Why Is Cost of Living So High in Switzerland?12 July 2021
Three Swiss cities, Zurich, Geneva and Bern, are constantly being listed among the most expensive places to live in the world. What are the reasons for that?
It has been known for many years now that Switzerland is quite expensive country to live in. Every year major Swiss cities land in top 10 of the most expensive global cities. Cost of living is so high, many people decide to live abroad and only work in Switzerland – so-called cross-border workers take advantage of lower costs of living in France, Germany, Italy and high salaries in Switzerland. The top 20 most expensive global cities list issues by Mercer recently saw Zurich in fifth spot – behind only Ashgabat, Hong Kong, Beirut, Tokyo – Geneva in the eight, with just Shanghai and Singapore between them, and Bern in the tenth, just after Beijing. Switzerland is the only country with three cities in top 10 and the only European one. Mercer focused in compiling the ranking were international employees, including cross-border workers. “The rankings demonstrate how currency fluctuation and shifts in the prices of goods and services can affect the purchasing power of expatriate employees”, the company said in a statement when issuing data. The ranking was taking into the account 209 cities around the world and the comparative cost of more than 200 items, like food, transportation, housing. In many other similar rankings Swiss cities end up on top. This cause to question why Switzerland is so expensive?
High prices at current euro exchange rate
Prices in Swiss major cities and the whole country are indeed very high. Looking at Europe, only Norway and Iceland have similar. Studies shows that for a basket of consumer good people in Switzerland pay 168 francs comparing to average 100 euros in the European Unions – as per latest average euro exchange rate 100 Euro are 109,43 Swiss francs. Apart from goods especially high prices are for housing, public transportation, annual health insurance schemes. Those living here are used to these prices – and they also have high salaries to match them – but for many cross-border workers, tourists or people coming here for business trips they come as a shocking thing.
Reasons for High Costs of Living
Why is Switzerland so expensive? One reasons, often cited by experts, is lack of competition and trade protectionism. The latter is a policy that protects domestic industries from foreign competition, so it is in fact triggering lack of competition in the country. Some Swiss products have no foreign competitors that would made their prices lower. Additionally, foreign suppliers and producers are exploiting the fact that Swiss have high salaries and great purchasing power by inputting higher prices of goods and supplies. A study conducted by the University of Applied Sciences of North-western Switzerland showed that Swiss buyers are overpaying for their purchases by more than three billion francs. No wonder many people go shopping abroad, to France, Germany and Italy. Also, e-commerce goods and products are more expensive in Switzerland than in other countries. Even when people want to shop abroad, they are often re-directed to Swiss site, where prices are higher. Additionally, in Zurich and Geneva housing is very expensive, as there is high density of population. This drives up prices of land and real estate.