1:12 will it destroy swiss economy?

[DC]

1:12 is an initiative by the People in my country. there will be a vote on a law that will forbid companies to pay the highest earner more than 12 times as much as the lowest earner in the Company.

goverment recommended to vote against the law, so did economic lobbies.
several companies have said they would leave Switzerland if this law will be implemented. Among those companies is Nestle. but also some of the companies that are here only because of low taxes.

while i actually like the idea , i don't know if it's a smart idea.

what do you think about it?

according to polls, there is a Chance it might get enough People to vote for it.

 

[lionking]

I just spent 2 weeks in your wonderful country, but I left with the strong opinion that citizen referenda to decide virtually all major decisions is not good government. Switzerland would better off in the Euro Zone, but people veto it, against the national interest, again in my opinion. This looks the same, against the national interest decision, if it goes ahead.

 

[DC]

I just spent 2 weeks in your wonderful country, but I left with the strong opinion that citizen referenda to decide virtually all major decisions is not good government. Switzerland would better off in the Euro Zone, but people veto it, against the national interest, again in my opinion. This looks the same, against the national interest decision, if it goes ahead.

I hope you enjoyed your stay.

what exactly made you think that direct democracy is bad government?
when I take a look at other countries there are only a few that can compete with us, and those are Scandinavian countries, all other representative democracies are worse off I think.

and most think joining the EU is against national interests. we are a democracy the EU is not democratic. we cooperate with the EU like we do with others. that is in our national interest.

 

[timhau]

I obviously don't know the details, but it does sound like a law that would be very easy to get around; reorganize the company by creating various subsidiaries which get the lowest-paid people, and as if by magic you might get a situation where everyone makes what they make now but nobody makes more than 12 times the salary of the lowest-paid worker in the company.

Of course, that's a hassle for businesses, and if they're facing a need to reorganize, they might just as well reorganize their headquarters and top management out of Switzerland. One of the big things Switzerland has had going for it business-wise is stability; envy-based populist initiatives like this are a great way of shooting yourself in the foot.

 

[DC]

envy? is it envy? I think its the idea that big differences in income create problems, in which envy surely is a part.

 

[lionking]

I hope you enjoyed your stay.

what exactly made you think that direct democracy is bad government?
when I take a look at other countries there are only a few that can compete with us, and those are Scandinavian countries, all other representative democracies are worse off I think.

and most think joining the EU is against national interests. we are a democracy the EU is not democratic. we cooperate with the EU like we do with others. that is in our national interest.

I enjoyed our holiday greatly.

I personally think, like most nations, that the best government is one where a properly elected government makes decisions in the national interest, which can sometimes be against the public interest. Things like tariff policy is a good example. Most people would vote for protection of their local industries, when this would often be a stupid and damaging decision. YMMV.

 

[theprestige]

Serious question: Why only 1:12? Why not 1:1? Why shouldn't everyone in Switzerland be paid the same amount?

 

[DC]

Serious question: Why only 1:12? Why not 1:1? Why shouldn't everyone in Switzerland be paid the same amount?

because not even the young socialists, who started the initiative, think everyone should earn the same. they even accept the fact that the same work in different companies or industries can pay more. also it is generally accepted that people with more responsibility in a company should earn more.

 

[Flo]

Serious question: Why only 1:12? Why not 1:1? Why shouldn't everyone in Switzerland be paid the same amount?

Maybe because Swiss people aren't complete idiots who live in a far-left la-la-land ?

 

[DC]

I enjoyed our holiday greatly.

I personally think, like most nations, that the best government is one where a properly elected government makes decisions in the national interest, which can sometimes be against the public interest. Things like tariff policy is a good example. Most people would vote for protection of their local industries, when this would often be a stupid and damaging decision. YMMV.

but we have direct democracy since the 1890's and we did well so far, I would even argue, better than most other representative democracies.
I don't see how a decision by a few elected ones is any better than the decision of the collective. when you decide yourself, you can blame nobody else but yourself for the consequences of your decision. and not damaging the economy is an important point for many if not most voters. we know we are already an expensive country and not the best place for companies to produce etc. and mostly when the economy lobbies like "economy Suisse" say this or that will damage the economy, people tend to listen to them.

 

[The Don]

I presume that to get around the law, organisations will fragment so that the person who cleans the toilet is employed by one company with a wage structure running from, say, 20,000 Francs to 240,000 Francs whereas the investment bankers work for a firm where the payscale runs from 1,000,000 to 12,000,000 Francs.

If the top guy in the first company isn't earning enough he'll be given an additional job for another firm.

 

[DC]

Maybe because Swiss people aren't complete idiots who live in a far-left la-la-land ?

I am pretty sure that, for theprestige, 1:12 is already a far left lala land idea and maybe it actually is

 

[timhau]

envy? is it envy? I think its the idea that big differences in income create problems, in which envy surely is a part.

Yeah, I'm sure large income differences are bad if they're due to a large part of the populace living in abject poverty. That's not the case in Switzerland. In fact, it seems like Switzerland (like Finland) has one of the lowest (post-tax) income differences in the world, so I'm not even sure there is a problem -- other than the fact that the idea "Those other people are making far too much money" (where "far too much money" is defined as "more than me")has always been a pretty easy sell. I bet the vast majority of the people who think that way don't even know what the top income-earners really do.

 

[timhau]

but we have direct democracy since the 1890's and we did well so far, I would even argue, better than most other representative democracies.

I bet you have, but you've also got probably the most invader-unfriendly terrain on the planet, which probably helped you a lot some 70-odd years ago. Some people might also suggest that your economy got a lot of help even before that by being the World's first tax haven.

 

[DC]

Yeah, I'm sure large income differences are bad if they're due to a large part of the populace living in abject poverty. That's not the case in Switzerland. In fact, it seems like Switzerland (like Finland) has one of the lowest (post-tax) income differences in the world, so I'm not even sure there is a problem -- other than the fact that the idea "Those other people are making far too much money" (where "far too much money" is defined as "more than me")has always been a pretty easy sell. I bet the vast majority of the people who think that way don't even know what the top income-earners really do.

well according to your source we are merely midfield.

 

[Segnosaur]

I don't see how a decision by a few elected ones is any better than the decision of the collective.

The problem is, "the collective" may be comprised of people who are, (not to be insulting) often ignorant of the issues they are voting on. They may vote for things that sound good in principal but are horrible ideas in practice. And it can set up situations where you get either conflicting decisions, or decisions which can tie the government's hands.

California is often seen as an example of problems with direct democracy. They have a budget deficit, yet there are various spending demands that were made via referendums. And I think there are also restrictions on raising taxes. (Admittedly, I'm not from California, and I know the situation is a bit more complex than that... but that's the basics.)

Now, its possible that Switzerland can and will avoid these problems. Maybe their population is better educated, or the rules regarding referendums make such conflicts rare. But it can happen.

...when you decide yourself, you can blame nobody else but yourself for the consequences of your decision.

Never underestimate a person's ability to shift blame to others.

 

[Flo]

Of course, that's a hassle for businesses, and if they're facing a need to reorganize, they might just as well reorganize their headquarters and top management out of Switzerland. One of the big things Switzerland has had going for it business-wise is stability; envy-based populist initiatives like this are a great way of shooting yourself in the foot.

Actually, the proponent of this idea is a businessman and stockholder (Mr Minder) who is extremely upset by the fact that the same people who made sure that the former national airline (Swissair) went belly-up, and the stockholders as well as the employees ended-up broke and fired, got enormous bonuses and raises in salaries instead of the jailtime they deserved.

Surprisingly, quite a number of businessmen support (parts of) the law.

 

[Dr. Keith]

I presume that to get around the law, organisations will fragment so that the person who cleans the toilet is employed by one company with a wage structure running from, say, 20,000 Francs to 240,000 Francs whereas the investment bankers work for a firm where the payscale runs from 1,000,000 to 12,000,000 Francs.

If the top guy in the first company isn't earning enough he'll be given an additional job for another firm.

Yep. Mexico at one point had a law that 10% of profits had to be shared with the employees.* Thus any company in Mexico with employees was not profitable, but the parent company without employees always seemed to do fine. Nice idea, just no real way to make it work.

*A not so funny consequence of this was that a company I worked with accidentally hired a mid-level manager to the parent company instead of the child company. Since he was the only employee there was a fear that he could claim 10% of the profits of the parent company for the time he was an employee. He didn't, but we never got a satisfactory answer from our counsel as to what would have happened if he did.

 

[Flo]

The problem is, "the collective" may be comprised of people who are, (not to be insulting) often ignorant of the issues they are voting on. They may vote for things that sound good in principal but are horrible ideas in practice. And it can set up situations where you get either conflicting decisions, or decisions which can tie the government's hands.

Especially when you take into account the fact that most of the propositions are written in a way that ensure confusion and mis-comprehension. This is due in part to the fact that they are usually devised in one of the official languages (most of the time Swiss-German), then redacted in more or less standard German, then translated in the 3 other national languages, and then interpreted by 5 main political organisations and a myriad of "independent" support groups (political parties and organisations don't need to disclose their sources of finances).

Discussing the issues in a local or national vote in Switzerland is fascinating: on most subjects, a huge portion of the population doesn't have a clue what their yes or no will actually entail ...

 

[Dr. Keith]

Surprisingly, quite a number of businessmen support (parts of) the law.

I can see investors supporting the law, but not businessmen generally.

From an investor's standpoint overpaid executives are a necessary evil. A law like this could reduce the problem. Or it could lead to an exodus of high level swiss executives. Hard to say. But worth the gamble from an investor's point of view.

Think of sports team owners and salary caps. Similar dynamics, some will be on board, others ill not. Both are logical, just looking at it from their own perspective. Whether it is "good" or not is a completely different question.