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Three tier system shows wide disparity

By Kristi Eaton

SAIPAN, CNMI (Saipan Tribune, Nov. 28, 2008) – As a result of the large number of foreign workers in the CNMI, the economy developed a two-tiered structure, with the upper tier earning thrice more than the lower tier, according to an economic impact report released showing the impacts of federal regulations on the Commonwealth.

"The upper tier is [composed] of high-wage workers, most of which are U.S.-qualified residents employed in government and various private businesses," the report states. "The lower tier is [composed] of low-wage workers, most of which are foreign workers employed in the apparel and visitor industries."

The average annual labor income was $12,917 in 1995.

On average, foreign workers earned $7,792 per year, while local workers earned $24,423 per year-more than three times foreign workers, according to the report.

"While the incomes of foreign workers were well below the average income, they were high compared to what the workers would have earned back home," the report states.

U.S.-qualified residents' income, especially those employed in government, approached mainland standards at the time, the report says. The 5,020 government employees saw an annual average income of $28,650, about four-fifths of the income for workers in the United States, which averaged $34,690.

"Considering the CNMI's short history as a market economy and its geographical isolation, the high incomes of U.S.-qualified residents was a remarkable achievement," the report states.

According to the report, although the two-tier structures are very different, they are interdependent.

"Most U.S.-qualified residents owe their high-wage jobs to the apparel and visitors industries, which in turn rely on low-wage foreign workers," the report says.

Of the 7,710 people employed in the apparel industry in 1995, only 510 were U.S.-qualified residents.

"But, as a consequence of its indirect impact on the rest of the economy, the apparel industry supported an additional 1,750 jobs held by U.S.-qualified residents in the economy, including 990 jobs in government. Directly and indirectly, the visitor industry supported 5,940 jobs for U.S.-qualified residents in 1995," according to the report.

The apparel and visitor industries provided 8,200 jobs for U.S.-qualified residents, which represented 76.2 percent of the 10,760 jobs held by those residents in 1995.

"Thus, the loss of these two industries would have a calamitous effect on not only foreign workers but also on local workers in the CNMI," the report states.

Malcolm D. McPhee & Associates and Dick Conway produced the economic impact report. The Office of the Governor commissioned the report with a grant from the Office of Insular Affairs.

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