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UBS Compensation Survey: wages to rise by 0.9% in 2014
UBS CIO Wealth Management Research expects an average wage increase of 0.9% in Switzerland for 2014. Low inflation and the poor economic situation in the export industry are having a dampening effect on wages.
Zurich/Basel, 1 November 2013 – Next year, wages in Switzerland are expected to rise by an average of 0.9%. This is the conclusion of the UBS Compensation Survey, conducted among 353 companies and employer and employee associations in 22 industries. With the average annual inflation rate predicted to be 0.6% in 20141, this would mean a real wage increase of 0.3%. The surveyed companies indicated that they had raised wages in 2013 by 0.9%. Taking annual deflation of 0.2% into account, this translates into a real wage gain of 1.1% for the current year.
End of deflation, uneven economic performance
In comparison with the current year, real wage increases for next year are expected to be relatively low. In the past 10 years, the average real wage increase has amounted to 0.8% annually. One reason is that wage negotiations have been affected by the deflation of the past two years. But inflation is likely to return in the coming months and reach 0.6% next year. Should this forecast materialize, the nominal wage increase of 0.9%, after being adjusted for purchasing power, would shrink to a mere 0.3%.
Moreover, despite relatively high growth, the economic situation in many industries is far from good. Though the domestic sector is doing well, many export-oriented industries are stagnating at best. Along with the strong Swiss franc, the sluggish economic performance of the Eurozone - the main destination for Swiss exports - has been a major factor. This uneven economic performance is also reflected in the expected wage evolution of individual industries. The highest nominal wage increases are expected in the fields of chemicals and pharmaceuticals (1.5%), IT and telecommunications (1.4%), and energy, supply and waste removal (1.1%). The wage increases in the export-oriented chemical and pharmaceutical industry are based on its unusually high international competitiveness. The lowest wage gains are predicted for the textile, logistics, media and tourism industries (0.5% each). In the media industry, the weak wage development appears to be the result of structural problems, while in tourism it likely stems from the collective labor agreement introduced in 2012 that led to significant wage increases at the time.
A divergent trend can also be observed when it comes to headcount. The public sector, the automotive industry and watch manufacturers added the most employees this year, while jobs were reduced in banks and insurance companies, the media, and textile companies. Apart from the public sector and watch manufacturers, IT and telecommunications providers, as well as logistics companies, are also expected to boost employee numbers next year. Conversely, banks, insurance companies and the media industry are likely to further reduce personnel.
In general, however, the economic expectations for 2014 have improved compared to the current year. The majority of those interviewed anticipate a moderate upturn for Switzerland, when only last year the majority had expected stagnation. The survey participants have also become more optimistic with respect to the unemployment rate.
Wage gap closing
The wage gap is expected to decline in the coming year. The survey results indicate that, in this year's wage round, lower-paid groups will benefit most, especially in the secondary sector.
Additionally, variable compensation systems are rising. The share of those receiving bonuses is likely to climb next year, both among mid-level executives and employees.
Free movement of people alleviates shortage of specialists
Of the number of companies interviewed, those that were able to address recruitment bottlenecks by the free movement of people went up considerably in the last year compared to 2010, approaching the high of 2007. Industry seems to have benefited most. The ongoing dearth of specialists is still by far the most important reason to employ personnel from abroad. Other factors, like language skills and cost savings only played a minor role.
Economic uncertainty in Europe seems to have had an impact on the labor market in Switzerland. A significant portion of the companies interviewed reported increased numbers of applicants from the EU over the past 12 months, especially from peripheral countries like Italy, Spain and Portugal. However, the increased availability of foreign manpower has not led to a proportional increase in recruitment from this area.
Table: Nominal wage trends according to the UBS Compensation Survey 2013 (%)
UBS has conducted the annual Compensation Survey since 1989. Some 353 companies, employer and employee representation associations in 22 sectors took part in the current survey held from 18 September to 15 October 2013. These sectors represent over two-thirds of Switzerland’s working population. From 1989 to 2012, the average wage increases assessed by the survey diverged a mere 0.3 percentage points from the official average salary trends (nominal wage index and collective labor agreements) published by the Federal Office of Statistics (BFS).
The detailed results of UBS’s Compensation Survey for 2013 can be downloaded from: UBS Compensation Survey 2013.
1 According to a survey of forecasting institutes. Source: Consensus Forecasts (14, October 2013)
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