Guam businesses prepare for wage increase

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HAGÅTÑA (The Guam Daily Post) — With the first of two minimum wage increases set to take effect on March 1, small-business owners said an increase in consumer prices is unavoidable.

Guam Gov. Lou Leon Guerrero signs the minimum wage bill law on Oct. 14, 2019 in the governor’s conference room at Adelup.  Photo by David Castro/The Guam Daily Post

About 3,500 workers on Guam stand to receive a pay raise after Gov. Lou Leon Guerrero signed a bill in October 2019, introduced by Sen. Joe San Augustin, to increase the minimum wage from $8.25 to $9.25 over a two-year period.

The first increase, from $8.25 to $8.75, will take effect on March 1. The next 50-cent raise will take effect March 1, 2021.

Jesse Cordero, owner of Brewed Awakenings Coffee Shop, said he has not implemented a price increase as of yet — but eventually, he added, he will have to.

“I hate doing it, especially to our regular customers,” Cordero said, adding that as the minimum wage increases, he has no choice.

Cordero said the government should decrease the gross receipts tax from the current rate of 5 percent to at least 4 percent. “Those little percentages count,” he said.

The government should help small businesses thrive, he added.

“(The minimum wage increase is) good for those receiving it, but it’s going to affect the small businesses,” said Jade Templo, owner of Rush Gear.

Templo said businesses could also experience more layoffs and less hiring.

“Small companies like us wouldn’t be able to hire,” Templo said. “Because we won’t be able to afford to pay for the hike of the minimum wage.”

As the minimum wage increases, eventually the price of merchandise will also increase to compensate for business’ added cost in payroll, Templo said.

“We hate to do that, but if the minimum wage does go up, there’s nothing that we can really do,” Templo said.

Joel Tudela, co-owner of Health City, said his company plans to reduce its promotional sales to keep the price of goods low and compete against the online market.

Tudela said the government should provide an incentive for small businesses that make $100,000 to $50,000 a month, or possibly reduce the gross receipts tax to 3 percent or 4 percent.

“It’s really challenging for small businesses, especially when the rent of the property is already expensive,” he said.

He added that with the 5 percent GRT, his company needs to focus on operational costs, which could contribute to an increase in their price of goods.

With the incoming wage increase, Tudela said his only concern is the domino effect of the rising costs of services.

Being in the retail industry, he said, most of his company’s products come from the U.S. and are shipped by ocean or air.

“If they do increase their prices, that hurts the business as well,” he said.

Tudela said consumers could also resort to shopping online to avoid the price increase of goods locally.

Catherine Castro, president of the Guam Chamber of Commerce, said the government of Guam should look into reducing its expenses.

“All businesses will be impacted by government-mandated minimum wage increases,” Castro said. “The most impacted will be small businesses and businesses in the services and retail industries.”

According to Castro, GovGuam can cut nonessential staff and services in order to meet the more important needs of public health, public safety and public education.

She added that the government could reduce the cost of doing business on Guam by lowering the business privilege tax back to 4 percent and roll back the property tax increase which impacts commercial rental units and hotels.

Additionally, she said, the government should review the cost of occupational licensing requirements and prioritize investing in education and workforce development to skill up Guam’s local labor force to meet the demands for technical and other specialized work.

“So our people can better compete for higher-paid job opportunities,” Castro said.

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