Unions enraged by central bank wage comments

SNB has stepped into the wage debate

Trade unions have hit back at a warning from a Swiss central bank director that excessive wage increases could result in spiralling inflation.

This content was published on July 9, 2008 - 18:15

Switzerland's trade union umbrella group Travail Suisse accused the bank of siding with employers after Thomas Jordan told a Sunday newspaper that restraint was needed in the next round of wage negotiations.

Jordan acknowledged that rapidly rising oil prices were eating into the real income of households. But he said that making up for the weakening of household income with high wage increases would bring about "unpleasant inflation".

In an interview with the NZZ newspaper, Jordan warned against "wanting to compensate for real losses, such as higher oil prices, through increases in nominal wages".

Unions have been calling for workers to get a share of the increased productivity Swiss companies have enjoyed in recent years. But Jordan urged them not to demand compensation against inflation pressures as this would drive inflation up even further.

Travail Suisse reacted angrily to the interview by a prominent member of the Swiss National Bank's (SNB) governing board.

"What the national bank is trying to do is outrageous," spokeswoman Susanne Blank told swissinfo. "The SNB is assisting employers and calling into question its reliability, and in the long run, also its independence."

"If you view the data accurately you see the situation is not quite so bad," she added. "Gross domestic product has increased by 11.7 per cent since 2004. That has meant enterprises have increased their profits and seen margins rise."

Competitive strains

Blank argued that real wages have stagnated at around one per cent since 2004.

She added that companies could afford to reduce their profit margins and said that they were not forced to pass inflationary pressures on to customers in the shape of price hikes.

Business leaders, however, do not share Travail Suisse's viewpoint. Johann Schneider-Ammann, president of Swissmem machinery, electrical and metal industries representative body, told a conference last month that large pay increases would damage both companies and employees.

"Wages determine the cost of products. Our products are sold against international competition, above all abroad," he said. "We need margins and financing so that we can be innovative in the future. This will ensure the long-term job security of our employees."

But Travail Suisse remains unimpressed by the SNB's entrance into the wage dispute. The body argued that the bank had failed to comment on an ongoing argument about "fat cat" manager salaries.

A recent Travail Suisse report into the disparity of pay between managers and shop floor workers found that a few top executives enjoyed around 10 to 15 per cent of the total wages paid out in Switzerland.

"They [SNB] could have entered the debate about the excessive wages of managers several years ago," said Blank.

swissinfo, based on an article in German by Alexander Künzle

Swiss National Bank

Switzerland's central bank is independent of the government and is free to set interest rates.

Its policy goal is price stability, which it says is an important precondition for economic growth and prosperity.

It bases its monetary policy on a medium-term inflation forecast.

Its chosen reference interest is the three-month Libor rate (London Interbank Offered Rate).

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Travail Suisse

Travail Suisse is an umbrella trade union group formed in 2002.

It represents trade unions and organisations that were once part of the Christian Trade Union Federation of Switzerland and the Association of Swiss Employee Federations.

The organisation has around 170,000 members and is headed by its president Hugo Fasel, a parliamentarian.

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