Wage stuff and bigger issues, too

As you no doubt know, the CNMI’s minimum wage bumped up another notch this month, to $4.55 an hour.

Anyway, if we keep our eye on the ball, we’ll notice that in six years, the wage will presumably be set at $7.25 an hour.

So, what will it cost to have a full time employee in six years? I’m asked to come up with one number to characterize this thing, and I come up with about $19,000 a year at a minimum. Of course, that’s in future dollars, not today’s dollars, but nobody wants to hear these footnotes when they’re fishing for a simple, one-line answer.

So that’s a bare bones, as-simple- as-it-gets cost figure. It’s based on taking $7.25 an hour, multiplying it by the standard 2,080 hours, adding a 20 percent burden to everything (to cover payroll taxes, administrative costs, and so on), and adding a very conservative $1,000 a year for training costs and such.

This approach isn’t some flight of fancy. It’s based on my hands-on experience with budgeting for the private sector. A 20-percent burden is at the light end of things, and that can easily soar if an employer is tasked with providing insurance, pensions, holidays, sick days, child care, and so on.

Hey, that’s a very pregnant “if.” Given that it’s likely that U.S. employers will face mandates to provide some or all of these things before too long, I wouldn’t ever advise anyone to budget for staff based on a skinny 20-percent burden. Beyond that, well, my more refined estimates are tendered on a case-by-case basis.

While Saipan is digesting the minimum wage issue, the mainland side of things is due for another spell in the limelight which, in turn, will determine Saipan’s situation as well. Which is to say, I think the U.S. minimum wage might rise substantially in the next few years.

In summary, that eventual “$19K” (minimum) cost of having an employee on Saipan might go up, or even go way up, but it isn’t going to go down. Doing a mere budget for this isn’t enough; a savvy analyst will do a real forecast and a sensitivity analysis. As always, the real risk is implicit. As usual, the bean-counters will miss it.

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I want to let this wage issue shift into a broader gig, for two reasons. First of all, the minimum wage subject bores me; any freshman economics student aces that gig on the first try, it’s just a price-control problem. But, secondly, it at least leads to a more profound topic that is going to body-slam those who aren’t ready for it. So here we go: One of the things we’re going to see in the coming years is a profound shift in the world’s labor markets. The declining economies are going to face crisis after crisis: Pension schemes will be going broke, bankruptcies will mount, jobs will flee for more productive places, clean and orderly neighborhoods will become nasty and grim, and middle-class people who considered comfortable desk jobs a birthright are going to be angry and scared when they can’t find work.

That last note is no mere social quip. When you push anger and fear into the mass psyche, the output is envy and malice.

A free market can survive all manner of human frailty. It can survive stupidity. It can survive envy. It can even survive greed. But it cannot survive malice. When people are more interested in undermining their neighbor than advancing themselves, there can be no free market; the very premise of the market is erased. Much of the poor world lives in this grim condition, but what is interesting is that much of the advanced world is joining it. This fact, more than any other, is going to write the history of the next few decades. Hostility (the term used by the late economist Joseph Schumpeter) is a force to be understood, dear reader. The first half of the last century provides a few insights into those situations, and Saipan’s war relics stand in grim testimony. The first half of this century might have some very destructive parallels.

The CNMI is entering extremely exciting times. I’m not the only one who thinks so, and over the past week I have been asked by readers to cover two topics: (1) the prospect of a large war in this area, and (2) the situation that Filipino workers face in the coming economic times. I will cover both of these topics right here. Stay tuned.