‘Hustle economy’ to be virus side-effect
A return to a large-scale “hustle economy” will be one of the after-effects of the Covid-19 pandemic and its devastation of the economy, an employers' representative has warned.
Keith Jensen, the president of the Bermuda Employers Council, said there could be a resurgence of “hustles” that thrived after the major recession of 2008.
He added: “For now, it's probably dwindled as there is less cash around, but it'll be back as persons find ways to earn income and to cut costs.”
But he said an increase in the grey economy would also deprive the Government of tax revenues.
Mr Jensen added that rampant unemployment could reduce a surge of pent-up demand for goods and services as restrictions were relaxed.
Mr Jensen said: “It results from the time lag of persons being re-employed more slowly compared with the time when they were laid off, which will hamper the flow of funds in the economy.
“Many will hope that short-term withdrawals from personal pension funds will kick-start their industries, but all businesses are waiting to learn about Government's plan for additional economic stimulation.”
He predicted that the Government would need to assist employees in some form for “at least a year”.
Mr Jensen added that the BEC had warned in 2013 that “hustles” left businesses dependant on cashflow, rather than profits.
Mr Jensen was speaking after Curtis Dickinson, the finance minister, told MPs in the House on Friday that “opting out from taking tough decisions at this time is no longer an option”.
Craig Simmons, a senior economics lecturer at Bermuda College, last week predicted massive job losses for this year — up to 100 per cent in hotels, 90 per cent for restaurants and bars, and 65 per cent in retail.
Mr Simmons also estimated wholesale and construction would shed about a quarter of their workforces.
Mr Jensen queried last week whether the crisis would prod the Government into a “get tough” approach to tax arrears, or into tackling employers who evaded payroll taxes.
He added that seasonal retail stock would soon be out of date with duty already paid, which made it difficult for stores to break even.
Mr Jensen said; “This is problematic because the money from goods that are sold pays for the next order and if there is no new stock they cannot generate sales and the downward spiral continues.”
He added that the lack of tourists and business visitors meant no “new money” in circulation for sectors such as the taxi industry and tourism-related businesses.
Mr Jensen said tourism-related retail would not recover lost ground, even if the airport opened by July. He added that a switch to online sales would still need stock that retailers could afford to purchase.
Mr Jensen said: “We have to ensure a value-driven visitor experience and shopping is one of them.”
He added that international business would be “ever more critical” as a prop to the economy.
Mr Jensen said: “The industry is a modest economic hero and their executives could be a valuable source of risk-savvy expertise that could help the island navigate successfully through these unprecedented circumstances.”
Mr Dickinson said on Friday that unemployment benefits would probably top $44 million.
But Mr Jensen said the emergency payments provided little past the 12-week programme and that the island would need “thoughtful discussions free of traditional rancour on the issue”.
He added that government revenues would take a hit from the loss of tourism-related taxes and “significant declines in taxes from the private sector”.
Mr Jensen said the Government had not yet cut its own payroll expenses and the BEC was “anxious to hear what it has been able to negotiate with the unions”.
He said it was “concerning” that some non-essential public-sector staff had been “paid without having to work” over the past five weeks.
Mr Jensen said health insurance coverage depended on businesses operating and that the creation of demand for products and services was “critical”.
He added that the recession caused by Covid-19 would be “worse than any in recent memory” and would have none of the activity and confidence that had persisted through the last recession.
Mr Jensen said fresh incentives and a redoubled effort to attract more international business were needed.
He added: “For every new 100 international business jobs, another 130 more jobs are created in Bermuda.”
Roland Andy Burrows, the chief executive of the Bermuda Business Development Agency, agreed that the island had been rocked by “one of the biggest economic disrupters we have faced as a country”.
Mr Burrows said financial services and international business had “seamlessly transitioned to a remote-working model, despite the challenges presented”.
He added: “This is significant, not only because international business typically contributes more than 30 per cent to government tax revenues, as the Minister of Finance recently highlighted, but because the thousands of Bermudians who work in this space have retained their jobs.
He said the sector was also responsible for “generous donations” when required.
Mr Burrows said the BDA's priority would include the identification of areas of opportunity.
These included an expansion of financial services and international business, a review of legislation to maintain a competitive edge, and “further adoption of technology to modernise our own infrastructure to support international business and Bermudians”.