Zurich, 26 October 2016 – The 314 companies surveyed by UBS expect nominal wages to increase by an average of 0.6 percent in 2017. UBS expects inflation to be slightly positive in 2017, at 0.4 percent. This would result in an average rise in real wages of 0.2 percent. Real wage growth will therefore probably be lower in the coming year than in 2016.
While the nominal wage increase of 0.5 percent forecast in the compensation survey for 2016 is in fact slightly lower than that for 2017, taking inflation into account produces a different picture. As a result of the drop in oil prices at the start of the year and the aftermath of last year's exchange rate shock, inflation will probably be slightly negative in 2016, at -0.3 percent. This would mean a real wage increase of 0.8 percent for 2016, compared with the anticipated 0.2 percent in the coming year.
Chemicals and pharmaceuticals with the highest wage settlements
The chemical and pharmaceutical industries and company services continue to top the ratings in 2017, all with expected average wage increases of one percent. Public sector employees, who can also expect an average wage increase of 1 percent, will be joining their ranks. The overall range will remain unchanged in the coming year, but the spread in the midrange will increase. Fourteen of the 22 industries surveyed, with an average wage increase of 0.5 percent, are only just below the average. Trailing behind in terms of wage increases come the watchmaking and media industries. A pay freeze is expected in both. In many cases, wage increases are awarded on an individual basis, with the aim of retaining skilled staff.
In real terms, there may actually be wage cuts in the watchmaking industry and the media. This is due to the positive inflation rate, which reduces the purchasing power of future wages. The forecast inflation rate of 0.4 percent for the coming year means an average drop in purchasing power of 0.4 percent for wages in the watch and media industries. The other sectors can all expect a rise in real wages, in spite of slightly positive inflation.
Modest wage growth, in spite of confidence
Expectations regarding the overall economic trend in Switzerland have significantly improved among HR managers. Over half the participating companies expect a moderate upturn for the coming year. In 2015 only around one-quarter of companies were that optimistic. A similar picture emerges for unemployment rates. While in 2015 almost two-thirds of companies expected unemployment to rise, this figure dropped to one-quarter this year.
Despite the optimistic economic outlook, average real wage growth will probably weaken in 2017. On the one hand, a positive inflation rate, expected for the first time since 2011, will dampen real wage growth. On the other, they will compensate for the very high growth in real wages in recent years. Inflation rates have been consistently lower than expected across the board in recent years and have meant that real wages have risen disproportionately, by 1.2 percent per year since 2008. Also, company margins in most industries fell in 2015 and 2016 due to the difficult economic situation and exchange rate conditions, so that many companies do not intend to grant any more significant wage increases until their margin situation has stabilized again.
Nominal wage growth 2016 and 2017
| Wage development 2016 | Expected wage development 2017 |
Chemicals & pharmaceuticals | 1.0% | 1.0% |
Corporate services (including real estate) | 1.0% | 1.0% |
Public sector | 0.7% | 1.0% |
IT services & telecommunications | 1.0% | 0.8% |
Financial services | 0.8% | 0.8% |
Energy, utilities & waste disposal | 0.5% | 0.8% |
Switzerland | 0.5% | 0.6% |
Materials & building materials | 0.5% | 0.5% |
Textiles | 0.5% | 0.5% |
Metals | 0.5% | 0.5% |
Machinery | 0.5% | 0.5% |
Construction & architecture | 0.5% | 0.5% |
Logistics | 0.5% | 0.5% |
Food | 0.5% | 0.5% |
Consumer goods | 0.5% | 0.5% |
Health & social services | 0.5% | 0.5% |
Wholesale trade | 0.4% | 0.5% |
Retail trade | 0.4% | 0.5% |
Automobile sector | 0.3% | 0.5% |
Tourism | 0.1% | 0.5% |
Electrical engineering | 0.0% | 0.5% |
Media | 0.0% | 0.0% |
Watches | 0.0% | 0.0% |
UBS has conducted the annual Compensation Survey since 1989. Some 314 companies, employer and employee representation associations in 22 sectors took part in the current survey, held from 8 September to 5 October 2016. These sectors represent over 80 percent of Switzerland’s working population. From 1989 to 2015, the average wage increases assessed by the survey diverged a mere 0.29 percentage points from the official average salary trends (nominal wage index and collective labor agreements) published by the Federal Office of Statistics (SFSO).
The detailed results of UBS’s Compensation Survey for 2017 can be downloaded from: UBS Compensation Survey 2017.
UBS Switzerland AG
Media contact
Daniel Kalt, UBS Chief Economist Switzerland
Phone: +41 44 234 25 60, daniel.kalt@ubs.com
Sibille Duss, UBS Chief Investment Office WM
Phone: +41 44 235 69 54, sibille.duss@ubs.com
UBS publications and forecasts for Switzerland: www.ubs.com/investmentviews
