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GOP Member Proposes to Eliminate Federal Minimum Wage in Puerto Rico

By on March 1, 2016

SAN JUAN — As Congress continues to evaluate options to address Puerto Rico’s fiscal and economic crisis, a Republican representative introduced last week legislation that would allow the commonwealth to opt out of federal minimum wage requirements.

“I recognize that it is by no means a cure-all for Puerto Rico, but I believe it is a step in the right direction in allowing the island to make itself more competitive and thereby avoid bailouts and an alteration to U.S. bankruptcy law,” stated Rep. Mark Sanford (R.-S.C.), author of H.R. 4637, or the Puerto Rico Minimum Wage Improvement Act.

The Puerto Rico government continues to lobby for immediate congressional action, particularly over access to a broad debt-restructuring regime. The Barack Obama administration, through the U.S. Treasury, is also making the case for granting access to a bankruptcy regime they say must be tailored to Puerto Rico and paired with federal fiscal oversight that respects the island’s self-governance.

“I believe allowing Puerto Rico to declare bankruptcy would have far-reaching and very negative consequences for taxpayers in South Carolina and across this country. Federal bankruptcy laws have long prohibited states and territories from filing for bankruptcy. If this was changed, one could expect to see states like Illinois or California that have overspent follow suit, given the impossible math entailed in their unfunded pensions,” Sanford further stated.

For his part, Resident Commissioner Pedro Pierluisi, a Democrat, said he opposes this bill, “which could very well be called, ‘Act to foster more outmigration to the States.’”

Speaker of the House John Boehner (R-OH) conducts a ceremonial swearing-in with Rep. Mark Sanford (R-SC) at the U.S. Capitol May 15, 2013 in Washington, DC. The former governor of South Carolina, Sanford won a special election on May 7 to win the seat vacated by Republican Tim Scott, who was appointed to the Senate. Sanford has bounced back after his political career was derailed in 2009 by an extramarital affair that cost him his marriage.

Rep. Mark Sanford (Photo by Chip Somodevilla/Getty Images)

The idea of allowing Puerto Rico to set a minimum wage below the federal floor was among the recommendations made by a group of former International Monetary Fund economists, led by former chief Dr. Anne Krueger. Yet, the proposal has not been pushed by the commonwealth government as part of its plan to address the fiscal crisis, after it was received with skepticism following the release of the so-called Krueger report.

In rejecting bankruptcy or any type of bailout for the island, Sanford said he thinks “it’s important to address what led to Puerto Rico’s economic problems in the first place, and this is what the Puerto Rico Minimum Wage Improvement Act offers.” He noted how Congress has already modified minimum wage standards for such territories as American Samoa and Northern Marianas.

“This bill would allow adjustment based on the prevailing wages in the Caribbean Basin and better enable the island of Puerto Rico to compete with its island neighbors,” the GOP member said.

House Speaker Paul Ryan (R-Wis.) has said the lower chamber aims to come up with a solution before the end of March, while there is still no consensus on how exactly the Republican-led Congress would deal with the problem.

A copy of the bill can be found here.

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