One of the suggestions for economic growth in Puerto Rico is to lower the minimum wage. James Dietz’s Economic History of Puerto Rico tells how previous efforts to keep Puerto Rico from paying the U.S. minimum wage worked out.
In the 1940s, when the U.S. and Puerto Rico were laying down the foundations of the idea of Puerto Rico as the “manufacturing power house” of the Caribbean, more than half of the manufacturing jobs in Puerto Rico were home needlework — 98% women, working in their homes on needlework for export. This industry accounted for two thirds of the manufacturing growth in the 1940s, and in the year 1940 represented 68% of all the manufacturing concerns in Puerto Rico.
By 1947, 21.99% of all Puerto Rico’s export value was needlework products made at home. Only sugar had a higher proportion of the total export value. In some years tobacco also surpassed needlework, but needlework retained the highest value in manufactured goods. However, the majority of the value of the goods was in the raw materials imported from the mainland U.S. to Puerto Rico.
And the value of the industry — an industry which accounted for at least 8.7% of all the jobs in Puerto Rico at the time — was minimal. Workers were paid one or two cents per hour, and their income accounted for just about 2% of all the income earned on the Island.
The industry fought for decades to avoid paying higher wages to the women who toiled in their homes to provide cheap goods for the mainland. By 1950, after many years of lobbying and several successful efforts to exempt Puerto Rico’s needlework industry, the wage was just 15 cents an hour. Minimum wage in the U.S. was set at one dollar, but throughout the early 1950s the backbone of Puerto Rico’s manufacturing industry paid just about $3.00 a week for full-time work, one tenth the wage earned by government workers.
By 1979, the hand needlework industry had moved to places with no minimum wage, where people continued to work for extremely low wages. Only 1% of Puerto Rico’s women were employed in the needlework industry at that time.
The industry was unwilling to pay reasonable wages, and employment in home needlework never led to economic growth for Puerto Rico. It was exempted from minimum wage as a “hardship industry” in the 1920s and then exempted entirely in 1937. In the 1940s, the U.S. minimum wage was redefined as a “target” and the home needlework industry was allowed to set its own minimum wage. Jobs were certainly created, but wealth was created only for the companies that sold the products, not for the people who made them.