Puerto Rico raised its minimum wage for the first time in more than a decade and while it’s a step in the right direction, experts say there are structural factors making it difficult for working-class families.
Gov. Pedro Pierluisi signed a law to increase the current minimum pay of $7.25 an hour to at least $8.50 an hour starting January 2021. This increase represents an additional $2,000 a year for a full-time worker.
“For a long time, thousands of workers on our island have not received an increase in the minimum wage, but they have had an increase in the cost of living over these past 12 years. A payment of $7.25 an hour is no longer sustainable to live in Puerto Rico, so it was time to do justice to the working class,” said Pierluisi in a statement.
According to Carlos Vargas-Ramos, Director of Public Policy at the Center for Puerto Rican Studies at Hunter College, the new law will benefit “people who are at the very bottom of the wage structure in Puerto Rico’s economy,” which includes workers in retail, department stores, supermarkets, gas stations, and security guards.
However, not everyone celebrated the new decision. Puerto Rico has been facing a financial crisis for decades and almost 44% of the population lives in poverty, meaning that the new minimum wage is still not enough to ensure fewer families live above the federal poverty level.
José Caraballo-Cueto, an economics expert and an associate professor at the University of Puerto Rico’s graduate business school said, “It’s not enough, but it’s a starting point. This can also be complemented with the earned income tax credit. When you consider that tax credit, a worker could basically earn the equivalent to $10 an hour.”
But the main reason why the current or new minimum wage aren’t enough to lift families out of poverty is Puerto Rico’s high cost of living. “The cost of electricity is one of the expenses straining most citizens and small businesses,” who already pay twice as much for electricity as U.S. customers for unreliable service, Caraballo-Cueto said.
A century-old law known as the Jones Act, limits foreign ships from going to Puerto Rico, raises the cost of imported goods, contributing to the island’s high cost of living. Under this law, American-built vessels, and American crews, among the most expensive in the world, are the only ones allowed to make shipments to the island without restrictions. This increases the cost of goods sold in Puerto Rico, including gasoline, cars, and produce. This is particularly important for an island that imports about 85% of all its food.
But things are looking bright, the minimum wage in Puerto Rico is set to increase again in July 2023 to $9.50 an hour. Then another increase to $10.50 is being considered for July 2024, but it still requires approval.
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