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Want a Raise? Vote on it! The Swiss do.
Want a Raise? Vote on it! The Swiss do.
Switzerland is vote crazy. It has a referendum on most issues. There is a vote coming up that I’m sure will pass. This time around, the Swiss are going to vote themselves a big salary increase. As a result, Switzerland will have the highest minimum wage on the globe. That’s nice for the Swiss.
The annual minimum wages of Switzerland’s neighbors: (Link)
Being on the top of the list of minimum guaranteed income is a positive reflection on the Swiss economy. But it will also bring envy. It is an embarrassment of riches. I don’t think it will go unnoticed. The country is surrounded by economic problems, yet it's flourishing.
Switzerland has insured that its domestic companies are insulated from the economic chaos of its neighbors. It has achieved this with a currency peg. This appears to be a simple solution. So far, the peg is working. But there are consequences to this policy. In order to maintain an artificially low value for the Franc, the Swiss Central Bank (SNB) has had to absorb a huge chunk of official reserves, the bulk of which has been in Euros.
An argument has been put forward by the SNB, economists and bloggers, that there is no reason why the Swiss can’t continue to absorb foreign reserves. They argue that it doesn’t matter if it is E260b today, it would not matter if it were E500b in six months. I disagree. The SNB has investment restrictions. It only invests its Euro reserves in the debt obligations of France and Germany.
At some point we will see headlines like these:
Month #1
Finance Ministers of France, Germany, Netherlands
Call on Switzerland to Invest excess reserves in
Bonds of ECB.
Month # 2
Swiss Finance Minister Rejects Calls for Reserve Diversification
“The investment policies of the SNB are not for discussion”
Month #3
Merkel travels to Bern to discuss direct
investment in EU Central Bank
Month #4
Swiss Parliament Rejects Pressure from Neighbors
Swiss President: “The Swiss people have no ability to influence the SNB”
Month #5
EU leaders threaten economic sanctions against Switzerland
French President, “We can have Beggar my Neighbor policies too!”
Month #6
EU Considers Tariffs on Swiss Agricultural Products
Farmers Protest
Month #7
Swiss Tourist Industry in Slump
Hotelier: “We have a bad image, so people don’t come”
Month #8
Belgium’s rail road Cancels Purchase of Swiss Locomotives
Pressure from government responsible
Month #9
Swiss Politicians Raise Possibility of Referendum
on Independence of the SNB
SPP Leader, “Let the people decide”
Two Days Later
SNB Reverses Stance On Investments. Will Invest 10%
of Euro Reserves in ECB Debt.
Major concession. Threat of vote forced
change in policy.
Month #10
Swiss Reserves Rise to New Record
Up E100B in Six Months
One Week Later
Italian Finance Minister Calls on Swiss
for Direct Investment in
Italian Bonds – Swiss say, “No”.
One Week Later
Italian Parliament Considers New Laws
on Swiss Bank Accounts.
Severe restrictions, penalties to equal 50% of account balances
Two Days Later
SNB to Hold 10% of reserves in direct obligations of
Italian government bonds
Italian Press: We put a gun to their head; they said
“Si.”
Two Days Later
Spanish Finance Minister Travels to Bern to Discuss Bond Sales
The question for the SNB: “Is Portugal next to visit?”
This is a bit whimsical, but I hope you get the point. I doubt the Swiss can hold unlimited amounts of reserves without pressure on them to diversify those huge holdings to some of the governments (and the Supra-nationals). I’m surprised that this has not happened already. Possibly Switzerland’s neighbors will look at the results of the upcoming vote on the minimum wage, and start asking those questions.
This very rich country may end up being the banker for some of its neighbors. What comes around, often goes around.
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Switzerland, long term, is fucked. Their banks are too big for the GDP and they hold too much toxic shit.
I'm gonna vote myself
All kidding aside, are you surprised the economy is collapsing on these spoilt morons?
Clearly people wanting a raise is irrational and should be hated.
Switzerland has a big competitiveness problem on the horizon. All the hot money looking for safety is driving up their exchange rates and the national bank is fighting a losing battle to devalue. The result is their cost of living has gone up. Once this gets reflected in wage demands, their competitiveness drops. Ideally this would lead to their economy slowing, and other European economies improving, but the whole fiat global imbalances are not getting balanced as they would need to. Hard to see how it works out.
To the Swiss people: Vote to buy gold with the SNB reserves.
It doesn't matter what's the minimum salary in Switzerland is if the buying power is the same as the minimum salary everywhere else in Europe.
Yep! A beer in a bar probably costs $15.00...
no if i go to a bar i pay for a beer of 3dl from 3.80 to 4.50 depending from the bar and position.
if you go in night club and discos then there you can find this kind of prices
The U.S. Congress votes on their own pay raises which seems ludicrous and selfserving.
Bruce, something I forgot to mention in my earlier post. What would be really interesting is an analysis of the swiss real estate markets (and whether it's as overheated as it seems to be) + the implications of a potential bursting of the bubble for CS & UBS (which have assets 7x Swiss GDP.....)
On the news last night they said that the Swiss labor unions were pushing this and that they had financed it and come up with the 110,000 signatures to make it an initiative.
One also has to keep in mind that in Switzerland there is no socialized or employer provided healthcare, it is completely private. As high as rents and land prices are here, quite often a family will pay more for health insurance than for rent, we currently do.
This is easy because interest rates are currently so low. At my local cantonal bank you can get a 3yr non-amortizing mortgage here at 1.2%, 10 years is now a little over 2%. However a small and simple freestanding house runs at least $600K and would be well over $1M in Zurich and even more in Geneva. A lot of this has to do with the appreciation of the frank, but living here is VERY expensive. On 40K CHF one could probably live as well as on $20K in the US.
100% correct,
This increase has nothing crazy when you spend minimum (and its a VERY STRICT MINIMUM in my view)
600CHF for 25m2 flat
600CHF income tax
200CHF insurance
300CHF corporate restaurant or buying sandwiches for dinner
300CHF usual home expenses, food&furnitures
200CHF electricity, phone & internet or TV
250CHF for transports (public or private, its a minimum)
Total 2450CHF/month and it's a rough budget here for a single person; you can easily spend 1000CHF in restaurants even in cheap ones...
In my personal experience, since 2007 I never ran a single month spending less than 2800CHF in ordinary expenses so I'm for this referendum.
600 for rent????
In Zurich you pay CHF 1700 for a 35m2 flat at the moment... You CAN NOT spend less, unless you look for a roommate.
You are for this referendum? It is just about labor unions getting more power and this leads high unemployment and only union members getting jobs. This then leads to that same place Italy and Greece are at. How about exiting Schengen and limiting the number grenzgangers (EU citizens who commute accross the border every day)?
And this is the real issue: the interests of the Swiss people are not alligned with those of the EU elites but some Swiss elites do have the same interests as the EU elites, which is being able to cling to or increase their power at any cost. The sacking of the franc by pinning it to the Euro was done to appease the EUrophile elite and this explans why Blocher and the SVP were so opposed to Hildebrand and Jordan who sold out Switzerland to the ECB and the Fed.
i live in Ticino, the only thing i can say you is that you're badly right!
and the guy who wrote this article is full of BULLSHIT
You obviously don't run a business in Switzerland. Swiss businesses were being hammered by the high Franc as was the tourist industry. Since the Swiss Franc was object of foreign speculation the peg was the only way to save the Swiss economy from drowning.
Only total oblivious right-wing nutcases and the elite vote for the SVP.
Actually I do run a business in Switzerland so you are probably misunderestimating me. CHF was driven to such high levels because many people believed that the historically fiscally conservative Swiss would not allow the franc to be debased like the dollar and the euro. They were wrong, Hildebrand sold us out, the franc has been molested, abused and trashed in an attempt to chain Switzerland to the EU through the backdoor. Hildebrand could have bought back the gold he pissed away in order to provide franc liquidity, instead he bought Eurobond trash and he has sold out the Swiss people. It is almost as bad as how the Irish government sold out Ireland for the sake of Irish banks.
The SVP was right about Schengen, the welfare state, high taxes, bloated government, deficit spending, global warming, strong defence, and especially they were right about the the EU, the Euro, and in this case, right about Hildebrand too.
+55 kajillion.
Anyone holding CHF or it's equivalents got screwed, just as anyone holding dollars or their equivalents (bonds) is getting raped by Bernanke.
I've read that in Switzerland they tend to vote down liberal initiatives and vote up conservative initiatives. Definitely update us on whether it passes or not.
Bruce,
A weak article ... which is unusual.
Swiss GDP Breakdown from U.S. Dept. of State website
GDP (2010): $475.8 billion (495.8 billion Swiss francs [CHF]).
Government expenses (in GDP%, 2008): 38.3% (federal, cantonal, and local).
Annual growth rate (2010): 2.6%.
Unemployment (March 2011): 3.4%.
Per capita income (2010 est.): $66,367.
Avg. inflation rate: 0.7% (2010); 1.1% (2011 est.).
Agriculture - 1% of GDP
Industry - est. 29% of GDP
Services - 70% of GDP
Chemicals, machinery & pharmaceuticals are the bulk of the idustry section. Those products move among a variety of plants throughout the EU, many of which are owned by Swiss companies. Attempts at coercion of the Swiss are more likely to harm the EU economy itself - which would be chickenfeed compared to the other offensive weapon the Swiss hold.
The Swiss have been the discreet banking service of Europe for centuries. They keep excellent records and they hold BOTH keys to all the private things held in their safety deposit boxes. The 1% of Europe would much rather have the EU come apart at the seams than to risk what would be "leaked" at the first signs of pressure.
Have all the votes anyone wants on minimum wage, women's rights or the color of the sky. The financial future of Switzerland will never be decided at the ballot box.
barliman
Barliman,
I absolutely dont share your opinion. In my view, it's a very good article, showing the issues Switzerland will soon be confronted with. Main points:
1. With the peg, the swiss franc doesnt virtually exist anymore (as long as the peg is not broken). A first step to the EU ?
2.The famous bank secrecy almost doent exist anymore. There will be new attacks from governments all over the world (especially US) to break it , so there could me huge money outflows. For the moment, swiss government reacts very passively to such attacks.
3. You can calculate on your own what happens with the 260bn euro if the Eurozone breaks up. For my part, I guess we would see an Euro around 0.90 cents, so the loss for SNB could be in the 70bn,
Bottom line: while Switzerland has still a very high standard of living, things could change very fast !
mate really is your opinion on Switzerland based upon what this guy wrote? cause if it's so you're an idiot.
i live in Switzerland and i am a proud swiss (LAST TRUE DEMOCRACY ON EARTH)
i can easily tell you that the guy and you, dont know a fucking thing about my country which is kinda normal.
situation here is completely different. minimum wage will not pass as the 6th holiday week is not passed. we're not a bunch of idiots. The proposal was made to fight against italians germans and french that on daily basis come to work here. The canton where i live is named Ticino, only canton where people speak italian (did you even know that? :P). we have a population of ca. 300 k and a working population of ca. 200 k. unemployed people are 20 k in majority young people well educated in swiss school that cant find a job cause we fucking HAVE 50k italians coming everyday to work. if i ask 4'000 francs you can easily find 10 italians asking 2000 francs. so............... that's why this proposal have been made.
THE MOST FUNNY THING is that who made the proposal to fight "grenzgangers" are the SAME IDIOTS that tried to make us go in Europe. funny eh? socialist everywhere are ruining every country
xamax,
See my comments in italics
1. With the peg, the swiss franc doesnt virtually exist anymore (as long as the peg is not broken). A first step to the EU ?
Extraordinary statement. The Swiss franc is still a separate currency - the Swiss can unpeg it whenever they want or print a great deal of it to escalate a race to the bottom. Bruce and I have differed on perspective from the moment the peg was put into place. He viewed it as a giant mistake. I viewed it as a strategic response to the Obama administrations heavy handed extortion attempts on Swiss bank confidentiality. Up to that point, the CHF had been one of two safe haven currencies outside of the USD. Great for Bernanke's beggar thy neighbor policies to have alternate safe havens so the USD can be devalued. By pegging to the euro the Swiss gave Ben and Obama the middle finger. Bruce points out the Swiss hold a great deal of euro's. That's true, they do - but that gives them a good deal of leverage over the ECB & the EU. From my perspective, the Swiss have no desire to enter the EU. I have done business with them. They view the Germans as undisciplined ... and by comparison, they are.
2.The famous bank secrecy almost doent exist anymore. There will be new attacks from governments all over the world (especially US) to break it , so there could me huge money outflows. For the moment, swiss government reacts very passively to such attacks.
Seriously, where in the world did you pick up that piece of disinformation? Please go do some research on the Swiss banks. Whether you want to buy into a conspiracy that they head up various secret organizations or you want to view them as white knights, you truly do not understand how much information any bank has on it's customers. Do you have a credit card through a bank? A checking account? How much of that information would you want to share with the world? Now imagine using the anonymous banking in Switzerland if you are a crony of Putin's, or part of the now deposed Libyan government, or someone who has been blackmailing various members of government, or a minister in one of the goverments using a Swiss bank to keep your mistress happy, or .......... the U.S.A. has used Swiss banks to launder money for our own dirty deeds. Wikileaks got people bent because some mid-level cables were leaked. The Swiss know the dirt on everybody for the last few centuries.
3. You can calculate on your own what happens with the 260bn euro if the Eurozone breaks up. For my part, I guess we would see an Euro around 0.90 cents, so the loss for SNB could be in the 70bn,
If the EU is going to break up, the Swiss will have an edge on that piece of information from the sudden surge of their anonymous account holders and safety deposit box holders needing to access their secret holdings.
Here is a scenario for you to kick around. If the EU, the Swiss, the Chinese, India, Japan and maybe a few sideplayers decided to make the euro the reserve currency, how does Switzerland come out financially on their 260 billion euro?
barliman
Barliman,
Thanks for your comments. Let me then also comment a few of your answers (my comments also in italic):
1. Extraordinary statement. The Swiss franc is still a separate currency
I stick to my opinion, wheter you like it or not. 70% of exports go to the EU zone. Further, SNB made it clear that will buy ANY amount to support that peg. But to understand that, one needs to know a bit the country which doesn't seem your case.
2. Seriously, where in the world did you pick up that piece of disinformation? Please go do some research on the Swiss banks.
Here also you are completely wrong. Switzerland manages 1/3 of the world' wealth. On the UBS case, the government gave 4500 (!) names to the US government.Go ask these people what they think about the bank secrecy. As you perhaps know, the whole world has massive debt and governments dont accept anymore tax evasion accounts like there are millions in Switzerland.
3. Here you simply reverse the problem, so I don't need to comment further.My point was that 260bn is a huge number for a small country like Switzerland, and as you probably don't know, debt to GDP is not zero but 50%, still a comfortable number but only compared to the others.
What leverage in holding euros? The Swiss economy is tiny. It's not really even an economy: just a hedge fund masquerading as a country. Go ahead: raise the wages. The Swiss people will turn around and buy real estate in Greece or Portugal. The numbers will be so pathetically small however that no one throughout the Continent will even notice. That's your "headline." move along sheeple...move along
have you ever been in Switzerland? i m quite sure no!
have you ever studied on what our economy is based? i m definitely sure no.
if you dont know something plz just shut up and do say stupid things
This thread reminds me of the old banned commercial ...
http://www.youtube.com/watch?v=VIfUo91ZrFQ
(Google+/Gmail sign in required due to language in video - but - its hilarious)
Given the longevity of Swiss banking, I agree the Swiss will probably retain their position in the global banking arena (thus the thought of the old commercial). They could only be replaced if an equally secure alternative was available (e.g. Dubai, Caymen, etc), but I do not see that as likely.
Regards,
Cooter
Like I have been saying for the last few months.....the SNB are just Buying the F EURO Dip!
The Swissies are also going to vote on a 12:1 initiative.....i.e the CEO of a company is not allowed to earn more than 12 times the salary of the lowest paid employee....
Also a vote coming on increasing the standard paid vacation time up from 4 weeks to 6 weeks.
Hopp Schweiz!!!
Yeah, I'm waiting for these 2 referendums... but I don't have any illusions about the 12:1 initiative, the initiative will produce a shitstorm and lobbyists will run like crazy yelling that if the people restrict CEOs earnings this will be the end of capitalism blablabla. And then we'll have all the political class magically supporting corporations, and in the end sheeple will vote it down and we'll stay assraped as nowadays.
highly unlikely either of these are gonna be accepted. just proof that SP is starting to do the same bullshit that SVP has been doing for years
Many wrong statements in this article + the comments
a) Switzerland does not have a minimum wage right now. However, nominal wages are already very high, I don't think there are any jobs that pay less than 3,000 Francs.
b) It is highly unlikely that this initiative will pass. The vast majority of initiatives get rejected by the Swiss people, and with such a controversial one, an acceptance is highly unlikely. This is mostly a PR-gag by the socialist party to try to garner more votes in the next elections.
c) I am not going to attempt to predict the future and say the floor will work or it won't. However, the article does not carefully examine the provided table of SNB's FX holdings. As you can see, the FX reserves greatly went up during 2010 when the SNB pursued a strategy of occasional interventions - a bluff that has been called by the markets. If you look at the bottom part of the table, you see that SNB did NOT have to buy any more reserves since it put in place the floor - it appears as though it has enough credibility for the markets to not test it. This is also why the EURCHF has been well over 1.20 since the floor was put in place.
Bruce, you're a great writer and provide amazing insight but this article is just sensationalist & wild guessing. You even provided the link to wikipedia where it literally says that Switzerland has "none" as minimum wage. You can do better
I didn't make up the article in NZZ or Swiss Info. I just wrote about them.
You're correct that reserves have stabilized. Do really believe that the peg is permanent? If you do, then you also have to believe that at some point the reserves will rise again.
Not necessarily. If the markets have 100% confidence in the fact that the SNB will hold the floor (it's a floor, not a peg!!), then no one will sell CHF when it's at 1.20CHF/EUR. B/c if you believe that the SNB won't let it go below that, buying CHF at 1.20 is a free call option. Therefore, the SNB won't have to buy a single penny worth of reserves. I'm not saying that this is what I believe, I'm just saying that a permanent floor does not automatically imply further increases in reserves.
Bruce, if the peg breaks and the Euro goes 1:1 on the Franc, what happens to the SNB? It would then be CHF52B in the hole and insolvent. It seems to me that this was the real purpose of the peg, it irrevokably tied CH to the EU and the Euro. This was a coup by the pro EU Swiss elite that are in Davos with their buddies right now. And like the murder of Czar Nicholas and his family, in that after that there was no way back to an imperial Russia, now there is no way back to an independent Switzerland.
Hildebrand gave the EU the vicegrips that the EU now have clamped on Switzerland's gonads.
lubyanka, I can assure you that there is a minimum wage right now in CH. read my other comments around.
LOL WE DONT!!!
for certain categories of workers WE HAVE " collective contracts" in which people have a minimum wage BUT and i repeat BUT this is not for everyone!!
i work as a office employee and I DONT HAVE ANY FUCKING MINIMUM WAGE!
STOP SAYING BULLSHIT ON MY COUNTRY PLZ
I'm not sure if you understand what a minimum wage is. There IS no legal minimum wage in Switzerland, unlike in most US states. I know that the Canton of Neuchatel has a minimum wage but that's on state level, not federal. Furthermore, I know many sectors have Gesamtarbeitsvertraege, but again there is no general minimum wage as defined by law.
A friend just got a job waiting tables in Luzern as she just lost her Graphic design job.
Pay is 20chf an hour before tax and tips. 35x20x4=2800 (Her rent is 1300).
I know we shouldn't do this, but if anyone needs a logo....she is a young, award winning graphic designer and she does amazing logo and concept graphic design work...so click here to see her work and save her from her under minimum-wage hell!!!!
Cheers!!
Tipping in Switzerland is a much lower % than it is in the U.S. (or perhaps even zero).
Please correct me if I am wrong about that.
35 hours isn't a full week. 42*20*4 = 3360 + tips
True, but her boss sends her home and doesnt pay her if it isn't busy. 35 will be more like what she gets.
And tips here are not like in the USA. She got 7chf from 4 hours last night :(
Awww. I will make some hot chocolate in her honor this AM!
So how does the US rank with wages in the above chart?
If we take the average US minimum wage @$7.29 and average it with higher states of $8.50 and consider Wa. and Or at close @$8.90 the average might be say $8 an hour.
Given a 40 hour work week and 52 weeks in a year you get about 2,080 hours a year.
That puts the USA worker at about $16,640 a year----- third from last place, third from the bottom yearly salary.
Right in front of Austria and Spain looking at the above chart.
I didnt use a calculator so if this is wrong, lemme know
There is a reason why wages are so high in Switzerland, it's because life is extremely expensive. $16,640... is the yearly rent of a small flat in Zurich...
and that will be a run down piece of shit shack!
Wow, so many problems with this initiative. Overall though, it will be good for the USA, as the mexican illegals will stop swimming across the rio grande and take the North Atlantic Drift to the Bay of Biscay.
The Swiss will get quite a shock when unemployment rises. If I was in business there, I'd just make one employee do the work of the other two, who I would lay off. I don't think swiss employers are going to "take one for the team," at least not for long.
They can also look forward to a great many closely-held corporations forming instead of companies that hire, either that or capital flight to friendlier places.
This is a populist law, so it will likely pass. I predict that in the long term, less of their population will pursue college degrees. Why would anyone go to four years of college to make $75k USD to start, when they can jump right in at $55k running a slurpy machine?
OTOH, employers might make up for the janitor's newfound wealth by taking from the basis of their skilled job openings.
"Wow, so many problems with this initiative. Overall though, it will be good for the USA, as the Mexican illegals will stop swimming across the rio grande and take the North Atlantic Drift to the Bay of Biscay."
I don't know about that. There are a lot of pretty strong swimmers in the US. I am sure they can beat the Mexicans there.
Must be Music, or Mozart, to the ears of Foxconn.
Foxconn will soon announce, after the passing of the minimum wages referendum, that, the NO wages-health-holiday-union-and-wh atever-required, human-look-alike programmable Intelligent-factitious-restless (IFE), AKA, Robot, that are capable of doing beds, flipping burgers, sweeping floors, serving dishes and thousands of other tasks will be available for delivery on the same day IPhone 5 is released to the public.
Must be music, or make that Franc, to the ears of bosses all over Swiss!
I disagree, I think they can pull it off; I'm not going to speculate as to how, but there is at least one obvious answer.
Note to self: remember that tipping is unnecessary in Switzerland.
In 2011, a Big Mac cost $8.06 in Switzerland, vs $4.06 in the US and $4.93 average for the Euro area. This may be one reason why.
Those prices would definitely cause me to think twice about ordering a Swiss Big Mac.
A minimum wage that high would give employers a strong incentive to eliminate low wage jobs, or switch over to illegal immigrants. With a Greek exodus imminent, good luck finding a restaurant job if you are a Swiss teenager.