British Virgin Islands

Thursday, Dec 03, 2020

Large expat workforce needed for unemployment insurance scheme

Large expat workforce needed for unemployment insurance scheme

The latest United Nations Human & Economic Assessment of Impact (HEAT) Report on the British Virgin Islands has recommended that the territory implement an unemployment insurance programme, but warns that its success will be dependent on a large expat workforce being maintained.

The report was launched during the recent signing of a Memorandum of Understanding between the BVI and the United Nations Development Programme on Monday, November 2.

The report, which is designed to support the government’s relief and recovery efforts post COVID-19, said the implementation of an unemployment insurance scheme would assist to prevent a number of families, including expats, from falling into temporary poverty.

“The main complexity faced in the implementation of such a fund would be the existence of a large migrant workforce. Given that there is a short period during which migrants on work permits are allowed to search for a new job, it seems reasonable to allow workers who have contributed to the scheme to access unemployment benefits while they search for a new job,” the report stated.

It continued: “At the individual level, this prevents migrant workers from falling into poverty in a country where they may have no informal safety net. This is particularly important given the relatively high incidence of child poverty for Caribbean migrants in the Virgin Islands. At the aggregate level, this retains both labour supply and domestic demand even during downturns.”

Migrant children to be impacted more by the pandemic

Providing statistical data from previous studies, the HEAT report revealed that child poverty rates in the territory will increase as a result of the COVID-19 pandemic, affecting the households of expats at approximately a third higher than locals.

“Data from 2003 suggests that the child poverty rate in the Virgin Islands was around 29 percent, translating to a total of 1,773 children living in poverty. The impact of COVID-19 may contribute to increasing this rate and number,” the report stated.

“Given that migrants constitute around 63 percent of the tourism labour force, children in migrant households will bear a significant portion of the burden of the COVID-19 pandemic. One qualitative concern is that non-national households may have access to significantly diminished family-based safety nets compared to nationals,” it explained.

Increase in Social Security contributions to fund programme

To get the programme functioning, the report said that an increase of social security contributions will be necessary, coupled with a financial contribution from the government.”

“Assuming a requirement to cover each individual up to at least 60 percent of the average monthly income at the baseline rate of unemployment, the cost of the fund would be approximately USD$ 758,000 per month. While the initial capitalisation will require an injection by the government, ongoing replenishment would be funded by a small increase in social security contributions,” the report stated.

The insurance programme is expected to limit the expenditure of the government when experiencing large negative economic shocks suffered from pandemics or natural disasters.

It will allow for a much faster automatic response to the respective crisis.

Back in September, Social Security Minister Vincent Wheatley announced that the government has plans to implement an Unemployment Insurance scheme next year.


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