Wage hike cuts into benefits

The recent minimum wage hike in the Commonwealth is forcing many businesses to scale back worker benefits to remain in operation, according to a recent survey of key business leaders.

Proponents of the increased wages, set to rise again by 50 cents each year until they meet the federal level, have long said the hike is needed to ensure workers are fairly paid compared to their counterparts on the U.S. mainland. Yet the mandate for higher pay has left some local employers—who are also facing skyrocketing utility costs and decreasing revenues—with little choice but to cut benefits like housing, health care, transportation, meals and other amenities.

The consequences for worker benefits in light of higher wages are reaching businesses throughout the Commonwealth, according to James Arenovski, president of the Saipan Chamber of Commerce. After the first wage hike last year, he said, businesses focused on increasing efficiency and reducing costs to cover the added expense, yet reducing costs further to adjust for even higher wages will prove challenging.

“People have cut costs down enough that now it’s going to cut into their bottom line if costs go up again and they have to reduce even more,” Arenovski said. In addition to reducing benefits, he noted that businesses have scaled back on hours of operation and, in some cases, the level of service they offer.

Recent figures from the Hotel Association of the Northern Marianas Islands, chaired by Lynn Knight, show the increase has prompted some hotels on the island to take steps like diminishing the number of work hours available for staff, eliminating overtime and reducing the number of employees. Other hotels have increased the fee charged to workers for housing or ended their staff’s health insurance, food and housing benefits.

The wage hike is “too large for the economic reality” in the Commonwealth, Knight said, and it is possible that many businesses will have to cut staff and benefits to stay in operation. “I’m worried about how this will impact younger and inexperienced workers” who could be the first laid off due to wage increases. “People need to realize that the money to pay higher wages needs to come from somewhere,” she added.

At hotels, the cutbacks in benefits appear largely due to the high proportion of hotel staff on Saipan receiving higher pay after the wage increase.

The HANMI survey says 1,199 hotel staff on Saipan and Tinian saw pay increases after the first wage hike and about 1,617—64 percent of hotel staff—saw higher pay after last week’s raise, which will result in $1.68 million in added expenses for hotels. This is high when compared to statistics from the U.S. Department of Labor, Knight noted, showing that, historically, when the minimum wage is raised nationwide, the increase impacts only about 3 percent of the work force.

“If these increases continue, many businesses will close for sure,” one hotel owner said in the survey.

The cutbacks in benefits, another hotel operator said, mean that staff “in reality…will not benefit from the wage increase.”