Not surprisingly, the island’s extreme income inequality, severe tax regressivity and exorbitant cost of living provide the perfect cocktail for widespread economic deprivation and poverty. Like many jurisdictions around the world, Bermuda has long resisted recognising its true prevalence of poverty.

Measures of poverty, however, that do exist in similar jurisdictions as Bermuda are highly indicative of the likely scale of our problem. Figure 1 shows the poverty rates of many of the island’s competitors from the offshore and onshore worlds. The similarities between Bermuda and these countries vary from jurisdiction to jurisdiction.

Each of these jurisdictions hosts sizeable finance industries but the degree to which finance dominates each country’s economy varies considerably. Finance comprises only 6 per cent and 9 per cent of the British and Swiss economies respectively, while forming 13 per cent of GDP in Singapore and 18 per cent in Hong Kong. But among Guernsey, Jersey and Bermuda, finance comprises between 39 per cent and 41 per cent of our economies.

Government revenues in relation to the economy vary considerably as well. At 16 per cent, Bermuda has the smallest government revenues-to-GDP ratio, while Hong Kong and Singapore are both below 20 per cent, Jersey and Guernsey fall between 20 per cent and 25 per cent, with government revenues greater than 25 per cent of GDP in each of the rest.

Clearly jurisdictions with elevated levels of finance and low levels of government revenues are at risk of high poverty. Jersey tracks its poverty every five years on a before and after housing costs basis and, once housing costs are removed from the calculation, poverty as of 2015 was estimated to be as high as 18 per cent. Similarly, Guernsey provide their public with detailed analyses of the island’s poverty and their most recent report released just last November revealed it had risen to 20.2 per cent.

Since 2012, Hong Kong has published its incidence of poverty on an annual basis with the latest data showing poverty edging higher to 19.6 per cent in 2016 despite Hong Kong’s relatively strong economic growth. Singapore on the other hand continues to resist calls to recognise widespread poverty despite continuing pressure from academics and civil advocacy groups. But an analysis of poverty by academics in Singapore using data dated as long ago as 2008 produced an estimate of 21 per cent.

Extending our international mosaic of inequality and poverty statistics is additional data from Guernsey — the Crown dependency with not only an industry make-up very similar to that of our own economy, but of virtually identical landmass and population as ourselves as well. Obligingly, Guernsey’s statisticians publish their household income data on an equivalised and unequivalised basis, allowing us to make the same comparison as we did last week with London. As seen in Figure 2, while possibly not as severe as Bermuda’s, Guernsey is contending with inequality and poverty levels, which, at least among developed, high-income countries, represents the world’s most extreme.

Providing further evidence of Bermuda’s problem with pervasive poverty is our well-documented presence of a litany of the social ills typically found accompanying widespread poverty. Figure 3 illustrates just one of these, demonstrating the close relationship between poverty and incarceration rates throughout the Organisation for Economic Co-operation and Development.

Poverty and income inequality more generally have been linked to a host of social problems ranging from teenage pregnancy, obesity, infant mortality, homicides and poor educational outcomes to the wider social conditions of low levels of societal trust, poor life satisfaction and lower social mobility. Needless to say, despite Bermuda’s reluctance to acknowledge its true prevalence of poverty, every indication points to the existence of an acute problem.

By now, extensive global research establishes a number of economic, social and cultural factors as contributing to the development of extreme inequality and rising poverty, many of which we have evidence of in Bermuda today. Perhaps most significant among these is the encoding of preferential treatment of capital over labour, and high-income households over low-income households in contemporary tax structures. As amply demonstrated in the previous column’s tax-incidence analysis, Bermuda unfortunately has been a world leader in this area. Another leading cause of these conditions has been a systemic undermining of the bargaining power of labour owing to a multitude of changes in government policy, accepted corporate practices, and changes in general economic thinking in the public and private sectors. Indeed, it is not an unfair characterisation to say “labour” has been regularly demonised since the 1970s in business, government and financial circles as posing an obstacle to the necessary reforms needed to enhance productivity and competitiveness.

In diagnosing the principle economic problems of our times, rarely does the focus of attention shift from labour to capital in examining its potential as the genesis of economic inefficiencies, inequities and hardships. As is historically typical during the ascendancy and dominance of economically “laissez-faire” ideological times, the balance of power has shifted decisively from labour to capital.

Bermuda certainly has not been immune to these global trends. Here, too, unions have been demonised and their critical role played in bargaining for fair pay and decent working conditions denigrated. As in the rest of the world, the ascendancy of capital’s power in Bermuda has occurred simultaneously with a dwindling of union membership.

The Bermuda Industrial Union’s membership has declined by as much as 40 per cent since 1981, falling from 6,067 to 3,647. As a relatively “laissez-faire” country to begin with, Bermuda’s union membership was always comparatively low. These trends have had an even greater impact on union participation rates overseas. As seen in Figure 4, since 1981 union membership has fallen far more precipitously in many other countries worldwide.

Thus far, the identified remedies to inequality and the growing prevalence of poverty globally include a number of measures, but foremost among them is the now widely recognised, critical role played by public policy interventions to raise the rate of market pay among low-income workers. That is to say, contemporary levels of inequality and poverty are identified now as owing to, in the main, malfunctioning labour markets and, among the range of effective public-policy measures to address these market imperfections, most important is the implementation of statutory living wages.

Author’s note: Economic crises of Bermuda’s magnitude do not happen by accident. And while politicians may be uniquely averse to acknowledging error, as suggested in this analysis the identification of effective solutions to Bermuda’s crisis can be achieved only through a recognition and understanding of the policy errors committed at the very origins of our crisis. To this end, future columns of “The Economics of Reform” will present analyses of the respective errors in economic policymaking committed by each of our former governments and identify the steps in policy reform necessary for their correction. Additionally, a further column on Living Wages will quantify a Bermuda-equivalent living wage meeting internationally recognised standards of adequacy and define Bermuda’s economic competitive limits in imposing statutory minimum wages, particularly in the context of the island’s existing economic priority of increasing Bermudian employment.

• Robert Stubbs is an economist, CFA, holds an International Bond Dealer Diploma and has completed the ACAS actuarial exams. He was formerly Head of Research for Bank of Bermuda and his professional interests at present lie in enterprise risk management. An electronic copy of this series in its entirety is available in PDF form online version