Cost of Living

In October 2022, the Progressive Democrats of Guam released a platform which advocated returning the minimum wage to its purchasing power in the beginning of 2015, which would be around $11.25 by the end of 2024. The current proposal is to raise the minimum wage in two increments to $11.10 by March 2024, which would be restoring the minimum wage to its 2015 level.

For most of Guam’s modern history until January 2015, Guam’s minimum wage was set by an obscure provision in the Minimum Wage and Hour Act of Guam, which requires that when federal law sets a minimum wage higher than Guam’s statutory minimum wage, then the minimum wage level set by federal law shall apply (22 GCA § 3121). Effective January 1, 2015, however, the Guam Legislature raised the minimum wage above the amount set by federal law, to $8.25 per hour. There have been been two incremental increases to the minimum wage since then, raising the minimum wage to $8.75 per hour in March 2020, and raising the minimum wage to its current level of $9.25 per hour in September 2021.

Both of the increases to the minimum wage failed to maintain the purchasing power of the initial increase in January 2015. To maintain constant purchasing power, the minimum wage should have been increased to $9.50 in March 2020, when the Guam Legislature had increased it to $8.75. That put minimum wage workers $0.75 per hour below where they should have been to keep their real wages the same. In September 2021, when the minimum wage increased to $9.25 per hour, the minimum wage should have reached $10.25 to maintain the same purchasing power as in January 2015. That means minimum wage workers were $1.00 below where they should have been, had the Guam Legislature chosen to maintain the purchasing power of the minimum wage. As of September 2022, the minimum wage should have been $10.75 to retain the same purchasing power from January 2015. In other words, minimum wage workers are $1.50 per hour behind the minimum wage level for workers in January 2015.

Another way to look at the minimum wage is to compare it to the average hourly pay of production workers. In January 2015, the minimum wage was about 61.4% percent of production workers’ average hourly wage. By March 2020, it was about 57.2%, and by September 2021, it was still around 57.0%. Since then, it has declined to 54.4%. In other words, the gradual decline in the purchasing power of the minimum wage has coincided with a decline in the pay of a minimum wage worker compared with the average private sector worker. Restoring the minimum wage to its January 2015 purchasing power, absent an increase in other workers’ wages, would bring the minimum wage to 63.2% of the average private sector worker’s hourly pay. Realistically, however, average wages would rise. In fact, mathematically, they would have to since workers at or below $10.75 per hour make up around 24-25% of workers.

Minimum wage increases of the scale suggested tend to be incremental. Assuming a return to the 5-year median increase in the cost of living, the minimum wage would need to rise to $11.10 by March 2024, a total increase of $1.85 from the current minimum wage. To phase this in two steps, the minimum wage could be increased to $10.20 in March 2023, followed by an increase to $11.10 in March 2024.