Puerto Rico legislators seek labor law changes

Bonds

Puerto Rico legislators in the party with a plurality of seats in both legislative bodies are seeking changes to labor laws, such as raising the minimum wage and increasing the number of vacation and sick days for workers, which some say may negatively affect the local economy.

Popular Democratic Party lawmakers in the Puerto Rico House of Representatives have brought the proposals forward this week.

Advantage Business Consulting President Vicente Feliciano said he thought the labor laws would be changed in a way that would adversely affect the economy.

Rep. Héctor Ferrer proposed the formation of a commission to analyze and establish an increase to the island’s $7.25 per hour minimum wage, the current federal minimum wage. More than 30% of those with jobs on the island receive the minimum wage.

“Contrary to what other sources indicate, granting an increase in the minimum wage would have a positive effect on the economic development of Puerto Rico,” Ferrer said. An increase should be phased in and the new wage should be adjusted for inflation over time, he said.

Ferrer has four other legislators co-sponsoring the bill.

“The PDP, like the electorate, moved to the left during the last election. Expect legislation on increase in minimum wage and new labor regulations to pass,” said Advantage Business Consulting President Vicente Feliciano. “To the extent that this legislation is populist, with disregard to the impact on the number of jobs, it would negatively impact the economy and Puerto Rico debt service capacity. The early signs are not good.”

Other proposals include two proposed bills from Rep. Domingo Torres that would undo the market-oriented reforms of labor laws endorsed by the Puerto Rico Oversight Board and approved by former Gov. Ricardo Rosselló.

One bill, to be acted on first, would undo the labor reforms. The other bill would study the negative effects of the reforms.

In Puerto Rico employers cannot terminate employers without good cause or giving them specified amounts of severance. To be eligible for these protections one has to pass a probation period, which in the Torres proposal, would be reduced to nine months and three months, respectively. Under current law, the probation period for professionals is 12 months and for others it is nine months.

The proposed bill would increase the amount of vacation time and sick time that employers must give workers. It would also reduce the number of hours they would have to average per month to be eligible for these protections.

“The narrative is about cost of living vis a vis minimum wage,” Feliciano said. “There is no mention of issues that drive employment such as productivity and labor costs. There is also no mention of other mechanisms to improve the conditions of the working poor such as expansion of the local Earned Income Tax Credit.”

Feliciano said Puerto Rico Gov. Pedro “Pierluisi’s position is unclear. He’s a moderate Democrat with experience in the private sector. As such, I surmise that he’s not ideologically opposed to new labor legislation but would try to balance the proposals with their potential impact on the number of jobs.”

According to the Puerto Rico Oversight, Management and Economic Stability Act, within seven days of the governor signing any bill he or she has to submit a cost estimate to the board and a certification the bill is consistent with the fiscal plan. If the board finds the bill to be inconsistent with the approved fiscal plan, it can reject the law, said a board spokesman.

“Without analysis or studies, and knowing that thousands of merchants are on the verge of bankruptcy, PDP legislators file a measure to increase the minimum wage,” tweeted Inteligencia Económica Chairman Gustavo Vélez.

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