Column: What Is Our Real Unemployment Rate?
[Opinion column written by Larry Burchall]
Bermuda’s true level of unemployment is likely much higher than the rate – seven percent [7%] and 2,348 Bermudian persons 2015 – that is officially and recently reported. The higher and real number creates a need for a massive difference in the fundamental approach to fixing Bermuda’s economic woes.
This critical difference in unemployment counts comes down to the difference between textbook economics and practical economics.
The start point is 2008. There were 40,213 people filling jobs and GDP [nominal] was at $6.18bn [adjusted].
Enter the ‘textbook economist’ who takes the universally agreed textbook view that the unemployed are persons who:
- were working
- are no longer working
- are actively seeking work
- will accept a job if offered a job.
If a person’s profile fits all four bullets, then the textbook economist holds that they are properly counted as unemployed. Miss a bullet, and you may not or will not be counted as unemployed.
I have no argument with the thousands of textbooks that count unemployment that way. It’s the way it’s done in over 190 countries in today’s world.
According to the textbooks, the Bermuda Government has said that Bermuda has between 2,348 – 4,000 unemployed Bermudian persons – in Bermuda.
Apart from unhappiness with the lack of precision in a national population that, by 2014, had dwindled to 61,777, I agree that there is significant Bermudian unemployment.
Now it gets hairy. We jump off the pages of those textbooks and land on the real-world 13,000 acre mid-Atlantic coral atoll at 32n64w known as Bermuda, where we find a unique economy. One that doesn’t easily fit into textbooks.
The background facts:
- In 2008, Bermuda had 40,213 people filling jobs; of these 13,033 were Guest Workers and 27,180 were Bermudian.
- In 2015, Government reports that Bermuda had 33,319 people filling jobs; of these 9,743 were Guest Workers and 23,576 were Bermudian.
- By 2015, according to these Government reports, Bermuda’s economy had lost 6,894 jobs; of these 3,290 were Guest Worker jobs and 3,604 were Bermudian jobs. So a 2015 figure of 2,348 – 4,000 unemployed Bermudians does makes sense.
But now we have a ‘rump number’. What do we do about that 3,290 number for Guest Workers? Three options.
- Ignore the 3,290 [after all, it’s only a number and maybe it will just go away…besides, they’re foreigners.]
- Determine that the number 3,290 exists but since it does not fit the textbook definitions, it is academically correct to ignore it [because it disagrees with all the textbooks].
- Recognize Bermuda’s unique economy and put that 3,290 into the matrix of problems that Bermuda’s economy actually does have. [But watch out! This mandates that you ignore those thousands of textbooks.]
Textbook economists say that these 3,290 should be ignored. The primary reason is that these 3,290 have all departed these Somers Isles and are not therefore ‘seeking’ work in Bermuda. Therefore – according to the textbooks – they do not fit the third and fourth bullet points.
So, we ignore those 3,290 departed Guest Workers.
Then Bermuda reality bites. If Bermuda re-employs all currently unemployed Bermudians, then Bermuda will have zero unemployment. Bermuda will be back to an economy that employs every available Bermudian [bullet point four applies here] and the recession and all our economic woes will be over. Correct?
Wrong! Completely wrong!
With every Bermudian fully employed, Bermuda’s national economy will have grown to where total employment rises to [33,319 + 2,348 said-to-be unemployed Bermudians] 35,667 and where the Bermudian segment gets back to [23,576 + 2,348 said-to-be unemployed Bermudians] 25,924. But this 25,924 is 1,256 less than Bermudian employment in 2008 [27,180].
Surely that is success. Surely, no more need be done.
Wrong, again!
At only 35,667 persons filling jobs in Bermuda, even with GDP possibly sniffing at [nominal] $6.1bn and Government revenue possibly sniffing at $1.0bn, Bermuda will still be in economic doo-doo.
With that combination, Bermuda’s economy will still be too small to support Nanci without running deficits, or severely cutting spending, or continuously borrowing around $100 million a year, year after year, and Debt and Nanci therefore increasing every year, year after year.
That’s Bermuda’s problem. Bermuda’s problem exists outside and beyond the academic parameters of those thousands of textbooks on economics.
Full Bermudian employment – textbook style – but an economy still in deep trouble. That’s Bermuda’s real world reality!
The answer? Toss the textbooks and trust analytical skills.
Entirely outside the realm of fusty academia, my analysis is that an economically successful Bermuda has – and since 1922, has always had – an ‘oversize economy’; and that Bermuda’s current economy must be made to grow to where it can carry its full financial and social obligations without cutting or borrowing.
That means that Bermuda’s economy must take back the 2,348 said-to-be unemployed Bermudians, then re-add 3,290 departed foreign workers plus another 1,256 departed workers [Bermudians?] which gets us back to 40,213].
After that, add another 5,000/6,000 job fillers to drive Bermuda’s filled jobs up to 45,000/46,000 and [nominal] GDP up to $7.9bn – $8.1bn level. It is only at this high GDP level that Government’s Revenue will be able to feed Nanci, as well as cover its Personnel, Operations, and Capital spending – without borrowing or cutting.
Back to those 3,290 Guest Workers who have departed. Should we, in our unique Bermuda context, count them as unemployed? Or should we, as we do now, follow the textbooks and ignore them?
I do not ignore them. I factor them into all my thinking and writing. They must be counted.
However, when they are counted, Bermuda’s real national unemployment rises from the currently touted 2,348 to the real 6,500/7,000.
No politician wants to step up to the cameras and publicly state that Bermuda’s real unemployment rate could be more like 17%/18% and not the textbook and recently stated and reported [and politically far more acceptable] 7%.
Ain’t nobody gonna’ say or admit that! No way!
So Government, by Machiavellian consensus, ignores Bermuda’s real world economy, Government, instead, chooses the virtual reality of academic texts in which all textbooks agree on those four bullet points.
However, in the real world at 32n64w, Mid-Atlantic, this is the reality:
- ResPop fallen from a 68,800 high [in 2008] and reported, by Government, as 61,777 [in 2014]; so by 2014, at least 7,000 fewer people in ResPop.
- In 2015, the total workforce was filling only 33,319 jobs [this is 126 jobs fewer than thirty years ago in 1986], and 6,894 fewer than in 2008.
- Nanci-feeding costs of $187.4 million a year with 18% of all Government revenue earmarked to priority feed Nanci its daily ration of $513,356.
- Since 2005, Government revenue has been oscillating around a too low average of $905 million; with revenue for 2015/16 [said to be $935.4m] stuck at the revenue level of 2007/08 [$928.5m].
- Since 2005, spending an average total of $1,110 million a year
- Borrowing an average $205 million a year every year since 2005. New administration but minimal change in spending and borrowing habits.
- Gross Debt [$2,385 million] now more than 2.5 times Revenue [$935 million in 2015/16] and forecast to rise to $2,445 million in 2017/18.
Shouldn’t we really do some clear and honest analytical thinking? Shouldn’t we?
Or, will we continue to blindly stumble along making grand speeches while deliberately ignoring the rough patches that we must, ultimately, get through?
- Larry Burchall
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Think you are jumping the gun a little too soon shouldn’t you wait until the results of the census comes before trying to write an article on this?
“…jumping the gun?” Hardly.
Unemployment became a significant matter eight years ago. ResPop decline commenced in 2009, again eight years ago.
DoS say that the mini-census now underway will not put figures out until December 2016 at the earliest.
In the meantime, what should managers and policy-makers do? Twiddle and twaddle their thumbs for eight years in a global economic situation that is moving fast and faster, and, as with Brexit, major events are happening and unexpected results are tumbling out all over the place. Trump? Clinton?
In 2015, the machinery of Government (Bermuda) finally admitted that ResPop had declined. But that admission – to the UK House of Commons – came in March 2015. That’s seven years after the fact. Until then, the machinery of Government was still holding that Bermuda’s ResPop had not declined.
“Jumping the gun?” Hardly.
Larry Burchall
But somehow you were against the proposed immigration bill? How can you be so alarmist and not vote for something that will help the economy and give people basic human rights?
Sorry, instead of ‘vote’ I should have said ‘support’.
I am not talking about unemployment not being an issue I am talking about the numbers you are popping out from who knows where. If the census shows that your number are wrong what does that make you look like???? Waiting
“…numbers popping up,..?
The Government itself finally acknowledged that ResPop had fallen below the Census 2000 count.
So Government and I agree that ResPop fell.
By how far? That’s where we disagree. The mini Census will simply confirm and precisely define the actual number and decline.
Larry Burchall
This is my point shouldn’t we just wait on the results. If the results are legit that come out from the census that was taken doesn’t match your percentage of people unemployed would that not be jumping the gun?
And plenty of unemployed “guest worker” family/spouses. But as you say, we don’t count!
Read it again.
“Back to those 3,290 Guest Workers who have departed. Should we, in our unique Bermuda context, count them as unemployed? Or should we, as we do now, follow the textbooks and ignore them?
I do not ignore them. I factor them into all my thinking and writing. They must be counted.”
He says that he DOESN’T ignore them, as the textbook teaches us.
But where are guest worker families allowed to work without work permits? Where they do that at?!?
Same thing occurs in the States and other locale around the globe , real unemployment numbers are skewered for political expediency. Real unemployment numbers being much higher than stated.
Global bankers caused this derivative mess from 2008 that Bermuda got caught up in but no accountability there. “Just pay your debt that we’ve exacerbated”. A song and dance heard around the world now as many nation states including Bermuda Inc. struggle under the weight of usurious debt. All this talk of ‘res/pop’ (cute) does not deal with the cause and real issue at hand. That catch phrase will not become part of the local consciousness/lexicon, no matter how many times its repeated. We reject usurious debt placed on the people by their governments.
Global debt jubilee, I say.
Without income tax, Government doesn’t even have an accurate idea who IS working. Under the table payments for casual-but-rotating work are rife in some sectors such as construction.
You are delusional if you think all countries that have income taxes don’t have people working under the table, in fact they have a HUGE problem with that!
Larry, I’ve missed you. While un employment of whites is at 4% (or 0 ) , that of blacks is at 17 % and that of black youth at 34 %. What we are talking about, are issues that the government does not want to talk about. So these facts do not exist . Can we have full employment, with 4000 black Bermudians out of work?
That’s ya Party.
Can you point to the source of your figures. Would like to look more closely at this.
What I find interesting is that the Government Revenue has remained fairly constant since 2008. The real problem has been the rise in Government Expenditure, paid by debt. Had the Expenditure matched the Revenue, and there is no reason it shouldn’t apart from an explosion in Government jobs for political purposes, Bermuda would not be in the serious financial position it is in today. With a reduction in respop, the Government Expenditure should match that in 2007. The finances would be in balance, so where is the drop in revenue from the reduction in respop? The numbers make no sense but seem to prove neither the Worldwide recession nor reduction of respop are the cause of Bermuda’s chronic economic situation. It was entirely home made.
@ ringmaster, you really need to stop it with those pesky facts!!!!! Sadly we have nearly 50% of our voting population that can’t understand that fact? Ignorance is bliss!
Kango i must dispel one myth …ignorance is not bliss,take just look around.
@ ringmaster, you really need to stop it with those pesky facts!!!!! Sadly we have nearly 50% of our voting population that can’t understand that fact? Ignorance is bliss! The OBA inherited a fiscal mess but I am not going to give them an entire pass either! They should have cut the government expenditures as well, but they didn’t because of political reasons!
Taxes and gov’t fees have gone up. That’s probably why revenue hasn’t changed .
If Bermudians who are seeking work would accept jobs that they consider beneath them for various selfish reasons, and have proper work ethics , the employment rate would increase significantly. This is one of the primary reasons that expats must be employed.
Moonbeam you are another one of those mislead sheep who think Bermudians are lazy. I have seen with my own eyes employers deliberately changing a person’s job title to justify why they have brought in a foreigner, when they are doing the exact duties as the person before. This is called economic discrimination.
You mean work for slave wages and then pay $2,000 a month for rent.
Ya a REAL @$$ hole !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Shouldn’t we really do some clear and honest analytical thinking? says Larry. Spot on, and it is something I have attempted, unsuccessfully for more than 30 years. Larry is great on figures and makes too much sense for any politician to take him seriously. What we need is the labour participation rate – how many people are actually looking for a job. That is the missing figure.
Keep up the good work Larry. Before I die I hope to meet (or know of) a politician that knows what he is speaking about when he discusses the economy. Alas I have a greater chance of marrying Beyonce.
This should be required reading for everybody – small wonder we cannot pay our bills. Expect more emigration if it continues this way. Thank you Mr. Burchall.