info-suisse April-May 2009
Law | International Affairs | Switzerland-Canada Comparisons
Canada and Switzerland rank among the countries with the highest quality of life. This is confirmed by the OECD Better Life Index where Canada and Switzerland rank No. 5 and No. 6. Yet, one indicator characterizing the well-being of a country is distinctly different in the two countries, i.e. the unemployment rate.
Unemployment -- a question of definition
According to the International Labour Organization (ILO) and the OECD the term "unemployed" refers to people who have looked for "employment" in the last four weeks and are available to start working, plus those who are waiting to start working in a job already obtained. However, this official definition is not very accurate for several reasons: A person who loses a full-time job and has now a paid job for one hour per week is classified as employed. An employed person who simply looks for a new job is classified as unemployed. People who have lost their job but do not make an effort to find a new job are not considered unemployed. And many people (especially women) refer to themselves as "unemployed", but they are simply not working.
The unemployment rate is defined as the number of unemployed persons in percent of the labour force, i.e. the number of unemployed plus the number of employed people. As it is not always clear who is part of the labour force, this is another source of inaccuracy in the unemployment statistics.
In Canada, the number of unemployed people is collected through household surveys carried out monthly by Statistics Canada. The lowest unemployment rate in Canadian history was posted in 1947 with just 2.2%. The highest unemployment rate in Canada's history was in December of 1982 with a monthly peak value of 13.1%. The current Canadian unemployment rate fluctuates around 7%. Many observers of Canada’s job market see the stagnant unemployment rate in the quality of jobs being created in recent years. A 2013 report from CIBC found that employment quality in Canada has been on a long-term decline. Canada has the third-highest proportion of low-paying jobs among the world’s wealthy countries, according to investment bank Morgan Stanley. On average, about 16% of jobs in the 35 advanced economies of the OECD are considered low-paying, but in Canada that number is around 22%. The analysts define a low-paying job as one that pays less than two-thirds of the median wage, which in Canada is currently CAD 27,600.
The number of job vacancies has a direct impact on the unemployment rate. Canada has 14.7 vacant jobs per 100 unemployed people, but in Switzerland this number is 36.8. Prospects for more jobs in the immediate future do not look encouraging. A Canadian economist says that he does anticipate some minor improvements going forward, but Canadians should not expect a "jobs windfall".
Another potential factor leading to unemployment is the tax on labour income, because higher taxes make employment less attractive. This is confirmed by recent studies of the relation between unemployment and taxation. The tax burden for a one-income couple with two children is currently 18.7%, in Switzerland only 9.5%.
In Switzerland, two unemployment statistics are published. The State Secretariat for Economic Affairs (SECO) publishes monthly figures for unemployment. However, these statistics only cover persons who are registered as unemployed with the Regional Employment Offices (RAV). But many unemployed persons are - for a variety of reasons - not in the files of a RAV office. This applies particularly to long-term unemployed people who are no longer entitled to unemployment benefits. Therefore, the SECO statistics show a far too favourable picture of the unemployment rate compared with statistics in other countries. The second statistics in Switzerland are based on the ILO definition and are published quarterly by the Federal Statistical Office. The data is collected from approximately 130,000 telephone interviews.
For a number of years unemployment was hardly an issue in Switzerland. One reason might be that Switzerland had many foreign workers with short-term permits, which could be revoked when economic times were bad. Furthermore, unemployed cross-border commuters (6.7% of the Swiss work force) did not appear in the unemployment statistics before the Swiss unemployment insurance was introduced (1977). Moreover, Switzerland had no problematic industries, such as mining, where small changes in demand often have a dramatic impact on the unemployment rate. However, during the economic recession of the 1990s, the number of jobless rose distinctly, reaching a record level of 5.7% in February 1997. An upturn in the economy at the end of the 1990s caused the unemployment rate to fall. Since 2003 it fluctuates around 4%. A seasonal increase always occurs, when the construction sector shuts down for part of the winter. The unemployment rate in the European Union (Switzerland is not a member), is currently higher than 10%.
A possible reason which prevents the unemployment rate in Switzerland from falling further is the attractiveness of unemployment benefits paid by the unemployment insurance. If you become involuntarily unemployed, you are entitled to 70% of your last income, and this up to a maximum amount of CHF 1,694 per week (in Canada only CAD 514 per week). A maximum of 74 weekly allowances can be paid. A person over 55 years is entitled to 105 weekly allowances. In Canada unemployment benefits are only paid out for a maximum of 45 weeks.