A recent rash of job cuts looks set to send the rate of unemployment spiralling up, threatening the state's resources to cope with the numbers out of work.This content was published on June 24, 2009 - 14:50
Swiss engineering firm Sulzer announced 1,400 global redundancies on Wednesday while chemicals maker Clariant confirmed 500 job losses at the weekend. Other manufacturers, the watch and finance industries are also laying off workers.
The run of bad news appears to confirm the expectation of economists that some 5.5 per cent of the workforce will be out of gainful employment by the end of next year.
"It has already started with the finance and export industries, but later on when consumption weakens, job cuts will spread to domestic markets such as retail," Bank Sarasin economist Alessandro Bee told swissinfo.ch.
"At the beginning of the year a lot of companies tried to shorten working hours to keep hold of workers. But now they see that the economic slump is set to continue they are starting to shed jobs."
Will stimulus work?
One in eight of the Swiss workforce is employed in the industrial sector that relies on foreign orders, but export companies have witnessed a sharp drop in orders. A survey published in June found that 40 per cent of Swiss firms are planning to shed jobs to cope with the economic downturn.
Despite being heavily reliant on exports, Switzerland has so far managed to escape the worst ravages of the global recession thanks to steady domestic consumer spending and a stable housing market.
But Bee is sceptical that a third economic stimulus package of SFr750 million ($703 million) announced by the government earlier this month could stop the domestic market from further eroding.
"I'm not sure it has the potential to shore up consumption. It looks more like a damage limitation exercise," he said. "Consumption is driven by sentiment. When people realise that the recession in Switzerland involves more than just the banking sector then confidence will fall."
The government has also tried to apply the brakes to the rate of unemployment through other means. It has extended the period the state subsidises workers for reducing their hours and pumped money into creating more apprenticeship places for youngsters.
Trade unions have called for shortened working hours to be extended and for redundancies to be linked to salary caps for top managers. One social pressure group has called for more funds to be set aside to help the long-term unemployed.
Social security hole
But cracks are beginning to show with the creaking unemployment insurance scheme. Parliament has been debating measures to raise contributions, with the scheme facing a SFr4.8 billion hole that could rise to more than SFr6 billion by the end of the year, according to some estimates.
With the situation deteriorating by the month, more desperate ideas are being formed to help relieve the pressure on the economy. One plan suggested funnelling funds from a Swiss natural disasters fund to debt guarantees for firms and support for the unemployed.
Matthew Allen, swissinfo.ch
Job loss roll call
Engineering giant Sulzer announced on Wednesday that it would reduce its global workforce by 11% with 1,400 job cuts.
Basel-based speciality chemicals maker Clariant confirmed weekend reports that it will shed 500 jobs – 40 of them in Switzerland. The firm had already announced 1,000 redundancies in January.
Leading Swiss watch firm Franck Muller of Geneva cut almost half of its workforce, while Neuchâtel-based Zenith slashed 70 jobs out of 250 in June.
Last month, industrial firm Georg Fischer announced 2,300 redundancies, around a quarter of them in Switzerland.
Swiss banking giant UBS said in may that it would reduce its workforce by a tenth, including 2,500 posts being axed in Switzerland.
Cement maker Holcim announced in January that it was cutting 3,300 of its global workforce, although he majority were in the United States.
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