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OIA believes it’s critical to consider particular circumstances in AS for min wage hikes

Increasing ASG’s reliance on federal financial assistance may occur if not
fili@samoanews.com

US Department of Interior’s Office of Insular Affairs (OIA) believes it’s critical to consider the particular circumstances of American Samoa when adopting a process of adjusting the territory’s minimum wage and suggested an in-depth study, says OIA Director Nikolao I. Pula in response to a US Government Accountability Office report.

The GAO report released Dec. 2 to US congressional members covers two alternatives for raising minimum wages in American Samoa to keep pace with the cost of living and reach the federal level of $7.25 per hour. (See Samoa News edition Dec. 6 for details.)

One of the methods involves adjusting minimum wages in American Samoa based on the cost of living index, while the second approach would establish a schedule of increases toward the goal of reaching the federal minimum wage level.

“Much more research and study are required to ascertain the full range of benefits and costs of these [two] methods, and ultimately, Congress may have to act on either method or an alternate approach,” Pula wrote in Nov. 3 comment letter to the draft of the GAO report.

The report also provides information about foreign countries, which allow remote areas under their jurisdictions to set their own minimum wage rates for local labor market. According to GAO, governments around the world employ a wide variety of approaches to setting minimum wage rates. These systems vary widely, including with respect to the entities holding decision-making authority, the objectives they seek to address, any mechanisms for making regular adjustments, and the effective coverage and level of the minimum wages.

OIA believes it is critical to consider the particular circumstances of the Territory when adopting a process for adjusting minimum wage rates,” Pula wrote to GAO. “Setting a minimum wage rate without considering the overall economic and labor market realities of the Territory may result in unintended consequences such as increasing ASG’s reliance on federal financial assistance.”

“An in-depth review of the suggested approaches by appropriate personnel” within USDOI, US Labor Department and US Commerce Department, along with Territory and industry experts “would result in a method of adjusting minimum wage in the Territory which would keep pace with the Territory’s cost of living and converging with the federal minimum wage rate,” Pula said.

For the overall GAO report, Pula said it correctly depicts the economic challenges in American Samoa in that the Territory is a removed, small group of islands — 76 square miles — located in the South Pacific, with limited resources to sustain a population of approx. 57,000.

Additionally, the ASG is the largest employer and “relies heavily” on federal financial assistance, which provides over 50% of ASG’s total revenue. The other major employers are the canneries — with and one of them — Samoa Tuna Processors Inc. — indefinitely suspending canning operations this month.

“The report also noted that although the territory’s minimum wage has generally remained below the federal minimum wage rate, they have generally kept pace with the cost of living in the Territory,” said Pula.

The GAO report cites federal government assistance to the territorial government. It says that in fiscal year 2015, ASG’s single audit reported that U.S. federal grants provided $164 million of the $255 million in total of government revenue to American Samoa.

 Ranked by grant expenditures, the largest federal grantors were the Departments of Health and Human Services ($40.1 million), the Interior ($34.8 million), Agriculture ($32.7 million), Education ($23.7 million), and Homeland Security ($10.2 million), according to GAO.