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Swiss labour market recovery boosted by effective social partnership, ILO-World Bank report says

A new ILO-World Bank report and online data tool presented at the 101st International Labour Conference shows that the Swiss labour market – even though it was hit by the crisis – recovered faster than in other countries, partly because of an intensive social dialogue between government, employers and workers.

News | 07 June 2012
This trend is one among the many findings identified in a joint ILO-World Bank report: “Inventory of Policy Responses to the Financial and Economic Crisis". The study accompanies a new online data tool that includes the first comprehensive and largest stocktaking of countries’ jobs-related policy response to the recent global crisis.

“GDP growth in Switzerland turned negative in 2009 (-1.9 per cent) and the unemployment rate reached its peak at 4.5 per cent of the labour force in January 2012. However, unemployment rates went back to pre-crisis levels in 2011. The report helps understand why Switzerland did better than most of its neighbours,” explains ILO economist Catherine Saget.

The study especially highlights the tradition of social dialogue existing in Switzerland that made it possible for social partners to sit down together and introduce the necessary reforms. Social partners are represented in tripartite committees of different labour market policy institutions at the federal and cantonal level. They are involved in a pre-parliamentary consultation process on major issues. There are also many informal discussions.

During the crisis, these formal and informal institutional settings proved to be very useful. Collective agreements on work-sharing were negotiated for each sector. It led to reduced working hours for employees in exchange for keeping their position, thus limiting the number of job losses.

Another reason for such a quick recovery lies in the employment policies that were set up. Three fiscal packages were implemented in 2009 and 2010, representing a fiscal stimulus of about 0.6 per cent of GDP. They focused on infrastructure development and energy saving measures. But they also included additional funds for wage subsidies and training measures. The fiscal package was flexible with a share of funds to be disbursed only if the unemployment rate exceeded 5 per cent, which did not happen.

Short-term work schemes also played a major part in limiting job losses. Without this instrument provided by the unemployment benefit system, the unemployment rate would have been 0.6 per cent higher, concludes the joint ILO-World Bank database.

A reform of unemployment insurance that came into effect in 2011 had the objective to put unemployment insurance on a long-term viable financial basis and prevent the accumulation of debts over the years. Savings were estimated to reach CHF 622 millions. The rise in social security contributions created additional receipts for about CHF 486 millions. The revision entailed tighter eligibility criteria, and reduced benefits.