Income inequality rate ‘appalling’
Bermuda's income inequality is “appalling”, but has not got worse in recent years, economist Robert Stubbs said yesterday.
Mr Stubbs, a former head of research at the Bank of Bermuda, added: “I'm not making any excuses here for Bermuda's status quo.
“Our income inequality on the island is nothing short of appalling.
“But the inequality statistics I've compiled show that while our income inequality is at extremely high levels, over our crisis period it hasn't worsened any.”
The 2016 Population and Housing Census Report, released last week, showed that the median personal income for black people in Bermuda dropped 13 per cent between 2010 and 2016, but increased for white people by 1 per cent.
Mr Stubbs said “perverse incentives” in the island's tax structure had contributed to the disparity shown in the statistics.
He said: “Personal income includes both capital and labour income.
“If white people hold a disproportionate amount of capital and the returns to capital increase relative to labour, as my research shows it has, then white personal income will perform relatively well.
“According to our GDP data, from 2010 to 2016 our compensation to employees fell 10 per cent while corporate profits rose 79 per cent and income from rents increased 66 per cent.
“These numbers highlight the perverse incentives inherent in our tax structure. Bermuda's current tax system penalises the creation of jobs while providing incentives encouraging the excess accumulation of commercial and residential property. Today, we have over 600,000 square feet of vacant office space in Hamilton.”
Mr Stubbs also said the changing figures could also be linked to better public compliance with the census.
He said improved compliance meant more people involved in the island's “informal” economy were included in the 2016 census than in the 2010 census. Mr Stubbs said: “The informal economy comprises people in what is termed precarious employment. These are people who do not have stable employment.
“They have no benefits, no guarantee of full-time work and quite often no employment contracts.
“I think it's a fair assumption that such people have relatively low incomes and if the income of such people falls relatively significantly, as it typically does in economic crises, and black people comprise a greater proportion of such workers, then the personal income of black people reported in the census will reflect a bigger decline.”
Mr Stubbs said the census results underlined the need for more frequent and better quality economic statistics and research to develop solutions.
He said: “The Bermuda Monetary Authority and our Ministry of Finance do a very poor job of providing the Bermuda Government and our public with prescient and insightful research regarding our economy.
“For various reasons, the Bermuda Government in the past has resisted being transparent with ourselves and the outside world. This secrecy has hurt us badly. It has allowed our problems to fester and resulted in a crisis of historic proportion.
“As I've been saying for three years now, our economic problems really are of a structural nature. They're deep. And if we're going to turn this country around, now is the time to be open and honest with ourselves and the outside world.”