Government: Pension changes to improve local employment

The Cayman Islands government expects that a combination of greater demand for labor along with changes to private sector pension rules will reduce Caymanian unemployment during 2017/18.

The government’s pre-election and financial update estimates Caymanian unemployment will fall from 7.1 percent in 2016 to 6.1 percent at the end of this year and then fall further to 4.9 percent in 2018.

It’s expected there will be an increase in employment opportunities as a result of a number of new construction projects getting started in the second half of 2017, including the Ironwood development and a new five-star hotel along Seven Mile Beach.

“Over the medium term, new employment is also expected from the islands’ hotel industry with the completion of new facilities and renovation of existing ones,” the report stated.

Meanwhile, changes to the National Pensions Law that allow workers to “cash out” their pension savings accounts if they leave before Dec. 31, 2017 are also anticipated to increase local employment.

“It is assumed a proportion of unemployed Caymanians will replace resigning expatriate workers beginning in the last quarter of 2017 and continuing in 2018,” the pre-election financial report states.

According to Chamber of Commerce estimates, some 2,500 foreign workers will depart before the end of this year to take the money from their retirement funds. After 2017, that option will no longer be available to those workers.

Economics and Statistics Office figures from the fall of 2016 said there were fewer than 1,500 unemployed Caymanians in total on the islands.

Unemployment overall is expected to decrease from 4.2 percent this year to 3.6 percent in 2018.

That decrease is projected to occur at the same time that unemployment among non-Caymanian permanent residents rises significantly.

The same government estimates that show Caymanian unemployment dropping from 7.1 percent to 4.9 percent, forecast that non-Caymanian permanent residents’ unemployment would rise from 3.8 percent in 2016 to 6.9 percent this year and stay at 6.7 percent in 2018.

No reason was given in the report for the sudden rise in unemployment among non-Caymanian permanent residents.

Non-Caymanian work permit holders’ unemployment levels hovered around 1 percent for the entire period. Typically, non-Caymanian work permit holders have low levels of unemployment because they are not allowed to remain in Cayman without a job.

Upward trend

Although the government projections show overall unemployment trending down in 2017/18, the most recent actual jobless figures for 2015/16 have shown an increase.

The number of unemployed Caymanians grew by 197 people between October 2015 and October 2016, according to the fall 2016 Labor Force Survey. The Caymanian unemployment rate went from 6.2 percent in October 2015 to 7.1 percent in October 2016. More than 1,400 Caymanians were unemployed and looking for work as of last fall, based on estimates from the Economics and Statistics Office.

The potential for an increase in unemployment numbers was forecast by Finance Minister Marco Archer nearly two years ago.

“The age of pension entitlement was increased to age 65 in May 2016 and this could have inspired persons 60 and older to re-enter the labor force,” Mr. Archer said. “A minimum wage was also established in March 2016, which could also have encouraged greater efforts towards getting a job by persons across all age groups.”

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3 COMMENTS

  1. There is a lot to be thought about with the pension change and what effect it will have on employment.

    Based on people I have talked to from all walks of life, I don’t doubt that 2500 will be leaving before the end of the year. People who you would never expect anything other than planning a future here are thinking “is now the time I should go?” Especially people who have been led to believe that the pension plan was a safe investment and could be used as a savings plan, and added a substantial amount of voluntary contributions to it.

    Does this mean there will be 2500 jobs to fill? On one hand yes as the teachers, police, medical staff will be replaced because they are essential positions. Hopefully a portion of these will have local applicants. Mid to low level positions will also likely get filled.

    On the other hand, some skilled people may be leaving that as part of their job they have a local support system. Perhaps an unskilled assistant, or junior team members that will be left without jobs when the skilled individuals leave. We can not assume that all the jobs that are currently filled will continue to exist in the new year.

    For arguments sake, lets say of the 2500 people leaving, 250 of those jobs get filled locally by Caymanians that are currently not working at all (if there are good jobs available, people perhaps under employed will have a chance to climb a ladder, having other jobs open up, there will be a lot of movement). And lets say that there is a very real likelihood that 250 of these job will just not be filled again.

    The trickle down is not good on a couple of fronts, one obviously the effect of the people that are employed in direct service of some of these people, helpers etc. But I feel the biggest impact will happen to Caymanian landlords and the rental market when 2500 leave on mass, and only 2000 new people arrive on island to rent rooms.

    There will be a mad scramble, people staying will move to better apartments, prices will drop as inventory has a temporary rise, and when the dust settles the people that really needed that extra $500-$700 a month renting their spare room will be left behind. Causing them to go out and look for work, increasing the number of unemployed Caymanians.

    This pension policy will have a larger negative effect on landlords than when rollover kicked in.

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  2. From what I am reading and understanding in this Pension funds issue . I don’t understand if this is a scaretactics or that the government was that stupid to create such a major problem for the Islands . What is the reason why these people are leaving the country ? Are they tell their friends ? Yes . Would their friends want to come to Cayman Islands to work ? No .

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