Editorials 2020-March-06

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The seen and the unseen

RECENTLY, the Guam Chamber of Commerce recommended a six-month suspension of the Guam-mandated minimum wage hike from $8.25 to $8.75 an hour in light of the sudden economic downturn caused by the global Covid-19 outbreak.

Guam, as all of us know, has the largest and most vibrant economy in the Micronesian region. But even Guam’s employers are not immune to arithmetic. When business revenue is going down while the costs of doing business are rising — someone has to give. The Guam chamber, in other words, made a sensible request. But the minimum-wage issue, like many other economic issues (trade, immigration, etc.), is never argued within the realm of logic. As California’s former Gov. Jerry Brown once said, “economically, the minimum wage may not make sense”…but it makes so much political sense. It is widely popular — who is against getting higher pay? — especially among good-hearted citizens who have no use for simple math.

Now the governor of Guam is a former president of the island’s women’s chamber of commerce, and her family founded and manages one of the region’s most successful business entities. But today she is also a politician, and her reply to the Guam Chamber of Commerce is, let’s just say, hard to refute: Personnel costs, she said, should be considered “a worthwhile investment, not a primarily overhead expense.”

That, however, is not the issue. This is: the mandated wage hike does not reflect current economic reality and may result in pay cuts, loss of benefits, and/or layoffs. If politicians “value” workers why are they in favor of measures that, despite their good intentions, would impose hardship on the same workers?

There are, in fact, other and more effective ways to help workers, but in politics what can be more dramatic than watching “decisive” elected officials “raise” the minimum wage just by signing a piece of paper (it’s almost magical, really) — and never mind the actual and usually dismal results of such an “action.”

French economist Frédéric Bastiat (1801-1850) once noted that in an economy, a law “gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen: it is well for us if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee.”

Sadly, politicians, now and then, can only “foresee” what can harm their electability, that is, their popularity. And it is never popular to say no to a wage hike — even if, in the end, it only exists on paper, and the workers end up getting less.

Regarding the PSS funding brouhaha

IT is undisputed that 1) the CNMI government is running out of money, and 2) will most likely collect much less than what it earlier projected before the global Covid-19 outbreak. These are the primary reasons for the across-the-board government budget cuts. But three of the five elected members of the Board of Education are opposed to the cuts imposed on the Public School System. Which is like saying that we should be opposed to a typhoon.

Even though the government doesn’t have enough money for its agencies and instrumentalities, PSS included, the three BOE members want the court to compel the government to give PSS the money that the government doesn’t have.

As the PSS acting finance director would put it, “What is 25% of zero?”

Regarding the 25% constitutional mandate — its language can and should be fixed so it can be clearer and more specific in its use of the phrase “general revenues.” Meanwhile, current and future appropriation measures will have to take into consideration the two CNMI justices’ problematic definition of “special revenues” — which the dissenting justice aptly termed as “unnecessary policymaking.” (See http://cnmilaw.org/pdf/supreme/2020-MP-02.pdf)\

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