Gov. Lolo Matalasi Moliga has shared with Congresswoman Aumua Amata his preference on dealing with minimum wage, in which the federal government would provide a subsidy to help pay for the federally mandated wage hikes.

However, if it's not feasible, the governor prefers the previous method, wherein  local wages were determined by a special industry committee under the purview of the U.S. Labor Department (USDOL).

The minimum wage of the territory is set to rise on September 30, this year.

The governor’s federal subsidy suggestion was first revealed two weeks ago during a cabinet meeting, and yesterday Lolo made his suggestions known in a letter to the Congresswoman.

Since their last conversation on minimum wage, Lolo wrote “we have been working diligently to formulate a collective territorial-wide position to detail the financial impacts on the Territory should the moratorium on increases be lifted.”

Lolo says he has written to both canneries and the local Chamber of Commerce for their assessments of the impact of the minimum wage hike, along with asking for them to detail their mitigation strategies. (The next wage hike is set for Sept. 30)

“The minimum wage issue poses a dilemma,” he said. “From the workers' perspective the hike in the minimum wage will provide financial relief from the growing cost of utilities, goods and services.”

However, from a business perspective, he said, the minimum wage hike will certainly increase their operating costs which will force them to either cut jobs or raise the price of goods and services to absorb the increase.

“This will become a vicious circle,” he said and noted that it has been “proven unequivocally that our economy's current carrying capacity cannot support the Congressional mandate to raise wages until the federal minimum is reached.”

The governor pointed out that the two canneries are the lifeline of the territory's economy, and the territory has already seen the devastating impact of irresponsible wage hikes when COS Samoa Packing left in 2009, due to its inability to absorb increases in the federal minimum wage.

Recognizing the narrow local economic base, Lolo said the government have been working to “attract minimum wage-immune companies” to the territory to ease the financial impacts attributed to the minimum wage hikes.

“There are in the pipeline potential major economic development projects that we feel will broaden our economic base,” he said but didn’t give any other details. “...however these developments will take one to two to three years before becoming operational.”

According to the governor, the obvious position to adopt is request the extension of the moratorium for at least five years to allow American Samoa “to implement our economic development program aiming to broaden our economic base.”

“Taking this position, however, will add further financial burden to our people struggling to meet the rising cost of living,” he said. “On the other hand, job curtailment will result if the minimum wage moratorium is lifted.”

Additionally, economic shrinkage will happen as businesses adjust their operations to accommodate the hike in the minimum wage. “Unemployment will increase while the quality of life for our people deteriorates,” he said.

Lolo said that his preference is to support the minimum wage hike but only if the federal government subsidizes the increased wages resulting from ending the moratorium.

“This will allow the territory to expand its economy by increasing consumption through increased wages,” he explained. “We anticipate that in five years... American Samoa will be able to wean itself from the federal subsidy.”

If the federal subsidy is not feasible, Lolo's second option would be to revert back to the former biannual review method of determining the minimum wage by Industry Wage Committees under the purview of USDOL.

In due course, Lolo said the government will forward for Amata’s review the final position on the federal minimum wage. Lolo also wants to get feedback from the Congresswoman on the federal subsidy issue.

OTHER ISSUES

“...it is our hope that you will champion our efforts to secure federal tax incentives supporting local investment,” Lolo said and noted that the federal 30(A) Tax Credit provision is ongoing, but access is limited to Star Kist. “The incentive should be open to every local and off-island investor,” he pointed out.

Lolo said there are also bilateral treaties being negotiated by the federal government which will impact American Samoa's fishing industry, “and we humbly ask that you ensure that our position is heard and addressed.”