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According to the Federal Council, the 13th AHV pension, to be voted on in March, would increase expenditure by 5 billion francs by 2032. This is evident from simulations of the costs and income of the federal government and parliament until 2050.
To ensure the survival of the first pillar, the federal government and companies must act quickly. If it comes into force in 2026, the AHV’s premium deficit will be as much as 9.7 billion francs ten years later. Without the 13th AHV pension, there would only be a deficit of 5.3 billion francs. With a 13th AHV pension, this deficit would be much greater.
This article was first published in the paid service of Handelszeitung.ch. Blick+ users have exclusive access as part of their subscription. You can find more exciting articles at www.handelszeitung.ch.
This article was first published in the paid service of Handelszeitung.ch. Blick+ users have exclusive access as part of their subscription. You can find more exciting articles at www.handelszeitung.ch.
The unions argue that there is still money in the AHV. But that is not true. This is what the public forecasts of the Federal Social Insurance Agency (BSV) show: with a 13th AHV pension and without additional financing, the AHV would face a deficit within two years of its introduction.
The political uncertainties surrounding financing
The people’s initiative does not define how the 13th AHV pension should be financed. Parliament should do this itself after a yes vote. As expected, there will likely be a heated dispute over this implementation.
The Federal Council has estimated the financing needs: either VAT should be increased by 1 percent.
Otherwise, AHV wage deductions would have to increase by 0.8 percentage points, i.e. from the current 8.7 to 9.5 percent of the gross salary. The wage bill to which AHV applies is approximately 410 billion francs. Based on experience with previous proposals, a combination of these measures is likely.
The group of people affected varies depending on the measure. If VAT were to be increased, everyone – rich or poor, companies or individuals and even pensioner households – would have to finance the 13th AHV pension. If payroll deductions were increased, working people and businesses would foot the bill. To what extent is controversial.
Major impact on the labor market
The Federal Council keeps the passage in its message about the economic consequences of the 13th AHV pension very short. There are only three sentences in it. First, he says that higher labor costs would “erode the competitiveness of companies.” Second, higher labor costs would “dampen firms’ demand for labor.” In plain language, this means: Companies would hire fewer people, no longer replacing those who leave or firing people. In business language, these are often the so-called “efficiency measures to reduce the cost base”.
And thirdly, the Federal Council says: “Making labor more expensive would also increase the incentive to save on personnel costs and increase the share of capital in production.” In practice, this means that companies, for example, reduce wages or do not allocate the full cost of living. Any payroll rounds would be postponed. Companies may also replace human work more quickly than before with machines or digital solutions, such as artificial intelligence.
Companies pay much less than employees
Already in 2014, a study by the Ecoplan agency commissioned by the federal government estimated the consequences of an increase in indirect labor costs (title: “Pension pension reform 2020: effects on employment, wages and labor costs”). An increase in wage contributions of 0.8 percentage points was assumed. The result: “32 percent of the increase would be borne by employers, 68 percent of the additional costs would be passed on to employees.” The burden sharing is therefore approximately one-third to two-thirds.
The trend seems to be strengthening. In a second study from 2020, the same Ecoplan office came to a passing on factor of no less than 76 percent to employees – or three quarters of the additional wage costs.
Inflation is fueled by rising wages and VAT
Companies in the internal market with sufficient price space could more easily pass on the additional costs to their customers, says Simon Wey, chief economist at the employers’ organization. “In this case there would be a risk that this would fuel inflation.” Just like after the energy crisis two years ago, an inflationary spiral is likely to start.
There will be a pension showdown at the ballot box on March 3. The voters will then decide on two AHV initiatives: on the one hand, on the unions’ popular initiative for a 13th AHV pension. On the other hand, about the pension initiative of the Young Liberals.
The trade unions’ popular initiative “for a better life in old age” calls for the introduction of a 13th AHV pension. If the answer is yes, a thirteenth monthly salary for seniors will be added to the previous twelve monthly pensions.
The Young Liberals’ pension initiative wants to increase the retirement age. First, it should gradually increase from 65 to 66 years by 2033 and then be linked to life expectancy: per month of additional life expectancy it should increase by 0.8 months – to 67, 68 or more. Automatically.
Details about both initiatives can be found here.
There will be a pension showdown at the ballot box on March 3. The voters will then decide on two AHV initiatives: on the one hand, on the unions’ popular initiative for a 13th AHV pension. On the other hand, about the pension initiative of the Young Liberals.
The trade unions’ popular initiative “for a better life in old age” calls for the introduction of a 13th AHV pension. If the answer is yes, a thirteenth monthly salary for seniors will be added to the previous twelve monthly pensions.
The Young Liberals’ pension initiative wants to increase the retirement age. First, it should gradually increase from 65 to 66 years by 2033 and then be linked to life expectancy: per month of additional life expectancy it should increase by 0.8 months – to 67, 68 or more. Automatically.
Details about both initiatives can be found here.
The Economists’ Guild agrees that workers will be affected differently by sector. Employees in the export industry (chemicals, mechanical engineering and IT) and their local supply companies (often SMEs) would be more affected by this than in companies aimed at the domestic market. Export companies are more exposed because they are exposed to international (low-wage) competition. In these markets, higher labor costs cannot easily be offset by higher prices, especially as the franc continues to strengthen compared to the currencies of the selling markets.
If the AHV initiative were voted ‘yes’, more jobs would likely be lost in exports than in the domestic economy. The latter are usually trust companies, craft companies, retailers or hairdressers. It’s easier for you to raise prices because customers can’t ignore it. All they can do is consume less, which will likely slow growth and prosperity.
According to conventional economists, state employees would be fully protected. The extra wage costs would simply be financed with higher budgets, i.e. with tax money.
A 13th AHV pension for people in need would be much cheaper
An option was considered in parliament to financially support only the 20 percent poorer pension households through a 13th AHV pension. This would have been achieved by improving the AHV pension formula, i.e. by providing a more advantageous pension for the 20 percent of the lowest earners. It would result in an annual increase in AHV costs of only 0.5 billion francs.
The difference between the annual costs of the ‘More AHV pension for low incomes’ option and a 13th pension for everyone – around 4.5 billion francs annually – shows how much the current proposal would mainly benefit wealthy pension households.
A historic voting template
The economic impact of the vote is significant. This hasn’t happened in a long time. Voters took the last such momentous decision in 1972: at the time they had to choose between the introduction of a ‘people’s pension’ or the three pillars of pension provision. It chose the latter. The AHV, which had existed since 1948, was then massively expanded: it became a viable pension.
The agreed additional AHV revenues amounted to approximately 3.5 billion francs (at current values). Income was mainly generated through wage contributions. The AHV premiums of employers and employees increased in two steps from 5.2 to 8.4 percent (1972 and 1975) of the AHV wage. The level of 8.4 percent was then maintained until December last year, i.e. for 48 years.
Since January, AHV contributions have increased by 0.3 percentage points, which companies are currently trying to absorb. The economic effects of this increase and the AHV reform will only be able to be analyzed in a few years.
The cost increase for the reform of the second pillar is on top of this
The next cost increase awaits companies and employees with the BVG reform. This is expected to be voted on this fall. According to Parliament’s decision, companies would have to pay 2 percentage points more in wage deductions in the second pillar for the 25 to 34 age group than is currently the case.
To this day, there is silence about these cumulative economic consequences of the AHV and BVG reforms. They would most likely be even steeper: even higher payroll deductions, even higher labor costs, even fewer jobs and even higher inflation. All in all, a threatening wage-price spiral is emerging. Neither the Federal Council nor science have yet quantified this effect.
Source:Blick
I am Liam Livingstone and I work in a news website. My main job is to write articles for the 24 Instant News. My specialty is covering politics and current affairs, which I’m passionate about. I have worked in this field for more than 5 years now and it’s been an amazing journey. With each passing day, my knowledge increases as well as my experience of the world we live in today.
