Lolo to GAO: Applying US living standards to American Samoa “is flawed”
Pago Pago, AMERICAN SAMOA — The “lack of inclusion” of American Samoa in the process of setting a minimum wage for the territory by the federal government is the “core issue fueling our objection,” says Gov. Lolo Matalasi Moliga, adding that ASG remains “concerned and worried” over the future of StarKist on island because of — among other things — increased labor costs.
The governor made his position known in an Oct. 24th letter to Emil Friberg, assistant director of International Affairs and Trade of the US Government Accountability Office. Friberg led a four-member GAO team who departed last Thursday evening after spending a week in American Samoa, assessing the impact of federal imposed minimum wage on the territory’s economic health.
In his detailed four-page letter, Lolo pointed out that his “predecessors have struggled and have painstakingly tried to articulate the basic flaw inherent in the practice adopted” by the federal government in setting American Samoa’s minimum wage based on economic and environmental standards of US states and the other territories.
He tells GAO that the “logistical, environmental, economic, social, political and cultural landscape for American Samoa is starkly different” from the states and other insular areas. Since taking over the helm of government, “I have waged the same campaign”, he said. And as his leadership incumbency draws near, Lolo said he is “obligated to again raise the issue regarding the sufficiency and equity of the current method being used to determine and set” local minimum wages. “Our underlying and core issue fueling our objection is predicated on the ‘lack of inclusion’ in the process of setting the minimum wage,” he explained.
“We are unequivocally committed to ensure that we have the financial wherewithal to meet the basic cost of living,” he emphasized. “Accessing financial resources to meet these minimum living costs is through jobs. If there are no jobs to be had, then the needed income will not be available.”
MINIMUM WAGE MANDATE ONE
According to the governor, the first mandate of the federal Fair Minimum Wage Act of 2007 (for the entire US including its territories) is meeting minimum living standards by gradually reaching the federal minimum wage as rapidly as is economically feasible.
“The human merits of this objective are unquestionable and we do support it wholeheartedly,” he said. However, he added that applying minimum living standards prevalent in the states to American Samoa “is flawed”.
He said there are many factors which bolster the “veracity of this statement”, but the “main ones include free medical care, free education, no property taxes, cultural practice of sharing, and subsistence living invalidate the application of [US] mainland living standards to determine our living wage.”
The second mandate of the Fair Minimum Wage Act — “not raising minimum wage to a level that substantially curtail employment in the industry.” According to Lolo, this mandate “failed as there was a sizable number of jobs lost” — some 2,000 jobs — when Chicken of the Sea’s Samoa Packing cannery closed in 2009 and “further job terminations” in 2016 when Samoa Tuna Processors closed its cannery operation — causing a loss of 800 jobs.
However, a “considerable influx of federal disaster recover aid into the territory” following the 2009 tsunami and Tropical Storm Gita in 2018 “minimized expected devastation” from the canneries closures, the governor pointed out. “Further neutralization of the anticipated financial havoc was from the aggressive investment by StarKist Samoa to expand its production capacity with its simultaneous aim to improve its competitive advantage.”
According to Lolo, ASG is “very concerned, anxious and worried” over the future of StarKist in American Samoa with the “litany of challenges” it currently faces. He then detailed eight “challenges” faced by StarKist “to give credence to our stated apprehension.”
• StarKist is fined $100 million in addition to the $6 million fine for federal environmental compliance issues;
• StarKist has to purchase, from China, fish that is caught in the Pacific region because of China’s escalating dominance of the fishing industry through subsidization of China owned fishing vessels and investment schemes with independent Pacific countries “compelling friendly relations and preferential treatment for their respective Exclusive Economic Zones”;
• US National Oceanic and Atmospheric Administration (NOAA) along with its National Marine Fisheries Service’s prohibition of fishing in the high seas and the shrinking of fishing grounds due to monuments and sanctuary expansions, limit the ability of the US fishing fleet and increases the cost of fish which StarKist has to purchase;
• Insensitive enforcement by the US Coast Guard (USCG) of its rules and regulations has also raised the cost of fish to StarKist because the fish is now transshipped from neighboring Samoa because foreign fishing vessels — which use to off-load their catches at the StarKist dock site — are afraid of being charged fines;
• With foreign vessels off loading in Samoa, American Samoa has lost its secondary market which includes refueling, supply re-provisioning, dry-docking, entertainment, and purchase of local products;
• Cost of our local infrastructure is high compared to the other tuna canning countries competing with StarKist on the global market. ASG is providing infrastructural discounts to StarKist but it is still insufficient to improve its competitive advantage;
• The future of StarKist is influenced by its market share, which is affected by its competitive advantage and predicated on its operating operating costs. Any future minimum wage increase will significantly affect negatively its cost structure and its competitive advantage;
• StarKist’s operation is very susceptible and vulnerable to any external imposed federal policy changes, economic changes, fuel costs increases, labor cost hikes, transportation cost rise, price of fish, infrastructure costs, and our local policy pronouncements.
“Our focus on ensuring the future financial and economic viability of StarKist is obvious because it constitutes the only other economic pillar upon which the entire economy of American Samoa is dependent upon,” Lolo said.
The impact of StarKist operations on the territory’s economy “is pervasive.”
“Without StarKist, economic devastation will undoubtedly result and it will take years for recovery and the burden will be on the federal government to revive American Samoa’s economy,” Lolo wrote.
The third and final mandate of the Fair Minimum Wage Act is “setting minimums that do not give a competitive advantage over counterpart US industries,” Lolo noted, adding that StarKist production is counted with the total U.S. tuna can production so it’s part of the US fishing industry.
He reiterated that StarKist competes with foreign canned tuna producing countries, and reminded the GAO that StarKist and Chicken of the Sea “collaborate to prevent usurpation of the US market by these foreign countries, which improves the US trade balances.”
Lolo explained that the fundamental issue with American Samoa’s minimum wage “is one of economic survival and the preemption of social devastation.” He went on to clarify “American Samoa’s perceived objection” to minimum wage hikes.
“Our position [is] that we set minimum wage that is supportable by the territory’s economy to avert any job curtailment that might emanate.” The governor said the current method in determining the territory’s minimum wage “is not acceptable, because it does not avail the opportunity to us to participate in the process.”
“It is our hope that a new method will be adopted that will ensure our participation, which will guarantee consideration of all relevant data in the determination of our minimum wage,” said Lolo, who also provided to GAO the 18-page report that the ASG Minimum Wage Task Force presented to him last week Wednesday.
(Samoa News will report tomorrow on the task force report).