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Switzerland votes on world’s highest minimum wage

Switzerland is heading to the polls on Sunday to vote on whether to create the world's highest minimum wage.

Presently Switzerland does not have a statutory national minimum wage. But if successful, the national minimum wage initiative would see Swiss residents earn at least 22 Swiss francs ($25) an hour, or 4,000 francs ($4,493) a month. This is way above minimum wages in other high income countries, such as the U.S. and U.K., where hourly minimum wages stand at $7.25 and £6.31 ($10.27) respectively.

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Switzerland's minimum wage initiative was launched by the SGB, the country's largest trade union, in response to concerns that the country's poorest citizens were underpaid. A referendum on the issue is possible because the country's system of direct democracy allows the populace to petition for votes on matters of economic, social and political interest.

"In several industries, such as construction or gastronomy, minimum wages have been introduced in Switzerland a long time ago through collective labor agreements," Kristina Schüpbach, a member of SGB's campaign staff, told CNBC via email.

"They protect the employees against undercutting. But the majority of working people in Switzerland do not have such protection."

Bad for business?

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However, critics have voiced concerns over the minimum wage's implications for businesses, jobs and the Swiss economy. They warn that a high minimum wage could crunch companies' profits, affecting how many people they can afford to employ, and pressuring the selling prices of goods and services.

"A minimum wage of 4,000 francs could lead to job cuts and even threaten the existence of smaller companies, notably in retail, catering, agriculture and housekeeping." Swiss Economics Minister Johann Schneider-Ammann told the local media earlier this year.

"If jobs are being cut, the weakest suffer most," he added.

In response, Schüpbach highlighted that in Switzerland's's gastronomy sector, employment had risen while wages increased. She told CNBC via email: "Higher minimum wages do not create more unemployment. Many international studies say so as well."

Worldwide, the effect of introducing a minimum wage has varied from country-to-country.

"In the U.K., which introduced the minimum wage in 1999, there were dire predictions of rising unemployment - but it just didn't happen," Jonathon Wadsworth of the Department of Economics at Royal Holloway, University of London, told CNBC via telephone.

He said evidence from across the Atlantic was more mixed however."There's quite a fierce debate in the U.S. about whether minimum wages are detrimental or not."

The high level of the proposed minimum wage is because Switzerland is already a high-wage economy, with high living costs, according to David Lea, senior analyst for Western Europe at Control Risks. To be meaningful, an official minimum wage would need to be set substantially above what low-paid workers are already earning, he said.

Past petitions

Read MoreSwiss head to polls to vote on salary cap for CEOs

In the past, Switzerland has hit headlines with its referendums on issues surrounding income inequality. Also upcoming is a vote on proposals for a guaranteed minimum income of 2,500 francs for all citizens, whether they are in employment or not.

Past responses in income-equality votes have been mixed. The "1:12" iniatitive, which sought to cap salaries of companies' top earners was rejected by the Swiss public in November.

However, sign-on bonuses and severance packages were banned following a referndum, after Novartis CEO Daniela Vasella's 72 million francs pay-off sparked public outrage. He later chose to forgo his package.

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