NMI minimum wage hits fed ceiling

Retired Capt. James Burke, left, and his wife Apple inside the store that they own and operate in San Jose. (Jon Perez)

A snapshot of the CNMI based merely on its minimum wage paints a very different picture from just 11 years ago, in 2007, when the minimum wage was pegged at $3.05 an hour, making the CNMI a low-wage economy. That’s no longer true.

Starting in 2007, staggered 50-cent increases across many years to allow CNMI businesses time to absorb the impact eventually brought the CNMI’s minimum wage to the federal level of $7.25 an hour last Sept. 30.

Capt. (retired) James Burke is proud to say that he is the only American on Saipan who owns a mom-and-pop store—a small business owner that doesn’t mind making a small profit if he could offer better-priced goods to consumers.

Burke and his wife, Apple, are a two-person team that employs five other people to help them with their daily operations of the Friendly Market in San Jose.

He said he has no problem complying with the federally mandated law that raises the minimum wage to the federal level of $7.25 an hour.

“I’m a small business owner and have five employees. We complied with the law,” said Burke, pausing to greet and briefly chat with one of his regular customers at the counter.

“It’s the law and business owners are required to pay their employees the minimum wage,” he added.

Burke plans not to raise his prices. “Raising the prices of the goods is in accordance with the suppliers and the shipment that comes to the CNMI.”

“Also, if the gas prices or taxes go up, or the wholesaler raises their prices, then the business owner is left with no choice but to also raise the prices,” said Burke.

But, he said, unlike other stores that make 50 percent or higher in profit, they keep theirs low. “I make a little money. If we have to raise our prices, we only mark up to get 10 percent profit.”

He acknowledges that many business owners do that—passing the extra cost of their operations to the consumers—but he feels uncomfortable doing that.

“As much as possible, we don’t take that out on our customers. We’re doing okay. We’re making enough profit just to be able to pay our lease, utilities, our deliveries, and, importantly, our employees,” said Burke.

John, who asked not to have his real name published, pointed out that they have been paying more than the minimum wage since 2016, with the rate still at $6.55. “We decided not to follow that level since our business was doing well.”

“We’re not complaining of paying more than the minimum wage since we expanded our business to three other services. I also hired two more employees,” added John, who opened his business on Saipan 20 years go.

He said that only one of their five employees is being paid the minimum since the guy is just new on the island. “I hired a new one since two of my foreign workers were affected by the CW1 cap.”

John said that raising prices all depends on the prices of the materials and the cost of bringing them to Saipan. “It is all based on the world market. There are many factors involved in raising your prices, not only the rising minimum wage.”
 
No difference

For two employees who are minimum wage earners, the 20-cent increase will hardly make any difference in their daily lives.

“It is just like your weekly expenses increased by 5 cents. It is not that much, as if your salary had an additional money to buy you a can of soda,” said Karen, who declined to give her real name.

“I’m already pinching pennies since I’m a single mother. My expenses include paying rent, utilities, transportation, food, tuition, and my loan. It is not that much, so I would hardly feel the increase,” she added.

Jim, also not his real name, said that he was already being paid 10 cents higher when the minimum wage was still at $7.05. “Even with $7.15 an hour before, it wasn’t enough.”

“You have bills to pay and the [income] tax that must be deducted every payday from our salaries. I think nothing much will change with my paycheck. But right now, I have no idea if I would already get the increase.”

It also didn’t help that the CW-1 cap affected his wife, who is now his dependent. “That’s another expense on our part. I have to pay another $370 to file her CW-2 application.”

An additional burden on their part is the fact that they got their jobs through an agency, which also gets a percentage of their salaries.
 
Competitive environment

Saipan Chamber of Commerce president Velma Palacios said with the CNMI’s economy improving, it has created a competitive environment with the businesses when it comes to workers, where some pay employees higher than the minimum wage.

“Our members have already been paying higher than $7.25 an hour. In the CNMI, the economy has improved, giving employees more opportunities to be in the workforce,” Palacios told Saipan Tribune.

“There are many jobs available. Employers are working on trying to retain the current employees through competitive salaries, benefits, training, and other opportunities.”

She added that some businesses, with the rising operational costs, also have no choice but to also increase the prices of their goods or services. “You have some businesses increase their prices. Some businesses will pass some of this increase to consumers. It is part of doing business.”

Hotel Association of the Northern Mariana Islands chair Gloria Cavanagh added that their members were prepared to comply with the law. “Hotels have been ready for this for a while now, we are glad that the economy is such that we can still absorb this.”

She said hotels could not easily raise their rates just to cover the costs of the 20-cent minimum wage hike. “Hotel rates are not like gasoline at the pumps. We cannot raise our rates because the costs of doing business are higher. It is the market that determines whether or not our rates go up.”