Blue Collar Muse

I was fascinated by a recent article in The Miami Herald on a modern day exodus that is happening below the radar.  It seems that between 2000 and 2006, a full 5% of the population of Puerto Rico has left the island for the United States due to inflation, recession and rising crime.  That works out to 200,000 people leaving a population of just 4 million!  According to a study done by the University of Puerto Rico, that exodus continues at a rate of 65,000 annually! They leave behind a workforce of 1.3 million people to provide for the needs of the population. Each worker is now responsible for 3 people, himself and 2 others.

”We are committing collective suicide,” said Elías Gutiérrez, who runs the graduate school of planning at the University of Puerto Rico. “This is going to become a country of elderly and poor people.”

If Gutierrez’s comment is true, one would think there would be a bit more helpful information given in the article. Unfortunately, there’s not. Titled ‘Recession Drives Educated Puerto Ricans to South Florida’, the piece is filled with information on 4 of the 5 ‘Ws’ of good reporting while skimping on the most important one, the one that would help us fix the problem in Puerto Rico and other places where it occurs, including right here at home.

The ‘Who’ is clearly seen. This is a disastrous drain on the skilled and highly skilled middle and upper class demographic of Puerto Rico. The people leaving are professionals. Doctors are specifically mentioned but the list includes Teachers, Nurses, Civil Servants, Sales and Law Enforcement. As Puerto Ricans are US citizens and a high percentage speak English, companies and governments alike are assisting the exodus by actively recruiting skilled, bi-lingual professsionals.

The ‘What’, ‘When’ and ‘Where’ are basic facts and are also easily found. These people are leaving in droves, from Puerto Rico to the States and, while that happens all the time, the last 8 years have been particularly harsh.

But the most important ‘W’, the ‘Why’ is basically left unaddressed. It’s a shame because if one doesn’t know what causes a problem, one cannot even begin to formulate a solution. There are a couple of hints, however.

Taxes. The legal status of Puerto Rico makes for some interesting relations. Taxes fit into that category. Puerto Ricans living on the island pay some Federal taxes and Federal Payroll taxes but they do not pay US Income Tax. The island has its own income tax. They also have their own sales tax. According to the article, two years ago the government faced a budget crisis and was forced to shut down for several weeks and furloughed many employees for that time. In a very brief mention, the article states that, when it reopened, it promptly instituted an increase in the sales tax to as high as 7 percent in some places. It is unmentioned whether or not there were also corresponding spending cuts (beyond the money government employees weren’t paid while the government was shut down). Raising taxes as the government’s solution of first resort, especially in the midst of a financial crisis among the people, is generally a bad move on government’s part.

Jobs. Also buried in a comment near the end of the article is this clue. “…the island has seen at least 55,000 manufacturing jobs go away in the past eight years, just after losing federal subsidies for corporations.” I’m unclear whether or not these subsidies came from the government of the US or Puerto Rico. But the situation as described is a great object lesson. Taking care of the goose which lays golden eggs is wise. Taking care of the corporations which pay the workers which pay the bills is a good thing. But it is possible to do good things in bad ways. Subsidies are a horrible way to provide incentive. Tax breaks work much better but they are SO politically incorrect and SO market driven that governments and the people they represent tend to hide them. In addition, tax breaks, unlike subsidies, tend to be contractual in nature. Corporations know what they’re getting and under what terms and for how long. No surprises. Subsidies? Not so much. Poor planning in the arena of employment and how to attract and retain it doesn’t sit well with citizens.

These are the only two ‘Whys’ given. They are not explained, amplified upon or put in context. They are meaningless facts added as fill in a story on the plight of Puerto Ricans in the States and at home. Unfortunately for news consumers, they are the most important facts. Thus, when the paper refuses to explain what caused the problem and merely reports that there is one, no constructive dialogue can be entered into; no solutions can be proposed; no thought goes into the process and no change can be put into place.

Make no mistake. This is an important issue buried in a human interest piece. America has 50 states which each function more or less like the government of Puerto Rico. Bad choices made in any of these 50 laboratories plus the one on the island will produce bad results and can be teaching moments for us all. Beyond providing the States with a solid core of well educated, bilingual professionals, the island is providing us a couple of other clues for fiscal health. The question is are we willing to study hard enough to learn the lesson?

Blue Collar Muse

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This entry was posted on Thursday, August 14th, 2008 at 10:00 am and is filed under Business, Common Sense, Economics, Entitlements, Lower Taxes, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.