The OBA’s failure to communicate on Pathways to Status

Former Finance Minister Bob Richards had to say in yesterday’s paper.

“It was clear to me as the economics guy that what we were proposing for immigration was very sound economics.

Here’s the problem.  The OBA completely and utterly failed to explain how their immigration proposals were sound economically and how they would benefit the average Bermudian.  They had tunnel vision and were only capable of viewing and explaining issues from their own perspective.  This versus trying to put themselves in the shoes of the average Bermudian to better understand and explain how this would benefit them.  This was one of the fundamental flaws of the OBA’s communication strategy and why they were consistently described as out of touch.

The OBA was wholly accepted as very strong economically.  The problem was, few people really understood how or why and they didn’t help themselves by explaining it. For example, nowhere in the former government’s communications regarding pathways to status did I see a coherent explanation of it’s economic benefits.  The following was closest and it wasn’t very compelling:

New applications will represent a revenue-enhancing opportunity as applicants pay the substantial fees involved under the legislation. New Bermudians, with their newfound security, could seek to purchase real estate or inject capital into Bermuda companies as directors and shareholders. Assets which will be earmarked to leave Bermuda will be more readily available for investments in the local economy. These contribute to an economic multiplier effect and feeds back into positive movement in Bermuda balance of payments and increased Government revenue.

It reads like we were putting status up for sale.  How does this benefit the average Bermudian?  Why would we want to openly sell Bermudian status?  It wasn’t encouraging from most any perspective.  Looking at the rest of the argument for pathways to status it wasn’t much more encouraging.  It was “the right thing to do”. Our policy wasn’t not consistent with international human rights and Bermuda is the only country not to have it.

Here’s the problem.  The framing was all wrong.  How you present an idea is very important as it steers the perceptions and how people feel about that idea. How people feel about an idea can often be more important than the idea itself. People, especially in a time of recession, care more about their own basic needs long before they care about ‘the right thing to do’ for non-Bermudians.  If you can’t explain how Bermudians will benefit, people will not only reject the idea, they’ll get annoyed that this is your focus vs things that are perceived to actually benefit Bermudians.  Thus, that is what we saw happen.

Worrying about basics like how you’ll buy food, how you’ll pay rent, the health and welfare of your loved ones are far more important priorities than whether or not we’re doing the right thing on behalf of our expat community.  People ask themselves “why should I care?”, “what will this do to benefit me and my family?”. The big problem with the OBA’s communication was that they failed to provide good answers to these question on most issues.

Certainly there were valid economic reasons to be made, however they simply weren’t elevated enough.  For example, one of the big issues we face is that jobs in international business, the core driver of foreign income for our island, have not really grown over the last few years.  This is a huge problem that far too few people really understand and hasn’t been explained very well.

Policies like term limits and the global recession contributed to a decline in IB jobs that simply haven’t recovered.  We aren’t growing jobs and risk losing more.  One of the big problems we face are situations where long term residents such as senior IB staff and Executives consider relocating off island and taking jobs with them.  I’ve met numerous senior IB individuals who lament that their children cannot work on island at age 16, may have been born and raised here and really only know the island.  It is just as easy to say “well, you knew that coming here” as it is “well, I’m going to relocate somewhere else and take my entire department of Bermudian and non-Bermudian jobs with me”. This is the crux of it.  We can’t have our cake and eat it too.

Everyone agrees we need jobs and yet nowhere in the entire Pathways to Status saga did I hear arguments of how it would held protect and help create jobs.  There were no explanations of how it would benefit the average Bermudian to support it so why would anyone have done so.  “The right thing to do” is a completely different argument than “it will protect and create jobs”.  Yet, the OBA never took the time to frame things properly from the context of the average Bermudian and as such allowed the issue to be framed as manipulation of the populace to boost their voter base.  It is a perfect example of why the OBA was seen as out of touch.  They did not take the time to view and explain their proposals from the perspective of the average Bermudian.


Where did non-Bermudian job growth come from?

The latest Employment Report data has been released for 2016 so it’s a good time to revisit job numbers to get an idea of the state and direction of employment locally.

One of the more controversial topics recently is that job growth only occurred among non-Bermudians.  This has many Bermudians up in arms but there is likely more to the story than simply comparing one number against another.  Where are the jobs being created and what are the details of the growth?  We already reviewed where this argument doesn’t tell the full story as when you account for attrition in government jobs, Bermudian job numbers did grow.  Let’s take a deeper look into the numbers to see what else they show.

Let’s start by looking at the Top 15 minor divisions of economic activity that employ non-Bermudians.

The first thing that jumps out at me about this chart is the ongoing declines in the biggest division for non-Bermudian employment: “Financial and insurance activities of IBEs”.  That’s honestly quite concerning that we’re still not adding to overall numbers of our key industry.

What does that look like when comparing Bermudian to non-Bermudian job numbers?

So, where is job growth for non-Bermudians coming from if not from international business?

Looking a bit closer

Let’s take a look at each one of these and compare Bermudian vs. non-Bermudian job growth

This chart is a bit telling.  Bermudians gained jobs while non-Bermudians lost jobs in the period from 2009-2012.  Then Bermudian jobs declined until they reached parity and we’re now seeing job growth for both, though stronger non-Bermudian job growth.

Recreational, cultural and sporting activities?  Bermudians saw a dip post 2013 while non-Bermudians have climbed.  I’m a bit curious about this one as I’m not really sure what “Recreational, cultural and sporting activities” covers, though it does seem to employ quite a few Bermudians.  I wouldn’t be surprised if many America’s Cup workers fell into this category and contributed to the significant growth but I’m honestly not sure.

Interestingly construction is one area where we see improvements in non-Bermudian job numbers while Bermudian jobs are still in decline.  Why?

Finally we see that in the Legal, accounting, market research and business and management consultancy division for the last couple years there is non-Bermudian growth while Bermudian job numbers are fairly stagnant.

Interesting.  Is it as simple as demanding that Bermudians get jobs before non-Bermudians?  Perhaps not. We can’t point the finger at international business as that is still in decline.  Restaurants are a tough industry that many Bermudians aren’t very keen on working in for the low levels of pay offered.  Legal and accounting require specialized expertise that isn’t easily replicated.  Construction leaves us with questions.  Finally, since America’s Cup is now finished, we might see a quick decline in the recreation and sporting activities division numbers next year.

Why are you desperate to prove the America’s Cup event was a failure?

The Bermuda Tourism Authority today released statistics covering the America’s Cup period and people are already up in arms trying to prove America’s Cup was a failure because it didn’t live up to the hype.  Why?

The America’s cup was to be so big that all the hotel rooms would be full and there’d be so much demand that they’d need to bring in a chartered cruise ships to host all the extra people.

One word:  Hype.  If you believe the above, you were sold on hype, not reality.

Smart financial decisions are not based upon hype.  They are based upon conservative projections of a return on investment. America’s Cup was not brought here because of hype, it was brought here because conservative projections suggested it was a good investment.

What we really need to do is take a step back and compare the results that we’re seeing against the projections to prove if the investment was worth it. The conservative projections suggested that based upon the invested amount we would generate $235 million of direct spend on the island.  We need to figure out if the returns generated met or exceeded that estimate.  If you expected it to bring the second coming of Jesus then I can only shake my head that you bought into such hype and suggest you’re reading the wrong blog.

Yes, hotel occupancy was down for June.

Yes, the original projection suggested hotel occupancy to be 10% higher

Does that make it a failure?  Well no. It was a projection.

You see, the government has no control over how Hoteliers run their businesses.  If hotels decide that they want to push their prices up to keep occupancy levels the same, government can’t do anything about that.  It is a business decision on the part of hoteliers.

So, what we saw was room prices being $133 more expensive on average in June than they were during the same period in 2016 while occupancy was slightly down.  What does that mean?  Well if you look at it from the perspective of bed nights (you know, nights that a hotel bed had someone in it), there were nearly 98,000 bed nights for June which was down from 107,055 for 2016.  However, if you consider that each one of those bed nights cost $133 more on average, then by a rough back of the envelope calculation we’re looking at about $13 million in additional revenue.  Assume that the 10k less bed nights accounted for a guess of about $300 a night on average in 2016 and we can subtract $3 million from that number.  So, for hotels that’s about $10 million in extra revenue.

So, look back up at the assumption snapshot above and you’ll note that $5.485 million was the projection.  If for June we honestly cleared $10 million in revenue (not counting May) then it suggests the event beat the projection.

How about Superyachts?  The original estimate?  40.  The final number? 100.  So that is looking positive as well but we won’t have good estimates of what they spent until the impact assessment comes out in October.



Cruise visitors?  This is an area that raises perfectly reasonable questions.  The projection called for 3,850 static cruise ship passengers though admittedly a caveat was included that this plan could change.  Ultimately $18 million was the estimated direct spend so we can work with that as it forms part of the $234 million total.  The question is, compared to the estimate, how did cruise do in spending?  To be honest, I have no idea.  The America’s Cup summary of the tourism statistics suggests there were roughly 13,000 additional cruise visitors.  The problem is that the statistics numbers provided are weak so it is very difficult to put together an idea of whether or not cruise measured up.  No cruise nights are listed, no expenditure is listed, so there’s really no good way to compare the cruise projections to the actual results at this point.  So I’m left suspect of the cruise number and will wait to see if more info is released to help clarify the numbers.

So.  Was the America’s Cup event a complete failure overall?  It isn’t looking like it. Was it a wild unbridled success that yielded the second coming of Jesus?  Well no, it doesn’t look like that either.  Did it likely meet and possible surpass the original projections?  Probably, but we won’t know for certain until the impact assessment comes out in October.

Here’s the thing.  If you’re desperate to prove the America’s Cup is a failure without fairly looking at the original projections and the actual results then I have to question whether you actually care about Bermuda’s future.  Great if you were so caught up in the hype of the election that you wanted your team to win over the other.  If your team won, great.  If your team lost, too bad.  Either way, take a step back, recognize someone won, and deal with that is the way it is going to be for the next few years.  Given that it’s over, isn’t it time we step back from the hype and cheerleading and rationally focus on a better Bermuda?  A first step would be to stop trying to prove the outcome you wanted and instead taking a serious look at the stories the facts are telling.

Before worrying about price controls, start with Unit Pricing

There’s a debate on “MAJ’s list” on facebook regarding the high prices of items in one grocery store over another.  It highlights a key thing I wish we’d see the government introduce: legislated unit pricing on price labels.

Here’s a great example thanks to a quick google search.

Many countries legislate unit pricing as a means to make it easier to compare products. Bermuda unfortunately is like the wild west.  Some things have a per unit price, others don’t. Usually they aren’t listed on the pricing label.

For example, look at frozen chicken in marketplace. They have numerous different brands, all with different quantities for different prices but no easy way to compare price per lb/kg. I usually have to take out my phone and do it manually. If you’re really lucky you get to shop in Supermart in St. Georges where most things have no price labels at all.

How is anyone supposed to be price conscious and hold stores accountable when it is very difficult to compare prices?