MINIMUM wage is one of the hottest issues in the CNMI today. Locally this issue has been simmering for quite some time now. At the national scene, powerful lobbyists have fueled this issue and it has come to the point of pressuring CNMI to raise minimum wages to national level. Even federal takeover threats have been issued if the CNMI does not take action to address this issue. The present administration seems to have a high priority to deal with it. It is in the light of this background, I feel that the public should be informed about the basic concepts of minimum wages.
In a free market system, just as a worker will only offer his labor time for a wage he finds beneficial, so an employer will only be willing to pay workers a wage that permits him to earn a profit and stay in business. The higher the wage, the more people will be willing to work. But employers will only be willing to employ fewer workers. This is the true economic principle according to the law of supply and demand of labor.
In general, those who support an increase in the minimum wage use an appeal to simple economic justice as the single important justification for their position. The proponents argue for a “fair or livable” minimum wage, as though government could simply legislate wealth for the workers. The hard facts are contrary to this doctrine. At the national scene, whenever there is proposal to increase minimum wage, opposition to any increase is based on the grounds that any increase will put more unskilled workers out of jobs. However, in the CNMI, the main opposition stems from the business community that argues that many businesses will close due to increase in costs, especially those operating in highly competitive environments. Both of these arguments have their own merits.
Unfortunately, many low-skilled workers and potential workers will not find jobs at a higher wage rate. However, supporters of an increase do not accept this well-established economic view. Instead, they claim the increase is a way to provide a livable wage and to fight poverty and in our case to employ more locals in the private sector.
But, the question must be asked: If raising the minimum wage from $3.05 to $5.05 or higher is so good for low-income people, why stop there? Why refrain from an even greater generosity, and raise it to more livable wages, ensure employment of more locals in the private sector, and an even greater fight against poverty? Why not raise the minimum wage to $10 or even $20 an hour, so all the locals who are in the job market can be employed and be financially well off!
This is no idle question. After all, the same reasoning that justifies an increase to $4.05—that lawmakers can generate prosperity and ensure employment of all locals through legislation—certainly also justifies an increase to $10 or more. The reason politicians and other supporters of increasing minimum wage don’t follow their own argument to its logical conclusion is because this issue is political and not economic.
Were the minimum wage raised to $10 or more today, many more locals would be looking for jobs tomorrow only to find that not many jobs are available to them. And they would know immediately that the new minimum wage law was responsible. Political heads would roll. And, if they could avoid an outright citizens’ attack on Capitol Hill, then, at the very least, those in office who supported the new minimum wage would be looking for jobs for themselves after the next election.
The law of supply and demand of labor cannot be repealed. Every increase will reduce employment at the lowest end of the pay scale and an overall decrease in employment. But the broad middle class will not be directly affected (indirect affect could be through increase in prices).
At the national level studies suggest that for every 10 percent increase in minimum wage, a minimum of 100,000 jobs are lost. The question is whether our labor market is comparable to the nation or can we expect a similar effect? The answer is no. Our labor is predominantly alien and we would experience an overall decrease in jobs in our economy without a significant impact on the employment of locals. As a matter of fact, our employment is more linked to immigration policy than level of minimum wages. Many marginal businesses will close and others will reduce number of employees.
But the majority of people adversely affected by the minimum wage increase are either young, illiterate, or among the lowest ranks of the socio-economic ladder. They participate least in political campaigns, contribute little campaign money, hardly write any letters to the editor, and rarely make themselves heard politically. In other words, this segment of the population just does not have much political clout. So political and special interests can posture as the saviors of these low income people while actually diminishing their prospects for creating more jobs and attaining upward economic mobility.
This is the reality behind the pretended concern and compassionate political rhetoric of supporters of a minimum wage increase, and it is a sad reality, indeed for the lower echelon of the labor force. In conclusion, I hope, this information will help the public to make an informed opinion about the minimum wage issue.DR. MOHAMMAD ASHRAF
Papago, Saipan
