Puerto Rico private sector jobs higher than before 2017 hurricanes

Officials say February numbers represent ‘total’ recovery

SAN JUAN – Puerto Rico Gov. Ricardo Rosselló again took the opportunity to announce that, for a sixth consecutive month, salaried employment reflected interannual increases, with 19,500 more jobs in February than for the same month last year.

“Although we are aware that we still have a lot to do, the improvement in the jobs picture and economic statistics show that the reforms we have implemented have had a positive effect. We will continue to promote our public policy to continue strengthening the competitiveness of Puerto Rico,” the governor said in a press release.

The most recent surveys pegged nonfarm payroll employment at 873,700 people in February. According to the data, which is based on business establishment payrolls, this represents about 19,500 jobs more than in the same month last year and 1,600 more than in the previous month.

The new numbers reflect six-consecutive annual increases for the month, the governor’s release reiterated, “after reflecting inter-annual losses for 66 months.”

Salaried employment in the private sector was estimated at 671,900 jobs, about 28,900 more jobs compared with February last year and 1,600 more than in January this year.

The employment survey registered 979,000 people working in February, or 5,000 more than the same month last year and 5,000 fewer than in January this year.

The unemployment rate was estimated at 8.5 percent, or 1.8 percent less than in February last year. When compared with January this year, however, the rate rose 0.1 percent.

Meanwhile, the labor-force-participation rate for February was estimated at 40.4 percent, an increase of 0.4 percent when compared with the same month of the previous year and 0.3 percent greater than in January this year.

Labor Secretary Carlos Saavedra Gutiérrez was quoted in the release as saying that “the positive interannual indicators have been consistent in recent months and we see reflected a rise in salaried employment, with an emphasis on the private sector, which validates public policies implemented by this administration in favor of economic growth.”

He recalled that the 671,900 private sector jobs represent 6,100 additional ones to the 665,800 in December 2016, before Rosselló ook office, and that the private sector also surpassed the estimated jobs in August 2017, the month before the hurricanes, reflecting an additional 10,100.
“This demonstrates a total recovery” since the 2017 hurricanes, the release says.

Saavedra added that the labor force has been growing “in various sectors, but the Leisure & Hospitality, Construction and Self-Employment sectors stand out with increases. We continue at a good pace in the recovery process, although we recognize that this does not mean we have overcome the difficult economic situation.”

The sectors that recorded increases in relation to the previous year were: Trade, Transportation and Utilities (8,100); Leisure & Hospitality (5,300); Education and Health Services (5,200); Mining, Logging and Construction (3,500); Professional and Business Services (2,200); Manufacturing (1,900); Financial Activities (1,500); Information (700) and Other Services (500).

Losses in relation to the previous month were seen in: Information (200); Mining, Logging and Construction (100); Professional and Business Services (100); and Government (100).

The government “reflected numbers aligned to the policies of reduction of expenses of this administration, with a decrease of 9,400 salaried jobs when compared with February of last year,” the release reads.

About 183,000 people were self-employed on the island in February, some 19,000 more than in February last year and 3,000 more than in January this year. The construction sector employed 61,000 people in February, or 21,000 more than last year and 3,000 more than in January this year.

The Labor Department surveys can be found here, while statistical data can be found at www.bls.gov.

Think Strategically: Gov. Rosselló 20 Months On

Measuring government with unbiased benchmarks

This issue of Think Strategically is dedicated to evaluating how the Puerto Rico economy has performed after 20 months under Gov. Ricardo Rosselló Nevares. Measuring a successful governorship takes much more than these metrics but allows us to measure the overall direction of the island’s economic well-being.

On Inauguration Day Jan. 2, 2017, Rosselló inherited the following benchmarks. In the chart to the right are the results.

Even with headwinds, improvements present

We see improvements in unemployment with a decrease of 24.7 percent over the past 20 months. In addition, the labor-participation rate increased almost 0.25 percent during the same period. It is worth mentioning that by October 2017, the participation rate had stood at 38.5 percent due to the impact of Hurricane Maria. The median household income also increased 2.87 percent, and the results for gross national product (GNP) growth for fiscal year (FY) 2018 showed positive or near-zero growth, reflecting much better performance than the previously projected minus-13.0 percent.

Maria’s aftermath has exposed the fragility of most essential services. As the most devastating hurricane in Puerto Rico’s modern history, we experienced 2,975 deaths from the event. It appears Maria’s economic impact was initially overstated, and the following aid package reflects this stance.

Rosselló’s advances

  • Placing P.R. hurricanes, FEMA relief on D.C. agenda. For decades, Puerto Rico was absent from the Washington agenda, and Gov. Rosselló and Maria changed that.
  • Seeking Medicare and Medicaid parity. Puerto Ricans pay 100 percent of Medicare and Medicaid insurance costs, yet we receive less than 40 percent of our benefits, which is a discriminatory practice. The governor has moved that message to the point that parity may be on the horizon.
  • Inflow of reconstruction funds significant. More than $54 billion in federal recovery funds and an additional $8 billion from private insurance have been approved. As of August 2018, the Federal Emergency Management Agency (FEMA) estimates it has disbursed or approved $8.1 billion in public and private assistance funding. The total expected over 10 years is $62.4 billion.
  • Total employment, including self-employed. Had been declining since 2007. This trend continued into 2017, as total employment reached 964,000 in August 2017, just before Hurricane Maria. This trend has reversed since Maria, with total employment increasing. In July 2018, more than 1 million residents reported having work, which is the highest level since February 2017.
  • Manufacturing increasing. Post- Maria, Purchasing Manager’s Index (PMI) has averaged more than 53, which suggests an expansion in manufacturing activity, and has been particularly noticeable over the past six months. The New Orders index has averaged over 55 post-Maria. This means further increases in manufacturing activity are expected over the coming months.

On the negative side, the governor’s challenges came into full light after the hurricanes.

Some observations

  • Establishing 95 percent of P.R. would have electricity by Dec. 15, 2017. Even as hopeful as this initial goal was, it created expectations for people that were desperate. A less aggressive goal would have been better. Power was restored entirely by Aug. 24, 2018.
  • Not working as a team with the Legislature, FOMB. The best way to cure the financial crisis is by reaching agreements with the FOMB, Legislature and U.S. Congress. Doing so will allow Puerto Rico to accomplish the needed five years of balanced budgets and eventual return to the capital markets. This will imply significant budget cuts and changes in the way Puerto Rico conducts its operations.
  • P.R.’s GNP growth may be temporary. Favorable growth rates of real GNP are anticipated for FY 2019 and FY 2020. Nevertheless, with current and expected growth rates, according to Estudios Técnicos Inc., “It will not be until FY 2026 that the level of real GNP will approach that of FY 2006.” Former N.Y. Fed President William Dudley warned: “Don’t be seduced by temporary reconstruction dollars.” Puerto Rico must find a more permanent economic growth model.
  • P.R.’s debt burden. The still mostly unresolved issues related to the government’s debt will affect its advances in other areas.
  • P.R. at systemic risk in healthcare. Puerto Rico hospitals are being forced to either reduce costs at the expense of creating potentially devastating impacts on the communities served or take less aggressive cost-cutting measures and risk facing severe financial hardships. The scenario with this indubitable Hobson’s Choice (which is a “free” choice in which only one thing is offered) has developed through profound public policy and market moves that transfer financial risk to the local healthcare systems. With little or no financing available, we have considerable similarity to the 2008 systemic risk crisis. Despite detailing the need to improve health services, there is no stronghold activity within the plan to use reconstruction funds (i.e., Community Development Block GrantDisaster Recovery).
  • Demographic changes, loss of population. Although recent data suggest it will not be as severe as expected, there is consensus that by 2025 the population of Puerto Rico will be nearly 3.1 million people. The difference is some 700,000 individuals from the population in 2000 and nearly 1 million below projections made that year for 2025 of about 4.0 million. The consequences related to demand are significant but given a much older and a very low-income population, the need for government healthcare and social services will be higher and will require considerable changes.
  • The federal tax reform. A new challenge for Puerto Rico is the federal tax reform approved in December 2017, which will require the island to radically alter its industrial promotion approach and take steps to mitigate the impact on the industrial sector and overall economy. Much of what will occur in the mid- and long terms depends on how successfully we reinvent our economic growth and development strategies.
  • Governor’s recent executive order increases minimum wage for construction workers to $15 an hour. At the lowest base level, this increase produces a cascade effect on all other payroll levels and industries closely related to the construction sector. The effect increases average labor costs for any government construction project by more than 85 percent.
  • The P.R. Tax Reform. This tax reform is ill-timed; it would have been more advisable to postpone it until 2020.
  • The 2,975 deaths from Maria. It took the government one year to accept this number of deaths, instead of the 64 initially reported.

Final Word: What challenge will make us work harder and faster?

We must find processes to strengthen the ways government is managed, and this can be done if we have the appropriate metrics. Benchmarking is a necessary function of government because it can enhance oversight and accountability of programs, improve effectiveness and efficiency of services, and assess what works and what does not while providing critical information for difficult policy decisions.

As for the challenges, we should begin to wonder: “what will be the next test for the island? What will be the challenges that will make us work harder and faster?” Nothing is more important than rising to the response to these questions.

Puerto Rico needs all the help it can get to emerge from this crisis, and it takes more than one person with a familiar name to do it. Industrialist Efraín D. Vassallo, may he rest in peace, used to say, “Last names do not make the person; it is the person who makes the last name.” The Governor has a once-in-a-lifetime opportunity to make his mark on Puerto Rico’s history.

–Francisco Rodríguez-Castro is president & CEO of Birling Capital.

While reiterating Puerto Rico gov’t lacks will for reforms, fiscal board certifies fiscal plans

SAN JUAN – Puerto Rico’s Financial Oversight and Management Board unanimously approved Tuesday five-year fiscal plans for the island’s government and the University of Puerto Rico.

Regarding the commonwealth’s fiscal plan, board member Ana Matosantos acknowledged that the fiscal plan had shortcomings because it does not reduce the budget gap, restore growth or free up money for creditors.

“Frankly speaking, I don’t like this fiscal plan,” she said, expressing concern that it cuts too deeply into public services for citizens.

As in previous versions, the commonwealth’s revised fiscal plan calls for a range of fiscal and structural reforms as well as stiff reductions in government spending.

While the board was holding its 15th public meeting Tuesday, President Trump tweeted that corrupt island officials were going to use federal funds to pay the public debt, which the board denied.

“Federal disaster funds do not run through the budget or the calculation of surpluses,” the board’s executive director, Natalie Jaresko, said.

For his part, Gov. Ricardo Rosselló replied to Trump’s tweet, saying, “I agree with you Mr. President, that’s why I’m opposing the Oversight Board’s outrageous plan that would severely hamper Puerto Rico’s recovery and growth.”

The fiscal plan takes into account about $82 billion in federal aid and private insurance claim payments related to damages wrought by Hurricane Maria, but only as a stimulus.

On Monday, Jaresko said that only if Puerto Rico implements certain structural reforms and fiscal measures would it be able to have a cumulative $30 billion surplus until 2033, after which it will it will run deficits mostly in tandem with the discontinuation of federal funds.

The required fiscal measures include pension reform, agency right-sizing, reduction of subsidies, healthcare reform and measures related to utilities, as well as procurement reform. Structural reforms that could help jumpstart the economy for the long-term involve energy, human capital, welfare and improving the ease of doing business. Jaresko said the board must do work “above and beyond” to be able to help jumpstart the economy.

Jaresko had criticized the government’s lack of political will to implement some of the reforms suggested by the board, including the ease of doing business and labor reform.

“There are additional measures to facilitate doing business that are not in the fiscal plan because there is no political will to adopt these reforms,” Jaresko said.

During the meeting, board member Andrew Biggs, a public pension systems expert, said in many respects that the fiscal plan accomplishes much, but is also an acknowledgment of the board’s and “greater failure of Puerto Rico’s government” because the structural reforms needed to spark the economy are absent.

“We cannot say precisely what will happen in future years. Without serious economic reform…Puerto Rico will remain poor in the future,” he said.

Biggs also said the political forces of the island refuse to reduce labor benefits, including the repeal of the Wrongful Termination Act, and added that the story he will take to Washington is that the government does not want to do what it needs to do.

Ex oficio board member Christian Sobrino, who represents the government, said he did not understand why “some of the board members are so grim when we have had a tremendous record of success since we started last year.” He noted that a substantial portion of the debt has been restructured, government revenue has outpaced projections and privatization plans for the energy sector are underway.

“We have accomplished a lot but labor reform is not the end all be all of this,” he said, adding that the government has reduced spending. “If you go to Washington, you should be advocates of Puerto Rico…Also talk about the success. I don’t get all that I want…but we move forward,” he said.

While investors hoped the surplus may be used to pay debt service, board members said they cannot use funds that are not recurrent to pay recurrent expenditures.

The board also approved the UPR’s fiscal plan to implement changes needed to face a government-subsidy reduction of $441 million by 2023, according to the fiscal plan. The plan calls for a tuition hike and urges the university to implement need-based tuition aid.

The plan calls for the creation of three university hubs. One of the conglomerates would be headed by the Río Piedras campus and would comprise the Bayamón and Carolina campuses. The second hub would be headed by the Mayagüez campus and include the Aguadilla, Arecibo and Utuado campuses. The Southeast Region Conglomerate would be made up of the Ponce, Cayey and Humacao campuses.

The Medical Sciences Campus would remain separate and autonomous. Jaresko said university President Jorge Haddock, who reportedly said Friday he was designing his own campus conglomerates, had yet to present his plan.

Haddock, who did not attend the meeting, said the plan would be detrimental to the UPR. Some members of the public criticized the board’s insistence on changing the university’s defined benefit pension plan to a defined contribution plan.

Puerto Rico fiscal plan predicts surplus if reforms are carried out

GAO: Limited Puerto Rico data hinders economic analysis

SAN JUAN – There is limited federal data on Puerto Rico’s economy and labor, limiting an evaluation on the island’s fiscal condition and the impact of applying a 2016 Overtime Rule that made certain workers eligible for overtime pay, a General Accountability Office (GAO) report issued Friday found.

The report recommended that federal agencies include Puerto Rico in their statistics.   

After Puerto Rico defaulted on more than $1.5 billion in public debt since 2015, the GAO said, Congress passed the Promesa law to establish oversight of fiscal affairs. The debt crisis coincided with Department of Labor (DOL) finalizing the 2016 Overtime Rule, which was invalidated in federal court and is being appealed. Promesa included a provision for GAO to assess the rule’s impact on Puerto Rico and examine its economic condition.

The report examined the economic conditions in Puerto Rico from 1990 to 2016 and assessed the potential effects of applying the overtime rule to Puerto Rico. GAO replicated the Department of Labor’s (DOL) impact analysis of the 2016 Overtime Rule using 2015 American Community Survey (ACS) data, the same year used by DOL in its analysis.

GAO also reviewed federal laws, regulations, court documents, “agency guidance, and criteria related to the federal overtime rule; facilitated group discussions with employers in Puerto Rico from industries most likely to be impacted by the rule; and interviewed relevant stakeholders and labor groups.”

The authors also found that Puerto Rico’s gross domestic product (GDP) has been trending down since 2000 and that the overtime rule “would have affected about 4.5% of the workforce, but limited data hindered full analysis.”

According to the report, Puerto Rico Planning Board data show that from 2005 to 2016 the island’s GDP decreased by more than 9 percent, after adjusting for inflation, and the “devastation brought by Hurricane Maria” in 2017 has worsened economic conditions.

“While the overall downward trend is reliable, GAO found that the Planning Board uses outdated methods to calculate GDP, which results in unreliable data from year to year and can make it difficult for policymakers to fully analyze specific economic needs and develop long-range plans. The Bureau of Economic Analysis (BEA), within the U.S. Department of Commerce (Commerce), does not calculate GDP for Puerto Rico, as it does for the other U.S. territories.

“For 6 years, BEA has provided technical support to the Planning Board to update its methods and Planning Board officials described plans to do so, but its methods remain outdated. A 2016 Congressional Task Force recommended that BEA calculate Puerto Rico’s GDP, and BEA considers it a long-term goal; however, BEA has not taken steps to do so,” the report says.

Puerto Rico has limited labor statistics, the authors argue, because it is not included in the Current Population Survey (CPS), which is produced by the Census Bureau and Bureau of Labor Statistics (BLS). CPS provides information about employment, such as hours of work and earnings.

“The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) suggested that Census conduct a study to determine the feasibility of expanding data collection to include Puerto Rico. Census officials said that they estimated the cost of such a study but have not yet conducted it. Census officials also cited concerns with data collection burdens. However, without CPS data on Puerto Rico, policymakers are limited in estimating the full economic impact of different policy changes. For example, DOL did not have the data needed to include Puerto Rico in its assessment of the economic impact of DOL’s 2016 Overtime Rule. Conducting such a study would help policymakers consider the tradeoffs of including Puerto Rico in the CPS,” the report reads.

GAO used a different dataset—American Community Survey (ACS)—to assess the potential effects of applying the Overtime Rule, which would have increased the salary level threshold from $23,660 to $47,476 at which executive, administrative, and professional workers would not be eligible for overtime pay, the report says.

“GAO estimated that about 47,250 of 1.06 million workers in Puerto Rico would be affected—that is, they would become eligible for overtime pay. In response to a salary level threshold increase, employers from selected industries in Puerto Rico told GAO that they might increase certain workers’ salaries, but cut overtime hours for other workers, and adjust the number of staff. An economist and a labor group official said that employers could respond by adjusting the number of staff or their hours, but the impacts to employers may be limited and the workforce could benefit. In 2017, a federal district court invalidated the 2016 Overtime Rule and the overtime salary threshold remains at $23,660, but that decision is currently on appeal,” the report adds.

In sum, GAO recommends that BEA include Puerto Rico in its reporting on GDP and that the Census Bureau study the feasibility of including Puerto Rico in the CPS.

“Commerce agreed with our recommendations and DOL did not have any comments on the report,” the GAO wrote.

See the report here.

Labor Department reorganization approved by Puerto Rico Senate

SAN JUAN – In a day marked by debates on several of the Puerto Rico governor’s reorganization plans, the Senate ended its session Monday by approving the Reorganization Plan of the Labor & Human Resources Department, without holding public hearings and only with the support of the majority New Progressive Party (NPP).

The passage of Senate Concurrent Resolution 37 is a stepping stone to the beginning of the transition to the proposal that is expected to save the local Treasury Department more than $2.2 million the first year and about $11.5 million during the next five years. This sum is added to the annual savings of $851 million that the government hopes to achieve with other consolidations.

This plan would create the Auxiliary Office for Labor Relations that would be in charge of the operations currently carried out by the Public Service Appeals Commission, the Labor Relations Board and the Investigation, Processing and Appeals Commission. It will also assist the operations of the Office of Mediation and Adjudication and the Conciliation and Arbitration Bureau.

The proposal seeks to “avoid duplication of programs, efforts and expenses, transferring to the Department of Education the programs of the Training, Employment and Business Development Bureau and the Vocational Technology Education Bureau,” which currently fall under the Labor Department’s purview.

Puerto Rican Independence Party (PIP) minority Sen. Juan Dalmau, who voted against the measure, criticized that the plan seeks to consolidate three entities “with quasi-judicial powers, with adjudicative powers in worker-employer processes” in a support office, under the command of a secretary turned “adjudicating judge.”

PIP Sen. Juan Dalmau (Courtesy)

“One of the arguments that is repeated in these reorganization processes that they propose is they guarantee savings to the public treasury. Although there are figures presented in the reorganization plan, […] apart from being a written expression, there is no type of evidence, there is no type of fiscal projection, there is no guarantee that these consolidations will in effect result in savings,” Dalmau said.

The lawmaker said he believes the priority of the government now must be “to protect the rights of workers, particularly female heads of household” and criticized that the assistant secretary would be appointed by the Labor secretary and not have to be confirmed by the senate despite possessing “enormous adjudicative powers of three entities.”

In a release, Ramón Rosario Cortés–Secretary of Public Affairs and Public Policy of the governor’s office, La Fortaleza–requested the withdrawal of Reorganization Plans 1 and 4, which proposed changes to the Economic Development & Commerce Department (DDEC by its Spanish initials) and the Education Council, respectively.

Model Forest Office reorganization passed in Puerto Rico House

“After submitted [plans 1 and 4], the Executive and the Legislative have brought communications to make changes to them. Since they cannot be amended, we will send the revised plans shortly to reorganize these two entities,” the La Fortaleza release reads.

With 21 NPP majority votes in favor and the opposition of Dalmau, the Popular Democratic Party caucus and independent Sen. José Vargas Vidot, the proposal now passes to the House, which will meet again Feb. 15. The Legislature has until Feb. 17 to approve or reject the two reorganization plans that remain before their consideration.

The reorganization plan that seeks to create the Public Service Regulatory Board–which consolidates the operations of entities such as the Energy Commission, the Public Service Commission and the Telecommunications Regulatory Board–is still awaiting passage in both legislative chambers. The Senate is expected to address this plan during its session Wednesday.

Think Strategically: G20 Encomia & Financial Oversight Board Jeremiads

G20 ‘Encomia’

The recent G20 member meeting in Hamburg, Germany, was full of “Encomia” toward most nations and all eyes were on President Trump.

These summits began in 2008, and their focus is an array of issues relating to global economic growth, international trade and financial market regulation. Other topics discussed during the meeting included climate change, labor markets, counterterrorism and global monetary policy.

During the summit’s opener, most world leaders quickly disagreed with the direction of free trade policy. German Chancellor Angela Merkel told reporters they are attempting to agree on differences between the U.S. and the rest of the countries. The advisers to the heads of state and government, known as “Sherpas,” have their work cut out for them, most especially focusing on strengthening the global financial system, which has been a critical point. Another subject with stark differences is trade policy, with President Trump expected to impose a tariff on steel imports at some time in the next few months, with chances of a trade war imminent. During the G20 meeting, the U.S. delegation agreed to include wording about the dangers of protectionism; it also included the right of members to apply “legitimate trade defense instruments” to address “unfair trade practices.”

As widely expected, Presidents Trump and Putin met for more than two hours and, allegedly, Trump brought up Russian interference in U.S. elections and the curbing of violence in Syria. According to Secretary of State Rex Tillerson, both presidents had a “robust and lengthy exchange on the U.S. elections interference, with Russia denying any interference.” Other sources from the White House stated President Trump did not accept Putin’s claim of noninterference.

U.S. jobs report

As reported July 7 by the Bureau of Labor Statistics, total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate changed little at 4.4% and the labor-force participation rate remained at 62.8%. Job increases were recorded in healthcare, social assistance, financial activities and mining.

P.R. Update: The FOMB jeremiads

As reported, the Financial Oversight & Management Board (FOMB) held a meeting with Gov. Ricardo Rosselló’s economic team at La Fortaleza. The purpose of the meeting was to have a session following last week’s certification of the government’s fiscal year 2018 budget. The FOMB intends to set the agenda for the fiscal plan implementation moving forward. During the meeting, FOMB Executive Director Natalie A. Jaresko stressed the importance of working with an increased sense of urgency and strategic purpose. “Time is of the essence. This budget and the upcoming budgets of FY18 and FY19 have significant challenges in the areas of structural reforms and rightsizing.” If Puerto Rico is to achieve the goals stated in the fiscal plan, the board must have an unyielding commitment to work strategically and begin implementation of all applicable measures. We should see increased movement in the public-private partnerships (P3s) arena to realize revenues and reduce the government’s size and inefficiency.

Final word

The FOMB is centering on meeting the expense cuts and reductions in the size and focus of the government, including the Legislature, to meet the fiscal plan and the approved budget.

We must now see the FOMB supercharge the P3 process utilizing the provisions that allow for infrastructure revitalization. We expect to see definitive actions regarding privatization of the P.R. Electric Power Authority’s power generation, distribution and/or all utility operations; other candidates include the P.R. Aqueduct & Sewer Authority, State Insurance Fund Corp., Automobile Accidents Compensation Administration, regional airports and most toll roads, such as PR66, PR52, PR53 and the extension of PR22. The divestiture of the Public Buildings Authority, and the sale of all unused government properties and other initiatives are expected.

However, we continue to be concerned about the actions that have impaired more than 60,000 local bondholders, who are facing widespread defaults on interest and principal. The destruction of wealth has been of significant proportions, and we expect both the FOMB and the government to provide increased clarity for local bondholders. “Perseverance and resolve have done wonders during trying times.”

Francisco Rodríguez-Castro, president & CEO of Birling Capital with over 25 years of experience, has been a key executive in government, global, multinational and public companies as well as a key corporate adviser to multiple entities in a diverse array of market segments. He has participated in structuring over $10 billion in municipal finance, corporate, commercial, asset-based, P.R. Industrial, Tourism, Educational, Medical & Environmental Control Facilities Financing Authority (Afica), and mergers & acquisitions transactions.

Union Asks Court to Reverse Wal-Mart Trespassing Order

Demonstrators, inlcuding Wal-Mart workers dismissed months ago, protest outside a closed Wal-Mart store in the Los Angeles-area suburb of Pico Rivera, Calif., Thursday, Sept. 10, 2015. The store was one of five around the country closed in the spring. The stores will reopen by November, and the retailer said it is encouraging former workers to reapply for their jobs. But on Thursday, Sept.10, 2015, a complaint was filed with the National Labor Relations Board by the United Food and Commercial Workers International Union, who claim Wal-Mart had no plans to offer jobs to many of its former employees who were actively involved in the fight for higher wages. (AP Photo/Nick Ut)

Demonstrators, inlcuding Wal-Mart workers dismissed months ago, protest outside a closed Wal-Mart store in the Los Angeles-area suburb of Pico Rivera, Calif., Thursday, Sept. 10, 2015.(AP Photo/Nick Ut)

LITTLE ROCK, Ark. — A labor union is asking the Arkansas Supreme Court to reverse a judge’s order barring it from trespassing on the retail giant’s property in the state, arguing that the issue needs to be settled by a federal board.

Attorneys for the United Food and Commercial Workers International Union and Wal-Mart appeared before the state Supreme Court Thursday over a Benton County judge’s order blocking the union from entering the Bentonville-based company’s stores or property for any activities other than shopping. Wal-Mart had sued union and its affiliate over demonstrations held at its stores.

A union attorney told justices the issue should be resolved by the National Labor Relations Board, not a state court. Wal-Mart’s attorney said the state has a significant state interest in trespassing complaints

House Approves Bill to Guarantee Domestic Workers’ Rights

SAN JUAN – The Puerto Rico House of Representatives has passed a measure authored by Rep. Yashira Lebrón, Lourdes Ramos and María Milagros Charbonier creating the Domestic Workers’ Bill of Rights, which would grant these rights enjoyed by labor unions and clarifies the applicability of the laws governing them.

Ramos reacted enthusiastically to the legislative approval, which in her view does justice to domestic workers, mostly Dominicans who work six days a week and do not receive fringe benefits that are mandatory for other employees.

House Bill 2383 received the endorsement of the Labor and Justice departments, as well as of the Women’s Advocate Office and the Ombudsman, through the Small Business Advocate’s Office.

MANILA, PHILIPPINES - SEPTEMBER 10: Filipino trainees are tested on their skills on housekeeping as part of their requirement before working aborad on September 10, 2013 in Manila, Philippines. Due to the rise of household help applicants going to different countries in Asia and the Middle East, the Philippine Government required that all workers undergo courses with accredited centers to be able to meet standards abroad. (Photo by Veejay Villafranca/Getty Images)

(Photo by Veejay Villafranca/Getty Images)

The measure stipulates that domestic workers may demand a contract signed between the parties and be guaranteed a minimum wage, overtime pay, days off, no excessive work hours, rest periods and payment of vacation days and sick leave.

Most of these workers are women, heads of households and the sole breadwinner in the household. The legislation would also allow these workers to eventually receive benefits when unfit for work.

A report notes that these workers, when working in private homes, lack adequate oversight for the prevention of labor rights violation that sometimes verge on human rights violations.

The measure’s approval also intends to restrict the underground economy and reduce tax evasion.

Bill That Will Grant Rights to Part-Timers Ready for a Senate Vote

The bill that will allow part-timers working for companies with 250 employees or more to accrue vacation time and sick leave is expected to go for a vote in the coming weeks in the Puerto Rico Senate despite concerns by some business groups about its impact on the economy.

The Senate Labor Affairs, Consumer Protection & Job Creation Committee recommended approving the bill, which is slated to go for a vote in the coming weeks and then move to the House.

Luis Daniel Rivera P.R. Senate Labor Committee Chairman

P.R. Senate Labor Committee Chairman Luis Daniel Rivera

According to Senate Bill 1239, workers laboring between 66 hours to 114 hours a month will accrue between one-half (0.5) to one (1) day a month of vacation time and between one-fourth (0.25) and three-fourths (0.75) a day per month in sick leave. Right now, workers accrue one-and-one-fourth (1.25) a day per month in vacation time and one (1) day per month in sick leave after working more than 115 hours a month.

Labor Secretary Vance Thomas, who supported the bill in public hearings, said that in 2005, around 14.2% of employees in the private sector were part-time workers and about 50% of part-timers work in the fast-food industry. The most recent statistics, which were from March 2013, show that 17.9% of the total workforce was part-timers. That year, there were one million employed people on the island.

Restaurant Association Executive Director Gadiel Lebrón rejected the bill because of the difficult economic conditions in Puerto Rico. He said the island is one of the few jurisdictions in which workers accrue 15 days of vacation time and 12 days of sick leave for working more than 115 hours per month. Stateside, the amount of time accrued is less, he indicated.

While he acknowledged the measure is one of social justice, Lebrón said it “carries a negative impact [on commercial establishments’ stability]…. We cannot isolate this from the impact caused by the taxes in the past few years.”

P.R. Chamber of Commerce (CofC) Legal & Legislative Affairs Director Eunice Candelaria de Jesús said the entity supports all legislation that can strengthen employment within a reasonable regulatory environment that allows for job opportunities. However, she said the CofC could not support the measure. “The impact of Senate Bill 1239 would have a negative mark on the economy,” she said.

The immediate effect will be forcing employers to eliminate positions to pay for the costs.

It is a Marathon! Life After 60 in Puerto Rico’s Lost Decade

The idea of a traditional retirement after age 65 is a notion that is fading as rapidly as the legendary gunslinger Shane rode off into the sunset.

Back in 2008, a fifth (20%) of Puerto Rico’s residents age 40 and older expected to retire at any age between 68 and 80. And even as early as 2007, the U.S. Bureau of Labor Statistics (BLS) estimated two major shifts would occur in workforce demographics that would lead U.S. employers to face “unique human resources challenges”—the aging of the workforce and a diminishing number of young workers. Almost 10 years later, that estimation has become a harsh reality for Puerto Rico with a potential for even harsher consequences for the local economy.

“The law in Puerto Rico states that a senior citizen is anyone who is 60 years or older. But even though this age is the judicial cutline for what is considered the second half of our lives, as part of the senior citizens’ group, distinctions must be made [within this group],” said gerontologist Mildred Rivera.CB (1)

In 2010, the U.S. Census Bureau reported 20.4% of Puerto Rico’s population was 60 years of age or older, and 14.5% was 65 years or older.

By 2014, those 60 and older were estimated to make up 28.4% of the local population or 812,000, of the noninstitutionalized population 16 years and older.

This trend, which was originally attributed to lower birth rates in Puerto Rico and longer life expectancy, is expected to continue in the coming years, as Puerto Rico’s lost decade and continuing fiscal and economic woes have led thousands of residents to move to the U.S. seeking better lives. According to the Census Bureau, about 300,000 people have migrated out of Puerto Rico in recent years, and many of these are younger adults with children who have favored the state of Florida as their new home. In a recent interview with Caribbean Business, the president of the Broward Chamber of Commerce said a survey ordered by the Orlando Sentinel newspaper confirmed more than 100,000 Puerto Ricans had moved there in recent years.

This trend coincides with the exit since 2006 of many pharmaceutical plants and other companies operating in Puerto Rico under Section 936 of the U.S. Internal Revenue Code, after Congress repealed the section. Since then, and along with other factors, Puerto Rico’s economy has spiraled down into a recession lasting 10 years.

The direct and indirect effects of lost jobs and decreasing government revenues from Section 936 industries leaving the island, the worldwide financial crisis in 2008 and the manner in which the Puerto Rico government has attempted to keep the island’s economy afloat, first by increasing public debt and later by approving more taxes, has plunged the island deeper into recession and pushed itself into the verge of default and bankruptcy.

For the past 10 years, whatever economic advances Puerto Rico may have previously made, were reversed or cancelled by negative or flat growth in its gross national product, insufficient revenues, increasing public debt, new and higher taxes and increasing unemployment rates. In fact, based on government figures, Puerto Rico’s economic indicators are currently at the same level as they were in the early 1990s.

40% of elderly residents living in poverty
In a 2014 survey conducted by AARP, formerly the American Association of Retired Persons, it was estimated that 40% of senior citizens in Puerto Rico were living below the poverty level, as defined by the Census Bureau. The report said this figure is almost four times higher than that of the elderly population in the U.S.

Seniors working 01The AARP survey also reported that some 537,000 senior citizens in Puerto Rico were out of the labor force and living on fixed incomes provided by Social Security benefits, retirement pensions and the U.S. Nutritional Assistance Program for low-income individuals and their families.

The situation with so many senior citizens living in poverty and on fixed incomes has prompted a significant number of people who are still working to postpone their retirement, while those who have retired are contemplating or even returning to the workforce, perhaps part time or in different fields altogether.

“The majority of [senior citizens] expect to be working and in a variety of ways—at least seven in 10 say they expect to work at their current jobs as long as possible or as a consultant on an as-needed basis. Half of these respondents think they will be working part time at another company or organization or change careers, while others are thinking about starting a business or going back to school,” according to the AARP report.

Specifically, seven out of 10 (69%) Puerto Rican workers interviewed for the report indicated “it is likely they will put off complete retirement.” Most of these respondents said they will likely be working in different ways, such as continuing to work at their current jobs (full or part time), becoming consultants or starting their own businesses. More than half of those currently working and age 40 or older—expected to retire between the ages of 68 and 80.

This situation, estimated to be a global trend in terms of a worldwide reduction of births, improved living conditions and life expectancy, is the main reason why the BLS gave a heads-up to American businesses on “the two major shifts in workforce demographics.”

As a result of the aging population and the continuing outmigration, employers in Puerto Rico have expressed their concerns regarding specific issues that could have an impact on their businesses. Among those issues are:

  • The difficulty of finding employees with the right skills and qualifications;
  • The difficulty of recruiting key positions;
  • Providing competitive benefits and/or compensation to workers; and
  • The impact of professional emigration on their respective industries.

Senior workforce offers solutions
While these concerns are real, for José Acarón, who is the director of AARP Puerto Rico, both the central government and private-sector employers are failing to see that the solution is right in front of them.

“They don’t see the experience in the senior workforce as an asset. They see the senior worker as someone on the Seniors working 02verge of retirement, so they don’t provide those workers with the necessary training to make them more competitive in their respective fields,” Acarón said.

Because of Puerto Rico’s tough economy, what is happening is that senior workers are not leaving their jobs or retiring, he indicated. At the same time, they have not been trained to be competitive in such areas as managerial or executive functions, technical expertise and even computer technology.

According to the AARP Puerto Rico director, employers have to start changing their perspectives on senior workers and start seeing them as solutions to some of their concerns.

“One of the alternatives that can be explored is ‘position-sharing,’ whereby two employees share the same position in a company. This is a surefire mechanism for transferring knowledge that would otherwise be lost when the senior employee leaves,” explained Acarón, who also assured that from a certain moment in life on, the senior worker will not necessarily be interested in working full time.

Acarón recalled a case in which a senior manager at a famous rum plant in Puerto Rico decided to retire at age 70 and had met with his younger successor to say hello and wish him good luck. A couple of months later, the young manager suffered a heart attack and died. As a result, the recently retired manager was hired once again because no one else could do the job as well.

Acarón believes the island’s labor laws must be changed to make them more flexible in terms of work schedules and conditions. Even though he foresees there could be strong opposition from different sectors, particularly labor unions, he is convinced changes to make labor laws more flexible would be beneficial for unionized workers as well as employers and their businesses.

“There’s a rich source of talent and experience withering away watching TV and playing dominoes while the country falls apart,” Acarón said.

Gerontologist Rivera had stated there is a need to distinguish between “the different kinds of senior citizens” mainly because of the wide age bracket used to define them.

“Distinctions have to be made because a 60-year-old person is not the same as a 75-year-old or an 80-year-old. There are 60-year-olds who enjoy good health and an active lifestyle and do not see themselves as senior citizens,” she said.

Rivera’s proposed distinctions would include from healthy seniors who live independently, to those who are still independent but require some assistance with certain services, to others who are bedridden and in need of assistance 24/7. As the island’s population continues to age, it is expected that the need for senior citizens’ services will also increase, in such areas as health, transportation, food preparation, caregivers, etc.

An analysis made by the Puerto Rico Planning Board revealed that the main problem affecting seniors is health. While 95% of seniors (people 60+) in Puerto Rico have medical insurance, a number of health-related problems stemming from limited insurance coverage have a negative impact on their quality of life, such as the lack of integrated services and restrictions on services and medical procedures, among others.

Elderly needs represent opportunities
Acarón sees a silver lining here, provided the necessary changes in attitudes and perspectives are made.

“One of the changes that we need to make is our conviction that entrepreneurship is in the exclusive realm of the young. Seniors can also be entrepreneurs,” said Acarón, who characterized the job market as an extremely limited universe for those 45 and older.

“Those 60 and older are almost unemployable,” he added.

Acarón proposes that the needs of one be provided by the other.

Seniors working 03“Think of it. If you are an independent retired senior and you need to supplement your income now that you live off a pension or Social Security benefits, you could very well provide transportation, food services or any related service needed by seniors who suffer from vulnerabilities. This way you supplement your income and keep your independent lifestyle. Employment, income, services…everything is covered,” argued Acarón, who also assured this could be developed as a community-based business model.

Some of these services are being offered, mainly by the government at both the state and municipal level, but in a very limited scope. For example, the Metropolitan Bus Authority offers its Llame y Viaje (Call & Get a Lift) program, which takes senior and residents with disabilities to their medical appointments. Nevertheless, the program is limited to the San Juan-metropolitan area and only for medical appointments. Other transportation needs, such as grocery shopping and entertainment, are not covered by the service.

There is also the Ama de Llaves (Housekeeping) program, in which mainly municipal governments assign housekeepers to help seniors and people with disabilities with regular chores they have difficulties performing, such as cleaning and cooking.

In terms of food services, several years ago the concept of providing fully cooked meals—known as fiambreras (lunchboxes)—was common, mainly for families with both parents working, the concept has not been widely developed, if at all, to include seniors with limited mobility. Nowadays, there are but a handful of businesses offering this service and combining it with catering. Even fewer businesses offer meal delivery, such as meals on wheels.

Housing, a key issue
For Rivera, the next significant need that has to be managed for senior citizens is housing, particularly for those who are still working and are independent, but their incomes are not necessarily enough to pay their monthly rents or mortgages, and for those who are retired and independent and have seen their incomes reduced.

The gerontologist argued the best alternative is for a person to be able to stay in his/her home during his/her elderly Seniors working 04years because not only is this situation emotionally healthy, but also because the local community serves as a support network. Nevertheless, she admits there are circumstances that could limit this possibility, such as loss of income, widowhood, health conditions and lack of mobility, among other vulnerabilities.

The concept of égidas, a residential complex for retired people that could be oriented to specific professional groups (i.e. teachers, police officers, etc.) because part of their retirement funds were used to build the facility, is “the healthy solution” for these independent seniors, according to Rivera.

Most, if not all, of these égidas are subsidized by government-managed federal programs that have set a predetermined cost for each housing unit and, depending on the seniors’ incomes, the federal government pays for part of the rent or its totality.

Some égidas have been developed recently by a few municipal governments and social-interest groups, such as the Methodist Church, whereby the eligibility of prospective residents is determined by their incomes, among other requirements. But the most important requirement is for residents to be independent. Residents who need medical care need to relocate to a proper facility, most likely a nursing home, which in turn also represents a significant housing need for this population.

Tamara Pérez, former president of the Federation of Extended Care Centers of Puerto Rico, has said that despite “the enormous need” for nursing homes on the island, the government is making it “more and more difficult for these to operate.

“The government has strict requirements for licensing nursing homes in Puerto Rico, and if any of our centers does not comply with one or more of those requirements, it could be closed down immediately. But when an illegal nursing home is detected operating without a license, that center is allowed 60 days to comply with all regulations. This isn’t fair for those that are complying but could fail in one or two items,” Pérez said.

Most of the extended care centers affiliated with the Federation serves middle-class families who cannot care for their elderly loved ones. There are a few high-end nursing homes on the island, where the cost of caring for an elderly person exceeds $3,000 a month, not including the cost of medicine or other special needs.

According to Acarón, as Baby Boomers—those born between 1946 and 1964—start reaching their retirement age, an increase in the number of working, independent seniors can be expected. This is despite the fact that, according to the Labor Department, in 2014, 72,000 out of a total senior population of 812,000 was working. Within this working group, 69,000 were employed, with the balance actively seeking employment.

It should be noted, though, that the labor-force participation rate for those 60 to 64 years old was estimated at 18.8%. Within that age group, 24.3% were men. This means that almost 25 out of every 100 men in Puerto Rico between 60 and 64 are working beyond the common age boundary for retirement.

Meanwhile, the labor-force participation rate for female senior citizens is higher, reported at 36.6% in 2014, corresponding with another trend of more women working than men in Puerto Rico.

Baby Boomers have also been labeled the “Sandwich Generation” because they have had the double responsibility of raising their children while caring for their elderly parents. Today, some adult children have also started living with their older parents, due to economic difficulties. These circumstances, along with the need for medical care, could be among the reasons why Baby Boomers are postponing their retirement, according to Acarón.

If this trend continues, as a consequence of Puerto Rico’s paralyzed economy, by 2024—when the last of the Baby Boomers reach retirement age and as senior adults continue to work and lead independent, active lives—the need for services and facilities for seniors in Puerto Rico will become immediate and can no longer be postponed. This is only eight years away.