Swiss Reject World’s Highest Minimum Wage, Jet Purchase

Swiss voters rejected the world’s highest national minimum wage, striking down a proposal for an hourly rate of 22 francs ($25).

The measure, was opposed by 76.3 percent of voters, the government in Bern said today. Polls, including one by gfs.bern, forecast that outcome. Voters also rejected the acquisition of Gripen fighter jets by Saab AB for 3.1 billion francs.

“It’s a strong sign to Switzerland as a center of employment,” Economy Minister Johann Schneider-Ammann said at a news conference in Bern. “Accepting the initiative would have led to job cuts in economically weak, rural areas.”

With income inequality growing among developed economies, minimum wages are on the table in other countries as well. In the U.K., Prime Minister David Cameron has increased it to 6.5 pounds ($10.9) per hour, while in the U.S., President Barack Obama is pushing for an increase in the $7.25-an-hour federal minimum to $10.1. In Germany, Chancellor Angela Merkel’s cabinet backed a national minimum of 8.50 euros.

Rejection of the Swiss measure, which called for a full-time worker to be paid at least 4,000 francs a month, breaks with a series of plebiscites -- including ones on excessive executive compensation and immigration -- that companies said make Switzerland a less desirable place to do business.

“People are again saying they don’t want the state to meddle,” said Hans-Ulrich Bigler, director of the Swiss trade association. “It’s a vote of confidence by the people in the economy.”

Cost of Living

While nine out of ten Swiss full-time workers already earn more than the propose minimum, trade unions argued the pay of those least-well off needed to reflect the country’s high cost of living. By contrast, companies and the government opposed the measure, saying it would hurt the economy by increasing joblessness and pushing wages up across the board

“Of course we’re disappointed,” said Giorgio Tuti, president of the union of transport workers SEV. Some “330,000 people earn a wage from which they can’t live -- the problem remains,” he said.

Traditionally, wages in Switzerland have been negotiated by collective bargaining. The median wage in the Swiss private sector was 6,118 francs last year.

Many small-and-medium sized businesses, which generate two-thirds of employment, couldn’t afford to pay employees more, the government said. Switzerland’s jobless rate as measured by the International Labor Organization was 4.1 percent late last year, compared with 11.8 percent in the euro area.

State Meddling

When adjusted for purchasing power, the Swiss wage would have amounted to $14.01 an hour. That compares to $10.60 in France and $10.20 in Austria, according to Organization for Economic Cooperation and Development data for 2012.

“In German-speaking Switzerland, especially in the countryside, there’s a strong view that the state shouldn’t get involved too much,” said Laurent Bernhard, a researcher at the Institute of Political Science at the University of Bern. In these regions “campaigns opposing state meddling generally find favor” among voters, he said.

As for the acquisition of new fighter jets, opponents of the plan had argued that the planes would cost 10 billion francs over its lifetime, money that could be deployed elsewhere. Supporters of the purchase, including the government, said neutral Switzerland needed the Gripen to defend its airspace.

Aircraft Acquisition

“It is a clear victory for budgetary sanity,” said Regula Rytz, a member of parliament for the Green party. “It doesn’t make sense that we have to save on flood protection, that we have to save on border security and at the same time buy new aircraft.”

Saab clinched a three-way contest to replace Switzerland’s fleet of Northrop Grumman Corp. F-5 Tigers in November 2011, edging out offers from France’s Dassault Aviation SA and from the Eurofighter consortium of BAE Systems Plc, Airbus Group NV and Italy’s Finmeccanica SpA.

“Today’s result requires a thorough analysis,” Defense Minister Ueli Maurer told reporters in Bern, adding that offering one today would be premature. In response to a question about whether the Swiss would lease the jets, he said: “We have no plan B.”

The Swedish Defence and Security Export Agency FXM, which is responsible for the Gripen negotiations with Switzerland, said what happens next is a question for the Swiss government

Saab Chairman Marcus Wallenberg told Switzerland’s Tages-Anzeiger earlier this week that failure of the Swiss Gripen deal “won’t mean the end” of the Gripen’s development.

Voter turnout was 55.5 percent for the minimum wage initiative, while for the Gripen it was 55.3 percent. That’s higher than the 40 percent average of recent decades.