Counterproductive Quota-Based Policy

Mira is 27 years old and comes from India. She studied computer science at ETH Zurich and graduated with a master’s degree. She feels integrated in Switzerland and would like to work here after graduating. Because IT specialists are in demand, she has no trouble finding a suitable position. However, because her potential employer is unable to justify why Mira’s employment is of great economic interest, she is not granted a residence permit. She therefore has to leave Switzerland — and the company in question is still waiting to fill vacant IT positions.

Five years later, Mira travelled to Switzerland again to take part in a start-up funding programme. In the meantime, she has founded a fintech company that she would like to develop further in Switzerland. After submitting countless documents, the competent authority rejects the application for self-employment. The reason: the young entrepreneur could not credibly demonstrate that her start-up would have a significantly positive long-term economic impact and create jobs for local people.

This case may be fictitious, but it reflects the experience of Swiss companies and foreign talent. They highlight what is wrong with the restrictive third-country immigration policy. For example, access to the labour market for third-country nationals is limited by annual quotas and is subject to various conditions. Even for well-integrated skilled workers who have been trained with Swiss taxpayers’ money and are urgently sought after by the economy, high barriers to the labour market are erected. Even innovative young entrepreneurs who want to work on Switzerland’s economic sustainability have to run a bureaucratic gauntlet — with no guarantee of success.

Selectively optimising the immigration system

The restrictive third-country regime is sometimes the “price” for the open borders that come with the free movement of persons to and from the EU. Since the conclusion of the bilateral agreements, immigration from the EU/EFTA states is no longer politically controlled. However, since the mass immigration initiative was approved in 2014, the Federal Constitution has required immigration to be capped. The result is that policymakers exert (sometimes excessive) control where they still have room for manoeuvre.

Even for well-integrated skilled workers who have been trained with Swiss taxpayers’ money and are urgently sought after by the economy, high barriers to the labour market are erected. (Adobe Stock)

This approach is as understandable as it is dangerous. The economy is dependent on the best talent. Particularly in view of the progressive ageing of the population in Europe, we would do well to attract the best minds from outside the “old continent” to Switzerland and keep them here. At present, however, immigration figures are (still) high. The immigration system should therefore be selectively optimised as a matter of priority. Possible measures that could be taken include the following:

Simplified requirements for university graduates
Anyone who has studied at a Swiss university with public funding should also be eligible for employment or self-employment here without having to meet severely restrictive conditions. The potential of master’s graduates and doctoral students needs to be utilised to a greater extent, particularly in the STEM sector. A bill that would allow this to happen is currently held up in parliament. If labour market integration is not the intention, it would be logical to consider higher tuition fees for foreigners. Otherwise, only the social costs of a good education are incurred in Switzerland, while the subsequent social benefits are realised elsewhere.
“Start-up visas”
Anyone who wants to bring a promising business idea to life in Switzerland should not be prevented from doing so. As is already common practice in many countries, “start-up visas” are to be introduced for founders from third countries. The granting of a start-up visa should be tied to a few strict criteria. One possible prerequisite could be the commitment of venture capital — in this way, it would be a market-based size rather than bureaucracy that would be the primary judge of a start-up’s prospects for success.

However, there are major hurdles not only for founders, but also for existing start-ups that are trying to recruit new talent. Further optimisation of the quota system for start-ups would need to be examined here. The Netherlands, for example, has launched an interesting pilot project that aims to enable start-ups to hire the talent they need for growth from abroad at an early stage. The signal effect of measures affecting start-ups is also important. They should portray Switzerland as a stronghold of ideas, innovation and entrepreneurship.
Linking quotas to demographic trends
With regard to quotas, the Federal Council decided this week to leave the maximum numbers unchanged for 2024. In the run-up to the decision, rumours of a reduction were circulating in the media, which led to discontent among business representatives. In order to prevent these disagreements from recurring, the quota set each year should be based on more transparent criteria in future.Or to be more specific, the cap should be more closely aligned with economic needs, whilst also taking population growth into account. In addition to a fixed “basic quota”, “variable quotas” could be created, the cap on which would take into account both the extent of European labour migration and the ageing of Switzerland’s (working) population.

Finally, it is often pointed out in these discussions that the quotas are not used up every year. However, care should be taken not to read too much into this. It certainly does not mean that demand is lower than expected. Rather, the complex authorisation process, which is plagued by uncertainties, means that start-ups and SMEs in particular do not even attempt to recruit from third countries despite the shortage of skilled workers. In addition, the cantons are often very economical with their quota shares. They want to ensure that they can still meet any needs of important companies at the end of the year. The bottom line is that actual demand is likely to be much higher than the quota utilisation figures suggest.

Swiss migration policy has changed repeatedly over time and adapted to new developments. Such adjustments are required again today. After all, it is quite possible that it will be people from third countries like Mira who will have a decisive influence on Swiss economic history in the 21st century — just like generations of migrants before them.

Further information on this topic can be found in our publication “Innovation without borders”.