Economic growth is impossible without expats

WEDNESDAY, AUGUST 24: ‘Without data, you are just another person with an opinion...’

Part II of II

For the first time ever, in 2006, Bermuda’s Registrar of Births began separating Bermudian and non-Bermudian births.

An immediate, major, and unsettling revelation was that only 72 per cent — three out of four — of the babies born in 2006 and thereafter were Bermudian.

In fact, after allowing for emigration and non-return of students, Bermuda, from 2000 on, could actually have negative Bermudian population growth.

Working that kind of much lower-than-expected Bermudian birth percentage back a few years helps explain why the number of Bermudians counted in the national work force first peaked at 28,069 in 1988; and then peaked again at 28,881 [just three per cent higher after 12 years] in 2000, but has been falling steadily ever since.

In 2009, the Department of Statistics counted only 26,789 Bermudians in the workforce. This is 391 fewer Bermudians than the 27,180 counted in 2008. This fall-off in the number of Bermudians is confirmed by reported reductions on the Voter’s List.

Obviously, this steadily reducing number of Bermudians is NOT — and cannot be — a creator of Bermuda’s national job growth or general economic growth.

Clearly, from 2000 to now, guest workers have been performing two critical functions. First, they are replacing those hundreds of Bermudians who are leaching out of Bermuda’s workforce — thus helping maintain and stabilize Bermuda’s unique economy.

Second, they are providing the new and additional workers to support and allow a growing economy.

With these known facts and regardless of any politics-of-the-moment, to get out of its current downward economic trend, Bermuda must re-grow the unique economic model that it switched over to in 1994.

Bermuda’s post 1994 economic model requires — it demands — an influx of guest workers as well as their continuing presence. Without such an influx and expansion, there cannot be any economic growth, and there can be economic destabilization.
Without such expansion, there will only be continued economic decline until Bermuda’s unique economic model shrinks and shrivels to the stage where it contains only 26,000 — or fewer — Bermudians.

By the time that happens, average GDP per capita will have plummeted from its current but reducing high of around $80k to new lows around $30K and trending even lower.

Since 2008, this is what has happened with Bermuda’s workforce: 40,213 in 2008. Down 1.7 per cent to 39,520 in 2009. Down 3.6 per cent to 38,095 in 2010. This workforce number is trending the wrong way. In 2011, it is possible that it could be down another 3.5 per cent to 36,750.

Since 2008, this is what has happened with Bermuda’s GDP. $6,068 million in 2008. Down an unexpected 5.8 per cent to $5,715 million in 2009. Projected to be down about 3 per cent to $5,545 million in 2010. This GDP number is trending the wrong way. In 2011, it is possible that it could be down another 2.5 per cent to $5,405 million.

Bermuda’s national economy will only turn around when the inflow of intellectual and dollar capital exceeds the outflow.

This will be seen in a material increase in the number of higher-paid guest workers. This guest worker inflow will, in turn, generate a consequential increase in the national workforce and in GDP.

Until that change occurs, Bermuda’s workforce and GDP will continue to decline, and Bermuda will head towards inevitable economic de-stabilization resulting from a continuing decline in on-island spending and foreign exchange earnings.

Tourism, scrambling to get back to delivering an anaemic $400 million a year is at least a decade away from successful and meaningful recovery — if it ever recovers.

Remembering that Bermuda’s national economic model switched over in 1994, and that Government’s still rising national debt servicing costs are now negatively impacting GDP, minister Kim Wilson’s current policy of non-renewal or non-issue of new work permits is diametrically opposite to what she ought to be doing or frenetically encouraging.

The minister is making the wrong national decision. Government is damaging Bermuda’s national interest by prolonging and sustaining Bermuda’s self-inflicted local economic recession that will continue as long as Government maintains the current policy, and as a consequence, keeps getting the same result — causing further national economic decline.

‘Without data, you are just another person with an opinion...’

Author’s note: All figures quoted and used on national workforce, GDP, births and so on are from data available from the Department of Statistics and the Registrar of Births. Anyone wanting to further explore the massive shift in Bermuda’s national economic model can find a good intro at www.bec.bm:  Download the Report entitled ‘The Shift’.