Yanking work permits hurts us in the long run

FRIDAY, AUGUST 19: “Without data, you are just another person with an opinion...Without data, you are just another person with an opinion...Without data, you are just another person with an opinion...”

Part 1 of 2

In pulling or denying work permits, Minister Kim Wilson may be satisfying narrow party political needs but she is making a huge strategic and national mistake.

As a result, short-term and narrow party political gain will be quickly offset by mid-term and longer term damage as Bermuda’s unique economic model contracts from employing 40,000 to employing 35,000 - or fewer (30,000?...26,000?)

Minister Wilson is handicapped by a lack of good data. This is shown by the 2009 unemployment figures that she still refers to; her just completed survey of the currently unemployed; and the lack of any good data from the completely messed up 2010 Census — which can only now be handled with a complete restart to make it a late 2011 Census — but whose data would not be available until 2012.

Here’s some of the key data the Minister ought to have...

Until 1990, Bermuda’s economic model was that of a Bermuda Living Room in which Bermudians successfully and profitably hosted air arriving tourists along with some cruise visitors. US and Canadian military base spending plus a small but growing financial services industry helped sustain a healthy and expanding national economy in which tourism provided as much as 70 per cent of GDP.

Up to 1990, the guest worker workforce peaked at 8,351 (in 1988) while Bermudians peaked at 28,069 (in 1988) for a peak national workforce total of 36,420. Between 1990 and 2000, that changed, and changed radically.

As the Financial Services industry expanded into international business, tourism was pushed into a corner and now provides just four per cent of GDP. This ten year changeover period showed in huge changes within the national workforce and rapid growth in GDP that saw GDP more than doubling between 1990 and 2000; but with Tourism’s contribution to GDP plummeting.

Between 1990 and 2000, employment in Bermuda’s fading hospitality industry fell 15 per cent from 6,190 to 5,280. (In 2011, Bermuda’s hospitality industry employs fewer than 4,500 people.) Between 1990 and 2000, employment in growing international business rose 34 per cent from 6,929 overall to 10,437 overall.

Much more importantly, all the economic growth in Bermuda’s changing economic model was driven by a new dual inflow. Inflow one was foreign capital. Inflow two was human intellectual capital in the form of actuaries and insurance underwriters and other such super-geeks and geeks who staffed the upper environs of international business. Along with this lead geek horde came another horde of camp follower lawyers and accountants and brokers and fund managers.

Economic boost

Bermuda and Bermudians shifted from hosting short stay tourists to hosting long-staying international business people, who did not just come for a five or seven day stay — they came and settled amongst us. They rented condominiums, houses, and apartments; bought cars; shopped in local stores; sent their children to local schools; and demanded — and paid for — a new range of personal, household, and business services which were far removed from the kinds of things that tourists had sought out.

This definite and irrevocable switchover occurred in 1994. From 1994 onwards, all economic change was driven by international business. From 1994 Bermuda’s now unique national economic model was set on a brand new path. Between 1994 and 2008, the number of guest workers grew 181 per cent from 7,213 to 13,033. In the same period, the number of Bermudians in the national workforce grew less than one per cent; moving from 26,930 to 27,180 for just 250 additional Bermudians!

Bermuda’s total workforce went from 34,143 (in 1994) to 40,213 (in 2008); for a grand total of 6,070 new jobs added — but only 250 of these new jobs could be filled by those 250 Bermudian additions to the workforce.

This was social as well as economic change. Massive. Tectonic. Volcanic. All of this change was driven by the combined influx of foreign capital and foreign labour. Bermudian involvement consisted of frantically scrambling about in a hugely successful and highly profitable effort to provide residential housing, office space, household and personal services, and infrastructural improvements.

In part two I’ll explore the impact of Bermudian demographics.

See part 2 on Wednesday.