A Landslide Against A $25 Minimum Wage

by Jonah Shepp

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Jordan Weissmann is “kind of bummed” that Swiss voters rejected a referendum this weekend that would have enacted a minimum wage of 22 francs (about $25, or $14 adjusted for purchasing power—the highest in the world by either measure):

As I’ve written here before, one reason we should all be at least a little wary of efforts to push the minimum up to $15 in places like Seattle is that there isn’t a whole lot of historical precedent, either here in America or abroad. According to the OECD, Luxembourg currently has the world’s highest minimum wage, adjusted for purchasing power, at $10.70 per hour. With it’s enviably low 3.2 percent unemployment rate, Switzerland would have been a pretty safe place to test-run something more ambitious. After all, you’re talking about a generally high-pay country—only a tenth of Swiss workers earn less than the proposed minimum—where, even with some job losses, you’d still have a remarkably robust labor market. Alas, it’s not to be. The economics profession can only mourn.

Dan Kedmey thinks the vote helps define the limits of the minimum wage debate:

In the US, 71% of voters back President Barack Obama’s proposal for a minimum wage hike. In Germany, 81% of voters supported a similar proposal from German Chancellor Angela Merkel. But the scale of Switzerland’s proposed hike, vaulting it two times ahead of the most generous minimum wage rate in the world ($10.66 an hour, compliments of Luxembourg), clearly had Swiss voters on edge.

The referendum offers an interesting test case of where in the voters’ mind a wage hike leaves the realm of economic reality and soars into Alpine-high levels of wishful thinking. After all, if the Swiss bill became U.S. law tomorrow, it would require instant wage renegotiations for 620 occupations across the country, all of which pay less than $25 an hour on average.

Leonid Bershidsky calls Switzerland a poster child for direct democracy:

The Swiss have proved their wisdom by throwing out most crazy ideas, such as the abolition of the armed forces or price controls on books, as well as politically charged ultraconservative proposals such as ending health-insurance coverage for abortions. They are down-to-earth people who recently approved extra investment in rail infrastructure but voted down the purchase of new fighter planes. If a political party had their voting record, it would have been a reasonably liberal, moderate, centrist one.

I suspect people in most countries would vote as cautiously and reasonably as the Swiss if they knew their decisions would be immediately put into practice. Like any middlemen, politicians are hanging on to their intermediary role, talking of the populist threat and ordinary people’s lack of specialized knowledge. There is, however, nothing special about the Swiss: They are no smarter than Germans, Thais or Ukrainians, just wealthier — and wealth, according to Bonoli and Haeusermann, is not a good predictor of voting patterns. If they can vote responsibly, there is no reason why direct democracy shouldn’t work elsewhere.