In July, private-sector businesses in Switzerland expect nominal wages to grow by an average of 1.3 per cent in a year's time. If this is the case, wages are likely to rise by less than 1 per cent after allowing for inflation. These are the findings of a KOF survey of around 8,000 firms on their wage forecasts for the next twelve months.
In July, KOF surveyed around 8,000 companies in the private sector about their wage expectations as part of its quarterly Business Tendency Surveys. Some 4,500 firms took part in the survey. Their forecasts for nominal wage growth have fallen continuously over the past three years. In July of last year, for example, expected nominal wage growth was still 1.6 per cent. This is 0.3 percentage points more than in the latest survey.
On the one hand, this decline is likely to reflect the decreasing shortage of skilled workers in the Swiss labour market. On the other hand, it probably also reflects the sharp fall in consumer price inflation in Switzerland in recent months. If inflation falls over the course of the year, there is less need to adjust wages the following year in line with past inflation. As these figures were collected before 1 August, however, this decline is not due to the high industrial tariffs that the United States is now imposing on Swiss firms. These tariffs are likely to have further reduced wage growth forecasts – particularly in industrial companies that are heavily focused on the US.
Firms expect to see little real wage growth
Nominal wage growth is less important for the purchasing power of wage earners than real wage growth – i.e. the growth in wages after allowing for consumer price inflation over the same period. The Business Tendency Surveys also asked the companies surveyed what inflation they were expecting over the next twelve months. If their forecasts of a price increase of around 1 per cent were correct, nominal wage growth would only be enough for a meagre rise of 0.2 per cent in real wages. The situation would be somewhat better for the wallets of wage earners if the inflation rate of 0.5 per cent forecast by KOF were to materialise. At this level, nominal wage growth of 1.3 per cent would result in real wage growth of 0.8 per cent in a year's time.
The majority of businesses expect to see wage growth of between 0.5 per cent and 2 per cent
Compared with previous surveys, there are only fairly minor differences between the firms surveyed. Most of the survey respondents expect to see company wage growth of between 0.5 per cent and 2 per cent. The differences in wage expectations between sectors were also greater in previous surveys. Businesses in wholesale (0.9 per cent), manufacturing (1.1 per cent) and retail (1.1 per cent) expect to see comparatively low nominal wage growth. Firms in hospitality (1.5 per cent) and construction (1.7 per cent) are forecasting relatively high wage growth. The construction industry is the only sector surveyed in which companies expect to see higher nominal and real wage growth than they did a year ago.