Puerto Rico’s economy? It’s complicated. On the one hand, Puerto Rico has a higher poverty rate, lower income, and more food insecurity than any state. On the other hand, Puerto Rico is in a significantly better economic position than any of its neighbors, including major Latin American nations. There are real signs of economic upturn in Puerto Rico…yet the level of economic inequality is high and growing. So, if we look at the facts rather than the feelings, is Puerto Rico experiencing economic recovery — or not?
Signs of improvement
The Federal Reserve Bank offers quite a few signs that things are getting better in Puerto Rico:
- In the past five years, employment has grown by 9.2%, more than double the U.S. overall.
- The unemployment rate is down to 5.8%.
- Private sector employment is at a 15-year high.
- Tourism, which has for many years been a relatively underperforming industry in Puerto Rico, has created plenty of new jobs post-pandemic.
- Employment in education and healthcare have rebounded to levels last seen in 2012, and manufacturing — though still low compared with 20th century figures — has been rising since Hurricane Maria.
- Overall, the economy is less dependent on government jobs.
“The island has made great progress in resolving and rebounding from its extensive fiscal crisis,” they conclude.
Accounting firm Ernst & Young speaks positively about the efforts of the PROMESA Financial Oversight and Management Board, saying that their work on the Island’s debt issues mean that “After two decades of decline and uncertainty, the government can now refocus on recovery rather than crisis management.” Acknowledging that Puerto Rico was in deep trouble economically for decades, they claim that now the Island is in a stronger position, better able to serve the needs of its people.
David Skeel, the Oversight Board’s Chairman, shares a similar message, claiming, “Decades of deficit spending have ended, and Puerto Rico is far along on its path to a responsible fiscal future.”
Sobering signs
In contrast, the National Financial Capability Study found that 47% of Puerto Ricans felt financially fragile. 43% are living in poverty according to government definitions. That’s twice the rate of the poorest state in the U.S., and low-income residents of Puerto Rico also get less in federal benefits.
Hundreds of thousands of people have left Puerto Rico, largely because of the lack of economic opportunity on the Island. Younger adults, ages 18-29, are more likely to experience financial fragility, 59% said they wouldn’t be able to cope with a surprise expense of $2,000. This circumstance makes it likely that Puerto Rico will continue to have a hard time keeping younger people in the population. The results are already visible: an aging population and falling birth rate that reduce the tax base and put Puerto Rico’s future on shaky ground.
These numbers have not improved significantly in recent years, even though the macroeconomic numbers for the Island have. One reason is the growing economic inequity. The gap between haves and have-nots is higher in Puerto Rico than in any state. “While many argue that the United States has an untenable distribution of wealth with only 10% of households earning over $200,000 a year, in Puerto Rico only 1.4% of households make over $200,000 a year,” says The Center for Puerto Rican Studies at Hunter College. “Meanwhile, poverty is widespread: 25% live with incomes of $10,000 a year or less (as compared to 6% in the general US).”
Puerto Rico may have a rising tide, but it is not lifting all the boats.
Solutions
Part of the problem for Puerto Rico is the effects of the colonial status of the Island. Much of Puerto Rico’s GDP is actually money going to multinational corporations based in the states, because of the tax loopholes that encourage companies to treat Puerto Rico as a tax haven. High-income individuals can also evade taxes by siting their reported income in Puerto Rico, even when their businesses don’t actually bring money to the Island.
Jobs in hospitality, which have been increasing significantly in recent years, are often paid less than jobs in manufacturing. The tourism industry also boasts about higher lodging revenues, but people staying in a hotel or AirBnB don’t necessarily provide long-term investments in the communities as would new residents coming for jobs in construction or healthcare. Some of the indicators of financial growth in Puerto Rico are less substantial than they seem at first.
Statehood is the solution. When Hawaii became a state, there was an enormous boom in tourism, and that was followed by increases in manufacturing and diversification in agriculture. Construction increased by 20% within five years. Investment from companies in the states skyrocketed. Alaska saw similar improvements, with booming population and jobs increasing at 5% each year, rising to 6% in the 60s. Even though Alaska had limited infrastructure when it became a state and suffered major disasters shortly thereafter, the state’s personal per capita income grew by leaps and bounds from admission on.
The current signs of economic growth show the capacity Puerto Rico has. With the level playing field of statehood, Puerto Rico will be able to fulfill that capacity. Tell your representatives that you support statehood, and show it in the November vote.
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