Tuesday, March 01, 2011

Jersey unemployment: an inevitable consequence of economic mismanagement

The recent news that Jersey's unemployment rate has hit an all-time record high comes as no surprise. And the figures would look a great deal worse if it weren't for the large outwards migration of unemployed workers leaving the island because there is no unemployment benefit.

Jersey's unemployed are the victim of economic policies that have been failing for years. Since the 1970s the island's government has claimed to be following a strategy of maintaining a balanced and diversified industrial base. In practice this was supposed to translate into keeping a balance between tourism, financial services, agriculture/horticulture, and light manufacturing industry. The reality is that the dynamic growth of the island's tax haven activity simply crowded-out the other industries through property market inflation and rising real earnings in the financial sector. Everything follows from there.

The current situation looks grave. Jersey's corporate tax policies are deemed abusive by the EU's Ecofin. The island's government lacks a credible plan B. Global pressure for effective measures against secrecy jurisdictions like Jersey is unlikely to diminish anytime soon, leaving greater uncertainty about the future of the island's offshore financial centre, but meantime tourism maintains its long-term structural decline in terms of investment in registered bedspaces, staying visitor numbers, average length of stay, and average spend per visitor, and the endlessly re-rehearsed notions of diversifying into new areas (a university has been mooted in the past, as have plans for information services) are mere pipe-dreams. The future looks anything but rosy.

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