By Gemma Q. Casas
Variety News Staff

THE impact of the first of the federally mandated 50-cent wage hikes is generally tolerable but business operations remain in peril as the islands’ domestic market continues to shrink, according to former Sen. Juan T. Guerrero, Saipan Chamber of Commerce president.
He said most of their members already pay their workers $3.15 an hour, so the increase in the new wage rate is actually less than 50 cents per employee.
The local wage rate has been $3.05 an hour since 1996.
Guerrero said the real challenge to employers is how to keep their businesses afloat despite the high cost of electricity on the islands and low visitor arrival rates.
Employers in the Northern Marianas have to pay their workers at least $3.55 an hour effective July 25.
The new federal wage law mandates an increase of the federal rate from $5.15 an hour to $7.25 over a two-year period.
The CNMI’s rate has to reach that level by 2015 through annual 50-cent increases beginning July 25, 2007.
“The first round impact (of the wage hike) will be minimized,” Guerrero said. “The highest you’d go is 50 cents. For the majority, it’s less than 50 cents because most of the members of the chamber, (pay their workers) an average wage of $3.15 an hour.”
He said the chamber will conduct a survey on the subject among its members.
Guerrero said he employs close to 300 workers and some of them may be “let go” in the future due to the islands’ worsening economy.
Most local businesses depend on visitors to purchase their products and services.
The islands’ domestic market is so small and largely made up of foreign workers who can only afford to buy the basics.
Since Japan Airlines pulled out its 14 flights a week between Saipan and Tokyo, the number of Japanese tourists visiting the CNMI has sharply declined.
The airline accounted for nearly 200,000 Japanese tourists visiting the islands every year.
“We’re looking at how to down-size,” Guerrero said, referring to company plans to lay off workers.
“It’s not by choice but because of external factors. Sales decline. Fewer customers buying the products. The impact of the new minimum wage. Tourism is down,” he said.