It’s all too tempting to get complacent about unemployment, we have such low rates compared to almost any other jurisdiction on the globe.  Unemployment?  Isn’t that something other countries have to worry about, not us?  But it’s been an issue comes up time and again on the doorstep.

Recent news has been ominous, much of it driven by changes happening in the UK.  The end of LVCR is something we know will drive up figures, though the full effects aren’t quite known as yet.  At the moment there just doesn’t seem like anything that will replace the type of jobs that came with the fulfilment industry.  And then there’s the changes to the treatment of property taxes in the last UK budget, which will affect some holding companies here, and QROPS, which are likely to affect parts of our key industry.  It all adds up to a feeling that the future for people working in finance in Guernsey isn’t as certain as it once seemed.

Guernsey has a cultural memory of industries that have been and gone.  Parts of the island bear the scars of past ventures: disused greenhouses, quarries abandoned long ago.  If you take a walk to Jerbourg point you’ll probably go past the old Idlerocks hotel, now derelict, a visible reminder that the halcyon days of mass tourism are no longer with us.  People are genuinely worried for the future, wondering if those coming out of education will be able to find jobs, wondering if their own employment is as secure as it was once assumed.

People in every country are facing similar questions, but Guernsey has some particular reasons to be concerned.  Some of the options available to other countries when unemployment aren’t available to us.  We don’t have our own currency, and although our employment situation may have benefited from Sterling’s depreciation making our cost of labour cheaper relative to other countries, we don’t have the option to devalue independently of the UK.  We certainly won’t be expecting any bailouts, as some Euro denominated countries have done.  We have limited options for borrowing, and limited options for raising taxes without harming our competitive position.

With limited options available, how would Guernsey cope if we had unemployment rates similar to those of our nearest neighbours?  The table below shows the equivalent number of claimants in Guernsey if we had unemployment rates from some of our neighbours, at 2011 levels:

It’s difficult to imagine just how we could manage in such a situation.  The drain on finances comes from two sources: firstly our main source of government revenue is income tax receipts, when people lose their jobs that income vanishes.  Then the second hit:  the States would have to pay benefits, or face the very real possibility of genuine poverty becoming a reality for many.  That’s why it’s so important to be thinking ahead now, to diverse sources of employment and revenue.  We can’t just rely on our most successful industries to employ everyone indefinitely, we need to think about alternatives too.