Jan. 5, 2006A high unemployment rate, coupled with the V.I.'s high cost of living, is damaging the territory's economy, according to local economist Dr. Richard Moore.
At a Rotary Club meeting held Thursday at the Marriot's Frenchman's Reef Beach Resort on St. Thomas, Moore spoke about local economic trends and the negative impact the federal government has had on Economic Development Commission businesses in the territory.
Moore primarily focused on St. Croix's economy, which he says is in "serious trouble." He said the inability to supply a sufficient number of jobs for residents in spite of an increasing labor force is particularly detrimental for the island.
While Moore said the economy on St. Thomas is stable enough, he added that the territory is just trying to re-establish records which have already been set. "For example, St. Thomas' labor force in 2004 was 27,660less than in 1994 when the labor force hit 28,000," he said.
The cost of living in the territory, which Moore said is 22 percent higher than the cost of living in stateside cities such as Washington, D.C., has also contributed to an unstable economy. "With a high cost of living, a high unemployment rate and an increasing labor force, there will inevitably be an increase in poverty as well," he said. "Add to that the fact that the V.I. pays its workers some of the lowest wages in the nation, and you'll see that we are damaging the quality of our labor supply and inevitably, the stability of our economy."
Moore also spoke briefly about the effects these factors have had on education. While enrollment peaked in 1983 with 33,000 students attending local schools, statistics collected recently show that only 21,419 students were attending local schools in 2004," he said. "And the enrollment rate will continue to decline as the economy continues to decline," Moore added.
Moore said the light at the end of the tunnel is that the government workforce seems to have decreased from about 13,000 workers in 1983 to 11,508 in 2004. However, when asked, Moore said these statistics do not take into account contracted government workers or temporary employees.
In terms of forces driving the economy, Moore said the Virgin Island's greatest economic stimulant is its financial services marketparticularly EDC businesses. "The EDC businesses represent a great diversification of our local economy," he said. "Unfortunately, this industry has been held back by the federal government. It's sad that we have to struggle to determine our own economic destiny."
After the meeting, Moorewho helped negotiate the creation of the EDC program under Gov. Juan F. Luis' administrationbriefly alluded to restrictions put on the territory by the American Jobs Creation Act, passed by Congress in 2004 to keep individuals from taking advantage of the EDC system. The act modifies federal tax rules that apply to U.S possessions like the U.S. Virgin Islands and regulates residency and source of income requirements for EDC beneficiaries.
One provision of the act stipulates an EDC beneficiary must reside in the territory for a period of 183 days in order to receive benefits. "This makes it hard for consultants to live here," Moore said during the meeting. "It's losing money for the territory, and therefore negatively impacting the economy," he added.
After the meeting, Moore also suggested that the act has posed an "intriguing" question for economists: "By passing these restrictions to the EDC program, is the federal government suggesting that we make our own money here in the V.I., or that if we want to succeed economically that we have to depend on them?"
During the meeting, Moore ended his speech on a more hopeful note, saying that a recent press release circulated by Delegate Donna M. Christensen's office in early December stated that U.S. Treasury officials hope to have final regulations on the Virgin Islands' EDC tax program before the end of the year. (See Delegate Sends Hopeful Message About EDC Program.)
"It would be wonderful if we get this industry up and running again," Moore said after the meeting. "Tourism is doing the job for us now, but it won't be around forever. What we need is the evolution of other industriesthat's what leads to a healthy economy."
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