“IT IS SOUND.”
Senator Dr Esther Byer, Barbados Minister of Labour and Social Security, was talking in Brooklyn recently about Barbados’ National Insurance Scheme (NIS), which like America’s Social Security system, is considered a necessary and vital element of the nation’s social and economic well-being.
“When we talk about National Insurance, we have to remember that it is several funds,” explained Byer, who was in New York for two Democratic Labour Party functions, a family day and a town hall meeting in Brooklyn.
“Most of those funds are quite sound, the Severance Payment Fund, for instance, is quite sound.”
Byer, also who sits in the Senate after losing her House of Assembly seat in the 2013 general election, said the soundness of the NIS could be seen in its fund operations. Actually, that’s how the United States (US) Social Security Administration assesses its system, which a decade or so ago was said to be in dire straits, putting at risk the security blanket and the economic backbone provided to individual households and workers, whose taxes built up the funds, with promises that the same security would be provided to “future generations”, according to Dorcas R Hardy, a former commissioner of the Social Security Administration.
Last May, studies conducted by researchers from Harvard and Dartmouth universities found that social security actuarial forecasts had over stated the financial health of the social security system and that its trust funds could be depleted in less than 20 years.
The findings raise the question: will the system across the US be able to pay benefits at the same level by 2033?
Although the issues in the US are far different from those in Barbados and therefore may not be relevant to the Caribbean island nation, the same key question which dominates the thinking of tens of millions of younger Americans may be perplexing Bajans at home, now that their country has gone through a prolonged period of recession. Will the NIS be able to keep its promise to Barbadians?
Byer seems convinced that it will be able to do so.
“The fund that is challenged at this point is the one that is always challenged when we have periods of recession, that is the Unemployment Fund,” she insisted in a conversation with BARBADOS BUSINESS AUTHORITY.
“By its very nature, it is supposed to assist Barbadians when they are unemployed. So whenever there is a recession and we have increasing unemployment, we see changes. It is cyclical. When the unemployment figures rise again and we have seen a slight increase in unemployment figures, you will see that boosted again. That is the only fund affected and that’s because of what it does.”
By “challenged”, the minister asserted, the Unemployment Fund “right now was paying out more than it was getting in at this time and that happens every time there is as recession.
You have more benefits being paid out. Because fewer people are off work, you have more benefits being paid out but less contributions are coming in. When that situation changes”, the picture would be reversed.
According to Byer, NIS investments are showing healthy returns, “they are quite good” and the investments were made “quite prudently” in Government projects.
“It is not the mix that they would have ideally wanted to go to, particularly after the recession” hit but using foreign exchange to place money into foreign investments was not something the country wanted to do,” she insisted.
“A lot of the investments of National Insurance money at the end of the day must be for the benefit of the people of Barbados.
“It makes no sense allowing the country to fall, allowing our dollar to decline just that we can say we save the [money in the] National Insurance Fund,” she argued.
“At the end of the day, the National Insurance Fund serves the people of Barbados and we are putting it to work for the people of Barbados. When Barbados is on a growth trajectory again, all of that would have paid off.”
Is there any merit in the notion that the NIS funds are the Government’s and therefore it can be utilised by the administration to finance its programmes, a view once articulated by a Cabinet minister?
The funds “belong to the people of Barbados” and they are “managed” by a board and an investment committee which “comes under the Ministry of Finance,” she said.
“It is the investment committee which always does its due diligence before any investments are made,” she added. “It is never a case in which the Government says ‘we want this’ and it happens.”
In the US, the Social Security Administration is hinting that its trust funds could be depleted by 2033 but experts believe that even that picture may be too rosy.
That raises the question: Is Byer’s assessment too optimistic?