Ads by Google Ads by Google

Alternatives for local min wage hikes presented to U.S. Congress

Minimum wage increases could be reduced or suspended based on economic indicators

The investigative arm of the US Congress has recommended two alternatives for raising the minimum wage in American Samoa to keep pace with the local cost of living and reach the federal minimum wage level.

The US Government Accountability Office (GAO) had already provided Congress with one alternative included in provisions of a federal bill enacted into law in October 2015, in which the minimum wage was raised by 40 cents effective Sept 30, 2015 instead of the previously mandated 50 cents.

Federally mandated minimum wage hikes for American Samoa were enacted into 2007 and the wage hike of 50 cents per hour was to implement every year until it reached the federal level of $7.15 per hour. However, federal amendments delayed it at least twice after the first wage hike prompted the closure of Samoa Packing cannery in September 2009.

According to GAO, the current schedule of increases would raise all American Samoa minimum wages to the current federal hourly rate of $7.25 by 2036. However, any new increase in the federal rate will lengthen the time required to achieve convergence, it says.

American Samoa has 17 different minimum wages, depending on the industry — with the lowest at $4.68 for garment manufacturing and the highest at $6.09 for stevedoring, and maritime shipping agency activities.

When the new law was enacted in October 2015, hiking the minimum wage by only 40 cents per hour, it included a provision for GAO to report on alternative ways of increasing minimum wages in American Samoa to keep pace with the territory’s cost of living and eventually equal the federal minimum wage.

On Friday, Dec. 2, the GAO released a new 110-page report which includes “two basic approaches for increasing American Samoa’s minimum wages to keep pace with the cost of living in American Samoa and to eventually equal the federal minimum wage—the criteria included in the provision for GAO to report on this issue.”

“The first approach relies on indexing minimum wages to the cost of living,” the report says. “The second approach relies on using a schedule of future adjustments.”

According to GAO, aspects of each approach could also be combined, as needed, with respect to the amount and timing of future increases to the territory’s minimum wages.

“Given concerns about potential negative effects of increasing American Samoa’s minimum wage on the territory’s economy, other design options could be incorporated to safeguard against such effects, it says.

For example, minimum wage increases could be reduced or suspended based on economic indicators that reflect the general health of the American Samoa economy or critical sectors.

The report also examines the history of minimum wage implementation in American Samoa; the status of the American Samoa economy, including changes in employment, earnings, and key industries since scheduled minimum wage increases began in 2007.

GAO reported that American Samoa’s gross domestic product (GDP) per capita is less than a quarter of the U.S.’s GDP per capita and, adjusted for inflation, “has declined over the past decade.”

Local government and tuna canneries are the largest employers, accounting in 2014 for 42 percent and 14 percent of the workforce, respectively. From 2007 to 2014, overall employment fell by 4 percent, and workers’ average inflation-adjusted earnings fell by about 11 percent, the report says.

During the same period, cannery employment decreased by 50 percent, and the minimum wage for cannery workers rose.

Cannery officials reported labor costs and fisheries access among the challenges of operating in the territory, and one of the two canneries announced plans to suspend operations indefinitely in December 2016, said GAO.

“The American Samoa government has expressed concern that continued minimum wage increases are at odds with sustainable economic development,” GAO said.

As previously reported by Samoa News, US based Tri Marine International announced early last month its plans to indefinitely closed down on Dec. 11 its Samoa Tuna Processors Inc., cannery operations in American Samoa.

See Monday’s Samoa News edition for details on the two alternatives to raise the minimum wage and other issues.