Tuesday, July 28, 2009

Is Guam’s leadership fighting to keep workers underpaid?

Guam's most effective champion in Washington is in Hawaii, and that is U.S. Rep. Neil Abercrombie.

Abercrombie, as the chairman of the Air and Land Forces subcommittee of the House Armed Services Committee, added two important provisions to the spending bill that funds Guam’s massive military build-up.

First, employers working on federal contracts will have to set pay to Hawaii's prevailing wage levels, which are a lot higher than the prevailing wage on Guam.

Secondly, foreign workers won’t be allowed to do more than 30% of the federally funded work. Prior to the Abercrombie amendment, it was estimated that anywhere 15,000 to 20,000 foreign workers were needed for construction on Guam. Now, contractors will have to ensure that 70% of their workers are U.S. residents from Guam, Hawaii and mainland.

Abercrombie obviously wants to help Hawaiian contractors, but this will help Guam's residents as well. Despite this, there will be considerable opposition.

The Washington Post, in a recent editorial, said the Abercrombie's U.S. worker and wage requirements will add $10 billion to the build-up cost. The Post wrote in part:
If giving U.S. workers jobs on Guam is a priority, this could be accomplished without driving wages up artificially to such a high level. You could, for example, keep the 70 percent restriction on foreign workers and let the market determine their wages.
But what is the construction labor “market” on Guam? Has Guam's longstanding reliance on foreign workers for construction depressed wages to artificial levels? Abercrombie wrote a letter in response to the Post's editorial. Here is part of it:
The alternative is to bring in foreign workers, for which the Guam government collects a bounty of $1,000 per head. However, this invites profiteering and would be a slap in the face of every qualified, unemployed American worker. The wages are established at the level for similar military construction in Hawaii, because we believe that wages should be commensurate with the experience and skills the jobs demand.
The national implications of Abercrombie’s position are just beginning to emerge. The Congressional Quarterly, in a piece published Saturday by writer Matthew Johnson, looks at the dispute between Abercrombie, who is a Democratic candidate for governor, and U.S. Rep. Zach Wamp, a Republican candidate for governor in Tenn., who opposes the Guam provision, CQ reports. Wamp is worried that military construction in other states will be shortchanged if build-up construction cost on Guam are increased.

[An outstanding analysis on the wage issue was written by Jayne Flores for the Marianas Variety, What's behind the Abercrombie amendment?]

In some sense, Wamp’s parochial views are understandable, but what isn't is the business and political opposition on Guam to Abercrombie. The Guam Chamber of Commerce as well as the Guam Contractors Association appear to be arguing that Abercrombie’s changes will drive up the construction costs for non-military projects as well, reports Heather Hauswirth for Kuam.com. Guam Senator Frank Blas, Jr., is worried that Abercrombie wants to make Guam just as an expensive place to live as Hawaii. Kuam quotes Blas:
This would obviously raise our prices to those levels (Hawaiian), people are experiencing and suffering in Hawaii, and I don't want Guam to go down that road. It would behoove Mr. Abercrombie to seek discussion with people in Guam on what this may mean. I don't like it.
From this quote, I don't know whether Sen. Blas is just thinking out loud or expressing pointed opposition. But the Kuam story says Guam's business leaders plan to travel to Washington "to lobby Congress to remove Abercrombie's provisions," so it seems as if some minds have been made up.

In sum, Guam’s special interest will argue in Washington that if Guam is allowed to load up the island with lower paid foreign construction workers to keep wages down, Guam residents will be much better off. I guess it would be wrong for Guam residents to get high paying jobs to help pay for their children’s education, save for retirement, buy a new car and improve their standard of living.

Along that line, Kuam also reported that Madeleine Bordello, Guam’s congressional delegate, said: "It would be nice to pay the workers more, but it is just going to cost too much money."

Memo to Del. Bordello: The build-up should have cost more from the start. The original construction estimates were based on the hiring of a lot of foreign workers to help keep wages low. Is that what you are actually supporting?

Prices on Guam are going to rise because of the build-up no matter what. It increases the island’s population by 15% and by attacking Abercrombie's build-up requirements, Guam’s business opponents really stand to gain. They will be able to charge more for new, non-federal construction and yet keep salaries pegged to existing levels. It’s a great outcome for them.

And is the business community really united against Abercrombie on this? I doubt it. U.S. workers assigned to the island are likely to spend a lot of off-hours eating at local restaurants, shopping, and enjoying Guam’s recreational activities. A lot of Guam’s small businesses stand to do well by this.

If Guam’s leaders are really interested in the truth, then they should hire two separate, independent off-island economic consulting firms to assess the impact of the build-up and look at wage and cost of living issues.

What these economic studies may show is that the cost impact will be transient. Once the construction is complete and Guam returns to something akin to a steady-state, what will sustain high prices? Not much. The two largest and best paying employers on the island are the federal and Guam governments, and government wages aren't that high. The tourist industry, the island’s other large source of revenue, isn’t a high-wage industry. Guam does not have high-paying industries and that’s not likely to change. But there will be a real problem with housing availability and affordability -- a problem regardless of Abercrombie’s build-up provisions.

If Guam’s lawmakers are really concerned about Guam residents, then they should support Abercrombie and recognize that the build-up should have been undertaken by U.S. workers from the start. A true price tag has has now been affixed to the build-up.

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