Statement of The Honorable Pedro A. Tenorio

Resident Representative

Commonwealth of the Northern Mariana Islands

Before the Senate Energy and Natural Resources Committee

February 28, 2008

Mr. Chairman and Members of the Committee:

Thank you for holding this hearing and for allowing me to testify about
the impact an increased minimum wage will have on the economy of the
Commonwealth of the Northern Mariana Islands. I am very appreciative of
this Committee, its leadership, and its members for their continued
advocacy for the territories on the subject of minimum wage. I would
also like to take this opportunity to thank officials from the U.S.
Department of Labor for not only the timely completion of their report
mandated by Public Law 110-28, but also for their honesty and
objectivity. At the outset, I would like to state that I agree
completely with the report when it describes our economy as very fragile
and that the quality and quantity of data on our workforce is
inadequate.

I believe that it is important to note that the study does not address
the potential impact of the second increase and whether or not there
should be a second increase. It instead highlights a number of potential
negative impacts that could result from the implementation of the
scheduled minimum wage increases. However, to quote the study "the lack
of such data for American Samoa and the CNMI significantly impairs
efforts to measure or to project the impacts of scheduled minimum wage
increases for these territories."

I feel that the implementation of Public Law 110-28 and its scheduled
minimum wage increases in the Northern Marianas is a lot like setting
the thermostat for your heater or air conditioner in the dark. If you
set it too high---you get hot, and if you set it too low---you get cold.
It is very hard to select wisely when you are guessing or simply cannot
see what you are doing. This is my impression of the findings of the
Report.

If the minimum wage increases too much or too rapidly then we can easily
be faced with the loss of jobs and increased inflation which will only
add to our economic problems.

If we increase the minimum wage too slowly or not at all we can expect
an increase in the number of residents who seek employment outside of
the CNMI due to higher wages elsewhere. This ongoing exodus includes
experienced and skilled workers and recent high school and college
graduates who are finding few well paying local opportunities.

Mr. Chairman, I am greatly concerned about the lack of reliable,
consistent and meaningful data on the CNMI's workforce including
earnings, number of hours worked, number of jobs available, and number
of unemployed residents or non-residents. We cannot truly know the
impact of the first or future minimum wage increases without accurate
data in these areas.

In formulating this testimony and my position on this subject I have had
to consider many things. Among them are:

1.  The need to reduce our reliance on non-resident workers in the
    private sector and provide opportunities for residents. For almost
    two decades, non-resident workers have outnumbered resident workers
    in the private sector, and although our private sector wages are low
    by U.S. standards, they were considerably higher than wages in the
    non-resident workers' home countries. Wages must rise in order for
    private sector jobs to appeal to resident workers.

2.  The need to reduce the size of the CNMI Government to coincide with
    the reduction in tax revenues. Unfortunately, many of our residents
    will choose to leave our islands rather than take employment in the
    private sector where wages are consistently lower. The Labor
    Department study reports that, currently, 68% of the CNMI workforce
    earns less than \$4.99 per hour. Resolving the discrepancy between
    private and public sector wages must take time in order to prevent
    further economic upheaval.

3.  The impact low wages will have on the overall need for food stamps
    and the growing number who would be eligible for Medicaid. Both food
    stamps and Medicaid are capped and the matching requirement for
    Medicaid is already a burden on the local government.

4.  The reality is that the decline in the garment industry has led to
    increased shipping costs, which have resulted in higher costs for
    consumer goods. Will higher wages lead to more inflation, or will it
    help balance it out due to increased purchasing power? While I
    cannot answer that question, I do believe there is something wrong
    when a minimum wage earner has to work more than an hour to purchase
    a gallon of gasoline.

5.  The need to reduce the cost of business. An increase in the minimum
    wage adds to the already high cost of doing business in the CNMI.
    Many of our larger businesses are required to generate their own
    electricity and purify their water. Smaller businesses rely on the
    CNMI Government for utilities and pay extremely high rates for
    electricity and suffer through blackouts, brownouts, and
    undrinkable, unreliable water. With these added costs, the CNMI has
    seen a number of businesses close and this trend is likely to
    continue if the prospects of earning a profit are minimal.

Sentiment in the CNMI regarding the second minimum wage increase,
scheduled for May 25^th^, and future minimum wage increases is not as
homogeneous as the Committee might be lead to believe. Over the last few
weeks, my office has been inundated with faxes, e-mails, and letters
from constituents who have asked me to support their position on the
second increase. There are valid concerns about the business closures,
loss of jobs, and the resulting loss of government revenue. These
private sector concerns cannot be ignored. I have also heard from
community activists, students, and parents, as well as some businessmen
and a few legislators who all believe that the second increase is needed
in order for the CNMI to move forward in our quest for a higher standard
of living.

Mr. Chairman, I have weighed my position on a second increase very
carefully. What ever decision is made will have a potentially
devastating effect on one sector or another in the CNMI. However, as a
pragmatist and a realist, and with all due respect, I simply do not
believe that it is possible to enact legislation by May 24th to delay
the second increase. Therefore, I would request the assistance of the
committee in the following:

1.  Pass legislation that will cap the minimum wage in the CNMI at
    \$4.05 an hour, the wage expected after the implementation of the
    second increase, which would remain in effect for a period of two
    years. This will have provided workers in the CNMI with a total
    hourly increase of a dollar, which is a significant step toward a
    livable wage. This two year hiatus would hopefully provide time for
    appropriate data collection tools to be developed and implemented so
    that reliable economic data would be available to evaluate impacts
    and guide decisions. This two year period will also provide our
    business community the necessary time to restructure their business
    operations so that they can remain in the CNMI.

2.  Provide resources that will assist the CNMI and the Department of
    Labor to develop, acquire, and implement the necessary surveys or
    related data collection devices to adequately and accurately measure
    the impact of the first two increases on the CNMI economy, as well
    as determine the likely impact of future increases.

3.  Assist us with resources to address our infrastructure crises so
    that we can reduce the cost of doing business in the CNMI, and
    provide breathing room for employers to pay higher wages.

Thank you.