Guam Chamber of Commerce warns linking wage to price measures will cause inflation loop

By Pacific Island Times News Staff

The Guam Chamber of Commerce warned that a legislative proposal to set wage rates based on the cost of living would create a vicious cycle of inflation.

Sen. Joe San Agustin’s Bill 4-38, which would create a mechanism to link wage increases to Guam’s consumer price index permanently, would have long-term consequences and an adverse impact on the local economy, the chamber said.

“Because of this structure, automatically increasing wages whenever CPI rises places additional and unpredictable costs on employers who are already absorbing higher operating expenses,” the chamber said in a statement.

The chamber said most Guam businesses, particularly small and family-owned companies, operate on narrow margins.

“When labor costs increase automatically and without warning, businesses are left with limited choices: raising prices, reducing employee hours, delaying hiring, or scaling back investment and expansion plans,” it said.

“In practical terms, this means that whenever prices rise, wages would automatically increase—without legislative review, without consideration of local business conditions and without the ability to pause during economic downturns,” the chamber said.

In an earlier press statement, San Agustin said Bill 4-38 was designed to maintain the purchasing power of minimum-wage earners and protect them against inflation.

Guam's last minimum wage increase took effect on Sept. 1, 2021, raising the hourly rate from $8.75 to $9.25, as part of a planned $1 increase under Public Law 36-1, with the final increment implemented then.

While proposals for further increases were discussed in 2023 and 2025, the $9.25 rate remains the current minimum wage as of early 2026

“Tying the wage increases to the CPI makes the most sense. If the CPI goes up, wages increase. Should it plateau, there is no movement,” San Agustin said.

The chamber, however, said any proposal aimed at addressing rising costs must be thoroughly examined, as once implemented, its adverse effects would continue indefinitely.

In 2025, Guam's economy saw slower inflation than in previous years, with reports indicating a cooling from the highs of 2023-2024, though costs for essentials like food and housing remained elevated, limiting affordability despite an overall workforce recovery and a rebounding tourism sector.

“Guam’s economy is fundamentally different from larger, demand-driven markets,” the chamber said. “Rising prices here are not the result of wages increasing too quickly or consumer spending overheating the economy.”

The business group explained that inflation on Guam is driven largely by external factors beyond the control of local businesses or workers, such as imports, shipping costs, fuel prices, utilities, regulatory requirements and federal or global economic forces.

The chamber said prices on Guam are driven by external pressures, not by local economic growth or productivity.

“If the goal is to improve affordability for Guam’s families, the Chamber believes the focus should be on addressing the root causes of high prices rather than imposing automatic cost increases on employers,” the chamber said.

The chamber recommended ways by which the local government can contain the spiraling prices of consumer goods, such as reducing regulatory delays that increase the cost of goods and addressing fuel and utility expenses that affect every household.

The chamber also urged the government to simplify permitting and compliance requirements, provide targeted tax relief or credits for low- and middle-income workers and encourage sustainable wage growth through productivity, training and business expansion.

“While well-intended, Bill 4-38 risks increasing prices, reducing flexibility, and undermining affordability for the very people it is meant to help,” the chamber said.

Chamber members are encouraged to closely review this proposal and understand how permanently linking wages to CPI could affect payroll costs, pricing decisions, hiring, and long-term business sustainability on Guam.