‘Further delay minimum wage hikes until CNMI, A. Samoa economies improve’

U.S. Interior assistant secretary for insular affairs Tony Babauta said with the economic prospects for the CNMI and American Samoa bleak for the foreseeable future, “Congress may find it desirable to take additional action to postpone increases or re-establish the industry committee process.”

Babauta was not alone in suggesting further postponement in the annual 50-cent minimum wage increases until the CNMI and American Samoa economies rebound.

He was one of those who testified at an oversight hearing in Washington, D.C. on Friday to review the impact of minimum wage increases in American Samoa and the CNMI.

“At such time as the economies of American Samoa and the CNMI recover their footings, Congress can return to the issue and re-establish the periodic increases until the federal minimum wage is achieved in the respective territory,” Babauta told the U.S. House Subcommittee on Fisheries, Wildlife, Oceans and Insular Areas.

CNMI businessman Jim Arenovski, who testified via videoconference, asked the subcommittee to “advocate a delay” and that the panel continue to monitor the situation in the CNMI.

American Samoa Gov. Togiola Tulafono, in his testimony, said American Samoa is in dire need of relief from U.S. Congress and “at a minimum, the present suspension of the minimum wage increases should be continued indefinitely or until some more satisfactory minimum wage procedures are designed and implemented.”

“Increases in the minimum wage should be terminated immediately in American Samoa,” he said.

American Samoa Delegate Eni Faleomavaega also pledged to do everything he can to halt further minimum wage increases in order to provide the American Samoa government with the time it needs to put an action plan in place.

CNMI Delegate Gregorio Kilili Sablan, in his opening remarks, said while he wants increases in the minimum wage, he is also not blind to the economic realities in the CNMI.

He said though the CNMI’s minimum wage increased from $3.05 an hour to now $5.05 an hour, he said the latter is still not what he calls a “dignified wage” but has helped people.

Interior’s Babauta said if territorial economies do not improve in the near future, the scheduled 50-cent increases may translate into new company closures and employee layoffs.

Babauta also said the Obama administration would not be opposed to re-instituting the industry committee process in American Samoa and extending it to the CNMI.

The 50-cent minimum wage hikes have been suspended in 2011 for the CNMI, and in 2010 and 2011 for American Samoa.

A 2007 federal law requires the CNMI and American Samoa to increase their minimum wages by 50 cents every year until it reaches the federal wage floor of $7.25 an hour.

Those who testified at the subcommittee hearing and requested further delays pointed to the closures of business, work hour cuts, and loss of jobs as a result of the minimum wage increases in the two U.S. jurisdictions at a time when their economies are in shambles.

Arenovski, a former president of the Saipan Chamber of Commerce, said not only is the CNMI wrestling with the impact of minimum wage law, but also the immigration reform law or U.S. Public Law 110-229 which is also directly related to labor and costs.

The law that placed CNMI immigration under federal control decreases dependence on foreign labor.

“A delay in the ongoing increases would allow businesses to invest money in the hiring and training of United States workers in order to comply with that law,” Arenovski told the subcommittee.

He said the goal of raising worker pay is laudable but should not be at the ultimate expenses of workers, businesses, and the economy.

“What is of utmost importance is not simply that minimum wage is implemented but rather that (it is) implemented in the right way,” he added.

Press secretary Angel Demapan, when asked for comment yesterday, said the Fitial administration shares the concerns of the business community.

“The current economic situation is already a major challenge to our business community, adding another obstacle would make it even harder for businesses to flourish. Businesses should be granted reprieve during these hard times so that they can remain open and continue to contribute to our economy,” Demapan said.

American Samoa’s Tulafono also said a U.S. Government Accountability Office report in May 2011 did not adequately, succinctly or clearly convey the magnitude of the worsening economic disaster in American Samoa.

For example, the GAO report “continues to understate American Samoa’s employment losses due substantially to the initial increases in the minimum wage,” he said.

He said while the GAO report estimated a 19 percent decline in employment in 2009, the American Samoa government estimated the job loss at 30 percent. His government said that there were only 13,434 in 2009, a drop from 19,171 in 2008.

“The worst is yet to come,” he added.

Tulafono also asked the federal government to consider previous U.S. Labor Special Industry Committee processes or some modification thereof for determining minimum wages in American Samoa.

David Gootnick, director of GAO’s International Affairs and Trade, also presented at the hearing the highlights of GAO’s 2011 reports on the employment, earnings and status of key industries since the minimum wage increases began in the CNMI and American Samoa.

GAO is the investigative arm of the U.S. Congress.

A GAO report is mandated by law so that Congress can assess the effect the 50-cent annual wage increases are having on workers and the economies of the CNMI and American Samoa.

The 2010 report contributed to the decision to skip the annual wage increase in 2011 in the CNMI.

But Sablan had said that the GAO report observed falling employment in the Northern Marianas, but could not determine whether this was due to rising wages or was simply the result of the overall economic decline in the Commonwealth.

The GAO report says tourism employers will continue to cut regular work hours and freeze hiring as well as start laying off employees by early 2012 as a result of the annual 50-cent increase in the CNMI’s minimum wage.

By 2016 when the CNMI’s minimum wage is supposed to reach $7.25 an hour, 95 percent of workers in the tourism industry would have been affected.