UBS Outlook Switzerland: Education pays off
The proportion of university graduates in Switzerland has boomed over the past decade, increasing from 11% to 25%. The Swiss economy is benefiting from the immigration of well-qualified workers, saving between six and eight billion francs in training and education costs each year as a result. UBS economists expect solid economic growth of 2.1% in the current year.
Zurich/Basel, 7 July 2014 – The level of training and education of Switzerland's inhabitants has increased sharply over the last 10 years. Some 25% of residents now have a university qualification. Adding in the university of applied sciences graduates, this figure rises to almost 40%.
At every level of training and education, the benefit outweighs the costs, meaning that the higher wage achieved as a direct result of training and education is on average higher than the cost of the training and education and the wage lost during the study period.
Education pays off not only for individuals. For the state too, the training and education of its residents is beneficial, despite the fact that it generally has to finance a large share of the costs. Due to the progressive tax system in Switzerland, taxes increase at a disproportionate rate as incomes rise, and well-educated people tend to receive less social welfare.
Fostering the dual education system
Switzerland has benefited in the past from immigration and has been able to benefit from an enormous global talent pool without burdening local public finances. In recent years, the country has seen annual net migration of around 20,000 people with tertiary education. The cost of training and educating these highly qualified people would amount to six to eight billion francs annually in Switzerland. Every year, Switzerland therefore saves around a quarter of its annual education budget.
But countries like France, Spain and Italy show that a high level of tertiary graduates and a widespread lack of apprenticeships can lead to structurally high youth unemployment. So Switzerland does well to foster its proven dual education system.
In spite of Switzerland’s excellent education system the country lacks qualified personnel in some sectors – an effect resulting in part from the strong economic and employment growth of the past years. High levels of immigration of skilled workers eased the situation, but could not fully eliminate the skills shortage. The acceptance of the mass immigration initiative could result in a further tightening of the labor market, in particular as demographic trends will reinforce the skills shortage going forward. “Over the coming decade a million people in Switzerland will reach pension age. With continued growth in employment in Switzerland, but smaller generations entering the workforce, the economy will be missing approximately half a million workers. Also in future we will need to attract the best and the brightest from across the world”, says Lukas Gähwiler, CEO UBS Switzerland, at the media conference in Zurich.
Economy: higher capacity utilization and equipment investments
At the start of 2014, Switzerland presented balanced economic growth of 2% in comparison with the previous year. In the first quarter of this year, high construction investments and the revival of the export sector were able to compensate for weaker growth in private consumption. As the recovery in Europe continues, UBS economists expect the Swiss export sector to go on developing positively this year. With capacity utilization rising, investments are set to increase. UBS economists expect economic growth of 2.1% this year and of 2.2% for 2015.
Daniel Kalt, Regional CIO Switzerland
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Veronica Weisser, UBS Chief Investment Office WM
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Sibille Duss, UBS Chief Investment Office WM
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