Only private sector growth can fill jobs void

WEDNESDAY, OCTOBER 19: Bermuda’s Census figures uncover an important reality that must be faced head-on.

The critical underlying fact is that Bermuda’s economy needs about 40,000 filled jobs if it is to function for everyone’s benefit. Less than 40,000 jobs, means empty office spaces, empty residential units, less spending on food and utilities, less foreign currency coming in, less business activity.

Proof? Falling Government revenues, falling GDP, falling job opportunities for Bermudians, rising Bermudian job losses, and thousands of Bermudians on reduced working hours and overtime bans.

National workforce figures reported by the Department of Statistics suggest that in 2011 there are fewer than 37,000 jobs filled. This results from the loss of over 3,000 jobs since the 2008 jobs peak of 40,213 filled jobs. Now the just released 2010 Census reports 2,581 Bermudians as “unemployed”.

The simplistic and obvious answer for getting back to 40,000 jobs? Just “give” or “find” jobs for those 2,581 unemployed Bermudians. Obviously, that will end unemployment and the economy will be healthy again.

This is exactly the moment and the point where solid fact and reality collide with myth, emotion, political posturing, and common sense failures.

What, exactly, will those 2,581 jobs be? Where will they come from? What revenue/sales stream/income source/capital investment will pay for and continuously generate the wages/salaries to meet 2,581 additional pay packets every week?

If each of those 2,581 “unemployed” Bermudians receives an average pay packet of $1,000 a week, then Bermuda’s economy must have enough “business” generating enough new revenue to fill those pay packets.

The total weekly salary/wages pay packet would be $2,581,000. That’s $134,000,000 a year. From the employer’s end, it’s a payroll expense of $160,000,000 year (Increase is caused by taxes — 8.75 per cent Payroll Tax plus 5 per cent personal Pension contribution — and benefits; $31 a week Social Insurance plus $35 a week for minimum health insurance).

With a payroll expense of $160 million a year, a business where half of its expenses go into payroll must do a minimum of $320-$330 million a year in overall sales revenue or business income.

So “employing” the “unemployed” means having an additional and brand-new line of private sector business or businesses that can pay out $160 million a year in salary/wages. That means that the business or businesses must take in anywhere from $320 million to $500 million in revenue.

Could Government fix it? Certainly! Government could just step in and borrow $65 million to $135 million a year, every year, and just hand that out as unemployment “benefits” of $500 to $1,000 a week. Of course, that will mean increased Government borrowing as well as new and additional taxation that will never ever stop.

Going forward, there are only three options. Create a brand-new Bermuda-based foreign exchange earning “business” that operates globally. Re-expand existing IB.  Resuscitate tourism.

After stripping out emotion and perceived or conjured up blows to racial or national pride, we are left with two questions. Are there unemployables? Can all of these 2,581 “unemployed” Bermudians be given employment?

Reality? Exactly like any other community, Bermuda has an ineradicable group of unemployables. Junkies, crack-heads, non-functioning alcoholics, known and active gang members; people with serious criminal habits, who simply will not work an eight-hour day, who will not consistently turn up for work, who will socially disrupt every functioning work environment. These people do exist in Bermuda. They are unemployable.

The unemployable

Some portion of that 2,581 unemployed Bermudians consists of Bermudian people with these habits and propensities.

So are there unemployable Bermudians? Yes. How many? I don’t know, but it could be 500 or 1,000 or 1,500 — or more. “Give employment”? No one, not even a government, “gives” real employment (see Greece).

In Bermuda, as happens globally, all employment stems from the real exchange of genuine services. From and in Bermuda, Bermuda must sell a service to somebody, somewhere elsewhere in the world. Either a “tourist” service or an “International Business” service. 

Getting back to 40,000 jobs filled requires an increase in job opportunities. Every new or additional employment opportunity requires fresh capital investment and the starting of new businesses that bring in foreign exchange; or the expansion of existing foreign exchange earning businesses.

So, can all of Bermuda’s Census discovery of 2,581 “unemployed” Bermudians be given employment? First, accept and recognize that a big chunk will be unemployable. Second, accept and recognize that new jobs or job opportunities require the creation of new or additional private sector business which, in turn, requires the acquisition and then the investment of new or old private sector capital. Or, Government can try to sidestep the whole issue and resort to eternally rising Government borrowing in order to pay eternal ‘unemployment benefits’ to eternally ‘unemployed’ people.

Bermuda’s economy must get back to at least 40,000 jobs. That re-growth can only be achieved with private sector expansion. With private sector expansion, all of Bermuda’s employable “unemployed” will get real and new job opportunities.

For and in Bermuda, private sector expansion, actually re-expansion back to 40,000 jobs is the real and only solution.

All else is a mélange of myth and mis-placed emotion and, in the real world, is unreal.