Last week’s story about the decline in employment income, and therefore payroll tax revenues, is yet another sign of the continuing decline of the economy.These statistics always need to be considered with some care. They are subject to revision, and can be skewed by anomalies, such as big bonus payments, the timing of public holidays, when taxes get paid and so on.Nonetheless, the trend is clear, and supports all of the anecdotal evidence that the economy is still shrinking.Employment income is a key statistic in this, not only for payroll tax, but as the main driver of the local economy.Payroll tax was likely to be down anyway, because of the welcome breaks provided to the retail and tourism sectors. These were supposed to provide some stimulus to the general economy. That may not have been accomplished, but they have enabled some businesses to stay afloat and some employees to stay at work.The fact employment and income have declined is the bigger problem. If there are fewer people working in Bermuda, and those that are working are earning less, then this flows through the whole economy, affecting retail sales, rents, expenditure on utilities, the construction industry and just about everything else.It has been stated here many times before, but what makes sense to the individual — to cut costs where possible — has, collectively, a disastrous effect on the whole economy, and causes a spiralling decline as one spending cut forces another.Turning this around requires, more than anything, confidence and investment. In the early 1990s and in 2001, Bermuda recovered from recessions due to the arrival of new waves of insurance companies.But the insurance companies came because the conditions for investment were right. The legislative, regulatory and tax structures made Bermuda inviting, along with factors like infrastructure and political stability.Bermuda has changed since then, and as Larry Burchall and Sir John Swan note today, intellectual capital can work anywhere as long as a high speed Internet connection is available.Until the Island creates a more welcoming framework, investors, regardless of whether they are insurers, fund managers or others, will not come to the Island in the numbers seen in the past.Many people seem to be under the impression that this does not matter, and that somehow the international business sector has no bearing on their everyday lives.The liquidation of White’s Supermarket in Warwick and so many other local businesses in the last three years demonstrates that it does. Businesses fail for many reasons in good times and bad. But the effects of the population decline and the slump in employment and incomes had to contribute to the closure of White’s.The result? Today there are dozens of people out of work and more jobs are threatened They will now need social assistance and help at a time when both Government and charities are already short of funds. Their wages are now lost to other businesses, meaning their sales will decline. And these businesses will find it harder to pay their creditors and to function. And so it goes on.This may mean that the Island’s remaining grocery stores are better able to survive as a result. But it also means less competition and less choice for the consumer, and that is never a good thing.Bermuda needs fresh thinking on the economy and it needs it now.