Guam military build-up increases population 15%

The U.S. Government Accountability Office provides a summary of the impact of the military build-up. In short, Guam will need a complete make-over to support it. The GAO is worried whether the leadership is in place to manage this daunting project.

Summary of what the build-up means:

As a result of the military buildup, Guam’s current population of 171,000 will increase by an estimated 25,000 active duty military personnel and dependents (or 14.6 percent), to 196,000. In addition, the realignment will require additional workers to move to the island, including non-defense personnel, DOD contractors, and transient military personnel. As such, the U.S. military realignment and buildup will substantially impact Guam’s community and infrastructure.

What is now lacking:

Construction demands will exceed local capacity and the availability of workers on Guam. In addition, Guam’s infrastructure is inadequate to meet the increased demand because of the military buildup.

The buildup requires double the existing port capacity, and Guam’s major highways may not have enough capacity to accommodate the increased traffic since the two major highways on Guam, which the military will use to transport supplies, need major improvements.

In addition, Guam’s electric grid may be inadequate to fully support the buildup. Further, Guam’s water and waste-water systems are near capacity, and demand may increase by 25 percent. Guam’s solid-waste facilities also face capacity and environmental challenges as they have reached the end of their projected useful life.

One of the points that Sen. Matt Rector's the Middle Class Job Creation Act of 2009 makes concerns the wage disparity between Guam and Hawaii.

When companies hire foreign workers they typically have to cite the prevailing wage as part of the visa application. Companies are required to pay prevailing wage to keep from undercutting the local workforce. The intent is to supplement the local workforce, not replace it.

But even at prevailing wage, foreign workers can still be paid less. They can be pegged at a lower experience level and may not receive the same benefits of a local worker. Moreover, the visa is tied to their continuing employment -- the ability of a foreign worker to change jobs is limited.

But on the prevailing wage issue, many employers use the Foreign Labor Certification Data Center to determine the prevailing wage for a given location.

I looked at one occupation, construction manager, to see how pay rates differ between Guam and Hawaii in this job category. Assuming my data is correct, it shows a remarkable difference. For instance, a Level 1 construction manager on Hawaii is paid 84% more than a Level 1 construction manager on Guam. The gap narrows as you move up the experience level, but it is still striking. If anything, Rector may have understated the wage disparity between Hawaii and Guam.

  Guam

OES/SOC Title: Construction Managers
Level 1 Wage: $14.59 hour - $30,347 year
Level 2 Wage: $19.97 hour - $41,538 year
Level 3 Wage: $25.36 hour - $52,749 year
Level 4 Wage: $30.74 hour - $63,939 year

Hawaii

OES/SOC Title: Construction Managers
Level 1 Wage: $26.85 hour - $55,848 year
Level 2 Wage: $35.45 hour - $73,736 year
Level 3 Wage: $44.06 hour - $91,645 year
Level 4 Wage: $52.66 hour - $109,533 year

Is there a similar cost of living disparity between Guam and Hawaii?I used the cost of living calculator at SalaryExpert to get a rough estimate.

According to it: If I earned $50,000 a year on Guam I would need to earn $59,560 on Hawaii to have a comparable standard of living as renter, a 19% difference. These percentages may change with salary level, so this example may not be true for all wage levels.

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.

Rector 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.

Outsourcing Gov Guam?

I am reading an opinion piece in the Pacific Daily News: Embrace: Outsourcing services is win-win scenario for Guam government

I am at a total loss to understand how PDN arrived at this conclusion that outsourcing will reduce costs. It writes.

Outsourcing provides a win-win scenario for the government. When private companies take over government services, new private-sector jobs are created. This allows GovGuam to reduce personnel costs without adding to the welfare rolls.

Outsourcing can make sense when you move a service, such an information technology department, to a vendor with deep expertise in that area. But it doesn't mean that you are reducing your costs; it's the difference between buying and leasing a car -- you are still making the payments. All that's changed are the ownership terms.

Whatever outsourcing is, it is not a win-win. It doesn't "create" private sector jobs. What it will do here is take well-paid government workers and replace them with workers who may earn lower pay with less benefits. In many cases, the government workers are "re-badged" -- turned into private sector employees; some thrive, some are laid off. The outsourcing firm will be paid its margins. The cost don't disappear and may increase.

An outsourcing firm is also private sector firm is not subject to civil service rules. Think about that one for a minute.

Does Gov Guam really know what is doing? What experience does it have managing outsourcing contracts? Where will get that experience? What are the metrics for measuring costs? How will it define success? What is the projected cost any contract over, let's say, a five year period? And how long should the contract be? What are the terms for getting out of it? What service levels will be set?

How many bidders for contract can Guam reasonably except to get? How will it know it is receiving a competitive deal? (Competitive doesn't mean cheaper).

I really don't mean to be harsh, but instead of acting like a cheerleader on a complex issue, the PDN's editors can best serve it readers -- and the government -- by asking prudent and necessary questions. If these questions aren't asked and answered now, they will be asked by your reporters, especially when the problems surface.

Guam tourism is not facing a crisis

The recent story in the Pacific Daily News about layoffs at DFS is not good news, obviously, but the story suggests this decline in tourism underpinning the layoffs will be longterm. Pessimism always seems the greatest at the onset of a problem, but I don’t think this conclusion is warranted.  

The economic downturn will pass, especially on Guam which will get a big stimulus from the military build-up. Even if Japanese tourism is declining as that population ages, I suspect there’s a lot of untapped interest in Guam.

When I first came to Guam in the mid-1970s, visitors from Japan were the mainstay of Guam’s tourism economy. There were Korean tourists, but not as many as I saw in subsequent visits years later.

Japan is one of the world’s largest economies with a high standard of living and Guam is a relatively short flight. As the Korean economy picked up, more people from that country discovered Guam as a vacation destination.

Present problems aside, the economies in the rest of Asia are expanding and I believe Guam’s potential to draw more vacationers from China, Philippines and elsewhere will only increase.

What’s Guam’s strategy for expanding its ability to draw tourists from other places in Asia?

The big issue is gambling. The DSF layoffs may help convince people to approve a plan to legalize gambling at Guam Greyhound Park, essentially turning it into a giant casino. That will boost tourism and create jobs, no question, but it will also fundamentally change the island by introducing many new ills and problems. It’s amazing how quickly you can loose so much. Little good comes from gambling.

The Japanese tourists have been coming to Guam for decades for its beauty, not gambling. That hasn’t changed. Gambling may increase tourism but it will extract a heavy price as well.

But the person who said it best, was Gov. Felix Camacho. He  is urging voters to vote “no” on this plan. Excerpts from the PDN report:

“I believe with all my heart that this measure, if allowed to pass, will bring nothing but devastation and destruction to our great island, our close-knit community and, most importantly, to our families and future generations,” Camacho said. “Make no mistake about it. Casino gambling will strip our people of the core values of commitment to faith and, to family. Children will be hurt, marriages ruined, homes lost. Our people will be torn apart.”

Guam: Paradise Found

Barron's, the financial news publication, has included Guam on a short-list of great places to live, especially in terms of the cost of housing.

Here's the story kicker: 

Retirement: Bulletproof Your Portfolio -- U.S. territories like Guam and American Samoa may not be high on your list of retirement havens, but they're well worth a look. Finding oceanfront bargains.

Although the story is aimed at people who want to retire, I also believe that Guam, Micronesia and points in Pacific, can be attractive to knowledge workers, people who can work independent of any office. 

As the article points out: 

Guam is also much cheaper than Hawaii, and not as isolated as you might think. Though it is seven hours from Hawaii, good short-haul airlines make it easy to reach Japan, the Philippines or China. The big worry in Guam is weather; the island sits in the western Pacific's typhoon zone. In the past decade, it's been hit by two super-typhoons.

Yes, the typhoons can interrupt work but they are relatively rare and the island is usually quick to recover. But the more important is Guam's proximity to Asian countries, which, in my mind, can make it very attractive to U.S. workers who want to be in relatively close range of Asian time zones.

As a counterpoint to the Barron's article, read Brad Boydston's thoughts on the idea of retiring on Guam. He loves the island, but as a place for retirement?

The Guam primary

The New York Times calls the Guam Democratic primary on May 3rd., the island's "moment in the sun." (Subscription required) This may be true but will it matter?

The NYT reports:

With four delegates up for grabs in caucuses on May 3, Guam is a player in the Democratic primaries for the first time. Though island residents cannot vote in the general election, they can help choose a presidential nominee. In fact, Guamanians need not be registered voters to participate.

This strikes me as a huge opportunity for Guam to draw attention to its political status as well as push Hillary Clinton and Barack Obama for changes. The candidates can't campaign for support without responding to local concerns.

Today, Guam is represented in Congress by a non-voting delegate. It is marginalized politically because it has no political power. The Democrat primary is an opportunity for the people of this island to tell the country what Guam is about.

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Note:

Guam is some 14 hours ahead of the East Coast. Which means when it is Saturday, May 3rd at 7 p.m. on Gaum, it will be 5 a.m. on Saturday, May 3rd in Washington. See: Guam Time Converter