Jobs, unemployment and tax increases
Published: Oct 29, 2013
Last week the Department of Statistics revealed that the unemployment rate in the country increased to 16.2 percent from 14 percent. This is the highest the jobless rate has been in a decade.
There are other concerning figures in the report. The unemployment rate on Grand Bahama jumped to 19.5 percent from 18 percent. Unemployment among young people (15 to 24) stands at 30.8 percent.
The Department of Statistics, however, said the unemployment rate is higher, in part, because of a 33 percent decline in the number of discouraged workers.
Despite the gloomy jobs report, Prime Minister Perry Christie is optimistic about the future. He foreshadowed yesterday that The Bahamas is on the cusp of a boost in employment, and said the ailing economy has “turned the corner”.
Christie’s comments came as the government signed an agreement for a $90 million expansion of Club Med resort in San Salvador.
“Today’s event marks yet another major initiative and advance in my government's commitment to the Bahamian economy, to create sustainable jobs, employment and entrepreneurial opportunities,” he said.
“There is more to come in further resort development now being planned as we implement initiatives to reduce the cost of electricity, modernize infrastructure, improve healthcare, social education and security services, expand agriculture and fisheries, create new industries and embrace emerging opportunities.”
There are other positive economic signs to bolster Christie’s claim. Genting has invested much in Bimini and is working on bringing people to that island. Sports tourism appears to be expanding, with the recent preseason visit of the Miami Heat and the announcement that NCAA football bowl games will be played in The Bahamas. The cruise ship business continues to grow.
While the Christie administration works on helping to create jobs through these large heads of agreements, it should be careful not to cause jobs to be lost and to stall investment through its wider tax policy.
The business community has become increasingly alarmed by the government’s decision to introduce value added tax (VAT) next summer. The uncertainty over the proposed tax is slowing local investment. How can you expand your business with this new tax pending? How can you take on new staff with VAT looming?
Christie must be careful that his government’s policies don’t pull in opposing directions. VAT will increase the cost of living in The Bahamas. It will take money out of the pockets of consumers. Its purpose is to boost revenue to support the profligate spending of our government. Half a billion dollar deficits are unsustainable in such a small economy. The hole must be closed. But in closing the hole through tax increases a choice is being made to harm job growth.
The government has made some moves to reduce spending. Those efforts, though, need to be just as much a part of this deficit reduction discussion as tax increases.
Christie will have some tough decisions to make come budget time next year. We hope the minister of finance chooses a mixed bag of measures not overly leaning on massive tax hikes at a time when his greatest desire is to create jobs.