The Minimum Wage Debate

In recent years, we’ve engaged in a contentious debate over minimum wage which has gone from deliberative discussions based on facts to the dreaded politically correct. This is further aggravated by the bully pulpit approach of the federal government trumpeting a message as though every poor nation in the world can afford it, including the CNMI.

In his article on free trade going off track, Robert Reich, professor of social and economic policy at Brandeis University and former secretary of labor wrote that President Clinton has changed his tune. At a recent commencement exercise President Clinton said that future free-trade agreements have to “lift everybody up, not pull everybody down”.

Said Reich: “Nice sentiments. But how do you pull everybody up when millions of people around the world are eager to work for a few dollars a day? Should we demand that every nation’s workers be paid at least the equivalent of America’s minimum wage, work no more than 40 hours a week (with time-and-a-half for overtime) and be as safe at the workplace as Americans?

Poorer nations couldn’t possibly afford these things. Such requirements would effectively ban most imports and cost American consumers a fortune”. The former secretary of labor pointed out why free trade is losing support at a time when the American economy is soaring. He attributes it to “vigorous economic expansion of the 1990s which hasn’t helped all Americans”. “The share of US income going to the bottom 60 percent of American families has continued to fall, while the share going to the top five percent has reached a post-war high.”

“The rate of corporate layoffs, meanwhile, has steadily increased. There were more layoffs last year than in any year since 1993, when the nation was emerging from recession. And so far this year, the rate is running ahead of last year’s. To be sure, with very low unemployment, most people who lose their jobs don’t have great difficulty find new ones. But if they’re among the three-quarters of working Americans who lack a university degree, the new job is likely to pay 20 percent less than the old.

“Trade isn’t the only force underlying these trends, of course. Technological change is important, if not more so. But trade is more visible. A job that goes abroad packs a bigger political wallop than one that is automated out of existence.” He recommended what ought to be done to empower American workers.

Said he: “Rather than try to ‘lift everybody up’ to American standards, a more reasonable objective would be to lift foreign workers up to a standard their nations can afford. As nations become wealthier and more productive, such standards should rise. This would help assure Americans that all nations were playing by the same rules and building strong middle classes along the way.”

The arbitrary imposition of higher federal minimum wage in the CNMI may be highly attractive for detractors who choose not to ignore the oceans apart in economic foundations. To push it is to instantly kill more than 3,000 jobs here at a time when the local economy has contracted significantly as a direct result of the confluence of the Asian Crisis and instability fanned by the shifting sand in federal policy.

If wealth creates jobs, then a federal minimum wage would force a major reduction in force in the number of employees now working in all sectors. We’re sure that this is furthest from the dreams of our detractors who won’t have to live-out the consequence of helplessness and joblessness externally imposed upon the NMI. Si Yuus Maase`!

Strictly a personal view. John S. DelRosario Jr. is publisher of Saipan Tribune