There was a stunning editorial on Cayman NetNews yesterday. It was entitled 'The gap between rich and poor'. I would love to quote it in full. It's a telling story of just what life in a tax haven is really like.
The background is simple. The Cayman government is undertaking a National Assessment of Living Conditions (NALC) survey amongst its population of 45,000. In plain language, it is essentially about examining how poor people in our community are living.
As Cayman NetNews puts it:
Even if we count them and work out what percentage of the population the wealthy represent, it is the people on low-income scale who this study should be examining closely.
The circumstances in which they live, the food they eat, the way they care for their children in low income homes and how the unemployed and low earners manage in a society where the 'haves' tend to push up the cost of living, putting the 'have nots' in continually worse situation are concepts that need to be understood.
That's not the sort of issue or comment most people would associate with Cayman, which seeks to encourage the idea of being a wealthy idyll. Nor is this:
The imbalance and the widening gap between rich and poor are problems for many countries around the world. However, different tax systems allow some governments to manipulate the system so that low earners have some leeway.
For example, income taxes are put on a graduated scale depending on earnings. Higher incomes, means citizens pay a higher percentage of tax and vice versa. Because this country does not have income tax, Government charges fees and duties, which is a nice word for 'tax', which are pretty much the same no matter how much is earned.
In other words, the security guard who earns $3.33 per hour pays the same duty when shopping at Fosters as the lawyer earning $120,000 a year. Since the percentage of salary paid in duty by the security guard is disproportionate to the lawyer, some may see this system as inherently unfair.
It will be interesting to see when the study is completed, what proposals the Government will come up with to help the needy out of poverty.
Put simply - some in Cayman realise the problems that regressive taxes cause. They have them. And they are exacerbating the poverty suffered by the poorest members of their society. This is the poverty that gives rise to these issues:
Many people are already thinking that many of the social problems that will be revealed will include alcohol, drug abuse, child abuse and sexual molestation. It is unlikely that many people will be surprised at the likelihood of the survey revealing that a significant percentage of the population is living in poverty.
Another interesting factor about the extent of poverty in this country is that much of it is a result that many people here are affluent.
The demands on the economy made by those earning big salaries in the offshore sector for example, are driving up housing costs to such an extent that many people in low-income jobs cannot find affordable homes to rent. In many cases the idea of buying a property is way beyond their expectations.
This growing gap between the rich and poor will inevitably lead to more complex social unrest. We may think we have problems now with alcohol and drug abuse - but if the growing divide between 'the haves' and 'have nots' is not addressed those problems will escalate.
Some of that could have been written just as easily of London. The issues are the same. So are these issues:
Moreover, this socio-economic imbalance will also lead to complex societal issues that are tied to immigration.
If it is not addressed, the divide may see more native Caymanians leave the country to settle in places, which have lower living costs, where they can buy or rent homes at a reasonable cost while earning blue collar wages.
This means the service roles here will be increasingly filled by expatriate workers from much poorer jurisdictions who are more prepared to live in inadequate housing as they accumulate earnings, which may be deemed particularly low to locals, but more then enough to make a difference in some of third world or developing nations from which they come.
We have all heard stories of illegal housing for the underprivileged residents of Watler's Road at the bottom of Eastern Avenue and other areas around the country. The 'haves' and 'have nots' divide could lead to more of these hovels.
The editorial concludes:
Whatever the result of the NALC study, Government will need to spend money addressing the growing poverty problem here. However, the question will be how much will be needed and how much the administration is willing to spend.
To put it another way, are the richest in Cayman willing to watch the social infrastructure of the place which most of them will have moved to collapse as they count their money? It's a question that's almost universal, but I greatly admire the author of this piece for having the courage to write it in a place like Cayman. That can't be easy. It shows the extraordinary cost the offshore world imposes in tax havens, and in the rest of the world as well.
I've probably overquoted the report. I hope I will be forgiven by Cayman NetNews. The fact is that I think this is an issue many of us might return to time and again.
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Dear Richard
The same blog – and the same editorial – could equally have been written about a number of other tax havens, not least those in what Winston Churchill called “our dear Channel Islands.”
The economic crowding out effect of hosting tax havens is well understood and has been analysed by small island specialists, including Mark Hampton and me. What is less well understood is the extent to which the interests of local populations on these small islands, particularly those excluded by reason of educational attainment from participating directly in the financial services industry, are crowded out from the political process by the ceaseless lobbying of special interests working with or on behalf of that industry. My observations from Jersey are that senior politicians are indifferent to the needs of the poor and marginalised and would actually prefer to see them emigrate from the island to open up space for more wealthy immigrants. This is, after all, a profit maximising strategy.
John Christensen
John is right,
Relative poverty in Jersey is growing, public spending on social protection is well below all EU countries. For example, spending on Health and Social Services in Jersey is less than 4% of GNI while the EU’s lowest spender is Estonia with 5.5%
46% of single pensioners live in relative poverty.
The new minimum wage is going to be £5.40 per hour, and the average price of a one bedroom flat is £169,000, if you can find one.
Jersey has a massive shortage of social housing, but the Housing Department has decided to sell 800 social housing units.
Social Security are about to intriduce a coercive income suppot scheme, that will force people into insecure, low-paid, part-time jobs that do not exist.
Our new fiscal and social policiess are unsustainable.
I wonder when the next boat is!!!
Chris,
Sorry, you’ll probably find the next boat is owned by a UK based non-dom, chartered through an off-shore holding company to avoid VAT on the purchase…
Or maybe I’m just getting cynical!
Gareth,
Your not cynical. One of governments new ideas is to attract more boat registration of non-domiciles and ships that could not get near the harbour let alone in it, including our Chief Minister.
dear all,
I went to jersey to work as a child protection social worker and lasted 1 week!The under investment in child protection has resulted in several recent invstigations into the state of child protection services.The island is now the subject of a police enquiry innto child abuse in childrens homes going back 45 yrs. As you have highlighted for the money which goes through the isalns finance industry the amount diverted to assist the poor is negligable and a disgrace and insult to the local population.
Dave,
The below is an extract from a paper that I submitted earlier to the Government of Jersey’s Scrutiny Panel on the Social Housing sell off, which demonstrates exactly what you are saying. It covers the key social protection spending departments and compares very poorly to the below mentioned countries. The interesting point to pick up here is when you compare Jersey and Luxemburge, another finance industry dominated country.
• Sweden 31.3% of GDP (OECD, 2007)
• EU15 average 23.9% of GDP (OECD, 2007)
• Luxemburg 22.2% of GDP (OECD, 2007)
• OECD countries average 20.7% of GDP (OECD, 2007)
• Switzerland 20.5% of GDP (OECD, 2007)
• United Kingdom 20.1% of GDP (OECD, 2007)
• United States 16.2% of GDP (OECD, 2007)
• Jersey 9.48% of GNI (Jersey in Figures, 2006)
Thank you from the bottom of my heart for writing this artice, this is coming from someone you will label as a “have not”. It is clear to me now that there are human beings that care for the unfortunate and not trap in a mind of greed and selfishness. i also aggree on what you said about immigration, that leads me to state that it is one of the leading factors on why this island is full of corruption which have a role in the cayman islands proverty line. THANK YOU! MAKE THE GOOD LORD BLESS YOU!
[…] that opposition have begun a movement that might spread to the BVI and onwards – even to Cayman if its own press is to be […]
I had no idea. Thanks for the link to that great editorial as well as a basic summary of the information. How is the situation working out now?