Weeks and months ahead of a 50-cent increase in the CNMI's minimum wage on Sept. 30, many employers have already cut work hours to cushion its impact against a backdrop of lingering economic woes, high utility costs, a still uncertain transitional foreign worker program, and threat of a government shutdown. For some employees, the work hour cuts render “useless” any positive impact the new minimum wage of $5.55 an hour would have on workers' take-home pay.
Other employers and workers that have prepared for this year's scheduled increase-after a delay in 2011-welcome the new rate.
The CNMI minimum wage will become $5.55 an hour on Sunday, up from the current $5.05 an hour. This is an 82-percent increase from only $3.05 an hour before the enactment of the federal wage law in 2007.
The annual 50-cent increase in the CNMI will continue until it reaches the U.S. federal minimum wage floor of $7.25 an hour.
“It's useless for us because our work hours were cut from 40 to 32 hours a week on Sept. 1 because of low occupancy. So even if the minimum wage will become $5.55 an hour, if our work hours are cut, we will still have less take-home pay,” a 61-year-old minimum wage earner at Saipan World Resort told Saipan Tribune.
Another employee said her work hours were cut from 40 to 36, so she does not expect any positive impact from the minimum wage hike. “It's not really helpful,” she said.
These hotel employees asked that their names be withheld from publication for fear of losing their jobs.
Juan I. Tenorio, human resource manager for Hafa Adai Hotel in Garapan, said yesterday that their 434-room hotel has prepared for the minimum wage increase so this is not something they are too worried about.
“We're not as impacted as the other companies because we prepared for this. We have 30 to 36 employees that are covered by this latest increase, out of 88 employees. Because of the economy, we've gone from having 256 employees to only 88 but we've managed to operate the hotel efficiently,” he said.
While they have long implemented work hour cuts, Tenorio said their employees earn overtime pay when hotel occupancy rate is high.
Daniel Taitingfong, resident manager for Townhouse Supermarket in Chalan Kanoa, said their companies-including 99 Cents in Garapan and San Jose Mart in San Jose-will comply with the 50-cent increase but he said this will “have a bit of an impact on our overhead cost.”
Taitingfong said their company will absorb the added cost but depending on the sales in the months ahead and the impact of the minimum wage increase on their business cost, then they will have to weigh their options. The three major stores have some 100 employees.
“All our plans are tentative. If it requires that we cut work hours, then we would consider that but it's not the only option,” he said.
'Passing on to consumers'
Douglas Brennan, president of the over 150-strong Saipan Chamber of Commerce, said yesterday that “most labor intensive operations like hotels, construction companies, and service companies have already reduced their workforce and work hours as much as they can as a result of past increases in wage rates.”
“After that, there's no option but to pass those increases on to consumers,” he said.
Brennan, general manager of Microl Corp. and secretary of the Commonwealth Auto Dealers Association, said the Chamber “didn't believe 2010 was a good year to increase wages, or 2011, or 2012.”
“In fact, I can't think of a good year to have a mandatory increase in wage rates,” he added.
Press secretary Angel Demapan said the Fitial administration shares the concerns the business community has raised on the minimum wage hike.
“The current economic situation is already a major challenge to our business community. Adding another obstacle would make it even harder for businesses to flourish. Businesses should be granted reprieve during these hard times so that they can remain open and continue to contribute to our economy,” the press secretary said.
Rep. Joe Palacios (R-Saipan), meanwhile, supports the annual minimum wage hike, which he said has been in discussion since 1978.
“When the Covenant was still being negotiated, we were given five years to build our minimum wage. But we've always held it off. In the '80s, when the economy was booming, we also asked that it be suspended even though that was the best time to increase salaries. So the federal government did it for us, when the U.S. president signed that minimum wage increase law [in 2007]. I hope there won't be any more suspension [of the annual 50-cent increases] just like in 2011,” Palacios said.
Delegate Gregorio Kilili C. Sablan (Ind-MP) said he looks forward to the new minimum wage of $5.55 an hour, even as he completely disagrees with the national Republican position that the minimum wage restricts progress.
“Northern Marianas workers deserve to earn a dignified wage for the work they do,” Sablan said.
The delegate said the CNMI has many families barely getting by and will benefit from bigger paychecks.
“And when they spend that money, it will be good for our local economy. The national Republican platform says that minimum wage restricts progress in the private sector. I cannot agree with that philosophy. I have seen for myself that increasing the minimum wage improves prospects for thousands of people in the Northern Marianas,” he said.
House Commerce and Tourism Committee chair Edmund Villagomez (Cov-Saipan) said the minimum wage increase has “good and bad” effects.
“Just like when the first minimum wage increase was implemented, employers took away some benefits such as free housing and transportation so workers said they would rather keep their housing benefits than get a minimum wage increase. But then again, it depends on the employers,” Villagomez said.
Other non-minimum wage earners have also been expressing concerns over equality and fairness, because they are stuck with their salaries but not the minimum wage earners who will see a 50-cent increase an hour.
Again, Villagomez said this still boils down to the employers' decisions.
Another 42-year-old minimum wage earner said his current work hours are only 76 hours biweekly instead of the regular 80 hours.
“But there were times when I was asked to work overtime so I am able to work more than 80 hours biweekly. But that's not happening all the time. So in my case, my salary depends on the number of customers we have, not because of minimum wage, although that will really help if we have regular work hours and overtime pay all the time,” the Garapan resident said.
Government also impacted
The CNMI's private employers are not the only ones impacted by this latest round of minimum wage increase.
The press secretary said there are “nearly 30 government personnel whose pay grades are being adjusted to comply with the forthcoming minimum wage rate of $5.55 per hour.”
Demapan said the bulk of these personnel come from the Department of Corrections and the Department of Public Works.
He said the administration has prepared for this minimum wage hike.
“OPM [Office of Personnel Management] is already in the process of making these adjustments. These positions are budgeted as the anticipated increase was included in the budget plan submitted for the new fiscal year,” he said.
Brennan said the Saipan Chamber of Commerce has not requested a suspension of future federal wage increases, but it “has gone on record supporting the implementation of industry review committees as suggested by Interior Assistant Secretary Tony Babauta.”
Demapan, for his part, said “if the economic conditions continue to warrant a delay, then yes,” the Fitial administration will support a delay in the minimum wage increase for 2013.
Hafa Adai Hotel's Tenorio supports an annual increase in minimum wage until it reaches the federal level.
“It is the law and it is up to us to cut costs. We want our staff to be happy, and a happy staff equals productivity,” said Tenorio, a former government personnel director.
Delegate Sablan said he understands just how fragile the local economy is. He said that's why, after consulting with workers, businesses, and economic analysts in the federal government, he proposed to skip the annual 50-cent minimum wage increase in 2011. That delay was signed into law by President Barack Obama in 2010.
The delegate also moved the annual increase from May to September to allow more time to study the impact of each year's increase, again by changing federal law.
But Sablan said “apparently, (his) legislative skill and openness to local constituents are not enough for national Republicans. The [GOP recently] approved a party platform in Tampa that says, 'Pacific territories should have flexibility to determine the minimum wage, which has seriously restricted progress in the private sector. A stronger private sector can raise wages.'”