Swiss struggle to close “productivity gap”

On paper, Swiss productivity is no more than average Keystone

Swiss workers were slightly more productive last year but they still lag some way behind counterparts in many developed countries, including their neighbours.

A report published by the Geneva-based International Labour Organization shows average per capita output of $41,310 (SFr49,815) – a figure dwarfed by the French with their 35-hour week.

Workers in France ($54,609), Austria ($48,162), Italy ($46,154) and Germany ($42,345) easily outstrip their Swiss counterparts.

They are also far more productive for each hour worked: the French squeeze out $35.08 an hour – a third more than the Swiss.

“Compared with the European Union – apart from the new members that joined in 2004 and 2007 – productivity is much lower [in Switzerland],” Marie-Claire Sodergren, an economist in the ILO Employment Trends Unit, told swissinfo.

She added that the figure was all the more surprising as Switzerland has a low unemployment rate – 4.0 per cent in 2006, according to the Swiss Labour Force Survey – and a relatively high percentage of the working population in employment.

Sodergren questioned whether lower productivity – it grew by only 0.5 per cent last year – was more likely the result of a lack of competitiveness, not enough innovation and too much regulation.

Flexible labour market

Boris Zürcher, an economist at the think tank Avenir Suisse, says part of the reason why Switzerland has such a low level of productivity compared with France or Belgium ($55,235) is because the Swiss labour market is more socially inclusive.

“In France it is much harder to get a job so this means that anyone in the labour market is more productive. But the drawback is that you have to pay for those people who are not working,” said Zürcher.

“Switzerland on the other hand has one of the highest levels of social integration in the workforce in Europe, which in turn means lower social expenditure.”

In Switzerland labour market participation stands at around 60 per cent of the population, whereas in France and Belgium the figure is nearer 50 per cent.

According to the Organisation for Economic Cooperation and Development (OECD), Switzerland has the world’s second-highest employment rate (78 per cent) in terms of the working population aged 15-64. The OECD average is 65 per cent.

But Zürcher admitted the country’s productivity growth rate had been far from impressive over the past 15 years, blaming “rigid regulation” in the internal market.

“There is a huge disparity in Switzerland. Productivity in banking and pharma is very high but rather low in retail and agriculture. If you take the average, it falls rather on the low side,” he said.

Economic reforms

A report last year by the OECD highlighted the “productivity gap” compared with other developed nations and called for wide-ranging economic reforms to boost growth.

Aymo Brunetti, chief economist at the State Secretariat for Economic Affairs, echoed the view that tougher labour market regulation in neighbours France and Germany meant less productive workers were kept out of the workforce.

“We have a very productive export sector but we have a couple of sectors that are more protected against competition than in other countries, such as agriculture, retail and construction. In these sectors there is very high employment, so lower productivity.”

Brunetti said Switzerland was looking to increase competition in the internal market to boost productivity, “because we have potential there”.

“The aim is to bring the figure up but to keep high flexibility in the labour market and to combine it with more competition in the product market.”

swissinfo, Adam Beaumont

In brief

According to the ILO report, Key Indicators of the Labour Market, the US still leads the world in terms of labour productivity.

Indeed the productivity gap between the US and most other developed economies continued to widen in 2006.

The US, with $63,885 per capita, was followed at a considerable distance by Ireland ($55,986), Luxembourg ($55,641), Belgium ($55,235) and France ($54,609).

However, Americans work more hours per year than workers in most other developed economies. Measured in hours worked, Norway has the highest labour productivity level ($37.99), followed by the US ($35.63) and France ($35.08) – Switzerland ($26.58).