We must grasp new realities to recover from this slump

FRIDAY, JULY 22: It is no secret that Bermuda has lost jobs over the past 2 years — by our estimates 3,000 at least. What is the impact of these job losses?

Quite obviously people become unemployed or underemployed and finding alternative work becomes more difficult.

There is a smaller working population with less cash in circulation leading to less spending. Business become more cautious, individuals become more cautious and lending institutions become more cautious, all of which leads to a tighter economy.

Government revenues fall and social pressures increase. All of this leads to a shrunken and more vulnerable economy.

Will the economy recover? Probably not to the levels we have known in the past over the next five years. The last two years have changed the economic picture for Bermuda and the West as a whole:

• It is not just about being in recession; pre-crisis policy choices have shown to be not the best, when times were good and the future looked bright no one was thinking about a rainy day and putting surpluses aside to deal with it;

• Our systems are too rigid and traditionally focused on protecting jobs (now not possible) rather than protecting and enhancing employability.

• Employment costs are high — pensions, health insurance, employment taxes — with rates of pay increasing faster than productivity;

• The culture of borrowing to pay your way that had become internationally acceptable has now proven to be economic folly;

• Belief that economies would recover to what they were is no longer realistic in the western world — we in the West are not leading the recovery and the burden of the cost of our employment norms is a restriction.

So what do we do? It is not so much a question of whether our employment scenarios are right and others are not, it is more about the realities of the modern globalised economy. Money is the most fluid of all things and can move with the click of a mouse.

Accepting that we are living in a changed economic world order is the first step in dealing with our economic realities. This needs everyone — business, workers, government and the man in the street — to accept that there has been a massive shift in our economic reality.

After acceptance of a new reality the next step is engaging in a national dialogue on how to meet this challenge. No one sector can fix the problem alone — government can’t solve it, business can’t solve it and workers can’t solve it. But collectively we have a better chance.

Job creation and retention is key and the private sector is the only place that this can happen meaningfully, so government needs to incentivise job creation and retention.

Education is also key and has long been recognised as such. We need to produce school and college leavers with the skills and attitude that will enable their employability. This can only happen with more direct involvement of the employer community in our education system.

Entrepreneurship is not for everyone but it has a strong history and presence in Bermuda which should be encouraged and supported. This is particularly true today when more traditional employment relationships are giving way to more of the outsourcing, individual contractor type of relationship. Signs are that full time employment will become less of the norm and this is already happening in the United States.

We need to reduce the bureaucratic costs and restrictions on businesses and incentivise employment to create an environment where business wants to start up and expand.

Young people are particularly vulnerable in today’s job market and it is here where incentivising employment through tax breaks would bear most fruit. There is a new economic reality unfolding and we must accept this openly and honestly if we are to deal with it.

At the end of the day only Bermuda can deal with Bermuda’s economy. No one else will do it for us and only our competitors will care if we fail. Survival and economic success is up to all of us.

Martin Law is executive director of the Bermuda Employers’ Council.

Special report: Bermuda in recession

• Slump sparks health fears
• Threatened with jail for childbirth bill
• 'We must look to the future'
• Viewpoint: How is the recession affecting you?
• A financial mess of our own making?
• The good news - help is at hand
• 'Green' jobs are seen as source of future growth
• Turning passion into profit
• We must grasp new realities to recover from this slump