UOG professor weighs in on minimum wage raise proposal

May 22, 2019

  "I'm honestly kind of tired of this minimum wage conversation, I would really like us to move to this professional, to this middle wage raise, and how we create that economic engine. I think we've got the minimum wage covered," said Dr. Roseann Jones, University of Guam professor of economics

 

Bill 136-35 has once again thrust the minimum wage into the forefront of public debate. Introduced by Sen. Joe San Agustin, the bill calls for two incremental raises in minimum wage rate, which will consist of 50 cent increases from $8.25 to $8.75 by March 2020 and then to $9.25 by March 2021.

 

In the 33rd Guam Legislature, then Speaker Benjamin Cruz introduced Bill 312-33, which would have raised Guam’s minimum wage increased to $10.10 by 2018.

 

As it stands, Guam's minimum wage is $8.25.

 

The University of Guam's Regional Center for Public Policy hosted a research seminar to explore market data collected both nationally and locally that correlates with mandated minimum wage values.

  

Dr. Roseanne Jones. Photo courtesy of OUG

 

 

In a presentation titled "Another Look at Minimum Wage: Current, Past and Future,” Jones used employer surveys and workforce data to dispel most arguments both for and against the mandated raise in minimum wage.

 

Those who support a mandatory wage raise argue that it would alleviate poverty, modulate wage inequality and adjust to changing cost of living. Detractors have forecasted that such raises could lead to increases in unemployment, a shift from full time workers to part time, drive a change to technology over human manpower, wage inflation, and businesses relocating to other regions with cheaper labor cost.

 

Citing the Federal Reserve Board Meta Review of Minimum Wage Increase, Jones said only two conclusions can universally be drawn from minimum wage increase: 1) it harms the prospects of unskilled workers and 2) it does not solve poverty.

 

Locally, data was collected retroactively following the previous minimum wage increase from $7.25 to $8.25 in 2014.

 

The study conducted by UOG was framed by the impact the wage increase had on business, as in the private sector, the government and the household of Guam residents and as such members of these three focus groups were surveyed.

 

The results sound almost too good to be true; business owners indicated that the wage increase led to increased investments in training of employees, the expansion of their business to explore new revenue streams, and contrary to original beliefs size and average hours worked of the workforce did not decrease and prices did not increase as a direct result.

 

Read related story

San Agustin bill would raise minimum wage

 

For employees and prospective workers, those surveyed indicated that overall jobs were more difficult to find, yet easier to hold on to and also most households did not see a disqualification from welfare assistance due to wage increases.

 

"Could it be that minimum wage increase is the great secret to economic development?" Jones quipped, later stating that "Innovation and new opportunities aren't created by government. They are often subsidized after the fact. It's usually some inventor, someone with a genius idea and a work hard kind of approach that finds a market and builds it. That entrepreneurial spirit which we have Guam is the most successful market model where the government stays in the background."

 

While the statistics paint a rosy picture, there was a key data point that raised eyebrows for several of those in attendance: of the Guam workforce which is approximately 60,000 workers only 1.4 percent or 890 workers occupy historically low wage earning occupations. Which prompted Jones to admit that the minimum wage only has a minimal effect on the macro outlook of the economy.

 

When pressed on where she stands in support or against the wage increase, Jones offered cautious support, "As proposed, I don't see anything against it and this point in time. With this economy at this point, it won’t have a major impact on the workforce."

 

She noted that Guam's economy is based on tourism and military, both of which have their cycles. "If our economy were to falter, we don't undo minimum wage laws, it's hard to pull back a wage from someone. Those wage rates stick," she said. "The government doesn't undo and lower the wage rate, which is when businesses would have to respond to with layoffs and workforce reductions."      

  

 

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