Swiss companies are planning a significant wage increase in 2023. But inflation will “eat up” the gains, leading to a record-high loss of real wages instead.
That's the finding of a new UBS wage survey released on Tuesday.
It found that while three out of four companies surveyed are making the cost-of-living adjustments, most salaries will not offset inflation.
On average, Swiss companies plan to increase nominal wages by 2.2 percent across all sectors, which is the highest raise in almost 15 years.
However, if inflation is taken into account — even though it is expected to fall from the current 3 percent to 2.1 percent — real wages will actually drop by 1.8 percent, which is the sharpest decline since 1942.
“Employees are hardly likely to celebrate wage increases of just over 2 percent. However, the restrained wage increase should help prevent a wage-price spiral, and is unlikely to further fuel inflation”, according to UBS Chief Economist Daniel Kalt.
And there is more bad news for Swiss consumers.
"Even if Switzerland avoids a major shortage of gas and electricity, the sharp increase in energy prices and weak European economic growth will weigh heavily on the Swiss economy in the winter," UBS said.
“Moreover, the uncertainties surrounding energy supply are unlikely to be limited to this winter alone. Another difficult winter situation, and therefore a fragile Swiss economy, is expected in 2023–24".
On the positive side, UBS economists don’t expect a "severe recession" to hit Switzerland — unlike the eurozone countries.
"Firstly, households can partially fall back on savings accumulated during the Covid-19 pandemic to compensate for the loss in purchasing power. Secondly, a robust Swiss labour market is supporting the economy" the survey found.
READ MORE: Do wages in Switzerland make up for the high cost of living?
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