‘It’s going up too fast’

While the CNMI experienced 42-percent increase in wages since 2014, according to the 2016 Prevailing Wage and Workforce Assessment Study results released yesterday, in Guam, there is a proposal by its legislature to increase the territory’s minimum wage for the third time in two years.

According to Guam Chamber of Commerce chair Bobby Shringi, the concern within the island’s business community is that wages are “going too fast, too quick.”

And that will have wide-ranging impacts on Guam, Shringi said. “A lot of small businesses will be impacted. The cost of goods is going to be impacted. …It’s the small ones, they are the ones going to be impacted.

“When your operating costs go up, what is the first thing you increase? What’s the first thing you do? You either find a way to reduce your operating expense, which is to reduce [the number of] employees, or increase your costs. That is where the challenges come in,” he added.

At the last Saipan Chamber of Commerce general meeting, Shringi thinks the CNMI mirrored what Guam did in 2015.

“Guam changed its wage in 2015. So we went from $7.25 to $8.25 and I believe that the CNMI is now at $7.25. When the CNMI finally caught up with Guam, Guam pumped it up by another dollar Now, there is a proposal on the table to take it all the way to $10.10 in two years. Businesses have just absorbed a huge impact in 2015, now lawmakers are saying we are going to take this $8.25 to $9.20 and ultimately to $10.10 in 2019.”

“This is not really about the large entities because a lot of the large companies are not even in that position where they have a number of employees earning minimum wage. So the impact isn’t great for them.”

Shringi questions the timing of the wage increases. “During that time, Dusit Thani has just opened with 700 employees, JRC has just brought in several hundred new employees. Applebee’s and iHop just hired another 100-plus employees. So was this a business boom because of the minimum wage or was the timing perfect?

According to Shringi, the business community in Guam knows that a wage increase could happen. “The reality is it’s a hot potato issue. Unfortunately, there’s an election season that is looming so something is going to pass.

“So instead of fighting this, rather than putting the armor in front of you, let’s work with lawmakers and see what’s palatable, what’s balanced and maybe, instead of going up by $2 over a two-year period, maybe we can go up $0.95 cents over a two-year period. That still represents a 6-percent and a 5-percent increment, respectively. Keep in mind that in the private sector, the 85-percent increase per increment is typically a high increment. Meaning, you’ve done really well this past year and we are giving you a 5-percent increase, 3 to 5 percent is the norm. It’s fair, it’s palatable, businesses have enough time to absorb it so that really the big thing,” Shringi said.

“The worst thing is going across the board,” he added.

According to Shringi, he knows it is the resolve of the Guam legislature to pursue some form of wage increase. But the Guam Chamber of Commerce would like to reach out in order to reach a “palatable” discussion.

A possible solution to increase a person’s take home pay without touching wages is the creation of a tip credit program that allows the F&B industry to use a certain portion of tips for wage hikes. “It sort of caps the wage at a certain level. As minimum wage goes up, tips can be applied towards the difference between the current minimum wage and future minimum wage.”

“Guam has had that policy for a long time, many states already do. But it just suddenly disappeared a few years ago. Let’s re-create it. That would actually protect the F&B industry from raising its costs, especially the hotels and restaurants,” Shringi said.

There is also a youth minimum wage because studies show that when minimum wage increases, those impacted are the young ones. “So there will be a cap-skilled workers here, unskilled workers there. Minors are not looking for a career, they are looking for part-time jobs so they can take care of bills and possibly pay for college.”

The Guam Chamber of Commerce is also asking its legislature to look into the Dave Santos Act, which is a gross revenue tax exemption issue “so small businesses can at least get something to offset an increase in minimum wage,”

“The Guam Chamber believes that wage increase should be dictated by market forces, not by government methods. That is the sole intent of the organization and the position we continue to preach but then there’s the reality of what is politically right,” he said.