Swiss productivity gains fuel dispute over wages and company profits

Swiss economic output per working hour rose by 2 percent last year compared with 2024, prompting a dispute over whether the gains are reaching employees or company owners, SRF reports.

Higher productivity can lead to higher wages or greater profits for companies and their owners. Thomas Bauer, chief economist of the trade union umbrella organisation Travail Suisse, said employees were no longer benefiting enough from productivity gains.

Patrick Chuard, chief economist of the Swiss Employers’ Association, takes a different view. He said the wage share showed that employees were receiving more of the economic output than companies were.

About 60 percent of Switzerland’s economic output goes to wages, with the remainder going to company profits. The wage share has remained relatively stable for years and is high by international standards.

Bauer said relatively low wages were well protected in Switzerland and that the country had so far avoided the sharp decline in wage shares seen elsewhere. Chuard pointed to Switzerland’s high level of education and said employees received a large share of value creation because much of the country’s economic output was based on knowledge.

The two economists disagree over whether companies have passed on a sufficient share of their productivity gains to employees in recent years. Bauer said wage negotiations had become tougher and that even compensation for inflation now required a struggle, leaving little room to discuss employees’ share of productivity gains.

He said real wages had not kept pace with productivity and referred to the wage index published by the Swiss Federal Statistical Office. Chuard argued that productivity should be compared with real hourly wages rather than the wage index, since both productivity and hourly wages are measured per working hour.

Under the wage index, for example, receiving more annual leave without a pay increase is not counted as a wage increase. It is included in the real hourly wage, Chuard said. Using that measure, he argued, productivity and hourly wages had advanced at the same pace.

Bauer said this calculation was distorted and that the exceptional effects of the Covid pandemic had to be removed before comparing hourly wages with productivity. He said the adjusted figures would show a similar result to the wage index.

During the pandemic, jobs with lower wages were more likely to disappear, pushing up the average wage. At the same time, short-time work sharply reduced the number of hours worked. Although gross domestic product also fell, working hours declined faster, creating a steep statistical rise in productivity per hour worked that did not reflect the real economic development.

Michael Siegenthaler, a labour-market economist at ETH Zurich, said both calculations could be correct because productivity and wage figures vary significantly depending on the data set used. The data therefore leave room for interpretation, which employers and trade unions use in political debates and wage negotiations. They ultimately decide how much of the gains employees receive as wages.