Hearing on Minimum Wage, Washington, D.C.

Photo by W.L. Doromal

February 28, 2008

This morning in Washington, D.C. the Senate Energy and Resources Committee held a Full Committee Hearing: Impact of increased minimum wages on the economies of American Samoa and the Commonwealth of the Northern Mariana Islands. The testimony of those testifying at the hearing can be found on the committee web site. Here is a summary of what was said regarding the minimum wage increase in the CNMI:

Pedro A. Tenorio, Washington Resident Representative
Mr. Tenorio stated what was stated by many of us - that the U.S. Labor report "does not address the potential impact of the second increase and whether or not there should be a second increase. It instead highlights a number of potential negative impacts that could result from the implementation of the scheduled minimum wage increases."

He spoke of receiving email, faxes, and other correspondence from business owners, community activists, students, and parents. Here are his recommendations to the committee:

"I have weighed my position on a second increase very carefully. What ever decision is made will have a potentially devastating effect on one sector or another in the CNMI. However, as a pragmatist and a realist, and with all due respect, I simply do not believe that it is possible to enact legislation by May 24th to delay the second increase. Therefore, I would request the assistance of the committee in the following:

1. Pass legislation that will cap the minimum wage in the CNMI at $4.05 an hour, the wage expected after the implementation of the second increase, which would remain in effect for a period of two years. This will have provided workers in the CNMI with a total hourly increase of a dollar, which is a significant step toward a livable wage. This two year hiatus would hopefully provide time for appropriate data collection tools to be developed and implemented so that reliable economic data would be available to evaluate impacts and guide decisions. This two year period will also provide our business community the necessary time to restructure their business operations so that they can remain in the CNMI.

2. Provide resources that will assist the CNMI and the Department of Labor to develop, acquire, and implement the necessary surveys or related data collection devices to adequately and accurately measure the impact of the first two increases on the CNMI economy, as well as determine the likely impact of future increases.

3. Assist us with resources to address our infrastructure crises so that we can reduce the cost of doing business in the CNMI, and provide breathing room for employers to pay higher wages.

Benigno R. Fitial, CNMI Governor
The governor started his testimony talking about the decline of the garment and tourism industries. The governor testified that HAMNI reported that "of 16 hotels polled, 64% of all employees will be affected by the minimum wage increase. He stated all of the cuts hotels made as a result of the last minimum wage increase. Almost all of them were cuts in hours and benefits to employees. His testimony continues relaying the Chamber of Commerce survey results of its approximately 160 members stating an increase in the minimum wage would result in:

"reduction of staff, reduction of hours, reduction in energy consumption, discontinuation of food and other benefits, eliminating positions currently unfilled, and putting into place a hiring freeze until the economy improves."

The basis of his testimony is that he is asking that wage increases "not be based on a fixed schedule, but on a careful analysis." He supports further studies of the US Department of Labor.

Jay Berman, Senior Economist, U.S. Department of Labor
Much of Mr. Berman's testimony mirrored the U.S. Department of Labor report, The Impact of Increased Minimum Wages on the Economies of American Samoa and the Commonwealth of the Northern Marianas Islands.

Nikoalao Pula, Acting Deputy Assistant Secretary of the Interior for Insular Affairs
Mr. Pula emphasized the fragile economies of the small islands. He quoted the U.S. Labor impact report:

"The DOL report also addresses the minimum wage issue with regard to the CNMI. The DOL report notes that the effect of the minimum wage increase in the CNMI, would be like raising the Federal minimum wage to $16.50 per hour in the 50 states. The report states that job losses in the CNMI will result in the return of foreign workers to their home countries and the migration of United States citizen workers to other United States jurisdictions."

The job losses are not a thing of the future, they have been happening for years and continue to escalate as more businesses and factories close. The business closures are due to trade agreements and the greed of the factory owners, the decline of tourist industry, the high costs of electricity and shipping costs. The minimum wages of the 50 states cannot be compared to the minimum wage in the islands. The cost of living is even higher in the island than it is in the states. Additionally, the majority of the work force in the states are not minimum wage earners who live below the poverty level.

His conclusion:

In light of the risks to the American Samoa and CNMI economies that are identified in this statement and in the DOL report, the Administration suggests that Congress give strong consideration to amending P.L. 110-28 in order to avoid increases in the minimum wage that could result in significant job loss and harm the economies of the two territories. We offer some suggestions regarding the factors that should be kept in mind in evaluating any potential legislative revision.

First, regarding proposals for a determination by the Secretary of Labor that would stop the implementation of an increase in the minimum wage, we would draw Congress’s attention to the difficulty inherent in making any objective determination about the impacts of a proposed minimum wage increase before it goes into effect. Increases in the minimum wage have numerous, complex impacts on an economy and, generally speaking, create some positive and some negative economic impacts. Broad language that would postpone an increase in minimum wage based on a finding of any adverse impact on the respective economies of the CNMI or American Samoa might have the effect of preventing all progress towards a higher minimum wage. Narrower language requiring a determination that the increase will not substantially curtail employment allows more flexibility, but the difficulties for the Secretary of Labor of obtaining reliable information upon which to base any determination will be significant.

Another model that Congress might consider is the special industry committee that set the minimum wage rates biennially in certain areas of the United States and American Samoa for over 60 years. The advantage of the committee structure is that it ensures that the people who determine the minimum wage increases share first-hand knowledge of island economies, while representing different stakeholder groups within those economies as well as the public interest. When compared with proposals to vest the decision making authority in the Secretary of Labor, this model offers the advantage of ensuring that local knowledge is fully incorporated and that stakeholders in the territorial economies are able to play significant roles.

No one who testified this morning addressed that fact that a worker's wage is related to his/her quality of life. No one mentioned that minimum wage is not a "living" wage. No one testified that the majority of the population in the CNMI, the minimum wage earners are already suffering because their paltry wages do not correspond with the costs of housing, basic commodities, health care, and utilities. No one stated that
employers in the CNMI owe their workers 6.1 million dollars in unpaid judgments. No one considered that the minimum wage earners are supporting families with children. No one presented the human side to this issue.

The written testimonies will show another side of this issue.