Today’s Editorial for May 24: Unintended consequences

Last September, the government
announced plans to increase work permit fees to raise revenue to help balance
the budget.  Simultaneously, it announced
that it would pass into law provisions for a private sector pension ‘holiday’ to
offset the additional costs to businesses caused by the increase in work permit
fees.

Both of these measures have now
happened, although the increase in fees happened several months before the
pension holiday.

In theory, this probably seemed like a
good idea to the government.  However, it
assumed a couple of things, namely that the number of work permits would remain
at least static and that most workers would opt to take the pension holiday,
adding money to their paychecks and relieving employers of some of their
overhead costs.

Unfortunately, neither assumption was
correct.

The number of work permits in the
Cayman Islands continues to drop, meaning the fees collected – even at the
higher rates – won’t generate as much revenue as expected. In addition, reports
that we have received indicate that low numbers of workers have opted to take
the pension holiday.

The combination of increased work
permit fees and little relief in pension obligations has only increased
operating costs for businesses, one of the things the government did not want
to do in the current economic climate.

Some people welcome a reduction of
work permit holders at a time when many Caymanians are out of work, but despite
the reduction of work permit holders, unemployment of Caymanians remains high.
This can only indicate that the jobs have been eliminated or moved off the
island.  One reason for this could very
well be the increase of business costs, including the significantly higher work
permits fees.

If the numbers of work permits continue
to fall, the loss of revenue will strain the government’s budget that much
more.

The law of unintended consequences
describes unanticipated outcomes to actions. 
Some times the consequences can be contrary to what was intended.  In the case of the increase of work permit
fees, all indications are the measure has hurt commerce without giving the
government the revenue it expected.

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