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Swiss Voters Reject Pension Reforms

4 October 2017 Articles News & Analysis


If the internal tensions of advanced economies and the welfare state are too much for the Swiss to handle, the rest of the West doesn’t have a chance.

by Gaius Marcius


A Swiss proposal to reform the retirement and pension systems was placed on the ballot after 6 years of parliamentary debate. Switzerland’s direct democracy requires voter approval of major legislation, particularly when constitutional changes are involved. The planned pension reforms include a slight increase in monthly benefit payments, larger employer and employee pension contributions, and a higher value added tax (VAT) to keep the system solvent until 2030.

Ordinarily such a vote would divide on regional lines since Switzerland has distinctive Germanic, French, and Italian areas, but regional results were mixed. Switzerland is also free of many social encumbrances that exist in the European Union. Switzerland has relatively low levels of immigration, and the Swiss have a strong national identity that compliments regional distinctiveness. Swiss workers are highly productive, and generous pension benefits are seen as a legitimate reward for a lifetime of labor.

Global trends for advanced economies do not stop at political borders, however. Swiss solvency depends on future generations of highly productive workers, and the Swiss birth rate fell from 1964 to 2001, with only a slight immigration fueled uptick since 2005. Most European nations use immigrant birth statistics or foreign guest workers to mask demographic and labor force decline, but the native Swiss are too productive for that strategy to work. Everyone knows that low skilled immigrants, even when they are net contributors to the economy, are not productive enough to prop up an economy whose benefits are based on the output of Swiss workers. If Switzerland wants a Swiss future, they, like all other European nations, will have to make it themselves.

Progressive social views on marriage, secularism, and feminism are not conducive to the large families needed to replace aging Swiss retirees, who now live on average to 83. Pension reform does not attempt to solve such fundamental problems, only aiming to stretch the viability of the current system as far as possible. One provision in the reforms would have raised women’s retirement age from 64 to 65 to match the men’s retirement age. The necessity of that reform, combined with a demographic chart, amounts to a tacit admission of the social cost of women in the workplace. The dichotomy between the priorities of the Swiss right and left are clear in their opposition to the reforms:

“The political right said the outcome of the vote showed that the reform was too complex and put a heavy financial burden on the younger generation.

The far-left, which also campaigned against the reform, said it was pleased that women’s retirement age will not be increased.”

Delaying major reforms is almost certain to ensure that the Swiss get the worst of both worlds—higher retirement ages for the old and heavy financial burdens for the young. Anyone watching the Swiss debate could reasonably despair of legislative reform succeeding in the United States, where the diversity of interest groups and ethnic lobbies is an order of magnitude greater than in Switzerland. On the other hand, the prospect of immediate financial pain will eventually force voters across the West to give up on virtue signaling profligacy and get their budgets and demographics in order. I would bet the Swiss will figure that out faster than most.