green Party. The current grand coalition is planning to put into effect a minimum wage of EUR 8.50 per hour before 2016.

 

Largely unnoticed by the German public, the unions and other employee organisations in Switzerland formed an alliance to push for a minimum wage of EUR 3,300 per month for a full-time job. In the debates during the time leading up to the referendum the number most often heard was 22 Swiss Francs. Compared to the minimum wages in neighbouring countries like France with its EUR 9.43 per hour, this demand may sound rather overblown. However, in some urban areas in North-Eastern Switzerland at least, the cost of living is much higher than in neighbouring areas in Eastern France, Southern Germany, and Austria.

To counter the generally common sense demand for sufficient pay for unskilled workers and other low-level jobs, opponents of this initiative raised a couple of good points, though:

 

  • There are great differences in the cost of living between the high industrialized and densely populated North and West, and the more rural area of central Switzerland and Southern cantons like Wallis, Tessin, and Grisons. Especially the Italian-speaking canton Tessin would be unable to compete with surrounding Italian areas, should such a raise in wages occur. The likely result would be a rise in unemployment.

 

  • Switzerland in many ways directly competes with the surrounding European Union members, but so far offers very company-friendly laws, which are not limited to tax and social security regulations. This advantage would suffer from a heavy interference with private wage negotiations.
  • A minimum wage as suggested would likely drive up prices as well, so that any money which employees in the lower income jobs would be earning more at first would soon is eaten up again by inflation. The problem here is that prices would rise for all Swiss. Rents and necessities of the daily life would be especially affected. Now, Switzerland has long been a country with high cost of living; this trend would have been intensified without the target group actually gaining a long-term benefit.
  • An increase of wages at the lower end of the scale will of course put upward pressure on the levels above that, all the way to specialized personnel. Critics of the initiative calculated that of the 330.000 jobs directly affected by the legislations, 55.00 would have been cut. This wouldn’t have happened over night, but managements would have found ways to further increase effectiveness, especially if higher wages make investments in further automation technologies more feasible. The original intention to secure social peace through fair wages would at least in some regions and fields been reversed and lead to unemployment and unrest.

 

Recently, a remarkable majority of 77 percent of Swiss voters rejected the initiative for minimum wages. One reason of the clear vote was surely the intensive previous discussion not only about the absolute hourly rate but also the concept itself. The various arguments clearly show how important it is to thoroughly check possible effects of planned measures in capitalistic markets. In some cases it might be better to look for different ways in which to achieve the well-intended goals.

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