Minimum-Wage Smartness in Switzerland
by Jacob G. Hornberger
Two years ago, Swiss voters had a national referendum that would have set the nation’s minimum wage at $25 an hour, ten dollars more than what is being proposed in the United States. I’ll bet you’ll never guess how the referendum came out. It went down to defeat, big time. 76.3 percent of voters voted no to the referendum.
Why did Swiss citizens reject that very generous minimum-wage proposal? Was it because they don’t like money? Was it because they hate the poor? Wasn’t it because they believe in the employer exploitation of the worker? Or was it because they like subsistence wages?
Actually, it was none of the above. The Swiss rejected the proposal because they’re smart, at least when it comes to economic principles. Or to be more specific, the 76.3% who voted against the proposal are smart.
I’ve got another bet for you. I’ll bet you’ll never guess what the minimum wage currently is in Switzerland.
It’s a trick question. There is no minimum wage in Switzerland. You read that right: There is no state-mandated minimum wage in Switzerland. Wages are left entirely to the free market.
Like I say, the Swiss are smart.
Now, I can already hear what minimum-wage advocates are saying. “Jacob, if there’s no minimum wage in Switzerland, then that means that every wage earner is being paid no more than a subsistence wage. That’s what employers do when the government doesn’t force them to pay a minimum wage. Employers exploit their workers. They would never pay more than just a pittance. Those poor Swiss workers. They must be barely eking out a living.”
However, according to an article in USA Today about the defeat of the minimum-wage referendum, “90% of Swiss workers earn more than the proposed minimum and are already among the highest paid in the world.”
Whoops! There goes the exploitation and subsistence-wage theory. Imagine: In a nation in which the government isn’t forcing employers to pay any minimum wage whatsoever, employers are already paying more than $25 an hour.
Is that because Swiss employers are more benevolent than employers in other nations? Nope. It means that they are simply responding to the natural laws of supply and demand within their country. The supply of labor and the demand for labor — that is, the free market — set the price for labor in Switzerland.
Take a look at my recent article “Minimum Wage Ignorance,” where I pointed out what credible economists have been saying for decades: that a state-mandated minimum-wage law locks out of the labor market every person whose labor is valued by employers at less than the state-mandated minimum. Black teenagers, who suffer from a chronic unemployment rate of 40 percent, are one example. That’s because employers value their labor at less than the state-mandated minimum. So, they go unemployed, permanently.
Unfortunately, all too many Americans still just can’t get it. They can’t comprehend the reasoning as to why a minimum-wage law is so destructive, especially for the poor. The only thing that goes through their minds is that the government can make people better off by passing laws that regulate economic activity. Any critical analysis of that notion goes right over their heads.
But not the Swiss. Like I say, when it comes to economics, those people are smart. According to the USA Today article,
The Swiss Business Federation, Economiesuisse, said the results show that the Swiss people wouldn’t tolerate government intervention in a free-market economy. “We were able to show that the initiative hurts low-paid workers in particular, the group’s president, Heinz Karrer, told the website.
Switzerland also has some smart public officials. Take a look at what Swiss Economics Minister Johann Schneider-Ammann said: “If jobs are being cut, the weakest suffer most.”
And they are not the only smart ones in Switzerland. The smart people also include the poor — that is, those who earn less than the $25 an hour that the referendum was calling for. The USA Today article stated:
Some workers who make less than $25 an hour had opposed the referendum. Luisa Almeida is an immigrant from Portugal who works in Switzerland as a housekeeper and nanny. Almeida’s earnings of $3,250 a month are below the proposed minimum wage but still much more than she’d make in Portugal. Still, she did not support the referendum. “If my employer had to pay me more money, he wouldn’t be able to keep me on and I’d lose the job,” she told USA TODAY days before the vote.
That’s impressive! When those at the bottom of the economic ladder can see how a state-mandated minimum wage is contrary to their best interests, that reflects an enlightened or smart citizenry.
Meanwhile, here in the United States, the move toward a $15 per hour minimum wage continues apace. It’s not very smart. In fact, it’s really dumb.