Brave Swiss Vote Down Fat Minimum Wage
Can direct democracy work? A Swiss referendum on a national minimum wage suggests it's not as bad as some politicians would have you believe.
The question was whether to establish an hourly minimum of 22 francs (about $25), which would amount to about $4,300 a month and be among the world's most generous. Putting it to a popular vote seemed a risky move: Why wouldn't people vote to insure themselves against poverty? Other referendums, such as a February vote to limit immigration with strict quotas, did not bode well. Government officials and business leaders warned that the move would harm the country's competitiveness and undermine the economy. The oilfield services company Weatherford International Ltd., with $15 billion in 2013 revenue, even recommended that its shareholders approve relocating the company's headquarters from the low-tax Swiss canton of Zug to Ireland. One major reason: Ireland's legal and regulatory environment "is more predictable and stable" because the country does not have direct democracy, whereby laws and even the constitution can be changed by referendum.
On May 18, though, the Swiss people rejected the proposal overwhelmingly, with 76 percent of those who turned out voting against. Taken together with other votes, the referendum suggests that the will of Swiss voters is actually quite predictable: They are somewhat xenophobic, but they are reluctant to tamper with personal liberties and free markets.
The Swiss have consistently reaffirmed their distrust of outsiders. A 2009 referendum famously banned the construction of minarets. Last year, 78 percent voted for a tougher asylum law. Then there was the 2014 anti-immigration vote, which European Union officials saw as a challenge to their free-movement policies and a dangerous precedent for other countries, such as the U.K., where people are uneasy about the growing influx of workers from the EU periphery. Although Brussels retaliated by excluding Switzerland from a student exchange program and freezing an energy trading agreement, a poll at the time of the Swiss referendum showed that Germans would have voted the same had their politicians asked them.
The Swiss have also generally proven to be pro-business. In 2012, they rejected a measure calling for extending vacation time for workers to six weeks from four. Last year, they rejected a proposal that would have capped executives' salaries at 12 times that of the lowest-paid worker in a company. They did, however, give shareholders the right to approve executive pay -- a perfectly fair provision that Weatherford would effectively escape by moving to Ireland.
A study of 22 referendums on matters related to wealth redistribution held between 1981 and 2004 showed that voters' age, rather than their stratification by income and education, was the best predictor of how a vote would go. Older voters consistently opposed working-time reductions, stricter labor controls and more generous protections for the unemployed. "A retired person will never again rely on labour market regulation, unemployment benefits or family policy. Hence, cost-benefit calculations are more straightforward and rational decision-making plays out more directly in individual decisions," wrote researchers Giuliano Bonoli and Silja Haeusermann. Given the fact that the typical turnout in a Swiss referendum is 40 percent and younger voters, as in other countries, are less likely to participate, older voters' conservatism and allegiance to the traditional Swiss work ethic ensure that leftist initiatives rarely pass.
The Swiss have proved their wisdom by throwing out most crazy ideas, such as the abolition of the armed forces or price controls on books, as well as politically charged ultraconservative proposals such as ending health-insurance coverage for abortions. They are down-to-earth people who recently approved extra investment in rail infrastructure but voted down the purchase of new fighter planes. If a political party had their voting record, it would have been a reasonably liberal, moderate, centrist one.
I suspect people in most countries would vote as cautiously and reasonably as the Swiss if they knew their decisions would be immediately put into practice. Like any middlemen, politicians are hanging on to their intermediary role, talking of the populist threat and ordinary people's lack of specialized knowledge. There is, however, nothing special about the Swiss: They are no smarter than Germans, Thais or Ukrainians, just wealthier -- and wealth, according to Bonoli and Haeusermann, is not a good predictor of voting patterns. If they can vote responsibly, there is no reason why direct democracy shouldn't work elsewhere.
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