Why Switzerland can't rely on foreign workers to fill its labour shortages

For more than two decades, Switzerland has relied on people from the European Union and European Free Trade Association (EFTA) countries to cover its need for qualified skilled workers.

Currently, about 1.7 million workers from EU / EFTA (Norway, Iceland, Liechtenstein and Switzerland) states are employed in Switzerland.

"Over the past 20 years, immigration from the EU has been essential to meet labour demand," according to the State Secretariat for Economic Affairs (SECO).

In the future too, "further growth of the working-age population will continue to depend on immigration, even more so than currently," SECO said. “The number of people leaving the employment market to retire tends to be higher than the number of incoming workers,” — a phenomenon which will further widen the deficit on the Swiss labour market, and where EU employees will be particularly needed.

READ ALSO: How EU immigrant workers have become 'essential' for Switzerland

However, it doesn’t look likely that the country can continue to rely on the foreign workforce indefinitely.

Why is this?

Demographic forecasts for Switzerland show that, by 2029, there will be a shortfall of 28,400 people in the labour market — a significant number in a small country like Switzerland.

In years past, workers from EU /EFTA countries were hired to fill this gap.

However, the demographic gap — that is, shortages created by retiring workers — is even greater in most European countries, according to economist Manuel Buchmann.  

“EU nations themselves need this skilled workforce and are willing to do a lot to ensure that their nationals don’t leave the country,”he said.  

“This is why it will become increasingly more difficult to bring people from the European Union to Switzerland,” he added. “This will inevitably impact Switzerland’s economy, which will probably shrink because of a shortage of workers.”

How will Switzerland compensate for this loss of foreign workforce?

One of the solutions Buchmann suggests is to encourage employees to work longer — that is, beyond their statuary retirement age of 65 for men and 64 for women (the retirement age for the latter will be raised gradually to 65 starting in 2025).

Another suggestion is to recruit more workforce from outside the EU / EFTA.

That may not be feasible, however.

That’s because Switzerland's justice minister Elisabeth Baume-Schneider has asked the Federal Council to reduce the permit quotas the government makes available for people from third countries each year.

READ ALSO: Will Switzerland cut number of work permits for third country nationals?

In 2022 and 2023, the government issued 12,000 permits for people from outside the EU / EFTA, but Baume-Schneider is calling to have this quota lowered to 9,600 permits in 2024.

The Federal Council will decide in the next few weeks whether it wants to act on Baume-Schneider’s proposal and tighten the screws on the third-country immigration and if so, when.