Coronavirus pandemic and rising inflation risk put income distribution to the test

With the Swiss Income Monitor, Banque Cler highlights the evolution and distribution of wages and income in Switzerland, answering the following questions in particular: did income increase from 2007 to 2018? What are the regional differences? How many millionaires are there in Switzerland?

In addition, two themes influence the distribution of income in Switzerland today:

1. The pandemic, which we analyzed in 2021 in the report Distribution of income in Switzerland in times of coronavirus.
2. The current rise in inflation, which we discuss in the 2022 report, The Effects of Inflation on Income Distribution.

Main results of Banque Cler’s Swiss Income Monitor for the new period (2007-2018):

• In 2018, the median household income in Switzerland was around CHF 53,000, an increase of CHF 3,900 (+7.9% in total, +0.8% per year) since 2007. (The median income of is obtained from the net income after deductions, such as pillar 3a contributions, excluding tax deductions. This median income corresponds to the middle value, i.e. the one at which 50% of income is lower and 50% is higher .)
• Even if the period observed was marked by major economic difficulties such as the financial crisis, the euro crisis and the abandonment of the floor rate, the distribution of income in Switzerland has remained at a very stable level.
• The cantons within which the distribution of income is the most balanced are those of Uri, Aargau and Glarus, while major disparities are observed in those of Zug, Schwyz and Geneva.
• In 2018, the canton of Zug (CHF 112,900) had the highest average income (sum of all household income divided by the number of households), while the cantons of Jura (CHF 54,100) and Valais ( CHF 51,300) were at the bottom of the ranking.
• Half of the households in the canton of Zug have an income above CHF 67,800, with Zug again at the top of the ranking.
• Between 2007 and 2018, the number of millionaires increased by no less than 53% to exceed 330,000 households, or 6.2% of Swiss households in total. With 13.4%, the canton of Zug records the highest proportion of millionaires in relation to the total population, followed by the cantons of Schwyz (13%), Nidwalden (10.6%) and Zurich (9%).

In collaboration with the Swiss economic research institute BAK Economics, Banque Cler analyzed the distribution of income in Switzerland and in the cantons between 2007 and 2018. The database used is the net income per Swiss household at cantonal level for years 2007 to 2018 as reported by the Federal Tax Administration (AFC). In the case of two-income households, it is the amount of money earned that is taken into account. The 2018 data is the most recent we have. The results are documented and presented in graphical form every year in Banque Cler’s Swiss Income Monitor.

Mats Bachmann, head of the CEO office of Banque Cler, sees these results from two different angles: In Switzerland, income increased significantly between 2007 and 2018. This increase concerns both the average income (9.7%) and median household income (7.9%), which is fundamentally positive. At the same time, at the cantonal level, there are clearer differences with regard to the level of income as well as inequalities in this area. Thus, in the canton of Zug, the median income is CHF 67,800, while it is only CHF 42,000 in Valais.

Median household income increased by 7.9% in Switzerland
Incomes increased significantly in Switzerland between 2007 and 2018. This observation applies both to average income (sum of all household incomes divided by the number of households) and to median household income (middle value, i.e. that is to say the one in which 50% of the income is lower and 50% is higher). The median household income is the most appropriate quantity for our analysis, because it makes it possible to limit the biases in the result induced by very high incomes. Having benefited from the positive economic development in Switzerland, it stood at approximately CHF 53,000 in 2018. During the period observed, it increased by CHF 3,900 compared to 2007 (+7.9% in total, +0.8 % per year).

The median household income is the highest in the canton of Zug (around CHF 67,800, or +12.6%) due to its advantageous taxation. This canton is followed in the ranking by those of Ble-Campagne (59,500 CHF, +4.6%) and Zurich (59,000 CHF, +10.5%). It is in Ticino (CHF 44,500, +0%) and Valais (CHF 42,000, +9.1%) that the median household incomes are the lowest.

Household income in CHF, growth rate in %
Source: AFC, BAK Economics

The canton of Zug, where taxation is advantageous, has the highest incomes; the cantons of Valais and Ticino bring up the rear
Overall, the distribution of income in Switzerland appears to be balanced in comparison with other countries, even if the Scandinavian states and our two German-speaking neighbors show less marked income disparities.

Between 2007 and 2018, the distribution of income remained stable in Switzerland, even if the country had to face several turbulences (financial crisis, euro crisis and abandonment of the minimum exchange rate). However, more substantial disparities are observed at the cantonal level:

• The 10% of households with the highest median incomes vary between a minimum income of CHF 105,500 in the canton of Valais and a minimum of CHF 196,700 in the canton of Zug (Switzerland: CHF 129,800). This value thus exceeds the 100,000 CHF mark throughout Switzerland.
• Half of the households in the canton of Zug have an income above CHF 67,800, with Zug again at the top of the ranking.
• It is followed by the cantons of Ble-Campagne (59,500 CHF), Zurich (59,000 CHF), Aargau (58,300 CHF), Schwyz (58,200 CHF) and Nidwalden (58,000 CHF).
• Conversely, half of the households earn less than 42,000 CHF in the canton of Valais, less than 44,500 CHF in the canton of Ticino and less than 45,600 CHF in that of Jura.

Impact of inflation and pandemic on current income distribution
For more than ten years, there have been no real strong price increases in Switzerland and many other industrialized countries, but in 2021 inflation has resumed. Now, key questions arise about its impact. For Martin Eichler, chief economist at BAK, it is entirely possible that current developments will influence the distribution of income: The surprise return of this old acquaintance could widen income inequalities in Switzerland. However, certain elements suggest that the phase of inflationary growth in which we find ourselves will remain brief and that it will cease during the first half of 2022. It is above all the coronavirus pandemic, still very present, and its consequences which should continue to mark the evolution of income distribution in Switzerland.

For any additional information:
Natalie Waltmann
Communications Manager
Banque Cler SA, CEO office
Telephone: +41 (0)61 286 26 03
Email: [email protected]