Jason Hayward ignores an obvious solution to ageing population
Jason Hayward, the economy and labour minister, recently announced a position paper on Bermuda’s ageing population.
There should be no doubt that this is not a “looming” crisis. The crisis is already here. If it was a hurricane, Bermuda would be feeling tropical storm winds and the roads would be clear as the worst of the storm comes.
The only surprise is that some people are surprised. The warnings have been issued for decades. That successive governments have failed to act is another matter.
In fairness, the One Bermuda Alliance did cite the ageing population as a significant reason for its doomed Pathways to Status plan, and it was Mr Hayward and his People’s Campaign who were major opponents of the same legislation.
So it must be galling to Mr Hayward’s OBA predecessor, Michael Fahy, to see increased immigration now being included as a big part of the solution.
The best that can be said is that governing is different from being in opposition; you have to deal with the world as it is and not as you would wish it to be.
The worst that can be said is that the former Opposition and present government wilfully ignored reality in order to gain political advantage. The result is that five years have been wasted while the Progressive Labour Party has tried to square the circle between its campaign rhetoric and reality.
As late as it is to deal with the issue, it must be tackled now. The Government has at least admitted there is a problem and has come up with some ideas for solving it. But too many of the ideas are just that — ideas or the need to talk about ideas — and not actions.
Mr Hayward’s statement rightly says: “Bermuda's ageing population will have significant implications on the island's economic growth and healthcare, among others.
“Based on the population's demographic trends, our current working population will be unable to support the local economy in the years to come.”
Those are terrifying words. If the demographic trend does not change, Bermuda’s economy must inevitably shrink — regardless of other events.
Bermuda has more people retiring out of the workforce than there are Bermudian entrants. Retirees are also living longer, meaning they must be supported for longer.
As a result, Bermuda’s dependency ratio — the ratio of non-working people to working people — is growing and by 2026 will be higher than the average for countries in the Organisation for Economic Co-operation and Development. Where there were 28 people over the age of 65 for every 100 people in the country in 2017, that number will increase to 43 per 100 by 2026 — a remarkable leap in only nine years. It will continue to increase after that unless something is done.
The ramifications are obvious. Pressure on healthcare will increase dramatically as an ageing population requires more care in terms of both cost and quantity. If the working population does not increase, that means premiums for working people will increase exponentially.
A similar problem exists for pensions. Recipients of the Contributory Pension Fund will need more money for longer, and this will have to be funded by a smaller proportion of the overall population. Thus, contributions will have to jump or the fund will go bankrupt.
Those are just the two main problems. There are many others. If people are unable to support themselves, the burden will end up with the Government and on the working-age taxpayer.
The solution to this in broad terms is to find ways to not simply maintain the working population but to increase it.
It may seem that this is simply a question of maintaining the working population at its existing size, but this is wrong. In fact, the working population has to increase, and increase quite dramatically.
Without getting too technical, if 100 people were expected to retire this year and there were only 80 Bermudians entering it, it would seem obvious that 20 additional non-residents — who could be returning Bermudians — would be required to maintain the working population.
But that would not be enough. The great insight in the report is that the working population needs to grow faster than the retired population.
If not, a static working population is becoming a smaller proportion of the population year by year.
To achieve this, the paper argues that the working population needs to grow by 25 per cent or 8,000 and to return to the levels achieved in 2008 when it was 40,000 strong.
Only then will the working population be producing enough in terms of additional tax revenue, health insurance premiums, pension contributions and the like to support the growing population of retirees.
Mr Hayward’s government has identified the means by which this can be achieved, although it is in the broadest of strokes.
It plans to increase the population by 8,400 people in five years, which equates to 1,600 people a year — an ambitious target.
It plans to do that by discouraging emigration and encouraging the return of Bermudians, immigration, economic growth and changes to labour policy.
This is stunningly vague. If the Government wishes to increase the population by 1,600 this year alone, it has three months in which to accomplish the goal.
Discouraging emigration and encouraging Bermudian “immigrants” demands that they feel they can do better in Bermuda than elsewhere, and that is simply not the case now. Increasing economic growth should be the goal of every government, but the Government’s Economic Recovery Plan is barely under way more than a year after it was launched.
Labour policy changes that encourage increased employment would suggest the Government wants to relax employment requirements and make them more flexible. But, in fact, most of the Government’s labour policy changes make hiring harder and more expensive — in other words, they deter jobs growth!
There are other ways of solving the problem that are not touched on here. Increasing contributions to the Contributory Pension Fund would be one. To be sure, the economic uncertainty that the island faces and rising inflation make this politically difficult, but failing to do so would simply make a bad problem worse.
Equally, the Government has flagged up having higher-income earners pay more into the CPF, but there was also a promise to increase the take-home pay of lower earners. In fact, given the crisis the island is facing, it would make more sense to maintain the bottom level of payments where they are.
More curious is why the Government does not mention increasing the retirement age as an obvious way of maintaining and expanding the working population.
The standard retirement age of 65 was established decades ago, since which time people are living longer and in general are healthier and mentally sharper than they were at the same age a half-century ago.
This idea is not new, but politicians seem to be terrified of implementing it. There will, of course, be many people who are keen to retire at 65 and have the resources to do so. But there are many more who wish to continue to work and who would benefit from working longer in order to improve their pensions and savings.
While there are many details that need to be worked out on this, it is a mystery that it is not even on the table. Bermuda faces a genuine crisis with its ageing population. Governments have spent decades avoiding dealing with it. Now all solutions should be considered.
Mr Hayward is right to raise this issue. Now he needs to take action. The time for talk is surely over.