UBS Zurich, 28 October 2015 - The companies in the 2016 UBS Compensation Survey expect nominal wages to increase by an average of 0.5% in 2016. Together with UBS' annual inflation forecast for 2016 of -0.4%, this estimated nominal wage increase yields an average rise of 0.9% in real wages.
The expected nominal wage rise for 2015 of around 0.8% resulted from wage negotiations based on an assumption of slightly positive annual inflation. Following the lifting of the minimum EURCHF exchange rate and the significant fall in energy prices, inflation for the whole of 2015 is expected to finish at -1.2%. That would mean real wages rising by an average of 2% in 2015.
Nominal wage rigidity in a downward direction means that in spite of the negative inflation rate forecast for 2016, average wage cuts are not expected in any sector, but may happen in certain cases. Average wage increases will be lower in 2016 than in 2015 in all sectors.
The chemical and pharmaceutical industries, IT and telecom sectors as well as the company services sector will continue to top the ratings in 2016, with average wage increases of 1% each. Furthermore, wages in the energy, utilities and waste disposal sectors, as well as financial services (0.8%), in the public sector (0.7%) and the construction and architecture sector (0.6%) will also be above the average. Wages in the food production sector (0.4%), in the wholesale trade and in the watches and electronics industry (0.3% each) will see below-average increases. At the bottom of the scale, in tourism, materials and building materials, media and textiles, a pay freeze is expected in 2016. In many cases, wage increases will only take place on an individual basis and with the aim of retaining skilled workers.
The lifting of the minimum EURCHF exchange rate is advancing the structural shift in the Swiss economy further. Companies in the textile industry expect the biggest job losses of all sectors examined, this year and next.
For the whole of 2015, the biggest increase in staffing levels is expected in the public sector. In 2016, the business services sector could well head the list. Higher staffing levels are also expected in the public sector and retail trade in 2016, as well as in the chemical and pharmaceutical industries.
In the health and social services sector, watches, IT and telecom service industries, as well as the automobile trade, the survey indicates stable staffing levels for 2016. Companies in the metal industry also expect unchanged staffing levels. In the remaining industries the number of employees may well be reduced.
The lifting of the EURCHF minimum exchange rate put those industries under pressure that are heavily export-oriented, are in competition with companies from the Eurozone and have a high proportion of their costs in Swiss francs. Some 77% of the companies in the secondary sector indicate that they have suffered either negative or serious negative effects. In the tertiary sector, 69% of companies have suffered negative or serious negative effects, in spite of the domestically oriented structure of this sector. Companies are trying to cover themselves by switching to foreign suppliers and introducing cost-reduction measures. They are also increasingly attempting to optimize their processes where possible.
Of all the companies that reacted to the abandonment of the minimum exchange rate, according to the survey, 59% had to reduce their profit margins. Broken down by sectors, 64% are in industry and 62% service providers. Among industrial companies, 60% no longer intend to fill any vacancies that arise. Eight percent of the companies throughout Switzerland that took action after the abandonment of the exchange rate limit indicated that they have reduced nominal wages or are planning to do so in certain areas. Some 35% of the businesses in the industrial sector are also preparing to outsource activities abroad in order to maintain their international competitiveness.
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