Germany is losing its footing. Switzerland, traditionally perceived as an expensive haven, is becoming a model of efficiency. Longer working hours, lower absenteeism, cheaper energy, and a business-friendly administration create a cocktail that is luring German companies.

The Swiss newspaper Neue Zürcher Zeitung published an article that sent shockwaves through Germany: hourly labor costs in industry and services are now higher in Germany than in Switzerland. In 2024, an hour of labor in Germany cost an average of 49.80 euros; in Switzerland, "only" 48.90 euros. As recently as 2015, Switzerland was 20% more expensive. This is no statistical anomaly — it is the result of soaring energy costs, bureaucracy, and taxes in Germany, compounded by declining productivity.

German companies are voicing their complaints ever more loudly. High social security contributions, exorbitant electricity prices — three times higher than in the United States — rising minimum wages, and mountains of regulation have made manufacturing in Germany a luxury. Automotive and chemical corporations are relocating factories to the United States, China, or indeed to Poland and Hungary. BASF, Volkswagen, and Siemens have already invested billions in Poland — because an hour of industrial labor there costs approximately 13 to 15 euros. The difference is staggering.

In Germany, an office worker, skilled laborer, or engineer typically earns less than their Swiss counterpart. Yet they cost the employer nearly as much. Southern German industrial firms noticed this long ago. Experts at the consulting firm Roland Berger, analyzing OECD data, found that gross annual labor costs before taxes and contributions in expensive Switzerland amounted to the equivalent of $110,000 in 2024 — only marginally more than in Germany ($107,000). "Switzerland compensates for that slim margin with significantly longer working hours and higher productivity," says Marcus Berret, global managing director at Roland Berger.

The differences in working hours are striking. In Switzerland, average annual working hours per employee stood at 1,520 last year; in Germany, at 1,334. A Swiss worker thus logs nearly 200 more hours per year than a German — equivalent to almost five weeks. In the United States, the figure is approximately 1,800 hours; in Japan, 1,600.

"Measured by hourly labor costs, I can clearly confirm that Switzerland is already on par with Germany," says Till Küppers, managing director at Trumpf Werkzeugmaschinen.

According to national statistical offices, Germans effectively have 31 vacation days; the Swiss, 26. Adding to Germany's shorter working time is a high rate of sick leave. In Germany, the average number of sick days for full-time employees is 18 per year according to the OECD; in Switzerland, it is 11.

The locational advantages tilt even further toward Switzerland when one considers electricity prices and corporate taxes. Last year, the price of industrial electricity in Switzerland was the equivalent of 148 euros per megawatt-hour (MWh), according to Roland Berger; in Germany, it was 189 euros. Switzerland was thus 22 percent cheaper — a major advantage for energy-intensive industries. On top of that, Switzerland's energy mix, thanks to nuclear and hydropower, is considerably "greener" than across the Rhine, which attracts many companies.

Küppers of Trumpf points to yet another major Swiss advantage.

"The authorities there are far more helpful and business-friendly than in Germany," says the executive. Whether it concerns site expansion, a permitting procedure, or even snow on a factory roof, Swiss authorities work in a highly solution-oriented manner and are eager to help. In Germany, that feeling does not always arise.

The German Economic Institute (IW) has also recently confirmed that high labor costs are becoming a drag on Germany's competitiveness. In 2024, labor costs in German industry were 22 percent above the average of 27 comparable industrialized nations and 15 percent above the eurozone average. In other words, to produce one unit of goods, German companies had to pay more than a fifth more in wages and salaries.

IW economist Christoph Schröder expects costs in Germany to continue rising in the years ahead — not least because the shortage of skilled workers is pushing wages upward. Reducing non-wage labor costs could help, among other measures. Without reform of social security systems, Germany as a business location is heading step by step toward deindustrialization.