Chamber of Commerce supports any delay in minimum wage hikes
Pago Pago, AMERICAN SAMOA — Although supportive of “fair minimum wages for our employees”, the American Samoa Chamber of Commerce says the economy of the territory - which is reliant on the canneries - dictates otherwise.
Therefore, the Chamber supports any delay in minimum wage hikes for the canneries until another economic option is feasible.
The Chamber’s position was outlined in an Oct. 24th letter from chairwoman Ella Gurr to Emil Friberg, assistant director of International Affairs and Trade of the US Government Accountability Office. Friberg led a four-member GAO team that 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.
While here, the GAO team met with the Chamber and private sector employees.
In the letter, Gurr emphasized that it’s “absolutely critical” that countries such as American Samoa “be inclusive” in discussions of minimum wage increases, “especially since we are the largest stakeholders being impacted.”
“While there is certainly a tendency to applaud increase in minimum wage as a victory for the economic well-being of low wage workers, these constant wage increases also come with effects positive and negative to many companies of all different sizes,” Gurr wrote. She provided highlights of both the negative and positive minimum wage increases
• Impact stability of the largest private employer - StarKist.
Gurr explained that StarKist’s direct and indirect impact to American Samoa does not go unrecognized, from lower utility rates and shipping costs as well as needed job creation.
Historically, she said, the main pillars of the economy for employment have been predominately ASG and the canneries. However, the 2009 closure of COS Samoa Packing cannery “interestingly created a structural and compositional change in American Samoa’s economy.”
“American Samoa is currently dependent upon the private sector, excluding the canneries,” she said, and pointed to the GAO’s 2017 minimum wage report that documented the composition of American Samoa employment in 2016: cannery employment (14%), ASG employment (42%); and other employment - private sector excluding the canneries - (44%).
Although data showed that there had been a shift in employment composition away from the cannery, Gurr said “StarKist still levies huge financial relief for American Samoa in the indirect impacts - [for example] with fuel and shipping.”
“Any increase in minimum wage could force the closure of StarKist and drive American Samoa into recession,” she notes.
• Impact on Margins and Cash flow
“The impact on profit margins and cash flow can also affect well-established companies who might be forced into pushing extra costs on to customers, leading to future economic strain on the business,” she explained, adding that higher minimum wages means that companies will need to allocate more recourses to paying their employees.
“In our highly price driven economy, smaller businesses and startups [business] might certainly be struggling to survive and an increase in their employees’ salary can be a tipping point that pushes them over the edge.”
For example, in recent years, some smaller companies have actually been forced to close down operations due to wage increases. Additionally, small business startups might find it harder to receive the funding they need to successfully begin a business due to increased salary requirements.
• Reduction in number of employees and/or working hours.
In some case, Gurr said, minimum wage hikes can actually reduce the overall salary earnings of low wage workers. Additionally, when stricter workforce management doesn’t lead to increased productivity gains and better profit margins, employers are often forced into cutting back the number of hours for employees.
Furthermore, the variance in minimum wages depending on the industry can also be impactful to business. “In these case, some businesses have a disadvantage with labor costs which can disrupt a healthy cash flow and profit margin when factoring in total labor expenses,” she explained. “This could potentially lead to less jobs being available as smaller businesses restrict the number of employees they hire.”
“Also, the variations of minimum wage across the island may also lead to a migration of jobs to [US] states,” she continued.
Among the positive impacts of minimum wage hikes cited by Gurr are:
• more disposable income for consumer spending
• happier employees
• reduced turnover in employment numbers
• stabilizing population - higher wages equates to less people relocated to the US for better living.
Gurr said there’s a need to “continue to build and strengthen relationships” with ASG and the private sector”. She said taxation without representation is a factor; for example, the lack of input by the private sector in critical economic development decisions.
Other economic environment issues cited by Gurr: diversification in other industries is a necessity; lack of commercial lending options on island is a factor for many businesses; and stagnant and declining economic climate.
“Unfortunately, these are just a few of the many needs of American Samoa,” said Gurr. “Chamber supports fair minimum wages for our employees, however the economic climate of the territory dictates otherwise.”
“It’s pretty simple, American Samoa is still very reliant on the canneries and therefore the Chamber supports any delay of minimum wage increases for the canneries until another economic option is feasible,” she concluded.
American Samoa has 17 different minimum wages depending on the industry. For the canneries, the minimum wage is $5.56 per hour. Samoa News will report in future editions on some of the local companies who submitted written testimony to the GAO, through the Chamber.