Roche and Nestlé fear talent crunch as Switzerland puts population cap to the polls | Fortune

The divisiveproposal, which is supported by theright-wing Swiss People’s Party (SVP),has been pitched as a “sustainability initiative” aimed at limiting population growth and stemming immigration.

However, for companies based in the country, the proposedcap at10millionpeoplecould significantly limit access tointernationaltalent and damageeconomicgrowthin a country that has the fourth-highest GDP per capitain the world.

Switzerland’s democratic system allows citizens to propose changes to the constitution through a popular initiative. If these initiatives receive 100,000 signatures from the Swiss electorate within18 months, the proposal will be put to a referendum.

While most constitutional changes proposed through this form of direct democracy have been unsuccessful, thereferendum onlimiting theSwisspopulation is expected to be close.

Among eligible voters who intended toparticipatein the referendum, 45% woulddefinitely orprobably vote infavorof the initiative, according to polling from Swiss research companygfs.bern, while 52% woulddefinitely orprobably vote against. A further 3%remainundecided.

If successful, the government wouldbe requiredto introduce measures to prevent the Swiss population from exceeding 10 million before 2050—Switzerland currently has apopulation of 9.1 million.This could includetightening rules on asylum and family reunification,once thenumber ofpermanent residentsreached 9.5 million,andterminatingSwitzerland’sagreement with the EU on the free movement ofpeople,if the 10 million threshold is exceeded.

Although Switzerland voted on a similar initiative in 2014,Martina Mousson, senior project manager atgfs.bern,says: “This is the first timea fixed population size is being defined for a country. Until now, the focus has always been on percentages rather than absolute figures.”

The Swiss business federation,economiesuisse—which countspharmaceutical firmRoche,mining companyGlencore, and the Swiss divisions ofGoogle, Amazon Web Services,and Accenture among its members—hasalsobeen vocal in its oppositionto the proposed population limit.

Economiesuissechief economist, Rudolf Minsch, says: “Switzerland relies heavily on highly qualified foreign workers. Major restrictions on immigration would weaken innovation, growth,and competitiveness, while making it harder for companies to attract international talent.”

Population cap could put a limit on growth

EU citizens have held the right toresideand work in Switzerland since an agreement on the free movement of people was reachedin 2002. Since then,Switzerland’spopulation has grownby almost two millionpeople, while itsGDP has increased from $314bn tomore than$1tn, according to theInternational Monetary Fund.

Reto Föllmi, professor of international economics at the University of St.Gallen, says that immigration has been key to the country’s economic growth over this period.“Immigration has allowed many young andwell-educatedpeople to come to Switzerland and has allowed the pharmaceutical, chemical,and IT industries to grow and hire specialized talent,” he says.

Roche, which employs 15,500 people in Switzerland and over 100,000 globally, says it is “highly concerned” about the 10-million initiative and claims that the free movement of people is “of central importance” to the pharmaceutical industry.

Jürg Erismann, sitemanagerat Roche Basel,says: “Our industry is particularly research-intensive and hasa very highproportion of highly qualified employees, which the small Swiss market cannot cover on its own. Restricting this access would directlyimpactour ability to innovate.”

In many ways,Föllmiargues, the immigration system has been a “victim of its own success.”The open-border policy has allowedorganizationsto recruit skilledtalentfromneighboringEuropean countries,and many sectors now rely on foreign workers.Approximately 30% of the Swiss population was born abroad.

Proponents of the cap claim that population growth is putting too much pressure on the country’s infrastructure, includinghousing, transport, schools,and hospitals.Those in favorhave also argued thatthe limit would helpprotect natural resources and living conditions,Mousson adds.

While the Swiss food and drink multinationalNestléacknowledges thatit’simportant to take concernsaboutthe societal and infrastructural impacts of migration seriously, it warns that limiting the population risks weakening Switzerland’s status as a business hub. Switzerland has thehighest number of Fortune Global 500 companies per capitain the world.

Christoph Meier,its globalhead ofexternalcommunications,says:“Nestlé considers the free movement of people to be central to the competitiveness and innovative strength of the Swiss economy.Limiting the population and restricting access to skilled workers would be critical, as this could weaken Switzerland as a business location.”

Switzerland’s demographic challenge

The referendum—which has been likened to the Brexit vote in the U.K.—puts Switzerland at the forefront of the immigration debate that is dominating much of European politics. Political parties including National Rally in France, Alternative for Germany,and Reform in the U.K. have risen in popularity off the back of their anti-immigration policies and promise of stricter border enforcement.

However, like many European nations, Switzerland is also facing the challenge of an aging population.The Alpine nation now has30.2 old-age dependents per 100 working-age people—the highest ratio since records began.Föllmisays: “We are getting olderand this stream of young immigrants and workershashelped to smooth outthedemographic challenges we face.”

Swiss employers’ association,DieArbeitgeber, which represents over 100,000 small, medium-sizedand large enterprises that collectively employ around two million people, has also warned that the putting a halt on immigration would “create substantial economic risks and weaken Switzerland’s long-term prosperity.”

If the Swiss electorate does vote in favor of a population cap,Föllmiis eager to stress that no change would happenimmediately. However, it would create increased uncertainty and could eventually force Switzerlandtoabandonmany of its economic agreements with the EU, where its most important trading partners are based.

Stefan Heini, head of communications at DieArbeitgeber, adds: “Arigid ceiling of10 million residentsignores Switzerland’s demographic realities and would jeopardize key agreements with the EU, which are essential for the country’s economic success.”

The outcome of Sunday’s vote willdeterminemore than the size of Switzerland’s future population.It will also signal how the country intends to balance public concern over immigration with the economic and demographic challenges it faces—a dilemma that many European nations are now grappling with.