UBS Compensation Survey: Wages to rise by 0.8 percent in 2022

Zurich, 28 October 2021 – In a survey by the Chief Investment Office of UBS Global Wealth Management, 314 surveyed companies expect an average nominal wage increase of 0.8 percent in 2022. Wage growth should therefore only turn out to be slightly higher than in 2021. The surveyed companies expect an average wage increase of 0.6 percent for the current year.

However, real wages adjusted for inflation are likely to rise only slightly. Catch-up effects after the removal of the coronavirus measures and rising commodity prices have led to positive inflation in 2021 after consumer prices fell in 2020. UBS economists are expecting inflation of 0.5 percent for the full year 2021 and 0.4 percent for 2022. As a result, the wage level is likely to rise by only 0.1 percent in real terms in 2021 and 0.4 percent in 2022.
 

Inflation is therefore causing real wages to stagnate in 2021 and increase only slightly in 2022. However, consumers should nevertheless enjoy considerably greater purchasing power. According to data from the Federal Statistical Office (FSO), the savings rate rose during the pandemic from almost 20 percent to more than 30 percent. Parts of these savings are likely to flow back into private consumption in the coming quarters and support the economy. The positive outlook is also reflected in the expectations of the surveyed companies. Almost 80 percent are also expecting an upswing in the Swiss economy in the coming year.

The economic outlook is also fraught with risks. The greatest risk is currently the difficult procurement situation. Delivery bottlenecks and rising purchase prices, which have caused inflation to increase, are fueling the worry that the economic recovery could collapse and inflation could rise sharply. The wage increase of 0.8 percent expected for 2022 corresponds to the average of the last ten years. Daniel Kalt, Chief Economist UBS Switzerland, explains: “Therefore, there is no inflation pressure to be expected from the wage side for the coming year. This makes it unlikely that the higher purchase prices will lead to a price-wage spiral, which is a prerequisite for a sustained increase in inflation. This supports our opinion that the latest inflation rise is only temporary.”

All 22 surveyed sectors expect a wage increase in the coming year. An increase of 1 percent is likely to result for two-thirds of the sectors. This includes sectors that were only slightly affected by the pandemic such as the chemical and pharmaceutical industry, IT, and telecommunications or financial services providers. 

Firms in cyclically sensitive industrial segments, such as machinery, electrical engineering and metal (MEM) as well as the watch and jewelry sector, also expect to see an increase of 1 percent. These industries have experienced a rapid recovery and are responsible for the average wage increase in 2021 turning out higher than expected last year (0.6 percent vs. 0.3 percent). “Almost every second industrial company in this year’s survey revised their wage adjustments for 2021 upwards,” says UBS economist Florian Germanier. The proportion of improved wage changes was also a good 40 percent for the remaining companies. The crisis turned out to be less severe for industrial companies than feared a year ago, says the UBS economist.

In contrast, there were no revisions for tourism sectors, including culture, sports and education, where the crisis turned out to be as serious as initially feared. For these hard-hit leisure industries, the result is zero wage growth in 2021. On average, these industries once again expect a wage increase in 2022, but at 0.5 percent they are still bringing up the rear.

UBS has conducted the annual Compensation Survey since 1989. Some 314 companies, employer and employee representation associations in 22 sectors took part in the current survey, held from 13 September to 6 October 2021. The firms represented in these sectors employ more than 90 percent of Switzerland’s working population. From 1989 to 2020, the average wage increases assessed by the survey diverged a mere 0.2 percentage points from the average salary trends (nominal wage index and CEA) published by the Federal Statistical Office (FSO).


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