Immigration into Switzerland slowing

Labor market: Pandemic slowing immigration into Switzerland

Switzerland has long been viewed as a popular immigration destination for foreign workers. But the coronavirus crisis is causing problems for the Swiss labor market too. With declining employment growth and rising unemployment, fewer foreign workers are required at the moment, and immigration is falling.

Immigration into Switzerland records sharp decline

The COVID-19 pandemic is leaving its mark on the Swiss labor market. At the start of 2020, immigration into Switzerland was strongly boosted by the robust growth in employment recorded over the two previous years and the repeal of the safeguard clause for Romania and Bulgaria. In the first quarter, net immigration from abroad was a good 30% higher than in the prior-year quarter.

The tide turned as a result of the coronavirus crisis and the associated measures. As the pandemic progressed a lockdown was decreed and Switzerland imposed restrictions on entry into the country – even extending to the closure of borders. These measures had a significant influence on immigration into Switzerland. In the second quarter of 2020, net immigration was 25% lower than in the previous quarter. This closure of borders not only made it almost impossible for foreign workers to move to Switzerland, it also greatly hampered the ability of family members abroad to join foreign workers already in the country.

Immigration into Switzerland declines due to coronavirus crisis

Swiss immigration during the coronavirus crisis

Migration movements compared to the same month of last year
Source: State Secretariat for Migration, Credit Suisse

Development of immigration into Switzerland hugely dependent on sector

Not all workers were affected by the border closures. Exceptions applied for workers from the European Union whose activity related to the supply of essential goods and services. For example, European workers active in the care, food, or IT sectors retained their right to come to Switzerland during the lockdown. The situation was very different in sectors such as hospitality and catering that were directly affected by the lockdown: These sectors recorded a sharp decline in immigration.

Immigration into Switzerland exhibits declining trend

For 2020 as a whole, net immigration of around 50,000 persons is anticipated, which would be only 3,000 fewer than last year. This modest decline is explained by the fact that immigration was still rising sharply in the first quarter, while the pandemic also had the effect of greatly reducing emigration. As an additional factor, the actual decline in immigration has not yet been fully captured due to the fact that short-term residents and asylum seekers are not taken into account in the statistics.

In 2021, net migration is expected to work out even lower – namely around 45,000 persons – due to the deterioration of the labor market. If so, this would be the first time since the introduction of the full free movement of persons 13 years ago that immigration has fallen below the 50,000 mark.

Declining trend in immigration into Switzerland

Immigration into Switzerland set to decline further in the future

Net immigration: Permanent resident population (including Swiss citizens) and employment growth
Source: State Secretariat for Migration, Federal Statistical Office, Credit Suisse

Unemployment rate rises in Switzerland and the EU

Overall, the crisis has left behind deep scars in the labor market, and not just on the immigration front. The total number of people employed in Switzerland is likely to decline by 0.5% in 2020. In 2021, the unemployment rate is expected to rise to some 3.9%, its highest level in 15 years. As a consequence, demand for foreign labor will decrease. And the fact that the labor market is recovering from this crisis only slowly is likely to prevent any rapid rise in immigration numbers.

At the same time, it is feared that Switzerland will suffer a decline in gross domestic product of 4% this year. That said, the recession in Switzerland is likely to be less severe than in other European countries, where the decline in economic output may be as much as 10%.

Rising unemployment rate in Switzerland and Europe

Unemployment rate rises, GDP collapses

Economy and labor market in Switzerland and the euro zone
Source: State Secretariat for Economic Affairs (SECO), Organization for Economic Co-operation and Development (OECD), Credit Suisse

Baby-boomer generation spurs demand for immigrants in the Swiss labor market

Once the coronavirus has been overcome, it is likely that demand for foreign labor will rise once again. The rolling wave of retirement in the high-birth-rate cohorts of the baby-boomer generation will leave a major hole in the labor market. At the end of the 2020s, a net 10,000 persons or more can be expected to leave the labor market. This hole is likely to be plugged at least in part by workers recruited from abroad.

As such, it is perfectly conceivable that net migration to Switzerland will at times rise again to the level of 60,000. On average, however, a net migration volume of slightly in excess of 50,000 appears the most probable scenario for the next few years.