A recent precipitous drop in the Cayman Islands unemployment rate is not expected to continue this year, according to government’s own estimates.
Cayman’s overall jobless rate has dropped from 6.3 percent in 2013 to 4.2 percent in 2015, figures based on Economics and Statistics Office surveys show.
For Caymanians, that drop was even more pronounced, going from 9.4 percent in 2013 to 6.2 percent last year.
However, estimates included as part of economic forecasts for government’s upcoming 2016/17 budget put overall unemployment for 2016 back up at 4.7 percent.
“[The unemployment estimates] assume a moderate average increase in the labor force of 1.3 percent,” government’s forecasts noted. “It is also assumed that the recent minimum wage increase will have a slight adverse impact on employment growth in 2016.”
Finance Minister Marco Archer has previously warned that certain government labor policies, including setting the minimum wage at $6 per hour and boosting the civil service retirement age to 65, could lead to higher unemployment. The minimum wage rate has already taken effect, while the increase in the government retirement age is due for consideration by legislators this fall.
A government report on the establishment of minimum wage estimated that up to 600 people could lose their jobs following the implementation of the base wage rate. The 2015 Minimum Wage Advisory Committee report cited the possible loss of 545 to 600 jobs – less than 2 percent of Cayman’s current labor force – if the minimum wage was implemented.
Premier Alden McLaughlin has advanced another theory: that job losses due to the establishment of a minimum wage, while affecting the local economy, would not have a huge impact on unemployment because most of the workers losing their jobs would be non-Caymanians who are required to leave the islands if they are not legally employed.
According to the advisory committee report, about three-quarters of the minimum wage workers in Cayman were non-Caymanians.
Minister Archer also said last year that increasing the mandatory civil service retirement age from 60 to 65 would likely halt the recent drop in Cayman’s unemployment rates.
“If you increase the retirement age from 60 to 65, you increase the working population, so your labor force grows,” Mr. Archer said. “The [worker] pool from which you are drawing will get bigger.”
The overall labor force in Cayman was expected to grow from slightly more than 39,000 people to more than 41,000 by 2019. Meanwhile, the unemployment rate – after the increase in 2016 – was expected to drop again to 4.2 percent by 2019.
“New employment is expected to be created directly and indirectly from the set of construction projects in the private and public sectors, as well as in the post construction phase of these projects,” the government financial estimates noted.
“Employment is foreseen to grow gradually at an annual average of 1.3 percent during the period.”
The proposed change in the government retirement age will not force any current civil servants to work beyond age 60. They will have the option to stay on until reaching age 65. Currently, government workers are allowed to stay beyond age 60 only if they receive employment contracts of between one and three years, although in practice those contracts are typically granted to Caymanian workers.