Job losses spread across Swiss corporate sector

Unemployment is set to rise in Switzerland Keystone

The list of Swiss companies showing their employees the door reads like a who's who of the big names in Swiss business. The likes of Roche, ABB and Ascom are among the large group of Swiss firms cutting back on staff as the economic pace slows.

Despite the raft of corporate payroll cutbacks seen over the past three months, the unemployment rate in August came in at 1.7 per cent, unchanged from the previous month.

However, Marcus Allenspach, chief economist at Cantrade Private Bank, told swissinfo that the jobless rate will pick up from now on.

“In the first half we haven’t seen a big impact on the jobless numbers as at the end of last year a lot of companies still had vacancies,” explained Allenspach. “Now we are seeing a lot of anecdotal evidence from banks and insurers that they are imposing a hiring freeze so unemployment will edge up over the remainder of the year.”

The economic implications of the terrible events in New York last week have still to be fully calculated. Certainly the effects on certain key industries, such as insurers and the airline sector, will have an effect for the world economy and also on the hiring requirements of large corporations.

The slowdown in the United States economy had previously hurt demand for Swiss products, and consumer demand had already lessened in Switzerland.

Swiss economy changing

The Swiss manufacturing sector, according to Marcus Allenspach, has been in decline for some time.

“We are continually seeing a shift in the economy here in Switzerland, as we have weak trade unions and no particular policies to hinder restructuring,” said Allenspach.

“We are always seeing losses in the manufacturing sector as productivity improves here and jobs are moved to lower cost locations, such as Eastern Europe. Up till now jobs have been replaced by growth in the consultancy, high-tech and service sector.”

These growth sectors are now slowing, and that means the unemployment rate will start to climb to between 2.5 and 3.0 per cent over the next twelve months.

Are job losses justified?

The reaction to job losses have been muted at many Swiss companies as staff associations remain weak and are keen not to jeopardise generous severance benefits.

However, Marie-Louise Mittelholzer, president of the Roche Staff Association, told swissinfo that she wasn’t pleased with the Basel based group’s decision to slash its workforce by five per cent.

“We can understand that in Basel the manufacturing capacity has to be reduced but this could have been done through normal turnover and not through these jobs cuts,” explained Mittelholzer.

As is most often the case Roche’s announcement that it was to reduce 3,000 staff worldwide, with 600 redundancies here in Switzerland, came after a poor set of financial results.

Marcus Allenspach thinks that companies often follow poor results with headline grabbing job cuts merely to please the markets.

“Those announcements of jobs cuts follow on very, very fast from bad results and that tells you they are not from a serious analysis of the business,” said Allenspach. “So they are mostly to give a signal to them markets and their own employees that they are doing something.”

Roche Staff Association president Marie-Louise Mittelholzer agrees that the redundancies at her company were inspired by efforts to please investors.

“We feel that this is only done for the markets and shareholders so they feel our management is tough enough to take measures to make profits higher,” added Mittelholzer. “I feel we are victims for the shareholders.”

The logic behind redundancies is that companies can create a leaner machine and hopefully improve their productivity as they reduce costs.

However, the news of cutbacks can send the most talented of a group’s employees out onto the job market, leaving those less able to find work elsewhere.

“As soon as you announce you’re closing things down the first thing that happens is that the good people will leave,” said economist Marcus Allenspach.

Social plans sway cantons

Whatever the reasons for a redundancy Swiss companies are encouraged to put together a package of benefits for anyone losing their job.

Richard Diethelm of the canton of Zurich’s labour office explained to swissinfo how his department works with employers.

“The company has to indicate to us when they plan to give more than 10 people notice,” said Diethelm. “We then try with the management to find ways to avoid unemployment as far as possible.”

However, Mittelholzer believes these packages of benefits can sway the authorities and staff association to agree to job losses when they shouldn’t.

“When the company gives the authorities the social plan and they see all the very attractive financial benefits they usually agree with it and they don’t fight for employment rights,” expanded Mittelholzer.

Redundancies, justified or not, are expected to increase over the coming year, but most economists predict an improvement in the unemployment rate by early 2003.

by Tom O’Brien