Starting today, the CNMI’s minimum wage of $4.55 an hour becomes $5.05 an hour because of a federal law that requires a yearly 50-cent increase until it reaches the federal wage floor of $7.25 an hour in 2015.
For many in the CNMI, the increase in the hourly wage rate couldn’t have come at the worst possible time.
The local economy is in deep recession, businesses continue to shut down or cut operations, and the cash-strapped CNMI government is on the verge of a shutdown because no budget has been passed as of yesterday, and over 1,400 employees could be temporarily out of job until a balanced budget is passed.
The forced minimum wage hike is drawing different reactions from those affected—the government, the private businesses and the local and foreign workers.
Businesses, for one, are concerned about the impact the forced wage increase would have on their operational cost.
As of yesterday, some were still hoping that the U.S. Congress will act on a measure to defer this week’s minimum wage increase in the CNMI and in American Samoa.
For the first time since 2007, the minimum wage increase will affect the CNMI government since there are government employees earning less than $5.05 an hour.
But Lt. Gov. Eloy S. Inos said the number of government employees that will be impacted by the 50-cent increase is minimal—at least this year. The succeeding increases will be felt more.
Inos, a former Finance secretary, said the government will have to comply with the federal minimum wage law.
Romeo Patriarca, a heavy equipment operator currently earning $4.55 an hour, said the 50-cent increase will be a big help to him since it will give him more money to buy food, pay for his utility bills, fill up his car tank with fuel, and remit to his family in the Philippines.
“I have seven children, and four of them are still students,” he told Saipan Tribune in an interview at a construction site in As Lito.
Other nonresident workers, however, do not really welcome the minimum wage increase because, even though they will be paid 50 cents more, their employers would remove their free housing or make them pay a portion of it.
“So in a way, it’s not a salary increase,” one of them said.
Douglas Brennan, general manager of Microl Corp. and president of the Saipan Chamber of Commerce, said that for Microl Corp. alone, more employees will be affected by today’s minimum wage increase compared to those affected during the three previous rounds of increases.
“This particular change is going to affect more staff members than the last two. And each change from hereon out will increase our cost of doing business. If the cost to business increases, we need to expand the business to cover that additional cost, to grow the business. Or pass it on to consumers or reduce our number of employees,” Brennan said in a separate interview.
He said payroll is a major cost for any business, and this has to be taken into consideration to remain viable.
The Saipan Chamber of Commerce, the largest business organization in the CNMI with some 150 members, and the Hotel Association of the Northern Mariana Islands, which represents 13 of the largest hotel in the CNMI, welcome this year’s minimum wage hike but is asking for a reprieve for next year’s round of increase.
Press secretary Angel Demapan, in a separate interview, said the 50-cent increase is not a merit increase but mandated by federal law so there is no need for the government to also raise the salaries of other employees already earning at least $5.05 an hour even before Sept. 30.
He said this should not be a cause of employee morale problems.
The work hour cuts embedded in the $132 million budget for fiscal year 2011 will also not stop the government from complying with the new minimum wage requirement.
Employees will start receiving $5.05 an hour, but will be subjected to either an eight-hour cut or 16-hour cut per pay period plus unpaid holidays, depending on the budget bill that will be passed today.
A May 1997 federal minimum wage law mandated a yearly 50-cent increase in the CNMI.
But a law signed by President Barack Obama in December 2009 delayed the yearly 50-cent minimum wage hike from May to September this year.
The succeeding increases will also be every Sept. 30 until the CNMI’s minimum wage reaches the federal wage floor of $7.25 an hour. The CNMI will reach that rate in 2015.
HANMI chair Nick Nishikawa and Chamber’s Brennan said the minimum wage increased by 66 percent from $3.05 an hour in 2007 to $5.05 on Sept. 30 this year—a “tremendous step forward” in fairly compensating the CNMI’s workforce.
“Unfortunately, the balance of the Commonwealth economy has not kept pace with the increases in the minimum wage,” they said in a letter in June to Delegate Gregorio Kilili C. Sablan.
Nishikawa and Brennan, in their four-page letter, said it is in nobody’s interest—not workers, not businesses, and not the government—for uncontrolled cost increases to lead to business closures.
Brennan said they have yet to receive a response to their letter.
HANMI and the Chamber said wage increases should not come about at the expense of jobs, adding that it is now appropriate to allow the rest of the economy an opportunity to catch up with the increasing minimum wage rate.
In today’s meeting of the Society for Human Resource Management CNMI Chapter, they invited Patrick Candoleta, assistant district director for the U.S. Department of Labor’s Wage and Hour Division in Guam, to talk about the minimum wage increase.
The lunch meeting will be held at the Pacific Islands Club’s Charley’s Cabaret from 11:30am to 1:30pm.