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EXPLAINED: Why Switzerland's cost of living isn't as high as you think

Helena Bachmann in Geneva
Helena Bachmann in Geneva - [email protected] • 2 Jun, 2022 Updated Thu 2 Jun 2022 15:48 CEST
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Swiss worker can afford to eat three of those for his hourly wage. Photo by Polina Tankilevitch / Pexels

Yes, Switzerland is expensive, but if you analyse things from a different angle, at least some of the country’s prices don’t look quite as bad.

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In almost all the international cost of living rankings, Switzerland comes near the top. Sometimes it competes for the “winner’s spot” with Nordic countries like Norway or Iceland, but any way you look at it, you need lots of money to live here comfortably.

Have you ever heard anyone (other than possibly multi-millionaires) saying “Hey, let’s spend our vacation in Switzerland. It’s really cheap there”.

There is a number of reasons why the country is so costly, which are detailed in this article:

EXPLAINED: Why is Switzerland so expensive?

But if you look beyond the sheer statistics, Switzerland does not fare quite as badly - particularly as a place to live. 

Here's why Switzerland isn't as expensive as we may think. 

Inflation rate

The Covid pandemic and the war in Ukraine have pushed worldwide inflation rates upward.

While in Euro zone countries this rate stands at 8.1 percent as at May 31, in Switzerland it is a much lower 2.6 percent.

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There are many reasons why Switzerland is withstanding inflationary trends better than other countries — at least so far — including the strong franc, which makes imports (though not exports) cheaper.

While prices here are going up due to reasons cited above, the increase is not as drastic as elsewhere in Europe.

READ MORE: EXPLAINED: Why Switzerland has escaped the global spike in costs of living

Strong economy

Overall, the strength of Switzerland’s economy, which withstood the pandemic much better than other countries, is worth its weight in gold —and not just literally.

“Even in a time of crisis, Switzerland scores thanks to its stability, predictability and security”, said Patrik Wermelinger, member of the executive board of Switzerland Global Enterprise (SGE), which promotes the country abroad on behalf of the federal government and the cantons.

Right now Switzerland’s unemployment rate is just over 2 percent, while it is 6. 8 percent across the EU. Looking specifically at neighbour countries, it is 7.3 percent in France, 8.4 in Italy, 5 percent in Germany, and 5.7 percent in Austria.

What exactly does all this have to do with the cost of living in Switzerland?

The country’s resilience to global crises means people remain employed, and employed people can afford to buy at least the basic necessities.

Right now, “the market situation is very positive for employees…Skilled workers are scarce and the shortage cannot simply be filled by workers from neighbouring countries”, according to Peter Unternährer, Manpower’s regional director for central and eastern Switzerland.

READ MORE: Employment: This is where Switzerland’s jobs are right now

High salaries

Okay, so your monthly income per se means nothing unless you convert it into its purchasing power.

In Switzerland, high wages are eaten up by high prices — at least that’s what many people will tell you and we won’t argue with that.

But wait before you jump to this conclusion, let’s talk about McDonald’s and its Big Mac burger (yes, you heard us right — a Big Mac burger).

The Economist magazine’s Big Mac Index is a globally accepted metric which compares how much this burger costs in every country.

Not surprisingly, this sandwich costs most in Switzerland ($6.98 = 6.71 francs).

However if you take a minimum hourly wage, say 20 francs, an average worker could buy three burgers for his hourly wage.

As a comparison, in the USA, where the Big Mac costs $5.81 (again, according to the index) but the median minimum salary on federal level is $7.25 per hour,  an average worker could have just over one burger for an hour’s work. 

All this is to say that things are not always what they seem.

Some things in Switzerland are (comparatively) cheap

Although “Switzerland” and “cheap” should never be used in the same sentence, the fact is that some things here are actually reasonably priced.

For instance, the Value Added Tax (VAT) is 7.7 percent here, while it is much higher throughout Europe, as the  chart below shows.

Tax Foundation screenshot

Because of that, prices of some goods, like electronics, are lower in Switzerland than in many European countries.

Also, the tuition fees at Swiss universities are low by the standards of many other countries. At the prestigious ETH technical institute in Zurich, for example, tuition and semester fees total 649 francs a semester.

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And let’s not forget about taxes.

According to Moneyland.ch consumer website, “The average resident of Switzerland spends 10.7% of their income on income tax according to OECD estimates. For the sake of comparison, income tax eats up 14.8% of the average French income, 16.9% of an average Dutch income, 18.3% of the average U.S. resident’s income, 19% of the average German’s income, and 36.2% of the income earned by the average resident of Denmark”.

READ MORE: 13 things that are actually ‘cheaper’ in Switzerland
 

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Helena Bachmann in Geneva 2022/06/02 15:48

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