GAO releases final report on impact of min wage increase

The U.S. Government Accountability Office, the investigative arm of the U.S. Congress released yesterday its updated final report, as required by federal law, on the impact of federally mandated minimum wage hikes on American Samoa and the Commonwealth of the Northern Mariana Islands.

 

Among the GAO findings is that American Samoa employment and earnings have decreased since 2007, but employment increased slightly from 2011 to 2012. Since 2005, the American Samoa economy has had a flat or declining real gross domestic product (GDP).

 

The report is being submitted to the U.S. Congress ahead of the next minimum wage hike set for Sept. 30, 2015. Here’s a summary of what GAO had to say about the territory’s economy, employment, earnings and worker views.

 

ECONOMY

 

American Samoa’s real gross domestic product (GDP) and population have both declined in recent years, said GAO, adding that American Samoa’s 2012 real GDP of $504 million was 4.5% below the 2006 real GDP, and also slightly lower than the 2009 real GDP.

 

Real GDP per capita increased 12.5% to $9,164 from 2006 to 2012. American Samoa’s population declined from 57,291 in 2000 to 55,519 in 2010, it says, adding that ASG believes its 2010 population was undercounted.

 

EMPLOYMENT

 

American Samoa taxes combined with GAO questionnaire data show that the total number of employees in American Samoa increased 1.5% from 2011 to 2012 - from 15,552 to 15,790,” said GAO, which also said in a footnote that American Samoa tax data are a count of persons employed during the tax year by the employer.

 

According to GAO, from 2007 to 2012, employment declined 11% — from 17,677 to 15,790, with a peak of 19,229 in 2008. (A footnote says American Samoa tax data from 2013 on total employment is not yet available. However, if many foreign workers left American Samoa, the impact on the unemployment rate would be smaller than if those workers remained because the foreign workers would no longer be included in the calculation.)

 

GAO also says that questionnaire responses from the tuna canning industry show that their employment of hourly workers dropped by 13% from 2012 to 2013 and by 58% from 2007 to 2013.

 

EARNINGS

 

According to the report, an earnings 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%.

 

“The decrease resulted from average earnings increasing by 2% while prices increased 4%,” it says.

 

For the overall period from 2007 to 2012, average inflation-adjusted earnings fell by about 5%; average annual earnings rose about 27% but local prices rose by about 34%.

 

“Although earnings data do not allow for a direct comparison of average and minimum wage annual earnings or for tracking the earnings of workers who lost their jobs, the hourly wage of minimum wage workers who retained their jobs and work hours has not increased by more than inflation since 2007,” said GAO.

 

The inflation-adjusted earnings of minimum wage cannery workers who retained their jobs and work hours fell by about 4% from 2011 to 2012 and by about 5% from 2007 to 2012. A footnote says although American Samoa has multiple minimum wages (18 different ones), “we use the tuna canning industry, American Samoa’s largest private sector industry, as an example throughout this report.”

 

WORKER VIEWS

 

During the GAO field visit to the territory late last year, it held group discussions with private sector employees and GAO said these individuals, “generally opposed additional minimum wage increases, citing American Samoa’s reliance on the tuna canning industry and fears about the effect of further increases on the industry and the economy.”

 

(GAO says 20 business representatives participated in the discussion group. Views expressed in discussion groups only represented the view of participants in those groups and may not be representative of all businesses’ views in American Samoa.)

 

The territory’s largest employer, ASG anticipated it would have to cut six employees to offset the 2015 minimum wage increase, with additional budget impacts resulting from any further increases, GAO said and noted that Gov. Lolo Matalasi Moliga has stated that he would pursue changes in U.S. law to allow American Samoa to take control of its minimum wage.

 

As for cannery workers, GAO says Star-Kist workers who participated in its discussion group generally opposed rather than supported further minimum wage increases.

 

“Workers expressed concerns that any increase would result in lost jobs or a closure of the cannery,” GAO said. “Some workers we spoke with also expressed concerns that future increases in the minimum wage would lead to an increase in prices in American Samoa, which they said occurred as a result of previous minimum wage increases.”

 

GAO made clear that there were ten StarKist workers who participated in the discussion group and therefore views expressed in discussion groups only represented the views of participants in those groups and may not be representative of all workers’ views in the tuna canning industry.

 

More from the GAO report later this week in Samoa News, including the governor’s response to the study.

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