Ads by Google Ads by Google

It’s “not the right time” for a min wage increase, says local GM

GAO logo
Points to a poor economy that doesn’t support “consequences of job losses”
fili@samoanews.com

Pago Pago, AMERICAN SAMOA — Another federally mandated minimum wage increase in American Samoa will be an additional cost that G.H.C. Reid & Co. will have to cut from its “operations/overheads,” said GHC Reid & Co. general manager, Cherith Lober, who shared the company’s view in a written comment shared with the US Government Accountability Office (GAO).

“Increasing minimum wage is good for our people, but this is not the right time. Only until we have an economy that supports the consequences of job losses,” she pointed out.

Lober explained at the outset of the written statement — provided by the American Samoa Chamber of Commerce to GAO — that the company’s views are based on its past, current and forecasted financial performance. “As much as we want our people to have the best living standards and be given the same benefits as all US citizens, we need to consider and take action to avoid long-term consequences that will impact our local businesses,” she wrote.

“American Samoa is probably the weakest economy within the US and minimum wage imposition will continue to weaken the capacity of our local businesses to support our economy,” she wrote, adding that the private sector, especially locally owned businesses and companies with a large workforce, are the mostly impacted negatively by minimum wage hikes.

MARKET BACKGROUND

Lober provided “market background”, saying it has become more competitive within the last 10 years compared to 10-plus years ago. She said there are more products, more competitors, and a large selection of “cheap and generic brands” are now available to consumers” pointing to Asian owned retail businesses, operating as wholesalers, as the culprits.

“Unfortunately, American Samoa does not have any legislation that protects and allows only locally-owned businesses to operate specific business categories such as, wholesale,” she wrote, adding that when there’s a reduction in sales volume, “it means we will resort to either increasing our sales prices or reducing overall costs to support our net operating income.”

Lober points to the local market as price-driven and “the majority of our consumers prefer cheap brands than quality brands,” meaning increases in prices to support a minimum wage hike will price them out of the market.

She noted the opposite impact of a minimum wage hike on retail stores, as people will spend more on cheap and generic products. And most of these stores (referring to Asian stores) have less manpower and rarely employ locals so minimum wage hikes have minimal or no impact on their overheads.

Retail stores “gain on the extra disposable income,” she said. “Does this income stay in American Samoa? On the other hand, local wholesalers like GHC Reid will again be forced to resort to cost-cutting.”

COMMUNITY OUTREACH COST

Lober said local businesses are “contributing immensely” to the local economy — through ASG tax/ duties, government fees, employment of a skilled and unskilled labor, donations/ sponsorships given to nonprofit organizations and government events, community projects, charity groups and so forth.  “These are all current costs that we incur each year,” she pointed out.

MINIMUM WAGE IMPACT

“The new minimum wage [hike] will be an additional 9% cost to GHC Reid” and this is the cost that “we have to cut from our operations/ overheads.” She outlined strategies in place by the company to counter not only government fees but, any further minimum wage increases:

•        Reduction in head count — The company’s workforce was reduced by 30% in the last 10 years as a result of the minimum wage hikes in 2015 and 2018.

•        Reduction in work hours: Even after workforce reduction, warehouse and delivery staff hours were reduced from 80 hours to 70 hours while critical jobs were maintained at 80 hours to keep operations running smoothly. “Given another minimum wage increase, we will again be forced to reduce work hours or lay-off staff, which will defeat the purpose of minimum wage increase,” said Lober.

•        Reduction of business hours: GHC Reid decided in 2015 to close on Saturdays due to minimal sales; and this removed overtime and forced consumers to purchase only between Mondays to Fridays.

•        Restructure Operation: With a new minimum wage increase, GHC Reid be will forced to cease its recycling operation — the only recycling facility on island.

•        Reduction of Community Support: With the additional cost, due to a minimum wage hike, “We foresee that we will not be able to provide the same level of support to our government and community,” said Lober, who said locally-owned businesses offer support to the community through donations such as cash or products, employment, scholarships and event sponsorships.

OVERALL VIEW

“Our economy does not support continual minimum wage increases — we have no thriving tourism and we are depending only on StarKist Samoa for exports,” she said. “The bottom-line is job security for our people, [some of whom] will be out of a job if a company decides to reduce its head count again.”

Lober raised the following questions: Will another business pick up the jobless? Will the federal government support the jobless? Do we have new investments that will secure these jobs? With the increase in disposable income for some, will that cash flow remain in American Samoa or will it leave our island, and who benefits?

“GHC Reid will definitely take action to reduce any imposing costs and will again resort to a reduction in head count,” she said.

There’s [also] no doubt “our economy's main private sector lifeline, StarKist Samoa, will be affected” by further minimum wage hikes.