How Switzerland plans to tackle its labour shortage

This reality has hit the labour market since the Covid pandemic ended. Many companies are finding it difficult to recruit enough staff to meet high demand.

Although inflation has subdued the post-Covid economic recovery somewhat in recent months, and consequently the need for labour, more than 110,000 jobs were still vacant at the end of 2023, according to the latest figuresExternal link from the Federal Statistical Office.

The situation looks set to get more acute. According to industry associationsExternal link, there will be a shortfall of almost 430,000 people in the labour market by 2040, mainly as a result of demographic change.

The influx of young people onto the labour market will not be sufficient to compensate for retiring workers of the baby-boom generation. Other studies, such as one conducted by the association Employés Suisse, paint an even bleaker picture. It estimates that by 2035, the Swiss labour market could be short of almost 1.2 million workers.

The Swiss authorities admit that companies will be competing increasingly fiercely to attract workers. However, they urge caution with these figures and warn against over-dramatising the situation.

“This demographic effect has been and probably will be mitigated to some extent by immigration. Generally speaking, it’s not easy to forecast conditions in the labour market, which is constantly evolving,” says Françoise Tschanz, a spokeswoman for the State Secretariat for Economic Affairs (SECO).

Liberal approach

On a global level, there are no detailed statistics on the scale of this problem and its future development. The fact remains that many countries, and not just in the West, will have to roll up their sleeves to fill the vacancies left by demographic transition and an ageing population.

“Until now, this problem has mainly concerned rich countries. But the labour shortage is starting to become a challenge for some emerging countries,” says Ekkehard Ernst, head of the macroeconomics division at the International Labour Organization in Geneva. “I’m thinking in particular of China, which is struggling to find workers for its agricultural sector. As the world’s population ages, this phenomenon is bound to become more acute.”

In the Swiss government’s view, no special state intervention is needed to avoid shortages in key sectors of the economy such as health, energy or transport.

“The labour market works very well. Dual vocational training is a particular asset, as it is constantly adapting to the needs of companies. What’s more, the level of education in Switzerland is high and has risen even higher in recent years,” Tschanz says.

This resolutely liberal and optimistic approach has so far worked quite well in Switzerland. But it has only been successful thanks to the massive influx of immigrant labour, mainly from European Union countries.

Since 2002, when the free movement of people came into force, the country’s population has grown by 20% to nine million. This extraordinary demographic growth is unrivalled in Europe.

Helping families

Most experts agree that international competition for skilled labour will intensify. And despite its high salaries and a living environment popular with expatriates, Switzerland is not the best-positioned country in the race to attract the best workers and minds, according to Rafael Lalive, a professor at the University of Lausanne and a labour market specialist.

“We are not competitive when it comes to the quality of childcare for families. France, Germany and Italy have much better childcare systems. As a result, Switzerland is depriving itself of a potential workforce that will become even more important in the future: qualified women with children,” he says.

In Lalive’s view, the state should play a much greater role in supporting family policy, which some describe as the poor relation of Swiss social policy.

At the same time, Lalive argues in favour of a flexible increase in the retirement age, particularly for people in occupations without physical constraints. Although unpopular, this step, which has already been taken in many countries, would counter a large part of the shortfall in the labour market.

Technological progress

As a proponent of non-interventionism, SECO believes that technological progress will enable companies to achieve the same performance with less labour.

Ernst is not convinced by this assumption. “It’s a bit of a vicious circle,” he says. “The less labour we have available, the less opportunity we have to invest in productivity-enhancing technologies.”

In times of shortage, the allocation of skilled labour between different economic activities becomes critical. “Over the past 15 years, new technologies have mainly been developed in areas where they do not have a major positive impact in economic, social or environmental terms,” Ernst says. “Take apps such as Facebook, Instagram or TikTok, for example. Meanwhile in the construction industry we have regressed to the same level of productivity as in the 1950s.”

So should the state, for example, force Zurich’s engineers to work on improving the insulation of buildings rather than developing Google algorithms?

“The freedom to choose one’s profession is a fundamental right. The state can only intervene as a last resort to allocate labour to areas where it is urgently needed, as was the case to keep hospitals running during the Covid crisis,” Lalive says.

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Increasing appeal of key jobs

However, Ernst says, public authorities have a role to play by introducing incentives – and taxes – aimed at redirecting market activities, and therefore the workforce, to where it is needed.

“That way it would be possible, with infrastructure or transport projects for example, to integrate the expertise of the tech giants and benefit from it without the state having to micromanage the economy and its labour market,” he says.

And when the state itself sets the working conditions, as is the case in the health and public transport sectors, it can also influence the attractiveness of the job.

“We need to offer higher salaries and more flexible working conditions, especially for women. Of course, this comes at a cost: nobody likes to pay more for their transport ticket or health insurance premiums. But in the end, these are the only measures that will effectively reduce labour shortages in these sectors,” says Lalive.

Edited by Pauline Turuban. Adapted from French by Catherine Hickley/ts