Last weekend throughout the United States, and across three other continents, the “Occupy Wall Street” (“OWS”) movement continued to gather steam.Although it is easy to dismiss these protesters (the irony of hippies raging against capitalism while co-ordinating rallies on their iPhones is not lost on many), it would be a mistake to ignore the emotions behind their angst. They are revolting against unbridled corporate power, the greed and corruption of the top one percent. They are fighting for their belief that the American Dream is basically no longer attainable. They are tired of governments that are run by lobbyists, and frustrated by seemingly never-ending high levels of unemployment. At the end of the day it is a movement against deepening social inequality, as the world’s working class sees their future prospects dissipate in the face of a growing concentration of power among economic, corporate and political elites.Unfortunately, Bermuda is not so different. The instability of inequality is asserting itself, opening the potential for social unrest. However, I want to start by making a few points clear. I am not about to embark on penning a new Communist Manifesto nor do I see the IB sector as evil. I continue to believe in capitalism and free markets even though many would suggest that the laissez-faire model has failed. In fact, any attempt to demonise the IB sector and evoke increasing protectionist measure under the guise of support for labour group will likely only exasperate Bermuda’s problems and may well spell disaster. Nor am I advocating any form of class warfare as revolting against the group with investable assets at a time when Bermuda is starving for capital would not be wise. The key is to note that Bermuda’s disparities will correct overtime if and when aggregate demand grows again.The widening gap between the haves and have-nots is reshaping the Bermuda economy and leaving it more vulnerable to recurring financial crises and less likely to generate enduring expansions. According to research published by the International Monetary Fund this year, societies with a narrower gap between the rich and poor enjoy longer economic expansions. But how do we gauge this in Bermuda? Since Bermuda does not have extensive data that could be used to produce a Gini Coefficient (a common measure of the inequality of income or wealth), we have developed a crude proxy. If one assumes that the higher income and wealthier cohorts of Bermuda are more prevalent in the international business (“IB”) sector of the economy we can use that group as a rough proxy for the ‘well off’ population in Bermuda. We can then simply compare this group’s growth in real average wages to the rest of Bermuda’s employment landscape. What one finds is probably not that surprising but it is telling nonetheless. We can see the IB group has enjoyed continued average real wage growth over the last seven years. Real average wages have climbed from $116,981 in December of 2003 to $174,879 in December 2010. The rest of Bermuda, or those that make up the lower and possibly middle class, has not fared so well. Total real average wage growth for this cohort is essentially flat, meaning that over nearly a decade workers outside the international business sector have seen virtually no increase in their purchasing power. Average real incomes of this group rose from $46,978 to only $51,388 an annualised growth rate of about one percent. Some of this disparity can be explained by the global outsourcing trend, since many of the larger insurance and financial service companies have moved some of their lower paying administration functions to low cost jurisdictions. Chart 1 clearly shows that a rising tide has not lifted all boats.It’s also interesting to dissect Bermuda’s two economic pillars in terms of real income gains. The first pillar, international business, is a majestic Corinthian column exhibiting real annual wage growth of roughly six percent. The second pillar of hospitality and tourism is more like a wet noodle exhibiting real annual growth of roughly MINUS 12 percent. (See Chart 2) I assume that part of the negative trend in the hospitality industry is related to more hotels closing and reducing hours during the quiet winter season.The discouraging thing with this stagnation in real wages for the bulk of Bermudians is that inflation continues while wage growth looks to be ephemeral. In fact, the weak labour market is resulting in wage freezes and cutbacks. As a result the escalating cost of healthcare and fuel is crimping middle and low income budgets, leaving less and less for education which, ultimately, leads to economic mobility. Bermuda’s inflation problem is actually stifling social mobility.Furthermore, regulatory aspects and policies are squashing the general consumer, which is possibly the largest unrepresented demographic group in Bermuda. Why is the consumer not consulted on duty changes, telecommunication bundling, or transportation fare increases? These aspects only frustrate the average Bermudian as he or she feels ignored and absent because he/she is unable to effect change when confronted with a corporate or political elite.The implications of these factors may be continued social discontent. It would not be surprising to see increased labour protests and union strikes around the Island as labour wrestles with capital.During this transition period it is more likely we will see an increase in public support and an increasing welfare state that attempts to alleviate the pressure on the average working Bermudian.This may come in the form of unemployment insurance programmes, healthcare relief, progressive forms of taxation or other social programmes.Ultimately a return to growth will be a function of demographics and productivity which I will discuss in a future article.