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Strong opposition to min wage hike continues

From 2007- 2012: local prices rose about 5% more than average annual earnings
fili@samoanews.com

The American Samoa Government and the private sector have maintained their opposition to future mandated minimum wage hikes, but some in the business community say the government has also failed to foster new economic development for the territory, according to the U.S. Government Accountability Office “draft” report on the impact on minimum wage on American Samoa and the Commonwealth of the Northern Mariana Islands (CNMI).
 
The draft report is now being sent to officials of the two territories for comments to be included in the final report due to the U.S. Congress in April this year — well before the next minimum wage hike would become effective — Sept. 30, 2015.
 
GAO officials, who met last November with the Chamber of Commerce and other local officials, made clear the investigative arm of the U.S. Congress does not provide in the final report any recommendations on the minimum wage issue, as that is left to Congress.
 
And in this draft report, as has been the case in previous GAO minimum wage impact reports, there are no recommendations.
 
The report does show that the total number of employees in American Samoa — based on ASG tax and GAO questionnaire data — increased 1.5%  from 2011 to 2012 (from 15,552 to 15,790). However, employment declined 11% (from 17,791 to 15,790, with a peak of 19,340 in 2008) between 2007 and 2012.
 
For “earnings”, the draft report states that analysis based on American Samoa taxes, the GAO questionnaire, and consumer price data show that from 2011 to 2012 average inflation-adjusted earnings of those employed in American Samoa fell by 2%.
 
For the overall period from 2007 to 2012, average inflation-adjusted earnings fell by about 4 percent while average annual earnings rose about 28 percent. However, local prices rose by about 33 percent.
 
The inflation-adjusted earnings of minimum wage cannery workers, who retained their jobs and work hours fell by about 4 percent from 2011 to 2012 and by about 5 percent from 2007 to 2012, it says and noted the cannery is the largest private employer in the territory.
 
Questionnaire responses from the tuna canning industry show that their employment of hourly workers dropped by 13 percent from 2012 to 2013 and by 58 percent from 2007 to 2013.
 
Samoa News should point out that this is only a draft report, therefore other specific data for earnings, the economy and other issues will be withheld until the final report is released.
 
OPPOSITION TO INCREASES
 
Some 20 business representatives attended a group discussion with GAO officials last November and the private sector were generally opposed to additional minimum wage increases. They also stated that previous wage hikes had been harmful to the local economy.
 
The employers called the minimum wage the most important issue impacting businesses and cited American Samoa’s reliance on the tuna canning industry and fears about the effect of further increases on the industry and the American Samoa economy in general.
 
In addition, these employers said that federal tsunami recovery assistance had cushioned the impact of the 2009 closure of the Chicken of the Sea cannery, so its full impact had not yet been felt.
 
Further, “the business representatives we spoke with expressed frustration with American Samoa’s lack of success in attracting alternative businesses to the territory,” the draft report says.
 
Business representatives also told GAO that ASG had not fostered economic development and that its tax policies had created a poor business environment, it says.
 
As the territory’s largest employer, ASG continues to report that any increases in the minimum wage will result in reduced government employment and ASG anticipates that it will reduce staff or hours as part of its response to any future increases.
 
ASG further stated that the scheduled 2015 increase would raise its wage bill by approximately $140,000 and ASG anticipated it would have to cut six employees to offset this increase. ASG also contends that any future increases beyond 2015 would have a drastic budget impact and contribute to the government’s “already critical cash flow problem”.
 
Also cited in the GAO draft report was Gov. Lolo Matalasi Moliga’s address to the Fono last month, wherein the local Commerce Department has been instructed to prepare and justify a request to Congress to permanently remove American Samoa from the federally mandated minimum wage.
 
According to the Governor, the justification will include the presentation of a locally-developed “living wage” to address what it described as Congressional fear that the American Samoa minimum wage does not provide for basic living needs in American Samoa.
 
StarKist cannery workers who participated in a discussion group also shared their opposition to further minimum wage increases rather than support for future increases. The draft report says workers expressed concerns that any increase would result in lost jobs or a complete closure of StarKist Samoa.
 
Workers told GAO officials that working hours have been reduced at the cannery and that opportunities for overtime have been reduced. Workers also said that prices for essentials such as rent, food, and utilities are high and difficult for them to afford.
 
“Some workers we spoke with expressed concerns that future increases in the minimum wage would lead to an increase in prices in American Samoa, which is something they reported occurring as a result of previous minimum wage increases,” the draft report says.
 
CANNERY ACTION
 
Two of the three employers in the tuna canning industry in American Samoa reported that they had taken cost-cutting actions from June 2010 to June 2013 including labor- and cost-saving strategies and reduced overtime, according to the draft, which didn’t identify the companies by name, but Samoa News understands GAO is referring to StarKist Samoa and the can manufacturing plant — Impress Samoa.
 
The third employer, which was just beginning operations in American Samoa considered the questions — on the impact of wage hikes to the cannery — not applicable. (GAO is referring to Tri Marine International’s local Samoa Tuna Processors Inc.)
 
“The two employers attributed all but one of their actions to a moderate or large extent to minimum wage increases. In addition to minimum wage increases, these two employers also attributed their actions to a moderate or large extent to increased utility and material costs,” the draft report says.
 
It also says that two of the three employers stated that they planned in the next 18 months to introduce labor-and cost-saving strategies, delay business expansion, relocate business, and reduce overtime hours.
 
“The two employers attributed all of these plans to a moderate or large extent to the minimum wage increases, but also to increased utility and material costs and business factors,” the draft report says and noted that cannery officials had stated that wage increases are one of many factors affecting the tuna canning industry in American Samoa, but that its labor costs, including the minimum wage increases, place American Samoa at a significant cost disadvantage in comparison with other canned tuna exporting countries.
 
“Both canneries cited congressional action to defer the next minimum wage increase to 2015 as encouraging their ability to invest in American Samoa. Cannery officials said that there is a spectrum of possible actions in response to increasing costs. For example, canneries could lower the staffing level or close certain production lines,” draft report says.



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