Palacios opposes minimum wage hike

Rep. Norman S. Palacios questioned the timing of calls for minimum wage increase in the Commonwealth as revenue collections continue to drop due to possible pullout of the garment industry by 2005.

Palacios said the weak economy and the vulnerability of the local garment industry pose a danger to the already dwindling revenue generation of the CNMI, thus a minimum wage hike would be disastrous to the Commonwealth.

“Whether the wage hike is imposed locally or federally, it would not really matter. The effect would be the same: our economy would suffer tremendously,” said the congressman, who chairs the House Committee on Ways and Means.

Palacios stressed that there would be additional revenue shortfalls if minimum wage hikes were imposed on the garment industry, which is already struggling with the ramifications of the 2005 free trade rules eliminating quotas on garment exports to the United States.

“It is very irresponsible for local politicians to be calling for minimum wage hikes in view of our economic situation. Our elected leaders should be united against wage hikes for valid economic reasons,” he said.

He cited the recent layoff of more than 100 garment factory employees as evidence of the extreme vulnerability of the CNMI’s garment industry. “A wage hike at this time would only accelerate the demise of many CNMI garment factories, particularly the smaller ones,” he added.

Palacios pointed out that any factory losses stemming from wage hikes and new WTO rules would translate into millions of dollars of lost government revenues, which would only worsen the CNMI government’s financial position and create mass local unemployment. The CNMI government, he noted, is already more than $100 million in debt.

The House Ways and Means Committee estimates that the CNMI government stands to lose more than $70 million in annual tax revenues if the garment industry folds due to wage hikes and new World Trade Organization rules.

Rep. Heinz Hofschneider had asked the committee Tuesday on the status of House Bill 14-30, which he introduced, that hopes to increase the existing $3.05 an hour minimum wage and eliminates certain statutory requirements for employers.

Hofschneider also said the failure of the CNMI Legislature to act on its own wage increase is what prodded the U.S. Congress to sponsor a bill increasing the CNMI’s minimum wage to $3.55.

The congressman also urged local leaders to abide with the U.S.-CNMI Covenant by sponsoring its own minimum wage increase to show the federal government that indeed, the CNMI has progressed and has the ability to raise its wage level.

“This measure also got the support of the employers because it would relieve them of certain burdens. Under the Covenant there should be an increase of economy,” said the congressman.