Between labour shortages and the desire to work part-time: ways out of the Swiss labour market crisis

Despite the economic downturn, Switzerland continues to enjoy a low unemployment rate and is even suffering from an increasing shortage of labour in many areas. The activation of the domestic labour potential could be a solution. However, as our employee survey reveals, confidence in the employability of older workers is declining. Respondents also show a clear preference for part-time work. This article discusses what options are available to combat the labour shortage.

After two years characterised by significant price increases and declining economic strength, the outlook for 2024 appears bleak. A silver lining, however, is that we have not yet seen a wave of redundancies. On the contrary, last year unemployment hit a historically low level and there continues to be a shortage of labour.

At first glance, it may seem contradictory that companies are actively looking for qualified staff in times of weak economic growth and austerity measures. In fact, this phenomenon is an indication of underlying structural changes that are currently taking place and of the profound challenges facing our society - in particular demographic ageing. Since the 1990s, the ratio of people of retirement age to those of working age has gone up continuously.¹ There is an increasing imbalance between labour supply and demand, which will be further exacerbated by the upcoming retirement of the baby boomer generation.

If these departures cannot be replaced, something that must currently be assumed, the labour supply will decrease in the coming years.² As a result, the challenge of creating the necessary prosperity to meet the needs of an ageing society will also become greater.

In recent years, the shortage of skilled labour has moved to centre stage. The issue became particularly evident during the Covid pandemic, when staffing shortages in the healthcare sector gained prominence. However, doctors and nurses are by no means the only professional groups to be affected. According to various skills shortage indices, in addition to healthcare professions, technical professions in IT and the manufacturing industry are particularly impacted.³ Moreover, there is not only a shortage of highly qualified specialists, occupational groups that primarily require an apprenticeship also lack workers. Even in areas that previously enjoyed an oversupply, there are signs that the supply is decreasing. There can therefore no longer be talk of a shortage of skilled workers, but of a general labour shortage.

For a long time, the simplest answer to this challenge was labour migration. However, more recently, the negative effects of massive immigration have led to increasingly polarised opinions about the impacts it is having. This has made it politically challenging to rely primarily on qualified immigration as the main solution to the skills shortage. Furthermore, the recruitment of foreign staff may even fuel the skills shortage by increasing the demand for more labour.⁴ Alternatively, attempts can be made to make better use of the domestic potential. One example often cited for this approach is Japan, a country that has been confronted with demographic change for some time and that has been reluctant to increase immigration.⁵ Instead, the country has initiated a series of reforms to mobilise its own workforce - especially women and senior citizens.

Some proposals in Switzerland, such as raising the retirement age or expanding childcare centres, are also in line with this approach. Considering these efforts, the question arises as to how the population itself is reacting to the changing conditions on the labour market. To answer this, Deloitte conducted a survey at the end of 2023 and 1,900 people participated. The results shed light on how Swiss residents rate themselves in terms of their employability and what preferences they have with regard to their working hours. These findings are particularly relevant as they show the extent to which current strategies to combat the shortage of skilled labour are in line with the needs and wishes of the workforce.

Over the last two decades, both globalisation and digitalisation have profoundly changed the labour markets: Above all, new jobs have been created, but certain types of occupation have also disappeared.⁶ For workers, these changes are often accompanied by the fear of being affected themselves at some point. A flexible and adaptable workforce is therefore in demand - due to demographic change even a workforce that is of advanced age.

In Switzerland, the majority of those aged between 18 and 64 who are still planning to work in the next five years appear to be confident that they will fulfil these requirements: around half (53%) are confident or very confident and around a third are neutral. Only just under a fifth, on the other hand, are not confident. However, it is clear that confidence decreases with increasing age: just under 60% of 18-34 year olds are confident, while only 45% of 50-64 year olds feel confident. Among the age group of 50-64 year olds a quarter even stated that they were not confident.

One explanation for the uncertainty could be the rapid development and implementation of new technologies, such as the recent progress made in the field of artificial intelligence. This is at least partially confirmed by the answers to the question of which skills or knowledge need to be improved or acquired in order to ensure employability. For example, just over half of those who previously expressed a lack of confidence stated that they needed to improve their professional skills such as technical knowledge or IT skills. The skills or knowledge rated second most important, at just under 40%, were social skills. Personal skills such as reflection and willingness to learn as well as methodological skills such as problem solving and analytical skills were each mentioned by just under a third (32% and 29% respectively).

Confidence in one's own abilities is an important prerequisite for continuing to work beyond the current retirement age. After all, employees must also have the confidence to continue working at an advanced age. According to an earlier Deloitte survey, there is certainly a willingness to do so.⁷ It will therefore be important for the future to continue to train and retrain workers in later working life so that more people can keep pace with changes in the labour market.

Amid the current challenges in the labour market, including the need for flexibility and lifelong learning, another prominent trend is emerging: the preference for part-time work.

The survey results show a major tendency towards part-time work among the Swiss population. Interestingly, only 30% of respondents aged 18-64 prefer to work full-time. A group of almost the same size would prefer a workload of 80-90%, while a fifth would prefer a workload of between 50-70% and a tenth even less than 50%. There are clear gender-specific differences: While a third of women (34%) prefer a workload of 50-70%, only 16% of men would find that desirable. The majority of men (77%) would prefer full-time work or a workload of 80-90% even if given the choice, in contrast to around 50% of women.

It also appears that the preference for part-time work increases with age, and although 18-34 year-olds would like to work more part-time than in the past, they are not the only ones today. The proportion of people who would work 100% if given the choice is roughly the same for 18-34 and 35-49 year olds. A difference between the sexes is also evident here: slightly less than 30% of women want to work full-time, compared with a slightly over 40% of men. The proportion is even lower among the older generation: only 16% of women aged 50-64 still want to work full-time, compared with 34% of men. Among women, this desire is also reflected in the current situation. Statistics from the FSO show that the proportion of women in part-time employment is highest in the 55-64 age group.⁸ The survey also suggests that women prefer a lower workload as they get older. Among 18-34 year olds, roughly the same number want to work 80-90% as 50-70%, while the older groups favour the lower workload.

It is worth noting that the main reason for the desire to work part-time – for both men and women - is not to care for children or other family members, but instead grounded in the desire for more time for personal hobbies and interests (see figure 3a). This also applies across all age groups, with the exception of women aged 35-49, who prioritise childcare slightly more. As expected, this decreases again from the age of 50, regardless of gender. Instead, at that age health concerns become more important.

In general, it can be seen that the frequently mentioned argument in favour of part-time work, the family, is increasingly falling flat. Instead, there seems to have been a cultural shift in which self-optimisation and work-life balance have become increasingly important. Of course, people have to be able to afford this financially, which is why this is partly a phenomenon of affluence. It is therefore not surprising that the biggest obstacle to working part-time is the associated reduction in salary (see figure 3b). Leaving aside the fact that many did not see any reasons that would speak against part-time work, the difficulty in reducing working hours comes a long way behind.

For those who currently work part-time, flexible working hours and work locations could be attractive options for increasing their workload, as stated by 35% and 33% of respondents respectively. Measures such as the expansion of state-funded childcare facilities (16%) or more generous parental leave arrangements (13%), on the other hand, received less support.

In conclusion, it is clear that policymakers and companies should consider alternative strategies to address the ongoing labour shortage. The following suggestions could be first steps:

1. Making gainful employment more attractive for mature workers:

Recommendations for policymakers:

With regard to gainful employment at a more advanced age, a first step would be to make the retirement age more flexible. In a representative survey conducted by Deloitte in 2019, 40% of all working people aged 50-64 stated that they would like to work beyond the official retirement age.⁹ However, only a minority of these respondents actually expected to do so. One reason for this is that the legally fixed retirement age creates an automatism in people's minds. Then again, continuing to work also makes little financial sense: anyone who receives a salary in addition to their pension has to pay additional taxes. After a certain level (an exemption amount/ “Freibetrag”), the salary is also subject to additional AHV contributions, without necessarily increasing the employee’s pension.¹⁰

The AHV 21 reform, which entered into force at the beginning of this year, already addressed some of these issues.¹¹ Among other things, it raised the exemption amount, and introduced the concept of only drawing a part of or even postponing the pension. This allows for a more flexible transition into retirement, by giving employee’s the option to reduce their employment level and compensate their reduced income with some of their pension. Although this reform has certainly gone in the right direction, it remains to be seen whether it creates a sufficiently strong incentive to continue working, especially since the ability to postpone retirement is not conditional on further employment.¹² In order to address the current labour shortages, it is important to see how the changes made unfold and, if necessary, consider further adjustments such as shifting the retirement age corridor upwards or creating more specific advantages for those who continue working.

Recommendations for companies:

A lack of employment opportunities is still a problem: Many companies will not hire retired employees, as they would incur additional costs due to higher salaries and age-related BVG contributions. Adapting working models could be a solution, and this could at the same time fulfil mature worker’s desire for reduced working hours in old age. When filling such positions it is important to avoid a 'zero gap' approach, where only employees who perfectly match the job description are considered.¹³ Instead, companies should rethink and redesign existing roles and find ways to utilise automation and AI technology. The task of experienced employees would then be to focus on ensuring the quality of the work.

With recent technological advances, if there is a concern that employees' skills no longer meet current job requirements, investing in on-the-job training could be an effective solution. This not only enables employees to continue their education directly at their workplace without losing income, unlike a full-time study scenario or external training programmes. It is also more efficient as companies can offer training tailored specifically to their needs, while taking the existing skills of their employees into consideration and integrating them into the process.

2. Increasing the value of full-time work:

Recommendations for policymakers:

With regard to the part-time trend, policymakers should carefully consider whether measures such as the further expansion of childcare centres and similar facilities are actually delivering, especially as the associated cost is always high and puts a burden on the taxpayer. The survey suggests that the majority of the population has already achieved their desired workload, even without these additional services. Therefore, adding more facilities might not actually have the desired effect of increasing work participation. Nonetheless, concerns regarding the quality, flexibility and, most importantly, the high cost of childcare, remain.

Particularly with regards to affordability, the state should focus on improving the framework conditions and on increasing the incentive to work longer hours, thus reducing the financial burden overall. An important aspect in this context is the tax system. Currently, the Swiss system is more attractive for single taxpayers or for married couples with a single earner. By contrast, married couples with double earners at a similar income level are subject to a higher tax burden, which, in combination with childcare costs, is a major disincentive to pursue full-time work. One solution would be to introduce individual taxation, which, according to estimates, could lead to a 20% increase in the level of employment for around one in seven working women.¹⁴

Finally, another important role for the state when it comes to incentivising full-time employment would be to create awareness of the impact that part-time employment has on retirement savings – an effect that many might not realise. Part-time employment often results in a lower salary, which means that the contributions paid into the social security system are lower as well. Additionally, it is generally more challenging to cut living expenses at the same rate as income decreases, reducing the ability to save privately. The pension gap is further exacerbated by the so-called compound interest effect, which means that part-time employees also miss out on the interest that would accrue on their contributions, as well as on any future earnings that would result from reinvesting all interest earnings – an effect that intensifies the longer the investment horizon is.¹⁵ The reform of the second pillar – the BVG – has the potential to alleviate some of these concerns, however overall the disadvantage compared to full-time employees remains.¹⁶

Recommendations for companies:

Many of the current challenges that childcare facilities face, such as being able to offer longer opening hours and flexible pick-up times, are directly related to the labour shortages experienced throughout the country.¹⁷ While the consequences are detrimental long-term, it should be evident that the state cannot feasibly subsidise every affected sector. Thus, in order to bridge the gap between the state policies and the practical needs of the workforce, it’s crucial for organisations to step in with innovative solutions in order to make full-time employment more attractive.

One solution could be to provide direct childcare support, whether through on-site facilities or financial subsidies for external services, thereby alleviating an important barrier to full-time employment. This move directly addresses concerns around the quality, flexibility, and affordability of childcare, demonstrating a company's commitment to an inclusive and supportive workplace culture. Additionally, integrating technology to automate transactional tasks, creating alternative career paths, expanding learning opportunities, and fostering a thriving culture are crucial. These initiatives not only make full-time roles more attractive but also help retain employees even as they progress to more demanding roles.

Hybrid work models, which blend remote and office work, are integral to this strategy. They provide the necessary flexibility while preserving the essential face-to-face interactions that reinforce company culture. Tailoring these models to align with an organisation's unique goals ensures they contribute positively to the company's overarching objectives. Moreover, these models enhance interpersonal connections that are necessary for mental well-being, creativity, and innovation. The focus on strategically leveraging office interactions to achieve a balance that benefits both individuals and the organisation is key, making full-time work a more attractive option for everyone involved.