Cost-of-living squeeze puts Swiss households at poverty risk

Official figures suggest 8.7% o the Swiss population – the equivalent of about 745,000 people – fall below the poverty line. © Keystone / Gaetan Bally

Poverty is increasingly visible in wealthy Switzerland. Testimonies of families struggling to make ends meet are piling up at a time of widespread price hikes. Official figures, however, fail to capture the gravity of the situation, according to the directors of two different organisations monitoring the situation of families living in precarious conditions.

“There are significant gaps in the data needed to assess poverty and precariousness in Switzerland,” says Emilie Rosenstein, director of the Observatoire des précarités at the University of Applied Sciences in Social Work and Health (HETSL) in Lausanne, which focuses on people in financial difficulty. “Current statistics only give us snapshots of poverty. They don’t tell us which people are systematically in a precarious situation.

She welcomes the government’s recent establishment of national poverty monitoring system, noting that it could provide a more nuanced picture of poverty in Switzerland.

Official figures suggest 8.7% of the Swiss population – the equivalent of about 745,000 people – fall below the poverty line. The pandemic barely shifted the numbers, with a poverty share of 8.5% in 2020 and 8.7% in 2019. The Federal Statistic Office took pride to note in a press release that Switzerland “boasts a higher standard of living than the majority of European Union countries”.

Rosenstein is less positive in her assessment. “We can be pleased that there has been no explosion in poverty figures since the pandemic. There is, however, a slow increase that is not yet reflected in the statistics,” she warns.  The data fails to capture the growing chasm between low and high-income households, a phenomenon she considers problematic in the long term.

Swiss families are suffering

The first Family BarometerExternal link published in April by the association Pro Familia Suisse and Pax, a pension insurance company targeting families, reveals a less glowing reality. It found that 41% of Swiss families have just enough to meet their needs, and 28% have nothing left to save at the end of the month. More than half of them also admitted that they have already foregone medical or therapeutic treatment on cost-related grounds. “Rising prices on basic necessities particularly affect families on low incomes, who are pushed into a precarious situation,” says Pro Familia director Philippe Gnaegi.

This trend is also reflected in the evolution of Swiss real wages, which have fallen by almost 2% between 2021 and 2022, according to the Swiss Federal Statistical Office. Whilst nominal wages have risen slightly, inflation has eroded the purchasing power of salaried workers. Once again, these figures do not shed full light on the difficulties faced by households, according to Gnaegi, as they do not take into account the constantly rising costs of health insurance.

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Inflation is certainly less significant in Switzerland, than in other European countries, such as Germany (7.9%) or the United Kingdom (over 10%). “We may be less pitied than others, but we must be careful when it comes down to comparisons”, says Rosenstein. She reminds us that when disposable incomes start to fall, it is primarily those on the lowest incomes who will suffer the consequences.

Acting preventatively

The director of the Observatory of Precarities believes that the State must not only help those who are most disadvantaged, but also take preventive action to help the lower middle classes who are struggling to make ends meet, before they slip into poverty.

“Family politics is the poor relative of our social system”, explains Philippe Gnaegi. The director of Pro Familia recommends extending supplementary benefits for families, which are already in place in four cantons. This is a form of financial support for working families who are unable to cover the basic needs of their household, including sickness costs.

Measures must also be taken to make it easier to reconcile private and professional life, according to Philippe Gnaegi. He points out that six out of ten women in Switzerland work part-time, a rate that is almost unprecedented in Europe. “We need to create more childcare facilities, keep their costs down and guarantee the quality of care,” says the director of Pro Familia. He therefore believes that the childcare bill approved by the National Council (lower house of parliament) in March is a step in the right direction. It provides for aid to be granted for each child looked after by a third party from birth to the end of primary school.

The headache of healthcare costs

“There are two things that weigh heavily on household budgets: rent and health insurance. These are the main causes of debt,” says Rosenstein, noting that almost a third of healthcare costs are now borne by individuals themselves. “This situation is problematic, because the rate is almost twice as high as the average for countries in the Organisation for Economic Co-operation and Development (OECD), and it will continue to rise.”

Gnaegi advocates limiting health insurance premiums to 10% of household income. Such a system is already in place in the Canton of Vaud. The Socialist Party has tabled an initiative to extend this system. For the time being, however, neither the government nor parliament is convinced by the initiative and would like to put forward a counterproposal.

Stefan Meierhans, the country’s price watchdog known by many as “Mr. Price”, argues the Swiss could do more to harness the power of competition. “You have to put competition into play,” he says. “There is too little movement on the part of consumers.

Rosenstein disagrees: “Playing off competition may help some people, but it won’t relieve those who are facing major difficulties. “

The answer in her view lies in addressing the issue of people failing to claim social benefits for which they qualify. Many people who would be entitled to supplementary benefits under the Old Age and Survivors’ Insurance or Invalidity Insurance schemes do not claim them, usually because they are unfamiliar with the system. “We need to point these people in the direction of existing solutions,” says Rosenstein.

Expatriation as a last resort?

When they reach retirement age, more and more Swiss people are choosing to move abroad. People over 65 account for around 10% of all emigrants. While their reasons for emigrating are not well known, many are doing so for financial reasons.

“With our pension system, which relies heavily on individual provision, some people find themselves in difficult situations even after having worked all their lives,” she notes. For them, moving abroad can be a pathway to preserving their dignity and avoiding having to apply for assistance.