July 2, 2015

Top-Down Economic Regulation Burdened Puerto Rico

Like the rest of the nation, Puerto Rico has the $7.25 minimum wage. But it’s that regulation, along with a host of other federally mandated economic rules, which has helped sink the island commonwealth into a $72 billion hole of debt. Despite what the advocates for a $15-an-hour minimum wage might say, a $7.25 minimum wage works fairly well for most of the U.S., where 16% of workers earn the minimum wage. But in places like Puerto Rico or American Samoa, $7.25 is too much, as the income and worker productivity is different. In U.S. territories in the Pacific, the minimum wage was kept around $4.50 in order to keep the jobs on the islands. Not only wage laws, but the Jones Act hurts the Puerto Rican economy. It’s a law that restricts the kinds of ships sailing into Puerto Rican ports, keeps competition low and prices high. Furthermore, the commonwealth has a welfare system that pays out much more to more people than the system in the states. High government-mandated minimum wage, stifling economic regulations, gratuitous welfare — as Arturo Porzecanski, who teaches international economics at American University, said, “They have all the traits of a welfare state gone wrong.”

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