Do wages in Switzerland make up for the high cost of living?
Cities in Switzerland have once again been ranked among the most expensive in the world, but do salaries of workers there make up for the high cost of living?
It will not come as a surprise to anyone living in Switzerland that, globally, Geneva and Zurich were ranked in the third and seventh place, respectively in a new survey of 20 most expensive cities for international residents.
The Swiss capital of Bern was ranked 16th in the study was carried by a global mobility organisation, ECA International.
However, on the European scale, Geneva was placed in top spot, Zurich in third and Bern in fourth.
RCA's cost of Living index is calculated using a basket of common goods and services, including food, clothing, housing, electronics, utilities and public transport.
“In its latest report, petrol and cooking oil prices have undergone some of the biggest increases of any items in the basket", ECA said.
This is not the first time Swiss cities rank among the most expensive in the world; in fact, it is a long-term and predictable pattern:
READ MORE: Why Zurich ranks as the world’s most expensive city once again
There is a number of reasons to explain the high cost of living; among the most often cited ones are protectionism and lack of competition, which are inter-related, as the former invariably leads to the latter.
This is done mostly to privilege domestic products and economy over imported goods.
However, there are other factors as well.
A study by the University of Applied Sciences of Northwestern Switzerland shows that foreign producers and suppliers impose large price increases in Switzerland, exploiting high salaries and consumers’ purchasing power.
This means that Swiss buyers are overpaying for their purchases by more than three billion francs, the study found.
READ MORE : EXPLAINED: Why is Switzerland so expensive?
But a more relevant question is whether the (high) Swiss salaries make up for the (high) living costs — not only in Geneva, Zurich and Bern, but in other notoriously expensive areas around urban centres, including the Lake Geneva region, Basel and Zug.
The average gross income in Switzerland right now is of 6,555 francs per month, which means 50 percent of the working population earns less, and 50 percent earn more.
The answer to this question depends, logically, on how high your wages are versus your fixed costs (rent / mortgage, health insurance premiums, food, transport, clothing, taxes, etc.), and also your overall spending habits on “non-essentials” such as entertainment, restaurants, travel, and leisure activities in general.
That, of course, applies to all countries, not just Switzerland.
One way to look at the salaries versus the cost of living is through the purchasing power parity (PPP) — the financial ability of a person or a household to buy products and services with their wages.
An in depth analysis by a digital employment platform Glassdoor provides some interesting and no doubt surprising insights into Switzerland’s PPP in comparison with other nations.
"Taking not only income and cost of living into account, but also the effects of differences in taxation, it is possible to derive an indication of after-tax, local purchasing-power-based, standard of living”, the study reported.
“On this basis, the highest overall standard of living is found in the cities of Switzerland, Denmark, and Germany. Although the cost of living can be relatively high in these countries, so are average wages and purchasing power”.
The study concluded that “in Switzerland, Denmark, and Germany the average city-based worker can afford to buy 60 percent or more goods and services with his or her salary than residents of New York. »
Also, if you look at the ‘big picture’ — taking various factors into account — the cost-of-living situation is not as bad as many people believe.
“Various factors” in this context means the low inflation rate (in comparison with other countries), high employment, and a strong economy — all of which mean that Switzerland is outperforming other European nations on many fronts.
All this goes to say that if you analyse things from a different angle, Switzerland’s cost of living doesn’t look so bad.
READ MORE: EXPLAINED: Why Switzerland’s cost of living isn’t as high as you think