U.S. REPORT: MINIMUM WAGE HIKE WILL HURT MARIANAS

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By Agnes Donato

SAIPAN, CNMI (Saipan Tribune, Jan. 28, 2008) – Scheduled future wage hikes will further harm the Commonwealth’s ailing economy, according to a report by the U.S. Department of Labor to Congress.

The U.S. Labor report said that raising the local minimum wage to the federal level would have adverse impacts on employment and lead to additional population declines in the Commonwealth.

Increasing the CNMI wage to $7.25 an hour, the report said, is comparable to raising the U.S. minimum wage to $16.50 an hour.

"The scheduled minimum wage increases for the CNMI are expected to add further challenges to an already declining economy. With both of its major industries declining simultaneously, the CNMI economy is in overall decline, and its current economic situation makes it especially vulnerable to additional shocks. While data are not available to precisely quantify the impact of the recent and scheduled future increases in the minimum wage, it seems likely that the current economic decline may be made worse," states the report.

It adds, "General experience in the U.S. and elsewhere has shown that potential adverse economic effects of minimum wage increases can be masked or offset to some degree by an expanding economy that is generating net employment growth. In a declining economy, any adverse impacts on employment will not be offset."

The report also predicted that future job losses would exacerbate the declining population trend in the CNMI. Displaced nonresident workers would return to their home countries, while U.S. citizens would take advantage of their access to U.S. labor markets.

The U.S. Labor’s Office of the Assistant Secretary for Policy prepared the report in response to the requirement of the federal wage hike law. The law states that the Labor secretary should report to Congress the findings of a study assessing the projecting the impacts of minimum wage increases on the CNMI and American Samoa. Both jurisdictions fall under federal wage policy for the first time.

The U.S. Labor’s findings bolster the argument of the local government and private sector against additional minimum wage increases in the CNMI.

"The report speaks for itself," said Richard Pierce, the governor’s special assistant for trade relations. "We appreciate the extraordinary effort extended by the U.S. Department of Labor’s Office of the Assistant Secretary for Policy, and agree with the report’s summary conclusions."

"Everyone wants and expects wages to increase, but when it comes to increasing the minimum wage itself, and the adverse effect it would have on revenue generation in an already unhealthy economy, it may be better to wait until we’ve regained a little of that economic ground we’ve lost in the last five years," Pierce said.

"As far as what the Congress will do with the report’s findings, I would imagine the challenge with preparing a minimum wage impact report would be putting it into a language politicians would understand," he added.

Under the minimum wage law, the local wage floor must be raised gradually until it reaches federal level in 2015. The first 50-cent increase was implemented on July 25, 2007. The next 50-cent increment will take effect on May 26, 2008, unless Congress passes legislation to stop it.

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