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ECONOMY

MYTHBUSTER: Yes, Switzerland does have people living in poverty

Many people, especially those living abroad, believe that only the very rich live in wealthy Switzerland. Is this really the case?

MYTHBUSTER: Yes, Switzerland does have people living in poverty
People are lining up in Geneva during the Covid pandmeic to receive free food. Photo: FABRICE COFFRINI / AFP

It is perhaps not surprising that people think of Switzerland as the country where only the mega-rich live.

After all, in various international surveys and studies, Switzerland consistently ranks among the world’s richest nations, whether in terms of household income or individual assets.

READ MORE: EXPLAINED: Why is Switzerland so rich?

Overall, according to the Federal Statistical Office (FSO), “the standard of living in Switzerland remains one of the highest in Europe. This means that despite the high price levels in Switzerland, the population’s financial situation, after deduction of obligatory expenditure, is more comfortable than that of its neighbouring countries and countries in the European Union”. 

However, while all this is true, these statistics don’t paint the entire picture of Switzerland’s demographics.

In fact, the super-wealthy — those with assets worth more than 1 million  — account for only 15 percent of the adult population.

The largest group, according to 2019 FSO data, (last figures available but still valid today), is middle-class, which constitutes 57.6 percent of the population.

This is defined as people whose gross income is between 70 and 150 percent of the median income. In Switzerland this means 3,930 to 8,427 francs a month for a single person, and from 8,253 to 17,685 a month for a family of four.

What about poorer people?

Yes, Switzerland does have people living under the poverty threshold.

A FSO study released in 2021 indicates that 8.7 percent of the population – around 735,000 people – live in poverty, which is defined in Switzerland at 2,279 francs per month on average for a single person, and 3,976 francs per month for two adults and two children.

READ MORE: Almost one in ten live in poverty in Switzerland: Report

“In European comparison, the Swiss at-risk-of-poverty threshold is among the highest in Europe, after Luxembourg and Norway”, according to FSO.

However, the cost of living in Switzerland is also higher than anywhere else in the eurozone.

The poor became the focus of particular attention at the beginning of the Covid pandemic in 2020, as thousands of people lined up on Saturdays for free food distribution programme in Geneva.

Many found themselves in precarious circumstances, as all but essential businesses were forced to close, leaving hundreds of people without a job and little (or no) income.

“We know this population exists,” said Isabelle Widmer, who was responsible for  coordinating Geneva’s response to the crisis and was providing support to the food drive.

“But it has been astonishing to see how this population was so immediately fragilised by this crisis”, she said at the time.

READ MORE: Coronavirus crisis lays bare poverty in Geneva as thousands queue for food

Who are the poor in Switzerland?

“The risk of poverty is largely determined by family circumstances and the level of education”, according to FSO.

This group is primarily made up of single-parent households, people with no education or training beyond the compulsory schooling, single people under 65 without children and who live alone, as well as immigrants.

Where do these people live?

Unlike some other countries, Switzerland doesn’t have ‘poor’  districts or, even less so, slums.

However, most major cities have neighbourhoods where there are poorer residents for instance, Kreis 4 between the Hauptbanhof and Langstrasse in Zurich, Paquis in Geneva, and Renens in Lausanne. 

This doesn’t mean that everyone residing in these areas falls below the poverty level, but this is where large numbers of these people live.

What help is available to the poor?

Any legal resident of Switzerland who lives below the poverty line is eligible for social assistance of some kind.

Most common is welfare, the amount of which depends on individual circumstances. About 3.2 percent of Switzerland’s population have received “social assistance in the form of a financial benefit on at least one occasion” in recent years, according to FSO.

“The risk of depending on social assistance is greater for certain population groups such as children, foreign nationals, divorced persons and those with no post-compulsory education. The financial social assistance rate is higher in urban regions and increases in parallel to the size of the commune”, FSO noted.

Among those groups, foreigners are the ones who receive the most benefits.

Additionally, health insurance  premiums for people on low incomes or families with many children can be reduced through federal and cantonal subsidies. 

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ECONOMY

EXPLAINED: How the strong Swiss franc has been a boost for Switzerland

The Swiss franc is breaking records against the euro, giving the Swiss economy a temporary boost as central banks battle inflation -- although experts remain cautious about the months ahead.

EXPLAINED: How the strong Swiss franc has been a boost for Switzerland

Seen as a safe haven, the Swiss currency briefly hit a high of 0.94 francs to the euro on Monday following the Italian general election.

While it has since eased back a little, it is nevertheless at the highest levels since the launch of the single currency more than 20 years ago, outside a brief flash crash in 2015.

“It’s more about the weakness of the euro than the strength of the Swiss franc,” Credit Suisse economist Maxime Botteron told AFP, citing the franc’s steadier performance against the US dollar.

“European growth is showing signs of running out of steam, even recession,” he said, noting that “these indicators come in a context where the Swiss National Bank (SNB) has changed its monetary policy”.

Switzerland’s central bank has abandoned the negative rate it has imposed since 2015 to combat the overvaluation of its currency.

Like other central banks, the SNB seeks to prevent inflation from taking root. But in the midst of soaring energy prices, the franc’s rise is providing it with welcome help in curbing price increases.

“In Switzerland, two-thirds of inflation is due to imports. An appreciation of the Swiss franc therefore reduces the rise of these goods a little,” said Botteron, adding that the SNB “therefore has less need to tighten monetary policy” than other central banks.

In August, inflation rose to 3.5 percent, its highest level in 29 years, but far behind the 9.1 percent recorded last month in the eurozone.

Tourism boost

“There is a very clear strategy to shield Switzerland the against the rising inflation coming from the eurozone, the US and other trading partners,” said Thomas Flury, UBS bank’s global head of currency strategy.

The franc’s rise has not triggered panic, unlike in 2015 when exporters feared their production costs and export prices would explode.

“High inflation in the eurozone makes the real appreciation much less dramatic than in the past,” said Flury.

“Acceptance is coming because companies in Switzerland would rather have a stronger Swiss franc than discussions on wage rises that French or German companies will have to do, as well the cost pressures from imports.”

If this rise in the franc eases somewhat the pressure on their imports, Swiss companies, with well-filled order books, also have some leeway to increase their prices, said Botteron.

In tourism, another sector sensitive to the exchange rate, the franc’s rise has enabled Swiss hoteliers to increase their prices to a lesser degree than in neighbouring countries given the lower inflation, a spokesman for the Hotellerie Suisse hotel industry body told AFP.

“For hoteliers, this means that they should become even more competitive against foreign countries,” he explained.

As Switzerland nevertheless remains an expensive destination, the group remains cautious, fearing that “consumer budgets will tighten”.

However, this boost to the Swiss economy may only be short-lived.

“We’ll have to see how this develops over the winter,” said Flury.

Even if it is too early to guess how the exchange rate might develop, recession or weak growth in the European economy would hamper Swiss companies and the franc’s value may become a much more sensitive subject.

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