Why Switzerland's 10-million population cap is worrying executives

By Bastian Benrath-Wright, Levin Stamm and Allegra Catelli

 

At its headquarters in Basel, Swiss drugmaker Roche Holding AG employs workers from more than 100 countries. In less than a month, the access to international talent that it’s long enjoyed could come under serious threat.

 

On June 14, Switzerland will vote on a plan to cap the population at 10 million, requiring  a severe reduction in immigration. That would affect businesses from manufacturers to banks to tech firms, who have in recent decades brought hundreds of thousands of people into the country to fill jobs. Roche’s chairman, Severin Schwan, has called it “dangerous for our society and for the economy.”

 

 

“Switzerland cannot meet the need for bright minds on its own,” he told shareholders earlier this year. “It’s vital to keep the borders open for top talent.”

 

Roche’s international workforce is a story repeated across the country. In Zurich, Google employs more than 5,000 people from 85 countries. On the shores of Lake Geneva, Logitech International SA boss Hanneke Faber stresses the importance of international talent from the Swiss Federal Institute of Technology, which she calls the “MIT of Europe.”

 

But as Switzerland’s high wages and quality of life make it attractive for foreign workers, the population has surged above 9.1 million people. Right-wing campaigners say the situation is out of control, and voters are getting on board. Polls show the electorate split down the middle, giving the proposal a realistic chance of passing.

 

Unlike anti-immigration campaigns seen in other European countries, the Swiss push doesn’t just target asylum seekers and refugees. It would also, if needed, bar high-earning bankers, scientists and engineers from entering the country.

 

The extreme idea has alarmed executives in Switzerland's impressive roster of blue-chip firms. Novartis AG says reliable access to international talent is critical for businesses. For Nestle SA, the “free movement of skilled professionals from diverse backgrounds helps ensure that the country remains innovative and prosperous.” 

 

The danger is not only a smaller labor pool but a rupture with the European Union, Switzerland’s biggest export market. The bloc’s principle of free movement underpins wider economic accords that ensure Swiss firms’ access to a $21 trillion economy and its 450 million consumers. Under the population proposal, Switzerland could ultimately have to terminate free movement agreements.

 

However, warnings about long-term economic fallout appear to be struggling to get through to voters who see long lines at apartment viewings, expensive rents and crowded trains that are affecting them right now. The cap appears to offer an easy fix, with a message that there’s just no more space for newcomers. 

 

It’s even got traction among those who work for companies which benefit from foreign talent. In private conversations, executives at international banks say they can see some merit in the idea as a response to strains in areas like housing.

 

The so-called “Sustainability Initiative” is championed by the right-wing Swiss People’s Party, or SVP. Thomas Matter, a Zurich lawmaker leading the campaign, said the problem is immigrants who in his view don’t contribute to the economy. 

 

With a limit on arrivals, “there will be competition” over who gets to bring in people, Matter said in an interview. “Companies will push to ensure that these are actually workers — who will benefit Switzerland — and not asylum abusers.” 

 

His argument is resonating in a country where keeping the gates shut has long been popular. Switzerland’s national identity is tied to neutrality  and having no limits on its sovereignty. The country never joined the EU, for example, despite being surrounded by the bloc.

 

And becoming a citizen isn’t simple either. The process – if not married to a Swiss citizen – only starts after living in Switzerland for 10 years and can then take an additional number of years to complete. It involves language proficiency and tests on history and politics, as well as proving to local and national officials that you are “successfully integrated and are familiar with the Swiss way of life.” Many people take citizenship preparation courses.

 

The proposal on the ballot says that the population can’t exceed 10 million before 2050. Calculations based on demographic trends suggest that would mean net migration can’t exceed about 30,000 per year. That’s less than half the average over the past decade.

 

Under the plan, the government would need to start limiting immigration once the population reaches 9.5 million, which could happen in just four years. 

 

Voter approval would mark another step forward for right-wing causes in Europe after the recent success of Nigel Farage’s Reform UK party in local elections there. In Germany, polls suggest the nationalist Alternative for Germany is on track to take over its first state government later this year.

 

For Switzerland’s SVP, whose ascent began in the early 1990s with derailing the government’s bid to join the European Economic Area, it would be a milestone moment in two long-running priorities: limiting ties with the EU and tightening immigration controls.

 

The decisive question is whether Swiss voters will be swayed by the risk of a long-term fallout for the economy.

 

In a report this month, Switzerland’s Demografik think tank estimated that the population cap will curb output by as much as 12% through the end of the century. It said healthcare, hospitality, IT and construction would be particularly hit with labor shortages.

 

The government’s economic agency has said Swiss firms “depend heavily” on workers from abroad, and the influx of skilled people from the EU helped companies and boosted productivity growth.

 

Patrik Lang, chief investment strategist at Geneva-based Global Gate Asset Management, said that instead of a short-term catastrophe, effects would “slowly creep in over the next 10, 20 years, deteriorating the attractiveness of the Swiss economy.”

 

“With such an initiative, you shoot yourself in the foot,” he said.