Thursday, April 2, 2009

A plan to raise Guam's standard of living

Islands Business brings attention in this report to a very interesting bill by Guam Sen. Matt Rector (D), the Middle Class Job Creation Act of 2009.

It reports:

For every foreign worker hired, a Guam employer will have to pay US$40,000 in annual fee—a sharp increase from only US$1000 they now pay to the Department of Labor—once a controversial bill that purports to raise government revenue eliminates the H2 programme and gives middle class jobs that pay at least US$30 an hour to local residents, becomes law.
On the face of it, Rector's bill looks like a legislative overshot, designed only to make a rhetorical point.

But then again, maybe not.

The truth is I have to admire Rector for this and I think there's strong merit to it. It is an audacious and challenging move that will force opponents to defend a lower standard of living for Guam.

makes a point that can't be danced around:
Currently Guam's workers earn a third of what their brothers and sisters in Hawaii make when working for the same company, on the same federal contract. This is not fair and it robs our families and our economy of billions of federal dollars a year.
If Guam wages are only a third of the wages paid on Hawaii, then it calls into question prevailing wage issues. Guam is an island, an expensive place to live with a standard of living largely set by government pay rates. The government, federal and island, is the employer of choice. That's where many of the best paying jobs are. Lowering the standard of living for Guam Gov and federal employees is as good as lowering the standard of living of the island.

Business groups are going to hate Rector's bill, but let's put aside the wage issue and just look at the foreign labor aspect of it. By raising the fee, the bill creates a strong disincentive for hiring foreign workers. What is wrong with that?

There are many U.S. workers, citizens and permanent residents, who would jump at the chance to work and live on Guam to help with the military build-up. Why would foreign workers hold any special advantage unless the intent is to pay them less?

Rector argues:

By implementing a $40,000 per year fee for each H2 temporary worker, it will make it more profitable to hire local workers at wages comparable to that of their brothers and sisters doing exactly the same work in Hawaii or elsewhere in the Nation.
He's right, of course. Employers will hire local and if they can't find the people with the right skills, it will still be more cost effective to recruit and tap mainland labor markets to avoid the fee. And an influx of mainland residents may bring other dividends: new permanent residents with the skills that Guam needs to create a stable economic future.

Rector's proposal can't be dismissed. Guam can flood the island with a foreign workforce and pay them miserable wages, or it can try to stake out a progressive approach that also helps to raise the standard of living on the island as well as build a stronger future for itself.

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