35 percent drop in NMI employment

A newly-released U.S. Government Accountability Office report says the inflation-adjusted earnings of minimum wage workers who retained their jobs and work hours rose by 25 percent from 2006 to 2009, even as CNMI employment fell by 35 percent mainly because of the demise of the garment industry and tourism decline.

These are among GAO’s findings contained in a report released Thursday on the impact of minimum wage increases on employment, earnings, and status of key industries in the CNMI and American Samoa.

GAO is the investigative arm of the U.S. Congress.

A copy of the 142-page June 23 report is available on the GAO website at http://www.gao.gov/new.items/d11427.pdf. It updates its 2010 report on American Samoa and the CNMI with an additional year of information.

In GAO’s discussion groups, private sector employers said minimum wage increases imposed additional costs “during a time in which multiple factors made it difficult to operate.”

Some tourism employers expressed their concerns about the wage hikes while others said the increases were needed and manageable, and that the primary difficulty was the CNMI’s tourism industry decline.

Workers participating in the GAO discussion groups said they would like pay increases but were concerned about losing jobs and work hours.

From 2006 to 2009, the CNMI’s minimum wage increased from $3.05 an hour to $4.55 an hour—an increase of 49 percent.

Because the questionnaire collected wage data as of June of each year, the data covered in GAO’s latest report cover the first three minimum wages in 2007, 2008 and 2009, but do not reflect the September 2010 minimum wage.

At present, the CNMI’s minimum wage is $5.05 an hour. It is set to increase by 50 cents every year until it reaches the federal minimum wage floor of $7.25 an hour in 2016.

Press secretary Angel Demapan, when asked for comment yesterday, said the Fitial administration noticed the recent report is comparable to the previous report on the same topic, with the exception of the ongoing uncertainties with regards to the pending transitional worker regulations, increasing energy costs, and several other factors.

Demapan said the administration has provided recommendations that Congress reinstate its earlier mandate to include living standard studies to be conducted by GAO to gauge CNMI living conditions.

“We believe it is important to gauge the level of poverty in the CNMI to get a clearer understanding of where we stand in terms of living below or above the national poverty level. Are we above it or right on the line? And if we are below and/or on the poverty line, what can the U.S. Congress, federal agencies, and the local government do to improve that?” Demapan told Saipan Tribune.

The CNMI also recommends that Congress and federal agencies work together to remedy these challenges imposed by the federal government, he added.

The report sheds light on employment earnings and the status of the key industries since the minimum wage increases began.

For the latest report, GAO visited the CNMI in October 2010 and interviewed officials in the Office of the Governor, Department of Commerce, and the Marianas Visitors Authority.

GAO said they were not able to meet with some other CNMI agencies, and the Office of the Governor said the officials were not available because they had just returned to work following a government shutdown.

They also met with and interviewed officials of the U.S. Interior’s Office of Insular Affairs and Department of Labor, along with private sector representatives including those from hotels and the workers. GAO said it also held a phone interview with the Tinian Chamber of Commerce.

The Society for Human Resource Management-CNMI Chapter and the Saipan Chamber of Commerce, among other entities, have started sending electronic copies of, or links to, the GAO report yesterday.

Richard Pierce, executive director of the Saipan Chamber of Commerce, said it’s anti-climactic to read the GAO report, considering that private sector employers have long expressed concerns about the result of minimum wage increases, including layoffs and work hour cuts.

“I would characterize it as anti-climactic but the Chamber will issue a statement about the report on Monday,” he said in a brief interview.

He added that the Chamber worked closely with GAO by submitting comments in preparation for the report.

GAO said CNMI employment fell 13 percent from 2008 to 2009, and 35 percent from 2006 to 2009.

Average inflation-adjusted earnings rose by 3 percent from 2008 to 2009 and remained largely unchanged from 2006 to 2009, it said.

Over the same periods, the hourly wage of minimum wage workers who remained employed increased significantly more than inflation.

In the tourism industry, scheduled minimum wage increases through 2016 would affect 95 percent of workers employed by questionnaire respondents.

GAO said tourism employers reported that they took cost-cutting actions from June 2009 to June 2010, and planned to take additional actions, including laying off workers.

“Few of these tourism employers attributed past actions largely to the minimum wage increases, and one half or less did so for each of the planned actions,” the report says.

Available data suggest that hotels generally absorbed minimum wage costs rather than raise room rates. Hotel payroll will represent an increasing share of total operating costs due to the minimum wage increases.

GAO said it shared the report with relevant federal agencies and the governments of American Samoa and the CNMI.

“While generally agreeing with the findings, they raised a number of technical concerns that have been incorporated as appropriate,” it said.

In American Samoa, employment fell 19 percent from 2008 to 2009 and 14 percent from 2006 to 2009, said GAO.

Data for American Samoa’s 2010 total employment are not available.

GAO questionnaire responses show that tuna canning employment fell 55 percent from 2009 to 2010, reflecting the closure of one cannery and layoffs in the remaining cannery.

Average inflation-adjusted earnings fell by 5 percent from 2008 to 2009 and by 11 percent from 2006 to 2009; however, the hourly wage of minimum wage workers who remained employed increased by significantly more than inflation.