Coronavirus crisis is exacerbating inequality in Switzerland

Incomes down by 20 per cent

People on very low household incomes of less than 4,000 Swiss francs have reported that their incomes have dropped by a substantial 20 per cent on average since the beginning of the pandemic. Those in households on monthly incomes of more than 16,000 francs have seen their incomes fall by 8 per cent, as shown by a study conducted by Daniel Kopp, Isabel Z. Martínez, Stefan Pichler and Michael Siegenthaler (all from the KOF Swiss Economic Institute at ETH Zurich) together with Rafael Lalive (Université de Lausanne).

Consumer spending falling

The picture is different when it comes to household expenditure. Respondents from households on high or very high incomes have reduced their spending the most (by around 16 per cent). People from low-income households have cut their spending slightly less (by 12 per cent). According to the study, the reasons for this reduction in spending differ in part. Wealthier households have cut their spending mainly because they have had fewer needs and fewer opportunities to spend money. Although these motives are also important for low-income households, 11 per cent of households on incomes of less than 4,000 Swiss francs state that they have reduced their spending because they have had less money available.

The differing changes in spending and income patterns at the upper and lower ends of the income distribution are also reflected in the levels of household saving one year after the outbreak of the pandemic. Whereas saving has fallen significantly among low-income households, it has risen among half of households on the highest incomes. Around 39 per cent of those on monthly household incomes of less than 4,000 Swiss francs even stated that they had drawn on their savings to cover current expenses

Unemployment has affected mental health

The study sheds light not only on the pandemic’s financial consequences but also on its psychological effects. It shows that, since the outbreak of the pandemic last spring, the mental health of people on low incomes has steadily worsened, despite having temporarily improved. Individuals from high-income households, on the other hand, fared somewhat better during the summer months. People affected by unemployment in particular have often reported being in poor health.

Trust in politics is declining

The study data also show that the initially high levels of trust in the Swiss Federal Council to manage the coronavirus crisis have declined over time. At the beginning of the crisis just under 20 per cent of respondents said they had little or very little trust in the Federal Council. By October 2020 and January 2021 this share had risen to 40 per cent. Respondents from low-income households have slightly lower levels of trust in political leaders than respondents on high household incomes.