Bermuda’s middle class is certainly in the middle. They’re pressed down from the top by very high housing costs and limited high-end high-pay job opportunities that would allow them to earn the incomes to afford an average house. They’re squeezed out of the lower level jobs that were once used as the ‘second jobs’ that enabled individuals and families to supplement their incomes.
Argus CEO Gerald Simons, has recently pointed out that, relative to incomes, Bermuda’s house prices are ‘four times’ higher than house prices in the USA, Canada, UK. Gerald also pointed out that Bermuda’s median annual household income is now $84,000, or $7,000 a month.
But Bermuda is bedevilled by two impacts of the globalization of Bermuda’s unique isolated economy. In Bermuda’s hospitality industry, in particular, wages growth has been held down by globalization. Service workers who were earning $10 an hour twenty years ago have not had their wages keep pace with overall increases in the cost of living. In 2006, wage rates for many service workers are still holding in the region $10 – $15 an hour, which is almost zero wage growth.
Elsewhere in this economy, in the past twenty years, wages have generally gone up by about 75% or more. So a person who was earning $12 an hour in 1986 would now be earning – same job – about $20 – $25 an hour today.
A middle class two-income Bermudian household with income levels at $15 an hour in 1986 couldn’t afford to buy a house. Despite wages generally keeping up with most increases in the cost of living, a to-income middle class household in today’s 2006 Bermuda still can’t afford to buy a house because house costs have gone up faster than wages.
House prices and top end rents have been sucked upwards by Bermuda’s shift away from the six day staying tourists, to the six year staying International Business worker who requires quality accommodation and who can pay top dollar for it. What should be low end rents have also been sucked upwards by the vastly increased number of lower paid – $10 to $15 an hour – expatriates who crowd themselves into lower end rental accommodations; and so deliver bigger rental incomes to landlords.
So where is Bermuda’s ‘middle class’?
At $84,000 a year – too poor to buy a house – too rich to starve. The whole class is hard pressed to find a decent paying ‘second job’ so that it can better its $84,000 a year income – and that isn’t because the second jobs don’t exist, it’s because many of the second jobs are now taken by cheaper ‘global’ workers.
Upward income mobility is stifled by a combination of the narrow specializations and skillsets required; and parallel the need for immediately useful experience in a difficult business that is in intense and unforgiving global competition.
In the past, Bermuda’s middle class climbed upwards by two-jobbing in a much bigger and more vibrant and profitable hospitality centred industry. Today, that’s not possible. So, in 2006, what does Bermuda’s middle class of 2006 do?
It twists and turns and searches and frets. It finds itself shut out and shut in. It finds itself unable to do what it has done in the past. Today’s middle class Bermuda household and family is really the ‘piggy in the middle’. Stuck whichever way it turns.
That’s not good and it bodes ill for the future. Perhaps some middle class responses are seeping through now. Perhaps Bermuda is seeing the beginnings of a small exodus of Bermudian professionals and semi-professionals. People who recognize that any upward mobility that they want to achieve is only possible in another economy in another place.
Bermuda’s economy is a unique economy. It needs uniquely high quality attention. Bermuda’s peculiar national employment profile coupled with Bermuda’s very high per capita and household incomes puts Bermuda in the same sort of expense to income position as General Motors Corporation finds itself in today. And just look at what GM is considering and is actually doing – and is being forced to do.
I started by saying “Bermuda’s middle class is certainly in the middle”. Perhaps I should have said: “Bermuda’s middle class is certainly being squeezed out of the middle.”
(PS – Thanks to the many people who wrote in to clear up my befuddlement.)