‘Federalization, wage hikes could hinder growth’

The federalization issue hovering over the Commonwealth and the tiered increases in the minimum wage the next six years may weigh heavily on the growth of the CNMI’s tourism industry.

This was the assessment made by First Hawaiian Back economics consultant Dr. Leroy Laney during an interview with the Saipan Tribune last Friday following his presentation at the monthly Saipan Chamber of Commerce meeting at the Saipan Grand Hotel.

“That [federal control of immigration] could have implication on the tourism industry and I think that’s in terms of a longer term economic development perspective. With the minimum wage and with the U.S. controlling immigration, if that happens, I think the CNMI has to say goodbye to any kind of growth engine that depends on low wage labor. It’s got to be something else and the question is what’s that going to be?” he said.

Laney, who is also an economics and finance professor at the Hawaii Pacific University and worked under Federal Reserve chair Allan Greenspan, agreed that the lower minimum wage in the CNMI vis-à-vis Guam may attract some companies working on the military buildup there to move some of their business here, but added that the high cost of electricity in the Commonwealth could be a foil.

“You have lower minimum wage here you so you might see some but with energy costs here being what they are it might be more expensive, so might as well do it in Guam.”

As far as Japanese tourists are concerned, Laney said the Japanese outbound market are not traveling as much anymore and if they do they’re not coming to places like the CNMI and Guam.

“Hawaii is in the same boat. We don’t depend as much on Japanese visitors. We’ve got the U.S. mainland, which is still our mainstay market. We’re getting a declining number of Japanese visitors,” he said.

Laney added that despite the Marianas and Hawaii serving different markets in Japan, both destinations appear to be experiencing the same thing.

“We don’t really compete for the same Japanese visitors. CNMI and Guam are perceived as more of a budget destination, while Hawaii [is in the high-end spectrum]. But there must be some similarities because the markets are behaving exactly alike.”

Laney also said that the weakening dollar may have translated to a stronger euro but that has not translated to more Europeans coming to the Pacific because “they have to get so far to come here.”

He conceded that Hawaii, Guam, and the CNMI may get a few Europeans, ‘but you have to have them over to the Caribbean, Florida, Southern California, and Mexico in order to get them out here. Most budget destinations in Europe prefer the Mediterranean [because it’s close and cheaper].”