GAO says no CW = negative impact

Eliminating the CNMI-Only Transitional Worker visa classification would have a negative effect on the CNMI’s economy, especially with Saipan experiencing renewed growth buoyed by new investments. That’s according to the latest report of the U.S. Government Accountability Office.

The visa classification known as CW1, which allows CNMI employers to hire foreign workers, would end in December 2019. Employers are expected by then to have already transitioned their foreign workers to another U.S. worker visa category. The five-year program began in 2009 and supposed to end in 2014. It was extended for another five years to 2019.

The GAO report, released on Friday, said that its conclusions were based on the CNMI’s most recent data available, the 2015 gross domestic product, which showed that the Commonwealth’s economy grew by 0.7 percent or from 2.8 percent to 3.5 percent in 2014. It was the fourth straight year the CNMI’s GDP went up, despite the fact that Typhoon Soudelor devastated Saipan in 2015. The CNMI’s GDP hit an all-time low of negative 17.5 percent in 2009.

The GAO report said the CNMI’s current and planned demand for labor exceeds the supply of U.S. eligible workers. “Demand for CW1 workers exceeded the available number of CW1 permits in 2016, while planned hotels, casinos, and other infrastructure projects estimate needing thousands of new employees,” the report said.

GAO added that the existing CW1 permits for foreign workers and the local supply of U.S. workers won’t meet the growing demand that is expected to further increase once other projects go online.

“CNMI employers face multiple challenges in recruiting and retaining U.S. workers, according to several CNMI employers that participated in our discussion groups and semi-structured interviews.”

GAO determined that the CNMI’s GDP in 2015 would drop by more than half if the Commonwealth would lose all workers under the CW1 category. “We determined that the CNMI’s 2015 GDP would decline by 26 to 62 percent with no CW-1 workers, depending on the assumptions made.”

The report stated that CW1 workers comprise 45 percent of the CNMI’s total workforce in 2015. “To estimate the possible effect of a reduction in the number of workers with CW1 permits in the CNMI to zero—through the scheduled end of the program—we employed the economic method that enabled us to stimulate the effect of a reduction under a number of different assumptions.”

“Available data suggest that predictions based on our model are consistent with the experience of the CNMI during and after the departure of the garment industry from 2002 through 2015, which also show a large drop in the number of foreign workers.”

The GAO report added that predicting the effect on the CNMI’s economy, if foreign workers under the CW1 program were to be decreased, is challenging compared to making a forecast on reducing domestic workers in general “because of several sources of uncertainty…including that the two groups’ economic effects may vary (i.e., they may serve in different types of jobs) and the numbers of domestic workers who enter the CNMI labor market may vary.”

Employers interviewed by GAO representatives—led by Assistant director/senior economist for International Affairs and Trade Emil Friberg Jr., Ph.D.—that visited the CNMI last year said that ending the CW1 program in 2019 is expected to have a negative impact on the local business sector.

GAO held four facilitated discussion groups and seven semi-structured interviews with members of the CNMI business sector and several government officials during their weeklong visit on Saipan in December 2016.

The report said that a participant of the discussion group revealed that he expects his business sales to dip by 30 percent. “The owner of the only airline that transports passengers to and from Saipan, Tinian, and Rota told us that 12 of his [CW1] employees will be affected by the 2017 cap next summer.”

“Without them, he did not think he would be able to remain in business. Some employers told us that they already have been negatively affected when they were able to renew CW1 worker permits,” the report added.

“In all four facilitated discussion groups and six of the seven semi-structured interviews, at least one employer reported that reaching the CW1 cap in fiscal years 2016 and 2017 had negative effects.”

GAO said a small business owner, in one of the discussion groups, reportedly lost his only videographer because he was unable to obtain a CW1 permit, resulting in lost sales while a large employer reported that it would not be able to open at full capacity after learning that 40 workers in one of its units would also be affected by the 2017 numerical cap.

“The employer also reported having spent more than $30,000 to purchase flight tickets home for 18 CW1 workers when their permits expired, as well as $20,000 to apply for H1B visas for some employees.”

GAO was required to make a report on the economic impact after a 2007 law required the CNMI to increase its minimum wage in increments. The Consolidated Natural Resources Act of 2008 gave immigration control of the CNMI to the Department of Homeland Security where they created the foreign worker transitional permit program.

DHS decreased the number of permits they issued annually; it currently stands at 12,998 for fiscal 2017. They are also required, after the 2014 extension, to zero out the CW1 program by Dec. 31, 2019.

GAO, however, did not made any recommendations on what needs to be done after conducting their report.