Over the past three years, business expectations in terms of nominal wage growth has continued to decrease.
In July, companies in the Swiss private sector expected nominal wages to increase 1.3% on average within a year. If this is confirmed, wages should increase by less than 1% after deduction of increases. This is shown by a KOF survey of some 8,000 companies concerning their wage expectations for the coming year.
The KOF questioned in July around 8,000 private sector companies concerning their wage expectations within the framework of its quarterly cyclical surveys. About 4,500 establishments participated in the survey. Over the past three years, business expectations in terms of nominal wage growth has continued to decrease. In July of last year, the nominal growth of wages expected was still 1.6%. It is 0.3 more percentage points than in the current survey.
This decline should reflect on the one hand the decrease in the shortage of skilled labor on the Swiss labor market. On the other hand, it should reflect the sharp drop in consumer prices inflation in Switzerland in recent months. If inflation decreases during the year, the need to adapt wages the following year to past increases decreases. Insofar as these figures were collected before August 1, the decline is not due to high industrial customs duties, however, that the United States now imposes on Swiss companies. These customs duties could have further reduced expectations in terms of wage growth in industrial companies being in particular strongly oriented towards the United States.
Companies expect low growth in real wages
Regarding the purchasing power of employees, the nominal growth of wages is less decisive than real growth. That is to say, that of wages after deduction of consumer prices inflation over the same period. As part of cyclical surveys, the companies questioned also indicated what increases they expected in the next twelve months. If their expectations concerning an increase in prices of approximately one percent proved to be correct, the growth of nominal wages would only be enough for a meager increase in real wages of 0.2%. The situation would be a little better for the employees’ wallet if the 0.5% increased by the KOF was carried out. With such a rate, the growth of nominal wages of 1.3% would result in real wages growth of 0.8% within a year.
The majority of companies expect wage growth from 0.5% to 2%
There are only low differences between companies questioned in relation to previous surveys. Most companies questioned expect wages growth in the company of around 0.5% to 2%. Between the branches also, the differences concerning salary expectations were greater in previous surveys. Companies expect relatively low nominal wage growth in wholesale trade (0.9%), manufacturing industry (1.1%) and retail (1.1%). Companies provide for relatively high wage increases in hotel and catering (1.5%) and construction (1.7%). Construction is the only branches interviewed in which companies expect nominal and real wage growth higher than a year ago.