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Economists Raise Concerns over Puerto Rico’s Latest Minimum Wage Increase

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The Puerto Rico House of Representatives approved last Tuesday a bill that seeks to increase the island’s minimum wage to $8.25 an hour, although many of the island’s economists remain skeptical.

House Bill 338, authored by Popular Democratic Party Rep. Héctor Ferrer Santiago, proposes the creation of a commission to analyze and establish a process to increase the minimum wage.

According to the representative, there are 300,000 people on the island with a job that pays the federal minimum wage of $7.25 an hour, which represents an annual salary of $15,080.

However, for economist Santos Negrón, this proposal falls a little short, because in his opinion, the minimum wage should be raised to $10.

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In statements offered to Brenda Vázquez Colón for the newspaper El Vocero, Negrón indicated that the increase to $10 an hour would be a point of equilibrium.

“It is simply a matter of them being able to recover somewhat the loss of purchasing power of the dollar. The ideal would be to bring the minimum wage to between $12 or $13 an hour. That would compensate for the inflationary growth registered over the past decade,” he added.

Ruy Delgado Zayas, a labor lawyer and former secretary of the Department of Labor, agrees, who also believes that $8.25 an hour is not enough. He said that for employees, the $1 an hour increase is not attractive because wages will remain low.

“Even with the proposed increase, workers will choose to leave the island in search of better benefits, or stay at home and receive social benefits,” said Delgado Zayas.

He added that although it is a good start, it is far from the attraction offered by the United States: “At least $9.50 to $10 an hour, in two stages, would be more beneficial and would not affect employers so much.

“All employers in all segments have been helped. The employees have been the least and the reality is that $7.25 an hour cannot sustain a household,” he added.

Staggered and moderate increases

The president of the Restaurant Association (Asore), José Vázquez, told a local media outlet that the minimum wage is an issue that should be thoroughly evaluated and its implementation should be staggered and moderate.

“Together with representatives of the public and private sectors, we are collaborating to study the issue thoroughly and reach a consensus on the feasibility of improving the minimum wage of the labor force in Puerto Rico. Any recommendation for an increase should be implemented in a staggered and moderate manner,” Vázquez said.

The president of the Centro Unido de Detallistas (CUD), Jesús Vázquez, said he is not against an increase in the minimum wage, but stressed that all parties affected in the process should be involved in the discussion.

“What we are stipulating is that all parties that make up the business ecosystem must be involved and this includes the government. The conditions for doing business in Puerto Rico must be improved in order to create sustainable economic development,” he added.

“We must analyze the impact on all economic sectors. For the time being, we are going to keep an eye on the proposals and analyze them to be able to issue a more informed opinion,” said the president of the Retail Trade Association (Acdet), Iván Báez.

Study on minimum wage in Puerto Rico

The Economic Intelligence firm, led by economist Gustavo Vélez, revealed this year that an increase in the minimum wage would mainly impact the lodging, food services and educational services sectors.

The study indicated that reaching the $10.00 per hour threshold would impact 367,475 jobs or 41.8% of the total 879,220 jobs on the Island.