Biz groups suggest alternatives

By Agnes E. Donato and Liberty Dones
Reporter

The Saipan Chamber of Commerce reiterated yesterday its call for a tiered wage system that can be created by a commission composed of federal and local labor officials and private sector representatives.

The Hotel Association of Northern Mariana Islands, meanwhile, favors “a gradual” increase in the minimum wage, warning that an immediate and abrupt implementation of a $5-an-hour minimum wage would jeopardize some hotels’ operations and result in the layoff of employees.

Both groups presented their inputs during a public hearing at the House of Representatives on House Bill 14-30, which aims to immediately raise the minimum wage in the CNMI from $3.05 per hour to $5. The bill is authored by Rep. Heinz Hofschneider.

In a statement, Chamber president Alex Sablan said a tiered wage system is a “must scenario” in view of the CNMI’s currently volatile economic condition caused by the market flux experienced by the Commonwealth’s two main industries: tourism and apparel manufacturing.

According to the Chamber’s proposal, the government should set the minimum wage for farmers, fishermen, and domestic helpers at the proposed $350 a month.

The Chamber said, however, that construction and garment workers should continue to be paid the current minimum wage of $3.05 per hour with benefits.

Meanwhile, the minimum wage for all other workers should be determined based on a wage study that takes into consideration all associated expenses in hiring nonresident workers.

Once the weighted average is determined, the government can phase in the necessary increase, while incrementally deducting the in-step wage increase value against the associated benefits.

The Chamber said this process could be created by a “Wage Commission” composed of representatives from the CNMI and U.S. Labor departments, as well as business leaders, who should utilize their personal expertise and economic indicators to determine each industry’s ability to pay an increase.

The business organization recommended that the government look at American Samoa’s 16-tier wage system, which is adjusted regularly based on testimony and recommendations by government and the insular territory’s Wage Commission.

“The Saipan Chamber of Commerce is cognizant that the minimum wage increase is a sensitive issue. We feel though that we would be remiss in our responsibility to the community as a whole, if we were to irrationally set wages to a level that, historically, …has caused layoffs or compromised service.

“The Chamber wants neither and strongly believes that—now more than ever—a comprehensive review of our economic ability to pay more, by industry, should be conducted by government labor experts and industry leaders,” said Sablan.

In her testimony during a public hearing at the House of Representatives yesterday, HANMI chair Lynn Knight said that some hotels “would like to see a more gradual, conservative approach than what this bill calls for.”

“Other hotels said the proposed rate increase would increase their payroll costs so substantially that it could actually jeopardize their continued operations. In the case of hotels that said they could not withstand increased costs, layoffs would be the most likely outcome of a rapid increase in the minimum wage. The jobs that would likely be eliminated would be those held by less skilled, less educated, least experienced or inefficient employees,” said Knight before the House Committee on Ways and Means.

She said a survey among the hotels showed that HANMI members generally pay more than the minimum of $3.05 per hour and are providing a differential rate pay for local employees “in consideration of the value of benefits currently mandated by law for nonresident workers.”

She said the differential value of benefits added to local workers range from .45 cents to $1.50 per hour.

“In other words, rather than paying local employees $3.05 per hour at the minimum wage, many hotels extend a higher rate ranging from $3.50 to $4.05 per hour,” she said.

In many ways, she said, “the political desire to increase wages is not supported by current economic conditions.”

“Wages can only go up when business is good and there are profits to share,” Knight said.

While the bill attempts to remove other costs to make up the difference with a higher wage, “it’s not clear that the trade off would be equal.”

In her testimony, Knight said that the local tourism industry has not recovered from a downturn that began in 1997. She cited that in June, the Marianas Visitors Authority reported arrivals that were down 5.6 percent from last year.

Hotels occupancy is also flat, she added. For the first six months of 2005, average room occupancy was 71.9 percent. During the same period last year, it was 72 percent.

Further, she said that average room rates are $50 per night lower than they were in 1997.

In some cases, she said that hotels are operating at a reduced number of staff and hours ranging from 32 to 36 per week.

Knight said now is not the time to increase the costs of doing business in the CNMI nor create major instability in the current employment system.

“In the middle of an airline pullout, it is also not a time when we can pass along major cost increases to our hotel guests,” said Knight, referring to the Oct. 1 projected pullout of Japan Airlines from the Marianas.