The New Swiss Employment Puzzle

Switzerland has traditionally had a better employment performance than most other European countries. In the past, this could be explained with a specific foreign workers policy and to the buffer role women played in the labor market. In the late 1990s, however, foreigners and women occupy a considerably more stable position in the labor force than in the 1970s. Therefore, other factors must explain this good employment performance. International comparisons show that advanced economies tend to perform well in employment creation if, a) there are big wage inequalities (USA), or b) if there is a large public sector (Sweden). We show that Switzerland has none of these features, and that on the basis of prevailing theories of post‐industrial employment creation, it is difficult to account for the Swiss labor market performance in the late 1990s. We put forward and assess a number of possible explanations for this “new puzzle”, and conclude that a successful research strategy in this area should combine elements of welfare regime analysis with a focus on labor market institutions.