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Switzerland's Minimum Wage Could Jump from $0 to $25 an Hour


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Is America's minimum wage of $7.25 an hour too low? Too high? How about $10.10 an hour -- the new minimum wage rate that President Obama is pushing? Or $10.50 per hour -- the rate Vermont just voted in for 2018? Or even $12.30 an hour -- where Richmond City, California, expects to be by 2017?

Here in the U.S., there's been a lot of controversy lately over plans to hike minimum wage levels at the federal, state and city level. But in Switzerland, the federal government is set to make the biggest jump in minimum wage levels in recorded history -- going from $0 to $25.13 in 60 seconds (figuratively speaking).

Top of the Heap -- If It Happens

The Swiss vote May 18 on the new minimum wage law, which would in a single stroke double wage levels over the highest rates even being considered in the U.S., create Switzerland's first national minimum wage, and give Swiss workers the highest hourly minimum wage in the world.

This would be a big change in Swiss labor laws -- maybe too big. Though it's supported by Switzerland's Green and Socialist parties, the referendum isn't given much chance of success by pollsters, who say that at last count, about 64 percent of voters are expected to vote against the new minimum wage law.

The country has already taken at least one step that might ease the referendum's passage, though. In February, Swiss voters approved a referendum restricting immigration into the country from European Union countries. Passage of that law may be taken amiss in the EU, Switzerland's biggest trading partner -- but it would at the least help to minimize the expense of the new minimum wage law, should it pass. Had the immigration restriction not been passed, the logical result of a $25 an hour wage floor would have been an influx of workers from lower-wage countries, such as Germany, which is planning a minimum wage hike of its own, but "only" to $11.83 an hour.

Winners, Losers ... and Another Unusual Proposal

For Americans earning less than one-third the hourly wage Switzerland is proposing, the proposal sounds incredibly generous. If it becomes law, the new minimum wage in concert with the anti-immigration legislation means that Swiss workers could expect a minimum wage of 4,000 Swiss francs per month ($4,500), about two-thirds of Switzerland's median salary in 2012.

About 10 percent of the Swiss currently earn less than that. By way of contrast, only about 1 percent of American workers earn less than our current minimum wage of $7.25 an hour.

However, passage of the minimum wage law could be a worse deal for some Swiss than an alternative proposal making the round. That one calls for the government to pay all Swiss adults a flat $2,800 a month (2,500 Swiss franc) minimum income -- whether they work for other wages, work even harder as unpaid homemakers or simply lounge around the house watching the TV. (Those grants would essentially replace social safety net programs with monthly stipends for everyone.)

Given the choice, which would you choose? $2,800 a month, on top of which you could either work and earn more, or not, as suited your preference? Or $4,500 a month to work a McJob -- with the potential to earn more in a better job? Or to get whatever wage your boss decides you're worth, without the government having a say in the matter?

Motley Fool contributor Rich Smith has no position in any stocks implicated in the developments discussed above -- or any Swiss stocks whatsoever. He's worked his fair share of minimum wage jobs, though (and even jobs paying less than the minimum), but never made $4,500 a month doing it.


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