June 22, 2009 — The federal minimum wage will increase to $7.25 per hour July 24, and the V.I. Department of Labor is reminding employers to make sure they are paying their employees what the law requires.
This is the second step of a two-step increase in the minimum wage enacted by Congress in early 2007. In July of 2008, minimum wage jumped from $5.15 per hour to $6.55 per hour.
The economic impact of the increase may be somewhat greater in the Virgin Islands than on the U.S. mainland because of the local economic environment. As recently as 2004, 6.8 percent of all employees earned no more than the then-minimum wage of $5.15 or less per hour, according to figures from the 2004 Virgin Islands Community Center Survey, conducted by the Eastern Caribbean Center at the University of the Virgin Islands. That compares to about three percent of workers earning minimum wage in the rest of the U.S.
Add to that another 11 percent of Virgin Islanders who were earning between $5.15 an hour and the soon-to-be new minimum wage of $7.25 and 17.8 percent of the entire Virgin Islands workforce is affected. Assuming the labor force today is similar to that of 2004, about 1 in 6 workers will be directly affected by the increase at least a little and about 1 in 15 will have seen their pay go up by two dollars an hour as compared to two years ago. That is more than a 30 percent increase in pay for those who make the least and have the least to spare.
Who are those making minimum wage? Hotel, motel, restaurant and bar workers account for 21.1 percent of those working at the minimum, according to the Community Center Survey. Cleaning and working in building service occupations account for 13 percent of people working at minimum wage in the territory.
Omer ErSelcuk, president of the St. Croix Chamber of Commerce and CEO of Seaborne Airlines, endorsed the increase when it passed Congress two years ago and believes it will improve standards of living for some in the Virgin Islands.
"There is a balance that needs to be struck between what businesses are able to afford and what solid employees need to live on," he said. "Most of our folks at Seaborne Airlines are well above that to begin with, so it doesn’t have much impact on us, though." With the economic downturn, increasing the minimum wage both puts a strain on small businesses and provides a bit more cushion for low-wage workers, he said.
"Anything we can do to raise everyone's standard of living is a good thing," he said. "It's a little tough for some to do right now, but the research has been done and Congress has set the wage, and local businesses will react accordingly."
Sen. Terrence "Positive" Nelson, who was active in labor before running for office, wholeheartedly endorses the increase and would like to see a higher Virgin Islands minimum wage.
"I believe, due to our higher cost of living, we here in the Virgin Islands perhaps should add more onto it so our minimum is a little higher," Nelson said Tuesday. "But I think it is timely, and since ironically the people who make the least spend the most, with extra money going right out to buy necessities. And they spend their money locally, so it should be a boost for local commerce."
Before the increase was enacted, industry groups like the National Restaurant Association and the National Federation of Independent Businesses opposed the increase, arguing that increasing the minimum wage will prevent or delay new hiring and lead to layoffs and higher unemployment rather than an improvement in the lives of those struggling to get by. Opponents also predicted more small businesses will close down if the increase occurs.
The AFL-CIO, other labor organizations and other proponents said these concerns are exaggerated, unsupported by data from past increases and self-serving for industries with low pay.
The collapse of worldwide financial markets and resulting economic downturn has made it difficult to discern what effect the minimum wage increase may or may not have had upon employment in the territory or elsewhere with any certainty. What is certain is that as of July 24, all wage employees must be paid at least $7.25 per hour.
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