Productive labour

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  • The annual Labour Day Parade makes its way through the streets of Hamilton on Monday

    The annual Labour Day Parade makes its way through the streets of Hamilton on Monday

Bermuda marked Labour Day yesterday with some people attending the annual rally and march and many more making it a day to relax before getting down to work after the summer.

The Trade Union Congress has made this year’s Labour Day theme “labour under threat”, and with some good reason, although some wounds have been self-inflicted.

Certainly, the BIU has been engaged in a long and costly fight with KFC Bermuda over a new contract at the fast food restaurant, but it is notable that the public has not rallied to the union’s side in any great numbers. The reality of the recession is that with unemployment at its highest levels in living memory, those people who are in work are considered to be fortunate, so arguing over benefits does not get the sympathy it once did.

The wide debate has to be over how to make Bermuda competitive again. Right now, from tourism to international business to every sector in the local economy, Bermuda is too expensive for the quality of service it delivers. The Island must either become more productive at its current prices, or find a way to reduce its costs, or both.

Bermuda’s economy depends entirely on its ability to earn foreign exchange, either through international business, tourism or other “exports” in order to import the goods and services it needs to survive and flourish. In an increasingly globalised world, that means it must be able to provide those services in a competitive way, something it does not do right now. If hotel rooms cost $400 or more a night in order to meet Bermuda’s high operating costs, then Bermuda must offer an experience that is worth $400 or more a night.

The same applies in international business and every other service Bermuda offers. Bermuda’s failure to do this is why much of the Island’s information technology services are now done from overseas, and any other service that can be done remotely will follow if the Island does not become more productive or finds ways to reduce its costs, or both.

The problem is how to do this when prices for most goods and services are so high that employees cannot see how they can survive, and businesses cannot lower those costs without putting themselves out of business. In part, this is because employment conditions in Bermuda have become too inflexible, both in unionised workplaces and under the Employment Act, making it difficult to reduce staff in difficult times. As a result, employers are also reluctant to hire.

Similarly, the cost of benefits are becoming impossible for many employers to meet in a still contracting economy. When benefits and taxes add 20 to 30 percent to the average payroll, and when items like social insurance and health insurance continue to rise even when the economy is shrinking, this creates an impossible burden for employers.

That’s why easing employment conditions and relaxing benefit requirements would go a long way to making Bermuda competitive and, in the longer term, helping the economy to grow while keeping jobs in Bermuda.

The other factor that is critical is to make Bermuda the domicile of choice for international business once more. Right now it is not. Immigration restrictions, heavy touch regulatory demands and lack of flexibility mean that Bermuda is no longer looked at first by international companies and entrepreneurs looking to establish their businesses.

The Cayman Islands’ recent stumble with its proposal to impose a payroll tax on expatriates is an example of where Bermuda can take advantage. By simply guaranteeing that Bermuda will not discriminate between Bermudians and non-Bermudians on tax matters, Bermuda could attract many Caymans-based companies to the Island. Instead, Bermuda does nothing.

Far from recovering, Bermuda’s economy is running out of time. On this Labour Day, Bermuda has to make a commitment to becoming more productive and more competitive.

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Published Sep 4, 2012 at 8:33 am (Updated Sep 4, 2012 at 8:32 am)

Productive labour

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