Why is Switzerland so expensive?

Lauren posed this question on my previous entry and it got me thinking: Why is Switzerland so expensive? Especially compared to all the European countries surrounding it?

After living here for a few years, I do have several suspicions why.

(Photo via socialjusticefirst)

First is that Switzerland IS an island of sorts… we are located in the middle of the EU, but not part of it. This makes a huge difference with import and export and VAT going between the different countries, especially if goods are made in one country, filled and assembled in another and then delivered and sold in another country.

The EU-island position also affects supply and demand on a local level as well. Many places online will ship everywhere in the EU but not to Switzerland. Try buying something on Ebay.de and asking them to ship it to Switzerland. No bueno. It’s why we had to ship our Tempur mattress to a town just over the border in Germany and then pick it up ourselves and pay customs tax going back into Switzerland.

The second reason this place is expensive is that minimum wage is much higher in Switzerland. Labor and services all cost more, so the actual prices of the products need to be able to sustain the salaries of the employees. Grocery store clerks earn around $25/hr for example. I’m pretty sure if all the cashiers at Krogers earned $25 an hour, the milk in Columbus would have to cost a little more. 😉

(Image via Blick.ch and an article about the plight of cashiers only earning 3700CHF – $3963 a month)

Restaurant prices seem exceedingly expensive here when a quick lunch can easily run you 20-30CHF and a proper dinner is minimum 50-100CHF. But if you think about how much it costs to import high quality food (Swiss are a bit picky about where food comes from and they have regulations), how much the rent of the restaurant costs ($$$) and that the waitress and cooks are all earning at least 30-35/CHF an hour, it’s not really a surprise. Still, that doesn’t stop Kay complaining in wonder how they can charge 50CHF for a steak entree.

Naturally with such a small country, even if the population is not very dense in some areas, the real estate is still ridiculous. Think San Fransisco. Rent is expensive and with many regulations on how and where you can build, there won’t be tons of sky scrapers popping up in Switzerland to alleviate the housing issue any time soon. That’s why areas like Zürich only have 0.06% free apartments and landlords can charge 4000CHF a month for a run down old flat.

(Personal photo)

Now in addition to the supply and demand restraints from the EU and the higher salaries people enjoy here, there is something even bigger that affects the cost of goods and services: Low taxes.

Let’s be honest, compared to many EU countries (Germany, Netherlands… I’m looking at you!) we do have pretty low taxes in Switzerland. The fact that they are so low is one of the reasons why taxes are such a big problem for Americans here. We are supposed to pay the difference to Uncle Sam what we’d pay in the States. The problem with that is that Uncle Sam doesn’t know that part of why the taxes are so low here are so that Swiss can use their own money to pay for health care, ridiculous rent, unbelievable grocery bills, more expensive restaurants, crazy priced clothing and everything else.

Basically, you could say that goods in Germany are much cheaper because overall German salaries are much lower and their taxes are much higher. They cannot afford to pay more. In Switzerland with low taxes and higher salaries, we make up the difference by paying out of pocket. In essence, they charge more because they can. But if you travel here, out of context everything looks absurdly expensive!

It’s interesting that IWC is able to price their watches much higher in Switzerland because the demand for them here is much higher than in the USA. They know that the Swiss population has money so they price accordingly.

After five years here, I still seem to have sticker shock when I think how much things cost in the US. I actually believe now that goods in the US have to be subsidized for the Americans or many families wouldn’t be able to afford everything they need. That’s why sometimes we see Swiss-produced fondue selling for less in America after export and Ikea products sometimes 1/2 what you would pay in Switzerland. It drives me nuts, but that’s the way it is.

This is why most German towns over the border are filled with Swiss cars doing their weekly shopping, but for many it is simply too much hassle to go to Germany every time you want to re-stock your pantry. And with the limits on how much meat, eggs, milk and so forth that you are allowed to bring in, it’s not worth it for us to go so we shop locally and I just ignore most of the prices on the receipt. 😉

What do you guys think about the pricing in America? Have you ever wondered why some things are so affordable? We Americans complain a lot about gas prices for instance, but they are so much lower than everywhere in Europe. What’s your take on that?

38 thoughts on “Why is Switzerland so expensive?”

  1. Interesting post, and thanks for responding to my question! There’s definitely some info here I did not know…I had always assumed that Switzerland had universal health care and high taxes like all of the rest of Europe, and that these costs were just passed on in the form of higher consumable good prices. It does make more sense that higher standards = higher prices. I wonder if you think that’s a good thing? I eat normal eggs for $1.99 a dozen and haven’t sprouted tentacles yet… I do find it odd though that patio furniture costs so much more.

    I do think gas is taxed less here, perhaps that is why it is cheaper. In regards to food, perhaps it is cheaper because the most of our food comes from fellow states. Although transport costs could be high (then again we do have a lot that occurs by rail…), there are no customs issues or duties. I think we also can’t discount supply and demand– massive supply = cheaper prices, and the US has many things in abundance. And less = more expensive. My house is a perfect example. We live in a large city, and there are only two exemplary public private schools that aren’t in the super super expensive area. So, our house costs approximately 30-40% more than a house just across the road in a different elementary school zone.

    Still, it’s an interesting subject, perhaps something for an economist to write his (or her) PhD thesis on. Sadly I majored in history and am a lawyer so am no help!

    On a side note, what I do love about the states and commerce is how many products are available here from foreign countries. I used to just love Ritter chocolate bars (German, I know) and now I can get them in my local grocery store. Amazing!

    1. I think the extra tax part of products and services here also goes to things like the great railway system or the cleanup of the city for example. The streets are regularly cleaned and especially compared to places like New York, you can tell they are taken care of by taxes. So we do have some extra benefits that the tax is able to take care of because people pay other things like health care individually.

      We also do have some options in grocery stores. Eggs from Holland for example are a lot cheaper, but many people here buy local eggs or local fruit or meat whenever possible because they trust it more or they want to support the local environment. And definitely true about America having way more resources to supply food! I guess I was thinking along the lines of things like Ikea furniture or electronics that come from Japan. When exported to both countries, they are priced way differently and it’s just funny to think about how they get priced that way. 🙂

      Interesting to think about overall! And apparently Swiss has come a long way… they now have cranberries at Thanksgiving, pumpkins for Halloween and even my local grocery store has BBQ sauce. Now if they would just get frozen corn some day!! 🙂

      1. I do think that the differing prices of things from Japan or Ikea furniture directly relates to import/export treaties of various countries. For instance, the U.S. is a bigger market of, say, Japanese cars(I own one, even!). Thus, it would behoove Japan to have lower tariffs on U.S. goods imported, to give the U.S. incentive to lower their tariffs on Japanese goods. It’s got to be related to that.

        And, I got to use the word “behoove”, so this is shaping up to be an excellent Monday. In all seriousness, I find your blog very interesting, thanks for your posts!

  2. What I thought was very interesting was your conversation on the price of meals out. While our actual meals might be cheaper, think about how now it is the norm to do 20% tip on every meal- When you think about that, plus the up charge on alcohol, is it so different from prices in the US? Do you need to tip in Switzerland?

    1. That is true Liz! When we went to Hawaii (where of course it’s pretty pricey) we realized that with 15-20% tip, meals were pretty darn expensive!

      Some people think you should tip 5-10% in Switzerland, but we tend not to tip more than 1-2CHF per meal. (We are pretty damn cheap I guess…) But the price is still way more expensive here. A big mac for example is $6.9 and a wine in a local restaurant is generally $16 a glass. Cocktails are $21.5-$26.9 a piece usually. If you get a bottle of wine with dinner you can bet it adds 50CHF to your bill. 🙁

      But yes, tipping in the States is sneaky and I am always unhappily surprised about it when I travel there… it got quite annoying in Hawaii!! 😉

  3. Things aren’t more affordable in the US if you are trying to survive on minimum wage. The cost of labour has stayed the same for years while prices have risen significantly and we still have to pay a 20% tip to make up for the fact that companies are too cheap to pay their staff properly and expect to make disproportionate levels of profit. There are also lobbyists to prevent standards in food and production quality so the junk you buy cheap is just that: junk.

    The reason you tip in the US is because servers can be paid as little as $2 an hour and the tax department assumes that they earn a minimum amount in tips so they get taxed regardless of whether they earn those tips or not. I am fine with tipping when food is affordable but in the Bay Area it is super expensive PLUS you pay tips because restaurants and chains don’t pay a living wage. So, basically, the consumer pays for the lack of minimum wage either way.

    Overall, I think Sweden and Finland have it right. People earn a living wage, pay high taxes so their health/education is covered and overall they are happier, healthier and have better economic outcomes.

  4. Nobody is wondering why Switzerland offers us the best lifestyle and the highest salary than any other European country? 🙂 I lived already in Luxembourg, where people are supposed to earn a lot of money, but we pay double taxes there compared to Zurich. I realize that with my salary (which is also low compared to people around me) I can do a lot and much more compared to other countries, luxembourg included. I don’t know any other country that can offer to me the same or better an other country that could offer to everybody a good life, as Switzerland does. This country offers us opportunities that our native countries do not. That’s why everybody is here. thanks Switzerland!

  5. hello people,
    i am from New Delhi (India) and i was planning to visit switzerland for an internship programme next year for 6 weeks. It would of great help if anyone could tell me about the accomodation cost, vegetarian food available in switzerland, transport and most importantly about how much money should i carry with me for 6 weeks to live here? And also please tell me if there is some other european country which is much more cheaper than switzerland?
    thank you 🙂

    1. Just got back from a expensive but beautiful trip to Lucerne, we live mostly inMiami and for a few month every year in Bavaria … I like your answers to the question “why….” Do you have something I could put on FB like a blog, addressing this question…..lots of people have asked us ….your answers were very informative… Thank you

  6. Just got back from a expensive but beautiful trip to Lucerne, we live mostly inMiami and for a few month every year in Bavaria … I like your answers to the question “why….” Do you have something I could put on FB like a blog, addressing this question…..lots of people have asked us ….your answers were very informative… Thank you

  7. We were passing through Switzerland in May of this year as part of a four country European vacation.

    We needed a pit stop and saw the McDonald Arches.

    We did buy 2 small burgers (99 cents each here in the US) and one order of small fries.

    The order came to 15 Swiss Francs ??????

    BTW 2 small packs of ketchup were 25 cents each !!!!!

    My wife and I still can’t figure out how the Swiss can afford these kinds of prices – after all this was not gourmet food.

    We think we live in an expensive State ( Connecticut) here in the US but it’s “cheap” compared to Switzerland.

  8. I am Norwegian, i think it’s a real pleasure to stay in Switzerland, i have been there 6 times and i have to say as my swiss friend in Basel says “you have to pay for freedom and full/directly democracy, and high standard of living”. I think a meal for 40 CHF is ok and it’s cheaper than Norway and a bottle of wine for 40 – 50 CHF is ok, Norway you have to pay at least 60 CHF or more for a bottle of wine in a restaurant and the food, alcohol and tobacco prices are greater in Norway than in Switzerland, for me i need at least 400 CHF for my food expenses in Norway from the food store, a 20 pack of cigarettes is 15 CHF, a 6 pack of beer at the food store in Norway is from 25 – 30 CHF. So for me Switzerland is cheaper for me than my own country. Have to say i love Switzerland, cheaper, good quality and good standard for your money.

    1. Norway is certainly an expensive country, especially for alcohol! If I am correct, I think it only ever falls slightly behind Switzerland on the most-expensive country lists because of government benefits like health care and maternity leave and the like which don’t really exist in Switzerland. But both countries have a great standard of living! I would be happy to live in Norway too. 🙂

  9. While grocery stores like Migros in Swiss is quite reasonable, still restaurants charge double EU prices..

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  11. Katie, yes Switzerland is expensive for tourists and of course every Swiss will cross the border to France or Germany because daily foods and other articles are at least 20 % cheaper.

    But we lived there for about 10 years and were so stupid to return back to the Neherlands, so to inform you Switzerland as very little bureaucracy, extremely low income an capital and corpoate taxes. TVA is only 7.8 % compared to the Netherlands 21 % and many more additional taxes non existing in Switzerland. Despite the expensive houses and more expensive foods our standard of living and net buying power was at least double or tripple my comparabel standard of living in the Netherlands.

    Kindly inform yourself completely and correctly about the fantastic pleasant swiss life, he rest of the world can only envy the swiss for the comfortabel and easy efficient and disciplined way they have organised their country. Europeans are very poor compared to the swiss and on top of that living in an EU-Brussels bureaucratic and high taxes dictatorship.

    Best regards a well informed friend.

    1. if you only count Income tax and VAT as taxes, then Ch has lower taxes than netherlands.
      if you also count parking fees, inflated train fares, document fees, import duties as taxes, inflated healthcare costs as taxes then CH is the most heavily taxed country in the world.

  12. Strangely enough, there’s no mention of the fact that Switzerland is a tax haven (for rich people), which means that this country steals of a lot of money from its neighbors. The same thing occurs in Luxembourg, etc.

    So the main reason why prices are so high there is simply because the country attracts – steals, rather – a lot of money from the rest of the world. If being a tax haven wasn’t worth a lot, those countries wouldn’t fight so hard to keep the status quo.

    As for Norway, the prices are high because it still have oil… although that won’t last as the North Sea hit peak oil around 2000.

    Fundamentaly, prices reflect the amount of money people have to spend: There’s no way Swiss or Luxembourg workers are 2-3 times more productive than the Germans.

    1. Um, I specifically mentioned our taxes being the biggest reason why people here have more money for spending. It affects more than just the “rich ones” that we “poached” from other countries as you imply, which incidentally, doesn’t quite pay for my healthcare. We have more money to spend because we aren’t taxed 40% like many EU countries, and we also are not bailing out the rest of the EU. I am not sure how much tax money we actually get and use from the extreme rich, especially with organizations like FIFA and UEFA being “non profit” to avoid taxes, but it is definitely part of the taxes affecting prices here. And for sure, not having to foot Greece, Portugal, Spain, Ireland, etc’s bills sure helps too!

      It would be hard to blame it all on a tax haven though, because certainly people coming here to start a business would also love if they could get away with paying German salaries and expecting people to survive on that. And people coming to benefit from taxes are not paying significant parts of the rest of the population’s social welfare, as they would in Germany.

    2. Switzerland stealing money?
      You must be dreaming. Its people who VOLUNTARILY carry THEIR money to Switzerland. Unless you think you (or anybody else) has a right on that money over and before its owners. In that case, the theft exists, but the other way round. Look, Switzerland is not a perfect country, but one main reason why they have such a positive surplus in capital and such a high standard of living is -precisely!- the opposite: They respect ownership rights, otherwise said, they DO Not STEAL, like governments evrywhere love to do. Its a strange paradox that in the context of voracious robbers and widespreafd bucaneering practices everywhere, when someone decides NOT to stick ones hand in the other’s pockets, he is immediately dubbed a thief. Its the other way round, my friend !

  13. I recently finished a 2 week holiday with my family in Switzerland. Here are my thoughts:
    Swtizerland is a very beautiful country and for a mountain lover like me, a nature paradise. They have excellent transport system and their trains, trams, boats, cable cars etc. are very efficient. Buying a Swiss Travel Pass for throughout the stay was the smartest decision I made as each inter-city travel can cost around 90 CHF by train. The nice thing is that kids below 6 years of age travel free. Traveling around in Swiss is very easy. Their streets are very clean and I found their public toilets very clean, compared to UK. However, for a Muslim traveler from Middle East, it is a lot more expensive than the rest of the EU countries. Contrary to the popular belief, not everyone who comes from Middle East on holiday to Swiss is super wealthy. Many, like me, are average salaried workers, who, living in a desert, like to enjoy greenery, mountains and water falls once a year. The rent of an average studio or 2 bedroom self-catered holiday apartment in Zurich or Interlaken can cost you over 700 CHF for 3-4 nights. Living in a Hotel room without a kitchen facility was simply out of budget for us.

    Finding Halal meat in Swiss is very difficult as Swiss laws prohibit Halal way of slaughtering the animal. Hence, all of the halal meat and chicken is exported from neighboring countries and finding it fresh in Swiss is simply no option. For this reason, there are very few halal restaurants in cities, and they too, are super expensive and still the food quality is very bad for the price they charge. The prices of halal restaurants in Interlaken is out of the roof. One plate of Chicken Biryani (a popular indian dish) can cost you 25 CHF. In Saudi Arabia, my whole family of 4 can eat Chiken Biryani 2 times at a restaurant for that price. A cup of coffee or tea at these restaurants is also around 5 francs. A single nan bread (https://en.wikipedia.org/wiki/Naan) is around 4 CHF. In my country, we would get it free complimentary :). We couldn’t find any halal products in Coop or Migros either. So, we spent most of our holidays home cooking rice and fresh veggies. Since they have large number of tourists coming from Gulf, they should consider allowing Halal meat at least for travelers. Some of my relatives who live in border towns travel to Holland or Germany to buy fresh Halal meat. What I found strange is the prices of other items too vary very greatly. For example, a bottle of Evian water 75cl would cost you 3.5 francs in Kiosks, while you can get it for 95 cents at Coop. In the restaurant, it will cost you 4 francs.

    The apartments in tourist cities and main cities like Zurich are very small. We had 4 bags and there wasn’t any space to move after we kept the bags in the hall. Still, these apartments cost around 180 CHF per day. The apartments in villages neighboring the tourist cities were a bit cheaper. One of the good thing living in an apartment compared to hotels is free laundry service. Internet was free in all apartments, except in Holiday Inn hotel, where the speed of 512K was free, anything more than that was charged. If you are traveling to Swiss, better to buy a two-pin plug adapter for your chargers before you come to Swiss. Buying a plug adapter for UK/US specs would cost you 17 CHF from an InterDiscount store. Also, if you are planning to go in mountains, buy warm clothing in your country. Here, a warm coat can cost you around 500 CHF.

  14. Ahmed Noorul, yes Switzerland is expensive for tourists, but it is a rich fine live for the locals who pay very little income and capital and TVA taxes, about 3X times lower as in my country the Netherlands, they also have very low and very efficient bureaucrats through their fantastic Direct Democracy Referendum political system, giving in fact all the power of all important decissions back to the local communities and to the people through binding referendum.

    I honestly regret I ever left Switzerland after 10 years of working life in Switzerland and made the mistake to go back to the very high taxes of very bureaucratic and impoverished the Netherlands.

    Yes my body is in Holland, but my soul is every second of the day in Switzerland, the country where my life always was very peacefull and my mind in a relaxed peacefull state, without all the unpleasant daily news and daily new frauds of the EU-Europe-Holland.

    Switzerland has a bright future ahead, Holland-Germany-EU do not have any future as the daily situations are now and seriously worsening!

    At least my wife is happy being back in Holland.

  15. Due to the high prices the quality of living in Switzerland is actually much lower than in any other country. you could live much more confortably with 1000€ per month in germany than with 10k chf per month in switzerland.
    Also switzerland is the worst country on earth in regards to human rights. think about water. restaurants in zurich charge at least 10fr for 0.5L bottle. in the second most expensive country you might pay 2fr for a 0.75L bottle.
    The right to healthcare is also disregarded. doctors here bill you for doing nothing at all. nowhere else in the world doctors bill you for a phone call.
    Also swiss hotels are great abusers of human rights. they charge their guests for parking! not happening outside ch.

    1. I’m sorry but I disagree with you. Try to live on Germany on 1000 euro salary ??!! Laughable . At least 60% of that will go to apartment rent. So good luck with 400 euro to survive. On a 10000 franks salary in Switzelrand I would in fact live very comfortable life. I earn much less and don’t complain… Parking in the hotels in other European countries always free??! For real? I don’t really think you had travel enough to make such an assumptions.

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