Millennials Poorer – What it Means for Barbados

Recently John A sent a couple interesting articles to the blogmaster that served as a reminder what a future state will possibly be for the next generation of Barbadian, the so-called millennial.

Despite our rich investment in formal education there is a palpable lack of cognitive awareness by Barbadians to give weight to what is important. A case in point- it required Prime Minister Mia Mottley repeating what had been stated by others for years AND what was explained in NIS actuarial reports since 2013 for the majority of Barbadians to understand the implications for pensioners. For Mottley to tackle the problem of the NIS fund which poses a risk to her government’s popularity was enough to jolt Barbadians from a comatose state.

In 2007/8 the global financial crisis had the effect of decimating incomes and investment portfolios across all strata in our key tourism and international business markets. Local financial talking heads have suggested that the Barbados economy is to fully recover from the hit. Isn’t it ironic 15 years later our key productive sectors have not changed appreciably? In fact the current investment project pipeline is congested with tourism related projects.

Now we have John A’s articles which reveal a worrying trend in the UK and US- generational wealth of millennials in the two countries has stagnated. Although the majority of Barbadians are ignorant to the implications of this developing trend, there is a simple truth, the US and UK are our two significant source markets for tourism, foreign direct investment AND remittances. 

The blogmaster challenges you and you to read the two articles to appreciate what a future state may look like.

It is fair to suggest in the absence of similar analysis the same trend applies to Barbados. Barbados is one of the countries the spiral of the economy of the post 2006/7 period is yet to experience a bounce, subsequent catastrophic events have not helped. Recently the government announced that in the face of economic uncertainty Barbados will renew the IMF agreement. We should have time to unpack the implication of the decision, however, discerning BU regulars are fully aware of the root issues.

It does not give the blogmaster pleasure to state what should be obvious. Our current economic path is plotted to arrive at a destination to nowhere fast. We continue to try to induce economic performance from a ‘not fit for purpose’ economic model. One does not have to posses the nous of Nostradamus to predict the outcome.

National Insurance Fund in Critical Condition

After the dust settled yesterday evening at the Lloyd Erskine Sandiford Sandiford Centre (LESC) Prime Minister Mia Mottley confirmed in flowery language what some in this medium and elsewhere have been alerting the public. The National Insurance Fund (NIF) on its current trajectory will be unable to honour its obligations to persons eligible for benefits from as early as 2034 – that is a short 12 years.

Briefing on the state of the NIS Fund (10 Aug 2022)

Was Prime Minister Mottley quoted in the press correctly that she was alerted to the danger faced by the NIS in June 2022 by actuary Derek Osborne? Surely the Prime Minister does not believe some of us are so gullible? That aside the blogmaster is pleased on the occasion of the availability of the 17th Actuarial Review of the National Insurance Fund, Unemployment Fund and Severance Fund as of December 31, 2020 it has finally been positioned on the front burner. 

A bone of contention has been the inability of the NIF to produced up to date financials. We learned yesterday during the press briefing at LESC the challenge is linked to reporting cash and accrual items and is being addressed by the NIS Board and Auditor General’s office. Again the promise of when current financials will be available is cloaked in non committal language. Although the NIS continues to struggle to produce current audited financials the prime minister’s message is correct, the structural problems afflicting the NIS looms large and must be the priority 1 concern.

The key takeaway from the briefing yesterday is that in a short 12 years the NIF will not be able to pay benefits to those eligible IF reform measures are not taken in the short term. With an ageing AND shrinking population there are limited corrective options available that will not be ‘painful’- add an underperforming economy to the mix and houston, we have a problem. 

Source: NIS

That it has taken so long to get to where we are today is bound up in politics but we are here now. Better late than never some say. Deputy chair of the NIS Board Rawdon Adams appears to have a grasp of the problem and seems earnest in his comments to move the matter along. We wish him and his Board of Directors well. The NIS is our rh life line.

NIS Needs Lifeline

This week government approved a $50 million boost to the Unemployment Fund, the first tranche of a $143 million recapitalization of the NIS Unemployment Fund planned over 3 years. Government’s decision comes as no surprise in the wake of over 52 thousand claims filed in 2020 as a result of the displacement of workers caused by the pandemic.

We must not forget contributors over many years have posted concerns about the questionable governance framework National Insurance Scheme has been doing business. Protracted delays of published Audited Financial and Actuarial Review reports continue to shroud the business of our most important statutory agency. If the NIS is to satisfy its mandate to pay pension benefits, it means government has to show greater transparency and implement effective governance measures to protect the fund. Both major political parties when in government have operated the NIS Fund to use the popular analogy like an ATM. Unfortunately in a dysfunctional system of democracy practised, we continue to fail at finding ways to hold successive governments accountable except at 5 year intervals.

Source: NIS Website

It is encouraging to observe government taking some action to protect its mandate to stabilize the Unemployment Fund to honour claims from Barbadians. It is unfortunate the Mottley government has not been able to replicate the same urgency associated with the transition to a Republic by 30 November by addressing long-standing issues affecting the NIS Fund promised on the 2018 election campaign platform. This is another example of another government kicking the can down the road because of political damage considerations. This is another example of a member of the duopoly showing no trepidation to over promising during an election campaign knowing there will under deliver in office.

Source: NIS Website

There is no need to be prolix prosecuting this matter, read the several blogs posted in the BU Archive by entering ‘NIS’ in the SEARCH BOX at the top of the page. That is, if you are interest in discussing an important matter that should concern all Barbadians devoid of the usual political partisan claptrap.

54 Not Out

On the 54th anniversary of our Independence as it is referred to signify the slashing of our navel string from former empire, several issues floated around the fertile mind of a lowly blogmaster about what to blog.

We will read, listen view the usual scripting by program directors at the media houses. Barbadians everywhere will share on social media platforms things barbadianna. This is a good thing. The BU household is proud of what our tiny 21×14 little rock has been able to achieve with negligible natural resources. Like many countries across the globe, we are experiencing challenges that come with having to survive in a competitive space.

Some of us reflect on where we have come and try to visualize the road ahead still to be travelled. It is to be regretted that the some who are moved to engage in such reflections do not represent the majority. A reasonable observation is that the vast majority of the population is easily influenced by messaging from the establishment. Should this be the case given the billions of dollars allocated to education since 1966? A definition of the purpose of formal education “is to provide a knowledge source to enhance students’ skills, methods to capitalize and motivate their curiosity (BU emphasis) to improve their wellness and understand how their environment works...”. Hold this thought!

Barbados Underground (BU) was born after Adrian Loveridge had to sit in a separate VOB studio because it was the condition imposed by then minister of tourism Noel “Barney” Lynch. Several Loveridge columns were severely edited by the Nation newspaper were posted unedited to BU. The same courtesy was extended to Peter Wickham when the Nation declined to publish articles they considered to be defamatory. BU posted the articles unedited. Last and not least the same courtesy was extended to Senator Caswell Franklyn. The blogmaster is happy that today the individuals mentioned appear to have overcome whatever challenges existed with Starcom Network and Nation Publishing which denied them access.

To use another definition- a well functioning mass media should “inform, persuade, entertain and transmit culture“. Can we honestly opine that local media if evaluated on these four measures pass the test?

@ David I read some of the press comments you posted and will say just this. Anytime someone says the NIS Fund is sound cause it has 4 or 5 billion dollars in assets stop reading the article. It equated to me saying I have a $50,000 car cause that is what I paid for it, don’t mind it’s ten years old and has a market value of $5000.

John A

The quote inspired this blog for what it indirectly condemns as an irresponsible media, dishonest heads institutions and prominent others whose agenda is to protect the establishment at all cost. Why are we not having constructive engagement from the thousands of Barbadians educated at Cave Hill and elsewhere? Why has there been no commitment to remove the fog that has enveloped the National Insurance Fund? Why has traditional media given token coverage to this matter?

The topic of the NIS has to be the most posted topic on BU. Despite assurances by successive governments, it has become crystal clear to this blogmaster the time has come for all issues good and bad affecting the NIS fund to be laid bare and as a people agree to a palatable way forward.

On this 54th birthday of our Independence this is the matter top of the mind of a lowly blogmaster. The ask therefore is that 54 not out is a good time to mark fresh guard.

@John A sadly Covid 19 is a respiratory thing, and hastily removed all the breathing space they thought they had gained. And then exposed that, with a prior serious underlying condition.

Northern Observer

Rising Concerns about the National Insurance Fund

Barbados Underground (BU) has written extensively our concerns about the lack of public disclosure of the National Insurance Fund. Since 2006 Chairman after Chairman, Minister after Minister have promised to bring the NIS financials current with little success. The last time we sighted Dr. Justin Robinson on BU, Chairman of the NIS- who was not averse to posting to BU- he commented on the 01/11/2015 at 4:02PM as follows:

Walter, I respect your views, expertise and comments and I take being accountable to the public very seriously and I have responded to queries about NIS many times on this forum, in fact quite recently. What I don’t quite appreciate is the NIS ambush whatever the issue I am commenting on.

As I have said on many occasions, when I became a member of the NIS board in 2008, the last audited financials filed were for 1998, as a board we hired an accounting firm to help bring the financials up to date. As a result of that project the NIS has submitted its financial statements for up to 2014. The NIS is a government dept and as such has to be audited by the auditor general. The auditor general put out a tender for the large backlog of financials and EY was the only bidder. The audits have progressed much slower than expected for two main reasons. Firstly, the audits are going back well over a decade and secondly the 2004 audit posed a major challenge as this was the first year of the nis switch over to the sap system.

We have gotten the financials up to 2014 and cleared the audit backlog from 1998 to 2005 i think. I was not there when the backlog was created, but I am chairman now and the failure to have up to date audited financials is mine. I accept full responsibility, the failure is mine.

I still hope I can engage in a public debate on other matters without constantly having to explain NIS.

It is ironic the Walter (Blackman) mentioned in Robinson’s comment was also a frequent BU commenter until he landed a ‘pick’ hosting a talk show on the government the owned media outlet. We look forward to hearing him in his professional capacity as an actuary host a program which critically analyses the current state of the NIS Fund. We suspect the government ‘pick’ has effectively muzzled Walter and all for 30 pieces of silver.

Fortunately Barbadians have Charles Herbert who is head of the Barbados Private Sector (BPSA) and a respected actuary to share his view on the state of the NIS fund.

We do have real problems. But the truth is, all it is going to mean is – and we already have the highest NIS contributions in the region – they are going to have to go higher or we are going to have to cut benefits because we cannot realize our investments . . . . So I think cash flow is going to be an increasing problem for National Insurance like it is a serious problem for Government – Barbados Today

Here is what Robinson posted to BU on the 02/11/2015 at 11:49AM:

The NIS in Barbados is currently able to cover benefit expenditure from its contribution income. Given the population demographics and current contribution levels, unless either benefits or contributions are adjusted, at some point in the future the scheme will need to draw on its investment income and assets to meet benefits. I don’t think there is anything especially unusual about this. The NIS is very open about the fact that 75% of its portfolio is in government of Barbados of securities (its been around that level for most of the life of the scheme). Therefore if at some point the government of Barbados is unable to meet its debt obligations the NIS would be severely impacted.

Barbadians, an ageing population, find themselves between a rock and a hard place. Either our NIS contributions will have to be increased in the near future- already the highest in the region- or benefits will have to be reduced. As far as BU is aware the most recent actuarial study was received by government earlier this year but it has not made public. Barbadians are left to speculate about the state of the fund. If BU were to add our voice to the speciation we would hazard to state that the NIS is cash poor and Barbadians should be very concerned. We do not have the power of recall, 20,000 Barbadians marching appears not to have registered concern with the government even as a general election looms.

Is the NIS Fund cash poor?

Notes From a Native Son: Fooling Some of the People All the Time

Hal Austin

Pensions policy has been the most talked-about of all social policies in the late 20th and early 21st centuries. To be now discussing the subject in relation to Barbados is like going back in time, but it is a necessary discussion to have, given the reluctance of decision-makers to even learn the basics of the subject. But before doing so, a brief history: state pensions as the term is now understood in policy discussions go back to 1898, when Bismarck introduced the benefit in Germany, with a state retirement age of 65. However, in those days, longevity was about 45, so it was unlikely that most working Germans would reach retirement age, and if they did, live very much longer. But, post war, due to improvements in medical science, nutrition, and a reduction in hard, physical work, global longevity has now expanded by leaps and bounds with people in developed countries now living in to their 80s and 90s. What this means in real terms, is, for example, someone coming out of university at the age of 23, working for 42 years and retiring at the age of 65, has on average 15 or more years to live. With a growing population, there were on average about four to five workers for every retired person at the turn of the last century, making the pay-as-you-go system viable. However, combined with the demographic time bomb, in which there are now about two workers to every pensioner (Japan at present, China by 2030, and most developed nations, with the exception of the US, by 2020), this is no longer viable.

In 1981, under the brutal General Pinochet, the Chilean military government embarked on one of the most progressive reviews of state pensions in the world. This was followed by most democratic countries, leading to a series of state-backed pensions, geared to meet this challenge. In New Zealand we got the KiwiSaver, in Australia compulsory superannuation, in the US 401(Ks), in Britain National Employment Savings Trust (which is semi-compulsory), and many more.

Continue reading