Simmons: Bermuda’s entrepreneurs are the key

  • Promote the movers and shakers of growth: economist Craig Simmons

    Promote the movers and shakers of growth: economist Craig Simmons

Successful entrepreneurship is the key to boosting Bermuda’s finances, an economist has claimed.

Craig Simmons said that businesspeople were the drivers of economic growth and that they took on risk like “heroes”.

The senior economics lecturer at Bermuda College added: “Governments don’t create economic growth, entrepreneurs do.

“They are the movers and shakers of growth.

“They graciously accept the downside of risk, taking on a bank loan — debt — on the remote possibility that their business venture will be profitable.

“In this way, entrepreneurs are like saints, war heroes and mothers.

“If we want growth then we need to provide them with access to capital as well as a business-friendly regulatory and tax environment, the kind of treatment we give to international business.”

Mr Simmons added: “When it comes to economic growth, the Government is a facilitator not a creator.

“The Government’s role is in creating the conditions for entrepreneurs to succeed by providing an impartial judicial system, roads, security for residents, access to basic healthcare and education.”

Mr Simmons claimed that the “tale of two Bermudas” simplified inequality “by creating two types of people: the rich and the rest”.

He said it meant that the top 1 or 10 per cent of earners went into one “bucket” and everyone else went into another.

Mr Simmons explained: “The problem with oversimplifying the world in this way is that it is likely to produce bad solutions when a nuanced approach could reveal a more rational response to inequality.”

He said it was also important to look at income distribution.

Mr Simmons, speaking before the 2020-21 Budget statement on Friday, added: “We have very little data on how profits and dividends — the main source of income for entrepreneurs — are distributed despite the fact that they make up about 40 per cent of incomes earned.

“It’s fair to say that profit and dividend income are concentrated among the top 10 per cent of the population.”

But he said not all of the highest earners are equal in any given period, with entrepreneurs’ income levels prone to fluctuation year-by-year.

Mr Simmons added: “A sound understanding of top 10 per cent incomes requires several years worth of data.”

However, he said “We can still start using the Government’s annual Budget to address inequality with the blunt instruments at our disposal.

“Specifically, we can address the problems faced by our working poor — individuals earning less than one-half the median income — $32,000 per annum or $600 per week.

“The Government has indicated its willingness to assist this group by lowering their payroll tax to zero.

“I would argue that this does not go far enough and that an earned tax credit could target this population with an income top-up.

“The top-up would raise working-poor incomes towards a livable income.”

The Ministry of Finance, in its Pre-Budget report, said that the Government was “considering reducing or eliminating the lowest band of payroll tax to provide relief to those workers that have suffered through wage stagnation and increases in the cost of living”.

It added: “If the Government reduces or eliminates the lowest band, it will adjust the higher employee bands in order to maintain revenue neutrality for Government.”

Tax credits can be money subtracted from the taxes owed by a person or government payouts to give extra money to people.

Universal Credit is used in the UK to top up incomes and the payments are reduced as the recipient earns more.

Robert Stubbs, the head of research at Seed Bermuda, a think-tank set up to offer social, economic and environmental development solutions for the island, said that the “tale of two Bermudas” may be most evident in the labour market.

He added that employment statistics had indicated that “the fortunes of Bermudians and non-Bermudians have been diametrically opposed” for the past 20 years.

Mr Stubbs said: “While non-Bermudian jobs have been in recovery since 2014, Bermudians experienced job losses yet again in 2018, following a brief respite in 2017 due to the America’s Cup.”

The Bermudian working population was 28,203, or 76 per cent, of the 36,878 total in the 2020 census figures.

Non-Bermudian workers, who were not spouses of Bermudians, made up 6,881 people, or about 19 per cent.

Figures in The Bermuda Job Market Employment Briefs report — which are not directly comparable to the working population data in the census — published last June, showed that Bermudians held 23,579, or 70 per cent, of the 33,810 jobs filled when the survey was carried out in 2018.

The number of jobs filled by Bermudians were 23,833 and 23,576 in 2014 and 2015 — both 71 per cent of the total. In 2016 and 2017 the share dipped to 70 per cent of the total, at 23,494 and 23,671 respectively.

Other non-Bermudians, who are not spouses of Bermudians or permanent resident’s certificate holders, held 22 per cent of filled posts in each of the years 2016 to 2018, according to the Department of Statistics’ report.

They held 21 per cent of the jobs in 2014 and 2015.

The report showed that they held 6,885, 6,990, 7,259, 7,340 and 7,563 of the filled jobs for the years 2014 to 2018.

Mr Stubbs said that political and regulatory leaders under the One Bermuda Alliance and the Progressive Labour Party had “steadfastly refused to admit big mistakes” had been made.

He added: “The truth is, Bermudians are suffering due to the economic policy errors of their very own government.

“Politicians are particularly loath to admit mistakes, but until these underlying problems are recognised and addressed, Bermuda’s crisis will continue to grind on.”

To read the Pre-Budget Report, click on the PDF link under “Related Media”

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Published Feb 18, 2020 at 8:00 am (Updated Feb 18, 2020 at 8:09 am)

Simmons: Bermuda’s entrepreneurs are the key

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