The Puerto Rico Chamber of Commerce (PRCC) affirmed that it is in favor of increasing the hourly minimum wage to $8.50 and for it to be established gradually to mitigate the inflation that the new legislation would cause on the local economy.
PRCC President Luis Gierbolini suggested raising the hourly minimum wage to $8.05 by Jan. 2022 and to $8.50 by Jan. 2023 to make room for the economy to adjust to these higher wages.
“There is a snowball effect when the minimum wage is adjusted because, although there are approximately 10,000 to 14,000 employees in the private sector at $7.25 an hour, there are others that fluctuate between $7.35 and $8.50 that also have to increase their wages. Implementing a salary increase in such a short time could generate a reduction in hours, layoffs and [business] closings. At the end of the day, any increase will be paid by the consumer,” he stated.
Meanwhile, Gierbolini called on the government to improve the ease of doing business in Puerto Rico. “In order to help the economic growth of the country, there must be a commitment to reduce the costs of doing business on the island, such as the cost of energy, permits and the inventory tax,” he affirmed.
“The business sector in Puerto Rico deserves to know the empirical studies that support the minimum wage proposal. We are convinced that the increase should be staggered until 2023 until it reaches $8.50. It is a great cost for employers in Puerto Rico, and especially for small merchants, it would be detrimental,” he added.
The PRCC president said that as an entity that represents small to large enterprises, they are wary of how the local commercial environment would be impacted if this increase is not implemented in phases. Moreover, he opposed hikes beyond the proposed number. “The most solid companies that have salary scales above the minimum wage suffer direct consequences in other regions, such as the loss of customers and services from businesses that reduce or close their operations due to increases in the costs of doing business. An increase beyond $8.50 is out of the reality in Puerto Rico,” he warned.
Competing Legislative Bills
Gierbolini was reacting to two bills that were originally before the Puerto Rico Legislature on raising Puerto Rico’s minimum wage, which since 2009 has been at $7.25 an hour, the same as the federal minimum wage.
On Aug. 18, the Puerto Rico House of Representatives approved a bill that is based on a compromise with the Upper Chamber that would increase the hourly minimum wage to $8.50 an hour on Jan. 1, 2022, $9.00 on Oct. 1, 2022, and to $10.00 on Oct. 1, 2023, if approved by a yet to be established Minimum Wage Evaluation Committee.
However, on Aug. 19, Gov. Pedro Pierluisi submitted his own bill to increase the minimum wage, based on the recommendations of the Minimum Wage Advisory Group, which he had formed. This group is comprised of various economists, government officials and union members.
On Monday, the Senate sent the House bill back to the lower chamber to a conference committee after reaching an agreement with La Fortaleza on: $8.50 an hour in Jan. 2022; $9.50 after a period of 12-18 months; and $10.50 after another period of 12-18 months.
Pierluisi’s original proposal would increase the minimum wage to $8.50 per hour on Jan. 1, 2022, with an increase to $9.50 on July 2023 and to $10.50 in January 2025, assuming that certain metrics have been met. These metrics are related to level of employment, level of salary and level of economic activity.
For example, according to a copy of the Working Group’s report, the metrics for $9.50 an hour would be: “Total employment in Puerto Rico is equal to the average employment six months prior to the pandemic, plus 1.5 percent; Puerto Rico’s Economic Activity Index is 3.6 percent higher when January to June 2021 is compared with July to December 2022; and the current minimum wage ($8.50 / hr.) reaches a figure no greater than 46.8 percent of the average wage.”
Regardless, the minimum wage hike is now a go.