NMI braces for new minimum wage hike

President Barack Obama signed a law in 2010 delaying a scheduled 50-cent increase for 2011. That delay was a result of Delegate Gregorio Kilili Sablan’s (Ind-MP) request, with the support of the Saipan Chamber of Commerce and the Hotel Association of the Northern Mariana Islands, two of the largest business groups in the CNMI.

The 50-cent increase resumes on Sept. 30 this year, and every year thereafter until it reaches the federal wage floor of $7.25 an hour. The yearly wage increase law was signed in 2007.

Sablan said yesterday that he will not propose another postponement of the 50-cent increase for 2012.

“Workers are counting on that 50-cent increase on Sept. 30; and they already had to skip 2011. So I will not propose another postponement,” Sablan told Saipan Tribune in an e-mail interview.

He said when he obtained the one-year postponement for 2011 in Public Law 111-224, “it was with the understanding and agreement of HANMI and the Saipan Chamber that the increase would go forward in 2012.”

“So businesses have included it in their planning,” Sablan said.

Bhola Paul, an employee at Pacific Islands Club, said another 50-cent minimum wage increase will be a big help to employees, especially because of steep prices of goods and services on the islands.

Paul said he’s earning more than the current minimum wage of $5.05 an hour but his employer also raises the salaries of supervisors by at least 20 cents every time there’s a scheduled minimum wage hike.

“I thank my employer for that,” Paul, from Bangladesh, said in an interview at the U.S. Post Office in Chalan Kanoa yesterday. Paul came to Saipan 16 years ago to work at a garment factory but when factories started closing one after the other, he started working as a waiter and now as a food and beverage supervisor.

Paul said when the hotel gets busy, employees get to earn overtime pay because of the extra hours needed to be at the hotel.

“But I am happy just to still have a job, with or without increase because the economy is bad. I make it a point to save,” he added.

Douglas Brennan, president of the Saipan Chamber of Commerce, separately said yesterday that it is “politically impossible to effectuate any changes in the [minimum wage] law this year.”

He, however, said the Chamber will request for a delay in the scheduled increase for 2013.

“SCC would request for a delay in any further minimum wage rate increases, after the September adjustment, to consider implementing special wage committees administered by the U.S. Department of Labor,” said Brennan, general manager of Microl Corp.

Sablan said he would be open to a delay in the minimum wage increase in 2013, but it would completely depend on the economic information he gets next year.

“Is the economy improving, as the recent upward revision of the CNMI revenue estimate indicates? Have employers been able to incorporate the 2012 minimum wage increase without reducing employment or raising prices? I will be listening to business people and workers and looking at the data the federal government and the CNMI collect and I will base any decision on all those factors,” he said.

Brennan said he expects to see “even more work hour reductions in the workforce as well as the closure of additional businesses” with the September minimum wage increase.

“True, some employees will be better off as a result.those that get to keep their jobs. Others won’t be so fortunate. Of course that will translate into less revenue to the CNMI government,” he said.

Sablan, for his part, said, “HANMI and the Saipan Chamber told me they could live with it,” referring to the September increase.

“And I know that workers need it to keep up with the cost of CUC [Commonwealth Utilities Corp.] and gas and food. So we are going to stick with the agreement,” Sablan said.

Brennan said the postponement of the 2011 increase allowed more businesses to remain operational and allowed many people to keep their jobs, even with reduced work hours.

“We are all on a tight budget right now with high utility costs, increased fuel costs, new labor costs associated with the change in accessing foreign national labor, etc. The increase in labor costs will most affect those businesses that are labor intensive. Hotels, construction companies, and smaller retail operations will feel the next increase the most,” he said.

‘Political’

Brennan said the Saipan Chamber of Commerce believes that “purely political minimum wage increases are exactly that-purely political.”

“Minimum wage assessment should be directly related to economic conditions. The elimination of the 2011 minimum wage increase only delayed the inevitable. Until the CNMI economy is healthy enough to support additional increases in the cost of doing business, all measures should be taken to make sure no additional burden is placed on businesses that provide jobs in the CNMI,” he said. “Businesses really don’t need another government-imposed increase in the cost of doing business at this point in time.”

“We’ve had enough economic reports that accurately represent what will happen to the CNMI economy if wages continue to rise during our prolonged recession,” he added.

Brennan is also the secretary of the Commonwealth Auto Dealers Association.

The Saipan Chamber of Commerce believes, as does American Samoa Gov. Togiola T.A. Tulafono, that “irreparable harm has been done to our economies as a direct result of mandatory, federally decreed minimum wage increases that have destroyed our respective industries; tuna canneries and garment factories,” Brennan said.

“SCC believes, as does Governor Tulafono and Assistant Secretary of the Interior for Insular Areas Anthony M. Babauta, that U.S. Department of Labor-appointed special industry committees are a more prudent approach to establishing minimum wage rates based on purely economic factors, that are not harmful to existing business activity and future investment,” he added.

Doty Santos, a teacher at Kagman Elementary School, said any salary increase would help many of the employees in the CNMI but said employers should also ensure there’s “fairness.”

“If only those who are earning minimum wage will get the regular increase but not those who are earning above minimum wage, that will create an unfair environment. In a restaurant, for example, if a minimum wage waiter gets to earn more than the chef, that will be unfair,” said Santos, who also used to work in the private sector.

Impact report

Sablan said the economic effects of raising the minimum wage are complicated and have to be watched carefully.

“That’s why Congress requires the Government Accountability Office to report every two years on the impact of the minimum wage increases on the CNMI economy,” he said.

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

The next GAO report is due in 2013.

Sablan said he will be listening to GAO to also hear if they have any new insights beyond what was reported in 2011 that might affect what the CNMI does next year.

In its June 23, 2011 report, GAO said that numerous factors, including the minimum wage increases, were at work in the CNMI economy. But the minimum wage could not be singled out as causing a loss of businesses or jobs, Sablan said.

“In fact, the County Business Pattern report for 2010 that the U.S. Census Bureau recently released showed an increase in both jobs and wages in the Northern Marianas between 2009 and 2010. This included a minimum wage increase. The information is a little old, but it shows increasing wages does not necessarily mean fewer jobs employment. Quite the opposite, when wages went up, employment went up,” the delegate said.

Sablan also said the County Business Pattern data may show the impact of the American Recovery and Reinvestment Act which, between 2009 and 2010, contributed millions of dollars to the CNMI economy and was credited by local officials with preserving or creating hundreds of jobs. So the Recovery Act may have increased demand for labor in that period and helped push up wages, he said.