Gregory A. Fossedal, Direct Democracy in Switzerland, 2002.

14
Welfare

At a superficial glance, Switzerland has very little experience with welfare as Americans or other Europeans know it. This is true in a double sense. First, Switzerland simply never established (until 1990) an income support system for the poor that compared in scale with those of Europe or the United States.1 Second, the country enjoyed relatively low unemployment rates and reasonable wages for many years, so that there was less need for transfer payments to help the poor. Some would argue that the relatively low level of transfer payments is a substantial reason for the low level of poverty.

Whatever "the cause, the combination of policy and economic condition is such that among the Swiss, welfare was not a matter of great controversy until the last decades of the twentieth century. Then, a combination of somewhat higher unemployment rates, tight national and communal budgets, and the issue of immigrants receiving public assistance combined to make welfare at once a larger factor in the Swiss economy, and more controversial.

The country's prosperity -- and the evenness of it -- is such legend that it led me to an interesting, if in the end embarrassing, discovery. Riding the train into Zurich from Bern, around the region of the airport and perhaps ten miles West of the center of the city we passed through an industrial belt of what seemed to be warehouses, large factories, and light chemical or pharmaceutical plants. Suddenly, near the tracks and in some cases squeezed in between the tracks and the factories, little clusters of shanty houses began to appear, in clumps of fifty to 200 units by my estimate. As shanty towns go, these were nice. The rows were neat. The houses were made out of what appeared to be cheap wood (better than cardboard) and ribbed fiberglass roofs that looked as if they would, at least, keep out rain and snow. Some of the houses even had Swiss flags or the flags of other nationalities or cantons or organizations flying out in front, and all were laid out in rather neat rows. The places seemed strangely deserted, even for a working-class neighborhood. There were very few moms and small kids, if any. Decently dressed people, usually men or couples and often of obvious non-European ethnicity, occasionally wandered up and down the tidy rows of shacks, sometimes beating thick work gloves together. "Swiss ghettos," it struck me -- the nicest ghettos in the world. But still ghettos: a mild surprise.

My traveling companion aroused my suspicion further when he responded evasively -- it seemed to me -- when asked about these obvious little pockets of poverty among the Swiss prosperity.

"What are those, Hans?"

"What are what?," he answered blandly.

"Those -- over there." My hand pointed to Northwest.

"The one on the right looks like it is storage for ABB," he answered. "I don't know about the one on the left." But he was looking too far out.

"No, not the factory. The little houses in between us and the factory. There."

"Houses?," he asked.

"Yes, Hans, the little shanty houses right there." It felt bad to corner him and make him explain something negative about Switzerland. But these little unpleasant truths, it seems to me, are what give a country's strong points their real merit.

"You mean the Schrebergarten" he asked, keeping it up.

"Well, yes, if that's what they're called. What are those -- company houses for temporary Gastarbeiters or something?"

"Gregory, those are gardens. People come out and work on them in the evenings and the weekends. Some of them grow a few vegetables or flowers for their home, and some just like the gardening.

"What did you say you thought they were?"

Thus my discovery of shanty towns, so promising for a few minutes, turned out to be another Swiss efficiency, almost an annoying self-parody.

You have to look closely at Switzerland -- and do more than look, it turns out -- to avoid falling into one of two opposite errors. One error is that Switzerland has no poverty (and little or no welfarism) at all. The other is that the Swiss have huge, complex "hidden" class problems lurking just below the surface, or a developed welfare system along the lines of Sweden, Britain, or France. Neither is really the case, or to be more precise, each is partially true.

Swiss poverty rates place Switzerland near the bottom of the world in terms of social want. Measurement is rendered difficult by the typically federalist Swiss system of social assistance, and its informality and adaptation to individual cases. Surveys, however, suggest that about 5.6 percent of the population had an inadequate income to meet basic physical and health standards. Even this figure does not include some types of payments and assistance, though. And this figure is for the year 1992, which was just after a fairly sharp recession in Europe (coincident with the relatively mild U.S. recession of 1990-91). In fact, then, compared to many affluent countries where such statistical poverty rates often hover close to 10 percent, Switzer-land has enjoyed a poverty rate of about half the developed-country rate, and for most of the time, one-third or less.

Little of this poverty, while real in a sense, is hard core. That is to say, few of the people who may be poor one year in Switzerland are poor two or three years later. For example, about one-quarter of all the statistically poor are twenty to twenty-nine years old These are typically years in which young men and women emerge from school, dabble in different part-time jobs, and so on. Many U.S. youngsters are "poor" in the year they graduate from high school or college, since they may then enter the work force, but for only half a year or less. In Switzerland, persons aged forty and above make up about 54 percent of the population, but account for only about 37 percent of all the poor. Divorced men (10 percent) and women (20 percent) make up another significant chunk of the poor. Again, while these people often suffer real hardship, they are also often likely to land on their economic feet within a year or two. They are temporarily, not semipermanently, in need.

The shape of poverty in regional, ethnic, and other terms is happily even. That is, in Switzerland what little want there is does not tend to associate itself strongly with different races or other groups. For instance, of all the statistically poor, about 74 percent are of Swiss birth, and 25 percent are foreign born -- roughly their proportion in the work force as a whole. Similarly, 65 percent of the poor live in cities, and 35 percent in the country. About 64 percent live in a German-speaking region, 27 percent French, and 9 percent Italian -- again fairly close to the nation as a whole.

This spreading of poverty, where a little poverty there must be, is a great blessing, because it means that economic need does not readily spill over into racial or other frustration. One sees it even in the layout of major cities such as Zurich and Geneva. While any city has high and low rent districts, the ghetto is largely unknown among the Swiss. It is partly the result of Swiss decentralization, and partly makes it especially effective. Another contributing factor is the strength of Swiss education, especially vocational education. And then there is, according to former Zurich Mayor Sigmund Widmer, "the old-fashioned work ethic of Zwingli and Calvin." Widmer recalls a number of instances in which his constituents would keep a job rather than accepting unemployment insurance or public assistance -- even though they could have made nearly as much money for a time without having to work. "The Swiss would rather work," Widmer argues.

Welfare programs to respond to these needs, like many other Swiss policies, vary widely by canton and community. For basic family assistance, the federal government contributes only about one-eighth of payments, at 12 percent; the cantons, 34 percent, or about one third; and the communities, close to half with 45 percent.2

The result is not merely a uniform, national system administered locally, because the cantons and the communes have adopted distinctive approaches to social payments. The amount of spending per inhabitant on welfare varies widely by canton. As Figure 14.1 shows for selected cantons, the average combination of Soziale Wohlfart (social welfare) and Fiirsorge (assistance) is 2,200 Swiss francs per month. This ranges, however, from a high of 4,500 francs a month in Geneva, and 3,400 in Basel to as little as 1,200 francs in Uri and 1,100 in Schwyz and Appenzell Innerhoden. Part of these differences reflect higher living expenses and poverty rates in the larger cities, but they also reflect a higher affinity for such transfer payments in general in the different regions.

Rates of statistical poverty, especially those that measure poverty before transfer payments are accounted, are also in turn influenced by the subsidies available through social welfare programs.

There is equal or even greater variation between how different individual cases are handled within a given community. Even in Geneva, where the social welfare system is relatively more rationalized and bureaucratized and less personal and flexible, social payments can be significantly adapted. "We try to work with people, find employment, adapt the program to their needs," Monica Tross, a social welfare worker for Geneva canton, explained. This can include increasing payments for families where, say, someone is engaged in a training course, or where medical or other family circumstances have intensified the problem of a job loss. It can also mean decreasing them for people who aren't getting out and aggressively trying to get off the dole. There aren't a large number of such cases -- "five or ten percent, somewhere in there" -- but the ability to make them has an impact on the way the entire system functions.

In other cantons and communities the flexibility to adjust to different circumstances is even greater. "We have a great deal of ability to decide how to handle the situation of people who need social assistance," a member of the Aarau town council said. "We have certain normal practices, but we can decide what to do by the person or family."

Indeed, family assistance among the Swiss is more family-based than in much of the West. On the one hand, couples struggling to make ends meet, but who have not divorced, do not necessarily lose benefits they might need. On the other hand, the Swiss look to the extended family -- parents, brothers and sisters, in some cases even aunts or uncles -- to provide help too. In bureaucratic systems, the need to reduce such factors to formal codes often leads to a labyrinth of rules with little flexibility. Under the local, pliable system of the Swiss, such subtleties are incorporated into the program, but not necessarily the written law.

"We had a situation with a young man in my community," Giancarlo Dillena, a newspaper editor in the Ticino, recalls. "A young man with a problem," perhaps drugs or alcohol. "The village made a job for him, gardening and doing other chores. These were things that needed to get done, and it was better for him and the town than his having to continue on assistance."

Of course, this is the kind of flexibility many social welfare advocates in other countries plead for. In most cases, their publics would like such com-mon-sense adaptability as well. Such flexibility, though, does not come without a price. Sometimes programs don't work, and in Switzerland, when they don't there are fewer regulations to hide behind. Where there is human discretion, human mistakes are more clearly visible as such. During my stay in Southern Switzerland, a case in the canton of Valais appeared in the local newspapers about a man who was drawing assistance from three different cantons, amounting to a tidy sum in total.

Likewise, allowing officials to reduce or increase payments within reason would be less feasible in countries without the tradition of honesty and self-government of the Swiss. Larger amounts could be used as small payoffs or other corruption. Smaller amounts would bring lawsuits from persons arguing they were entitled to full payments. The position tailored for the young man in the Ticino, in some countries, couldn't be offered legally -- it would violate a union contract or other agreements. A young woman for whom a similar setup was established in Bern, running a part-time day care center while receiving some assistance, would probably have run afoul of child care laws and much other red tape in the United States, France, or Canada. These kinds of human arrangements, if they were allowed, would inevitably lead to occasional abuses, followed by a scandal in the press, and corrective legislation and regulations.

Thus at least a part of Swiss welfare system's functionality rests on factors outside the system. If it encourages citizenship, as it surely does, it is also enabled by citizenship. Swiss welfare policy, like the Swiss topography, is thus characterized by sharp changes and extremes -- not a smooth, flat, equal plane. It can be very generous, almost extravagant, in one case, and frugal, almost harsh, in another.

Viewing the evolution of social welfare in Switzerland over time, we can learn much about the economic philosophy of Swiss voters -- and about the tendencies of the Swiss political system and its interaction with trends in Europe and the United States.

Welfarism began in Europe in the nineteenth ccntury, with Germany, France, and Britain all expanding their programs into the early twentieth century. The Swiss were relative laggards. Some attributed this to the country's lack of affluence. At the time, Switzerland was still emerging from centuries as a medium- to low-income country in the European context. As well, the country's politics resisted change at the same time as Swiss traditional beliefs resisted anything outside the Calvinistic framework of work, thrift, and personal responsibility. "People not only dislike Bismarck's military system," observed an 1874 Neue Ziircher Zeitung editorial, "but his economic methods," referring to the German's use of social welfare programs to buy off potential opposition to his empire-building militarism on behalf of the Kaiser. A similar round of social-service growth hit the United States after World War I and in the Great Depression, but was relatively unknown in Switzerland.

For nearly a century, the Swiss didn't seem to need social welfare either. Unemployment topped 1 percent only twice in the twentieth century -- first during the Great Depression, when it never rose above 5 percent, and the second time during the 1990s, by which time the Swiss had constructed a relatively extensive social welfare program. Of course, many social scientists would argue that there was a connection -- that the lack of significant transfer payment programs helped keep employment high, and the Swiss emphasis on productivity generated sufficient goods and services to keep the economy functioning through the engine of private-sector growth. As reviewed earlier, economic initiatives that aimed at social spending fared poorly throughout the century and into the postwar 1950s and 1960s. There were two major exceptions from 1900 to 1975. The first was a gradual acceptance of government-assisted pension schemes from the 1920s onward. The second was the establishment of a labor concordat after World War II that raised wages and established further unemployment benefits -- but at the same time, established an almost strike-free continuation of many years of labor peace through the end of the century.

For whatever reason, the Swiss resisted the formation of the modern welfare state for many years. Social democrats in Switzerland and outside saw this as evidence of backwardness by the voters, or the system, and there is certainly a stubbornness in the Swiss character. On the other hand, when one looks at a chart of Swiss unemployment for the century and sees the long strings of "0.4 %, 0.3 %, 0.3 %, 0.2%" year after year, one sees a case for the Swiss resistance.

From 1974 to 1981, Swiss voters approved some national initiatives establishing funding for greater unemployment insurance and family assistance programs -- and many more cantonal referenda along the same lines. By the time these systems were becoming established there was a general economic boom in the West and in Swiss export industries in particular. Swiss expenditures on social welfare remained tiny, fueled by high rates of employment through the 1980s.

In 1990, Switzerland finally suffered an economic slump while having significant welfare programs as backdrop. Clearly the cause was not simply the fact of such benefits, because they had now been in place for some years without producing falling employment or a recession. They may, however, have exacerbated the troubles once they were set off by other events.

The collapse of the Soviet Empire in 1989 brought a flood of immigrants and asylum seekers not only to Germany but to the rest of Europe. Other countries, other than West Germany with its fellow Germans, were less welcoming than the Swiss with their tradition of hospitality to the foreigner. Not long afterward, the beginning of ethnic and religious unrest in former Yugoslavia created a new wave of humanity. While all this was going on, a mild recession hit the U.S. in 1990 through 1991 -- a recession that was felt more severely in Europe with its greater dependency on foreign oil. Perhaps most unfortunately, the Swiss chose this time to permit a crackdown on immigration in the most perverse way. Fearful that immigrants were "taking jobs" from skilled Swiss or dragging wages down for the less skilled, the confederation passed tighter restrictions on work permits for foreigners, and many cantons increased enforcement of the same regulations. The result was that many asylum seekers could not work -- but did receive social welfare assistance. Paradoxically the Swiss were making it difficult to work, and easier to be on the dole.

Finally, the taxes needed to pay for all these programs had climbed gradually in the 1980s -- and were raised significantly in 1990 through 1991. The higher tax rates were a drag on private sector activity and employment, driving more Swiss into the arms of public assistance.

The combination of these forces and policies was a deep recession indeed in Swiss terms. Unemployment topped 4 percent nationally for the second time in a century, and in some cantons exceeded 6 percent. Geneva, Vaud, Basel, and even Zurich went into an associated fiscal crisis from which they had still not fully recovered at the end of the decade. From 1989 to 1994, in each of those cantons, social welfare expenditures more than tripled. Swiss expenditures on unemployment benefits surged to more than 5.8 billion francs in both 1993 and 1994 from 500 million in 1990.

The nature of the Swiss system, however, put the Swiss in a good position to adapt to this new experience. For one thing, social welfare as a significant economic factor was a new thing to the Swiss. Switzerland hadn't had these programs long enough, in 1990, for social welfare to have settled into a hardened series of coalitions and expectations, resentments, and set battles. The politics of welfare, in short, were fluid. Furthermore, given Switzerland's still relatively strong economic position, it was possible to make adjustments to programs without touching off an economic crisis. Four percent unemployment isn't as good as 1 percent, but it's still relatively low compared to most of the developed world -- indeed, a 4 percent jobless rate would be a thirty-year record for the United States or most of Europe.

Perhaps most important, the federalist nature of the Swiss system allowed and even encouraged experimentation with different changes. Some cantons and communities simply cut payments under fiscal pressure, as Peter Frey reported in the Aargauer Zeitung. An intercantonal commission that some hoped would standardize social welfare payments instead helped spur a competitive series of downsizing and program reform in 1994 and 1995. Some cantons cut benefits; others asked for (and received) a greater contribution from the confederation; still others established limits that make it more difficult to continue receiving social welfare payments beyond a period of several months.

The net impact was to make welfare easy to get on, but hard to stay on -- resembling the reforms enacted in the United States, Germany, and elsewhere in the 1990s after a much longer experience with welfarism. Looked at from one point of view, it took the Swiss eighty or ninety years to catch up with the U.S. and Europe. On the other hand, it took the Swiss only five years to reform their system in much the same way that Europe and America were only able to enact after tortuous decades of rancorous debate.

This pace -- now maddeningly slow, now breathtaking in its methodical quickness -- is vintage Swiss. For instance, it took some Swiss banks decades to fully grapple with the problem of dormant accounts left over from World War II. Yet it took the Swiss only a few months after the rise to power of Adolf Hitler to gear up a major rearmament effort. By 1935, a major anti-German cultural and ideological resistance was underway at a time when most of the West was still appeasing the German dictator. In any case, it is wrong to think of the Swiss system as always being slothful, any more than it fits the image of democratic impulsiveness feared by political philosophers. Rather, democracy in Switzerland is capable of moving fast -- but often, it seems, chooses to deliberate, and move slowly.

During a visit to the Schrebergarten a few days after my investigation from the train window, a man of about fifty-five accosted me. He said he heard there was an American making a study of Swiss democracy and as a newcomer or outsider himself he had something to say. Dark-skinned, fluent in neither German nor French, he appeared to be of Middle Eastern descent, Yugoslavian or Iraqi, perhaps.

"Switzerland is the most -- democracy," he paused. "More in the democracy -- ," he continued, looking, it seemed to me, for the adjective. His English wasn't bad.

"The most demo-cratic, you may want to say," a young man, apparently his son, added.

"Yes, the most demo-cratic. I do not say anything bad about America, which is a great country. But Switzerland has the best democracy, even better than yours. It is good that someone studies it." He was under the impression, it seemed to me, that this was some kind of official mission.

The young man knew about my interest in immigrants and the working class generally, and offered that the older one, named Karl or Karlo, was working occasionally, but also receiving some assistance.

"No, no," Karl corrected, perhaps not getting the full gist of what the younger man had said. "I am working this week," he said, dusting some dirt off his hands. He was evidently maintaining some of the gardens for people too busy to tend them on their own. "There are not payments."

"But next week, if you do not -- then you will get some help."

"Well, yes, if I need that I will go see the woman who handles that in our town, and I will be back on again -- for a week or two. I hope it would just be for a couple of weeks."

There was a lot going on in that situation, it seemed to me. On the one hand was a social welfare program sufficiently free from red tape -- sufficiently human -- to fit itself into a family's situation in that way, like a glove rather than a one-size-fits-all mitten. At the same time, there was the man, more of a citizen (though he almost certainly was not one yet) than many people in many countries of their birth. And there was his sweet, simple disposition, his propensity to accept what was his from the system, but not advance claims of entitlement when assistance is not needed.

Those Schrebergarten became an apt metaphor -- in Switzerland even the shanties are symbols if not of affluence, certainly of a mentality that views dirt as a place to grow something, and a layoff as an opportunity to do some other kind of work.


Notes

1. This is a reference to "welfare" programs for the poor and unemployed. This does not include state and private pension plans, private insurance, and other forms of income support and charity.

2. Again we must keep in mind that while these levels of government correspond administratively with those of the United States or Europe, each level is significantly more intimate than its U.S. or European counterpart. A welfare recipient dealing with a U.S. state government is dealing with a unit, on average, of some 5 million persons; the average population of a Swiss canton is about 300,000. The source for these and other general statistics that follow include interviews with cantonal and community officials, popular press, and the Swiss Federal Statistics Office, Statistisches Jahrbuch der Schweiz/Annuaire statistique de la Suisse, published by Neue Zürcher Zeitung, Zurich, 1998, pp. 340-80.