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By Amy Taiko

KOROR, Palau (December 28, 1999 - Pacific Daily News)---New Year’s Day will mark the beginning of a new era in labor law on Palau, when a controversial minimum wage law goes into effect.

A bill that took well over a year to work its way through the National Congress will set Palau’s first minimum wage at $2.50 per hour as of January 1, exempting foreign workers who may soon gain an advantage in the local labor market.

President Kuniwo Nakamura, who signed the bill into a law in July, said in a recent interview that he believes the change will have a positive impact on local labor practices.

Many Palau government employees will not feel an impact from the law, as the government pay scale starts at $2.75 per hour and most employees earn about $4 an hour, Nakamura said.

The law, which contains just a few sentences, states that every employer in the Republic must pay the $2.50 minimum wage, with the exception of non-profit organizations and businesses with an annual gross revenue income of less than $100,000. Students and employees hired on a probationary period for less than 90 days and employees with work permits also are exempt from the new law.

The speaker of the House of Delegates, Ignacio Anastacio, said that all foreigners employed in Palau must obtain work permits, which means that the minimum wage law applies to Palauan citizens only. Although Anastacio supports the new minimum wage, he said he strongly opposes the exemption of foreigners.

"I think it should be applied to everybody," Anastacio said. "It is wrong for any country to have a double-tier minimum wage. But this is the first time that the Republic has enacted this legislation and it remains to be polished.

The speaker said the law may discourage the employment of Palauans. "The tendency is to hire a foreigner who would receive less than the minimum wage. Any businessman would do it out of pure business sense," Anastacio said.

One local business owner said that is precisely what he plans to do. Philip Reklai, who owns five small businesses under an umbrella company called PIDS Holdings, Inc., intends to make a few changes next month.

"It will directly hit me, so what do I do? I fire the Palauan and hire a Filipino for $1.50 an hour. I have to. I am a businessman," said Reklai who currently employees Palauans, Filipinos, and Bangladeshians at his fish market, farm, computer store, restaurant, and construction businesses. Reklai now pays his fish market workers $2.18 per hour. His Filipino farm workers receive $1.50 an hour plus free housing and food. The wages are fair and the work conditions are good, Reklai said.

The Palau Chamber of Commerce opposed the law, predicting that Palauan citizens would lose their jobs as a result, according to Executive Director Leilani Ngirturong.

"By mandating minimum wage, what essentially happens here, is that businesses will hire workers from elsewhere instead of hiring local workers," Ngirturong said. "The chamber and its members believe the market should force the minimum wage."

With the new law on the books for 1999, Palauan businesses and workers seem unable to avoid accepting it as a reality.

"The real test could come as the congress fine-tunes the law over time," Anastacio said, with a new version of the law ready possibly as early as March. The speaker still continues to fight the exemption for foreigners, he said.

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