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    Friday, October 19, 2018-4:45:56P.M.

     

     

     

     

     

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Variations | The price of everything and the value of nothing

THEN and now, many believe that “to achieve the goal of employing as many local U.S. citizens in the [CNMI] private sector as possible” businesses must pay higher wages.

This implies that wages can be arbitrarily set. Now wages are prices and many people also believe that prices are arbitrarily set by greedy people. By “greedy people” we mean other people because, of course, it’s not greed but fairness if we’re the ones demanding higher prices for our goods or higher wages for our services.

What happens if someone asks us to pay more for items we regularly buy? The likely answer is that we will consume less of it and/or seek cheaper alternatives.

Yet whenever we tell businesses to pay their workers higher wages because we say so, we never consider the consequences of an arbitrary wage hike when it comes to, first of all, the workers themselves. We assume that if we raise the costs of doing business, a company, unlike us, will not make necessary adjustments. In reality, however, a company can reduce its work-hours, the number of its workers and/or their benefits. A company can also raise prices, reduce its serving/portion sizes, downsize, resort to automation and/or outsource — or move to a more business-friendly place.

The federal government, ever so wise, imposed a gradual federal minimum-wage-hike law on the CNMI not when the local economy was booming, but when it was struggling.  The result: work-hour cuts, reduction of benefits, layoffs, company closures. (Why didn’t the feds federalize the local minimum wage when the local economy was doing well? Because the same economy allowed the CNMI to hire top-notch D.C. lobbyists who effectively protected the local economy from harebrained federal mandates.)

Happily, most if not all businesses can now afford the federally mandated wage hikes — but only because the local economy is finally improving. There are new investors, and more tourists are visiting the islands again. But for some folks (usually the same folks who insist on mandating higher wages), they’re the “wrong” kind of investors, and the “wrong” tourists. (The right kind of investors and tourists? Unicorn-breeders and tree-huggers.)

In the past, many concerned citizens said a federal minimum-wage rate and federal immigration control ought to “fix” the CNMI. Done and done, but they still think that the CNMI has gone from bad to worse. So now they’re saying that private sector employers should pay even higher wages and offer more generous benefits — just like the CNMI government which is the paragon of efficiency, financial prudence and cost-effectiveness as air-con/mold remediation contractors, independent auditors and MV Luta’s Japanese investor would attest.

But unlike the government, businesses cannot just order us to give them our money and threaten to jail us if we don’t. Businesses, first of all, must offer us services and/or products. And these cost money — like rent, taxes, loan payments, supplies, maintenance and, yes, wages, among other things. The other tough part of being in business is attracting a sufficient number of customers. The government, in contrast, can simply spend other people’s money. It is rare to hear an elected official arguing against passing yet another spending bill or approving pay hikes.

Meanwhile, I’m still waiting for someone to explain why is it that in the U.S., with a population of over 300 million and the world’s largest economy (by nominal GDP), employers who are already paying high wages plus benefits are still struggling to find workers for more or less the same jobs that CNMI employers are also having a hard time filling.

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