Puerto Rico raised its minimum wage for the first time in more than a decade, but experts say that while it is a step in the right direction, several structural factors make it difficult for working families in the United States.
Governor Pedro Pierluisi on Tuesday signed a law to increase the current minimum wage from $ 7.25 an hour to at least $ 8.50 an hour starting in January.
The increase could be $ 2,000 more per year for a full-time worker, he said.
“For a long time, thousands of workers on our island did not receive a minimum wage increase, but they have experienced an increase in the cost of living over the past 12 years,” Pierluisi said in a statement. “A payment of $ 7.25 an hour is no longer viable to live in Puerto Rico, so it was time to do the working class justice.”
The new law will greatly benefit “those at the bottom of the wage structure of Puerto Rico’s economy,” said Carlos Vargas-Ramos, director of public policy at the Puerto Rican economy. Puerto Rican Studies Center at Hunter College in New York.
These people include workers in the retail trade, which in Puerto Rico is a very large sector of the economy, as well as those who work in department stores, supermarkets, gas stations or as security guards, has t -he adds.
While many applauded the move amid Puerto Rico’s decade-long financial crisis, the new minimum wage is still not enough to ensure that fewer families live above the federal poverty line. Almost 44 percent of the Puerto Rican population lives in poverty, according to census figures.
“It is not enough, but it is a starting point. It can also be supplemented by the tax credit on labor income,” a refundable tax credit for working families with low income or moderate that Puerto Ricans will have access to from next year, said José Caraballo-Cueto, economics expert and associate professor at the University of Puerto Rico’s Graduate School of Business in Rio Piedras.
“When you consider this tax credit, a worker could essentially earn the equivalent of $ 10 an hour,” he added.
The main reason why the current minimum wage or the new minimum wage is not enough to lift families out of poverty is the high cost of living on the island.
“The cost of electricity is one of the expenses that weighs on most citizens and small businesses” who have already pay twice as much for electricity as US customers for unreliable service, Caraballo-Cueto said in Spanish.
A century-old law known as Jones Act, which prevents foreign ships from reaching Puerto Rico, increases the cost of imported goods, contributing to the island’s high cost of living, Caraballo-Cueto and Vargas-Ramos said.
Under this law, only American-built ships and American crews, some of the most expensive in the world, are allowed to make unrestricted shipments to the island. This consequently increases the cost of goods sold in Puerto Rico, including gasoline, cars and products, Vargas-Ramos said. This is especially important for an island that imports about 85 percent of all its food.
The minimum wage in Puerto Rico is set to rise again in July 2023 to $ 9.50 an hour, according to the new law. Another increase to $ 10.50 is being considered for July 2024, but it would require additional approval.
Helping businesses adapt to pay more
The government should step in to help subsidize the economic impact that future minimum wage increases may have on some small businesses, especially those in “low-income and highly competitive industries” such as day care centers and home helpers, Caraballo -Cueto mentioned. “If the minimum wage is too high for these businesses, it can cause them to close. ”
However, other industries such as construction and finance, which pay their workers at least $ 15 to $ 12 an hour respectively, may be better placed to deal with future wage increases, he added.
For this reason, Caraballo-Cueto argues that the ideal thing to do would have been to establish minimum wage requirements in different industries.
The latest pay hike excludes restaurant waiters, who still earn a minimum wage of $ 2.13 an hour plus tips, and some farm workers, some of whom have access to other farm economic incentives, Caraballo- said. Cueto.