Swiss industry is going through some challenging times. According to industry association Swissmem, the machinery, electrical and metals sectors recorded declining sales in the first quarter of 2025—marking the eighth consecutive quarter of decline.
A key reason for this is the ongoing economic weakness in Germany, Swiss manufacturing’s most important export market. In the second half of 2024, the number of companies applying for short-time work for their employees reached its highest level since the removal of the minimum exchange rate against the euro in early 2015.
Trump’s tariff shock has caused a sharp decline in economic activity since mid-April, a downturn that is also being felt by Swiss industry. Even if the U.S. were to completely lift the tariffs, pressure on industry is expected to remain high.
Powerful Long-Term Forces
In this environment, fear of deindustrialisation is spreading. As a result, political efforts to protect domestic industry are increasing—not just in the U.S. but worldwide. Such demands are politically attractive because they evoke nostalgia and recall an era when factory workers still earned good wages. In 1960, one in two employees in Switzerland worked in industry; today, this number is only one in five. High time, then, to take political action?
No. First, it’s important to distinguish between cyclical fluctuations, like the recent downturn, and structural shifts in the economy. Attempts to prop up the manufacturing sector with state aid are likely doomed if they run counter to long-term trends. The long-term decline in industrial jobs is not an anomaly but rather a reflection of structural change that has affected all Western countries in a similar way over the last century.
As the chart shows, industrial employment in developed economies is following an inverted, extended “U” shape. During industrialisation, it rose sharply as workers moved from agriculture to industry. With rising prosperity, jobs shifted again—but this time from industry to the service sector.
Rising Productivity, Changing Patterns of Consumption
This long-term decline in industrial jobs has three main causes. First, it is due to rising productivity. New technologies—initially mechanisation and now digitalisation—have massively increased output per worker. A U.S. study estimates that 88% of the decline in American industrial jobs during the 2000s can be attributed to productivity gains.
Second, beginning in the 1990s, emerging and developing countries opened up to international trade and became integrated into the supply chains of Western companies. The highly productive jobs remained in industrialised countries, while labour-intensive production was outsourced to countries like China—and later to Vietnam and Bangladesh.
Third, this decline in industrial jobs can be explained by changing consumption patterns. In 1950, around 70% of consumption in Switzerland was spent on goods; today, that same figure is only around one-third. Two-thirds of consumption now goes on services. One key reason for this shift is the price development of industrial goods. Higher productivity enabled companies to lower prices—making industrial goods increasingly cheaper compared to services. When the price of a given category of goods drops, the share of income spent on it decreases—at least when it’s a good that people don’t want to consume more of as their income rises.
Structural Change Keeps Us Agile
What’s remarkable is how similar the pattern of industrial employment across different countries is—largely irrespective of the specific characteristics of their economies, such as how open they are or whether they run a trade surplus or deficit. Even countries like South Korea, Singapore or Malaysia, which only became wealthy in the second half of the 20th century, have experienced a long-term decline in manufacturing employment.
Therefore, the long-term decline in industrial employment is not a sign of economic decline, but rather a result of increasing prosperity. Attempting to artificially revive factory work makes little sense if consumers are increasingly favouring services over industrial goods.
Moreover, as Swiss economic history shows, domestic industry benefits more from allowing structural change than from trying to stop it. Since 2000, the productivity of Swiss industry has more than doubled. No other industrialised country in the OECD can claim such productivity gains in this sector.
When an industry becomes more productive, its products remain competitive—especially internationally. Swiss industry has held up well compared to neighbouring countries. The share of industrial employment in Switzerland has stabilised. However, the face of the sector has changed significantly: today, highly productive industrial workers are increasingly to be found sitting at computers rather than on assembly lines.
