Minimum Wage Testimony of Rep. Tina Sablan

Written Testimony of Representative Tina Sablan

16th Commonwealth Legislature
Commonwealth of the Northern Mariana Islands

Submitted to the

United States Senate Committee on Energy and Natural Resources
March 5, 2008

Dear Mr. Chairman and Members of the Committee,

Thank you for the opportunity to submit this testimony on the impact of federally-mandated minimum wage increases on the Commonwealth of the Northern Mariana Islands.

I am a member of the House of Representatives in the 16th Commonwealth Legislature. I offer this testimony not only as an elected representative, but also as a member of the generation that was born in the Commonwealth in the 1980s and came of age in the 1990s. We have watched the steady dwindling of economic opportunities in our islands over the years with growing dismay. My generation yearns for change, and one fundamental and critically needed change is a raise in the minimum wage.

For years many of the Commonwealth’s government and business leaders have argued against wage hikes in the private sector, which they have claimed would disastrously impact the local economy. But few have acknowledged the disastrous impacts of keeping the minimum wage at $3.05 for over a decade while the costs of fuel, utilities, and groceries have soared; of deliberately and artificially depressing wages in the private sector while government employment expanded and government salaries rose; of relying excessively on labor-intensive industries and low-wage foreign labor; of investing millions in the education of my generation, without also seeking to create opportunities for us to apply our skills and make a decent living in the islands; and of losing hundreds, perhaps thousands, of young, well-educated, middle-class professionals and their families as they pursue and acquire professional fulfillment and financial self-sufficiency in the mainland United States, Hawaii, and Guam.

I respectfully submit that all of these factors have impacted the economic prospects of present and future generations of the Commonwealth far more seriously than annual minimum wage increases of 50 cents for the next seven years ever could. I also believe that any delay of minimum wage increases will ultimately mean a delay in long-term economic recovery. I therefore support the minimum wage increases mandated under Public Law 110-28, and believe they should continue as scheduled until the Commonwealth reaches parity with the rest of the United States.

Years of depressed wages have contributed directly to the economic difficulties facing the Commonwealth today. Minimum wage increases would help us begin to address those difficulties. Wage increases would help low-wage workers keep pace with the rising cost of living, meet basic needs without having to seek welfare assistance, and pump money back into the local economy. Wage increases would also help correct the glaring disparities between public and private sector wages, and attract more citizens from the oversized public sector to the private sector. The transition of citizens out of the local government and into the private sector will be especially important in light of the layoffs that the government is undertaking due to the current fiscal crisis.

Furthermore, wage increases would push the Commonwealth to wean itself from its over-dependence on low-wage foreign labor and finally invest more seriously in the development and well-being of its most valuable resource: its people. More citizens seeking work in the private sector would mean a larger and more stable labor pool for businesses. Higher wages overall would mean that more middle-class families and young, educated professionals and entrepreneurs might be able to return to the islands and help diversify and strengthen the Commonwealth’s economy. Future investors would be attracted to the Commonwealth, not for its low wages and access to inexpensive foreign labor, but for its skilled and educated workforce, among other positive attributes. Meanwhile, existing businesses would realize a more productive workforce that has greater disposable income, and those businesses that have relied on low wages no matter what jobs they offered would lose their competitive advantage over businesses that have opted to pay their employees livable wages.

It should be noted that the economic reform that would be spurred by federally-mandated minimum wage increases would be incomplete without also ensuring the well-being of both citizen and foreign workers during the transition. Citizens moving out of the public sector would benefit tremendously from unemployment and retraining assistance, for example, as well as small business development aid. The long-term foreign workers who have contributed to the local economy for years would benefit from improved immigration status that would ease restrictions on their ability to live and work in the Commonwealth. I ask that the Committee consider providing the appropriate funding and technical expertise to help facilitate the Commonwealth’s transition to a new economy that is free from the old dependence on low-wage labor.

Much has been said about the U.S. Department of Labor’s January 2008 study on the impact of increased minimum wages on American Samoa and the Commonwealth of the Northern Marianas. The study, by the Department’s own admission, was significantly hampered by time constraints, an inability to conduct field investigations, and a paucity of historical and contemporary labor market data. The Department notes, for example, that the Bureau of Labor Statistics does not collect any data describing labor market conditions in the Commonwealth, and that the Commonwealth is not included in the U.S. Census Bureau’s American Community Survey, or in surveys that generate data on industries, production, and household income and expenditures. Moreover, the Commonwealth lacks macroeconomic data collection and accounting systems technology that would be critical for the formulation of any objective economic assessment, including assessments of the impacts of wage increases in the Commonwealth.

The study was therefore inconclusive at best, yet it has unfortunately been used as ammunition to oppose future wage hikes in the Commonwealth. In particular, some have interpreted the study’s observation that “the scheduled increase in the minimum wage to $7.25 (by 2015) will likely affect at least 75% of wage and salary workers in the CNMI,” and the comparison to the U.S. 75th percentile mark of $16.50 for wage and salary workers, to mean that the mandated wage increases for the Commonwealth would be extremely untenable for the local economy. I respectfully submit that these figures simply underscore the fact that the Commonwealth’s workers are disproportionately low-wage earners who would stand to benefit from increased wages, and that the Commonwealth’s economy is and has been excessively dependent on low-wage labor.

I further disagree with two assertions made in the Department of Labor study. The first is that the recent and scheduled minimum wage increases are likely to worsen the Commonwealth’s economic decline. According to the study, “the lack of significant observed adverse employment effects in the months since the initial increase is not indicative that such effects will not emerge in the future.” Given the limitations of the study and the lack of data, there is no way to objectively arrive at these conclusions. Indeed, it could also be argued that the lack of significant observed positive employment and other economic effects does not mean that such effects will not emerge in the future with continued wage increases.

The second assertion with which I disagree is that minimum wage increases could lead to more citizens leaving the Commonwealth for U.S. labor markets. Citizens are leaving now, and have been leaving for years because of depressed wages, the rising cost of living, limited opportunities in the private sector, and diminishing options in the public sector. It does not follow that they would leave in even greater numbers if wages are raised over the years. On the contrary, citizens are likelier to stay and work in the Commonwealth if their wages keep pace with the cost of living, and if they can realize meaningful quality of life improvements associated with wage increases and other economic reforms.

I respectfully submit that perhaps the most significant conclusion drawn from the Department of Labor’s study is that there is no conclusion, and that no conclusion could be drawn because of the lack of historical and current labor market data. I ask that the Committee assist the Commonwealth in ensuring that we are included in federal labor market surveys, and help us develop the tools and expertise necessary to generate and analyze the data that would be necessary for future economic studies. I further ask that any future studies of the impacts of recent and future wage increases also consider the impacts of not raising wages in the Commonwealth. And finally, rather than postpone future wage increases in the Commonwealth for lack of data about adverse effects, I request that we continue with the wage increases as scheduled for lack of the same data.

Raising the minimum wage in the Commonwealth will obviously not solve all the problems facing our people today, but it is a crucial step in the right direction. The federally-mandated wage increases may entail some adjustments at first, but these are adjustments that can be made with enough resourcefulness, foresight, and resolve within our own community, and certainly with some federal assistance, if granted. In the long run, if raising the minimum wage can help bring about improved wages for all, better working conditions, a more robust and diversified private sector, expanded opportunities for citizens to live and work in the Commonwealth, a reduced reliance on labor-intensive industries and low-wage foreign labor, and parity between the public and private sectors, then the initial adjustment period will be well worth it, and future generations will realize a quality of life that is better than what we have today.

Public Law 110-28 presents an opportunity for the Commonwealth to begin to reinvent itself. I appeal to the members of the Committee to support the continuation of the minimum wage increases as scheduled.

Thank you very much.

Sincerely,



/s/ Representative Tina Sablan
16th Commonwealth Legislature