After winning a second term in the U.S. Senate last month, from his perch on the Congressional Task Force on Economic Growth in Puerto Rico, U.S. Sen. Marco Rubio, R-Fla., offered a proposal to help that island’s sluggish economy.
Rubio unveiled the “Economic Mobility for Productive Livelihoods and Expanding Opportunity (EMPLEO) Act” on Tuesday. The proposal would lower the employer covered minimum wage to $5 an hour, cutting expenses for businesses, while relying on a federal wage subsidy of up to $2.50 an hour for employees who make less than $10 an hour.
The “EMPLEO Act would establish an opt-in system by which participating employers disburse pay raises to all employees earning below the median hourly wage in Puerto Rico,” Rubio’s office noted. “Any worker earning less than $10 per hour would receive a raise, up to a maximum of $2.50 per hour. Employers that choose to participate in the program may reduce their share of a worker’s wage to a minimum of $5 per hour, thus reducing the cost of hiring new workers.”
Rubio and other advocates of his proposal have said that the federal minimum wage is a hindrance in Puerto Rico
“With Puerto Rico’s economy suffering from high unemployment and low wages, it’s hard for many Americans on the island to make ends meet,” Rubio said on Tuesday. “My legislation would help these workers and their families by immediately boosting their pay and reducing the cost of hiring so it’s easier to find a job. By expanding the workforce, increasing opportunity and making work pay more, we can help Puerto Rico get back on the path to growth and prosperity. As a member of the Congressional Task Force on Economic Growth in Puerto Rico, I’m proud to have brought this idea to the table and encourage my colleagues to consider it as we prepare our final report.”
Oren Cass, a senior fellow at the Manhattan Institute who helped craft the proposal, explained why it would help Puerto Rico in a piece at City Journal.
“The proposal is a creative, compassionate, and market-based tool for addressing Puerto Rico’s challenges,” Cass wrote. “Reducing the minimum wage should create many more entry-level job openings and make hiring more attractive to employers. Pairing the reduction with a subsidy ensures that existing workers are “held harmless” and see no net pay cuts, while drawing prospective workers toward the labor market with a more attractive wage. The subsidy also creates powerful momentum for on-the-books employment, because the subsidy will apply only to documented, tax-paying employment relationships. And it acts as an efficient and targeted fiscal stimulus, injecting money into the economy wherever employers believe low-wage hiring makes most sense.
“The proposal could mark a starting point for meaningful reform in mainland economic policy,” Cass added. “Many good ideas for boosting economic growth exist, particularly in the areas of tax and regulatory reform. But on their own, they will do little to counteract the structural economic shifts that are leaving less-skilled workers behind. A wage subsidy alone won’t solve that problem, but this type of idea—rethinking the shape of the low-wage labor market and government’s role in it—is a step in the right direction.”
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