Unemployment on St. Croix could soar to more than 18 percent by the summer and more than 12 percent territorywide in the wake of the closure of the Hovensa refinery, according to Labor Commissioner Albert Bryan speaking before the Senate Housing and Labor Committee on Wednesday afternoon.
People had talked off and on for several years about the possible closure of St. Croix’s economic cornerstone, Bryan said, "but our general belief was it would never happen."
"Well, our worst nightmare has come to pass and the serious implications for the Virgin Islands, especially the island of St. Croix, is cause for grave concern," Bryan said. "This event will affect every man, woman and child in the territory as its implications are far reaching.”
Hovensa is the territory’s largest private employer. The closing will result in 1,018 direct Hovensa employees being laid off, and another 1,200 who work for the refinery’s contractors will also be out of jobs, Bryan said.
Last month the territory’s unemployment rate was 8.5 percent, he said, 7.7 on St Thomas/St. John, and 9.6 on St. Croix. But the loss of all those refinery jobs will push the overall jobless rate in the territory to 12.5 percent and on St. Croix it will climb to 18.7 percent.
And that’s only the first wave, Bryan added. Because Hovensa paid some of the highest wages in the territory, the loss of those paychecks will have an impact as well. The median household income in the territory and the average wage are also expected to plummet. Gas prices, WAPA rates, the cost of food – every aspect of life will be affected, he said.
Bryan told the committee that the Department of Labor is following a three-pronged approach to deal with the expected flood of displaced workers,what he called the three Rs – Respond Retrain and Re-employ.
Labor will respond to make sure laid-off workers receive essential social services and monetary support. The department will provide access to educational resources and training, and assistance in connecting to companies with job openings either in the territory or abroad.
Employees can apply for benefits right away, he said, and can use all the resources of the department.
In response to questions from several committee members, Bryan said the Labor Department will ensure that the refinery and its contractors comply with the stipulations of the Virgin Islands Plant Closing Law, which requires laid-off employees to receive one week’s pay for every year of service.
Hovensa has indicated it will honor collective bargaining and employment agreements. The company is also offering severance plans that include additional benefits.
Because workers cannot receive unemployment payments until their severance packages are expended, Bryan said it will be several months before the full impact is felt on the department’s unemployment insurance fund. However, dismissed employees will have immediate access to Labor’s services and programs.
The territory has been forced to borrow from a federal unemployment insurance fund, as many states do, and that borrowing will also increase as a result of the Hovensa closure. Right now the territory borrows between $1.5 and $2 million a month to make unemployment payments. By the summer when the full impact hits, that borrowing will increase by $4 million, Bryan said.
So money will be coming in, but the maximum weekly benefit is $495.