Inflation and poverty in Switzerland

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This week, SRF held a discussion on poverty in Switzerland. Philipp Frei, Managing Director of the Swiss Budget Consulting Association, an organisation that helps people budget, voiced concern over shrinking disposable incomes. While economic historian Tobias Straumann spoke of the progress Switzerland has made on welfare and poverty’s often transient nature.

In 2021, Switzerland’s poverty line was set at CHF 3,989 (US$ 4,650) a month for a family of four and CHF 2,289 for a someone living alone. These sums are after compulsory health insurance premiums and taxes, which could add up to around CHF 2,000 a month for a family of four.

Around 8.7% of the population lived on a monthly household income below these sums. Most are not working. However, 4.2% of those employed either part- of full-time have incomes falling below these levels.

Those most likely people to fall into poverty include: single people under 65 (16.9%), families with three or more children (20.6%), single parent households (26.2%), those with no training beyond high school (28.7%) and people 65 and over (21.7%), especially those living alone (29%). Poverty among those 65 and over is in many cases alleviated by drawing on accumulated savings. For many people poverty is associated with changes in their family situation, for example, job loss, divorce, a new child, retirement or the death of a spouse.

At a European level Swiss poverty levels are lower than the average. In 2021, 16.8% of the EU population was at risk of poverty, defined as receiving 60% or less than the median income. In Switzerland, the rate was 14.7%. Among the working population, the rates were 8.9% (EU average) and 7.3% (Switzerland).

However, analysis by the Swiss Budget Consulting Association shows that disposable income in Switzerland has shrunk significantly over the last 40 years. In 1980, a family with two children and a net salary of 4,500 francs still had 940 francs left after paying their bills. In 2020, the same family would be 250 francs in the red. And the last 12 months have brought significantly higher health insurance premiums (+9%), more expensive electricity (+18%) higher rents (+17%), higher train fares (+4%) and since 1 January 2024, higher VAT, which has risen from 7.7% to 8.1% (a 0.4% higher cost of most things) to fill a pension funding gap created by an ageing population.

Philipp Frei describes a feeling of powerlessness in some who solicit his organisation’s help. No matter what you do you always have less money in your account, he says. And Swiss people do not like to talk about poverty due to feelings of shame.

At the same time, Straumann points to the progress made In the last 30 years. The state and the cantons have made enormous progress in combating poverty, he says.

Poverty in Switzerland became prominent with the rise of industrialisation in the late 19th century. Towards the end of the century, organisations offering poverty insurance emerged alongside laws banning child labour and limiting work to 11 hours a day. In 1918, compulsory accident insurance was introduced. Then in In 1948, old age and widows pensions were introduced in Switzerland, followed by disability pensions in 1959. Welfare provisions have expanded significantly since then, among them complementary old age pensions (1965), unemployment insurance (1976), pension inflation indexation (1979), and compulsory health insurance (1996) – see more history here.

Referencing a study by the Federal Statistical Office, Straumann says most stuck by poverty find their way out after four years. For most it is not permanent.

More on this:
SRF article (in German)

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