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Minimum Wage Task Force cites ‘ongoing challenges’ that face the private sector

American Samoa Executive Office Building

Pago Pago, AMERICAN SAMOA — In its 18-page report, the governor’s appointed Minimum Wage Task Force cited “ongoing challenges” that face the private sector, with the most impacted being the “fishery-related industries”.

Among the sections of the Oct. 23rd report, which Gov. Lolo Matalasi Moliga provided to the US Accountability Office (GAO) — the investigative arm of the US Congress — deals with “threats to the public and private sector”.

“The private sector continues to face ongoing challenges as a result of limited access to capital, artificial limitation arbitrarily placed on local natural resources and raw materials [other than fish], high transportation costs, and limited human capital,” says the report.

The Task Force notes that a short survey by the American Samoa Chamber of Commerce was sent to 233 local businesses. Of the 188 respondents who completed the survey, an average of 71% of employees currently earn above minimum wage. (There are 17 different minimum wages for American Samoa, depending on the industry.)

“While this may be an indicator that a good number of employers are paying above minimum wage, about 20% of employers anticipate either layoffs or reduction in hours as a result of the next minimum wage increase,” the report states.

Additionally, “No other sector is impacted by these challenges more than the fishery-related industries. It is estimated 1 in 3 private sector jobs either directly or indirectly supports the fish cannery industry, accounting for another 1,000- 2,000 jobs that are put at risk each time StarKist is faced with new and compounding operational costs.”

The Task Force reported that the transportation and tourism industries also “bear an asymmetrical portion” of the impacts of these federally imposed challenges. It is estimated that the current airfare for a single passenger, traveling between American Samoa and Hawaii (approx. 2,500 miles), is as much as 2 to 3 times higher than airfare on routes of similar distances within the U.S. mainland, the report claims.

Additionally, the federal cabotage law restricts the ability of local residents to seek out more cost-effective air travel options, which has severely hampered the development of the territory’s tourism industry. “With these artificial barriers hindering the development of many industries in the territory, the diversification of American Samoa’s economy is limited  to two distinct pillars”, the report states.

The first is employment by the American Samoa Government, which includes both federal grants and locally funded jobs. ASG employs approximately 5,400 local government workers in its primary government departments, and hundreds more through its component units and authorities.

The current government industry minimum wage is $5.21 per hour and another 40-cent per hour hike in 2021 - as dictated by federal law - will increase it to $5.61.

According to the report, a total of 876 ASG employees currently earn below $5.61, and by 2021, it would cost about $500,000 to bring these minimum wage earners up to the federal minimum wage rate. Furthermore, approximately 433 positions - at a cost of $213,000 - are locally funded versus 443 positions - at a cost of $266,000 - that are federally funded.

“This does not account for the gradual increase in payroll for the next level of workers,” the task force points out.

The second pillar is the fish canning industry - StarKist - which accounts for more than 2,300 jobs in 2017, the report states.  Currently, the minimum wage for the cannery industry is $5.56 per hour which is much higher compared to cannery operations in other foreign countries.

The report refers to Thailand and Vietnam as American Samoa’s “direct competitors” in the fish canning industry. “Maintaining a competitive position is a constant challenge that necessitates flexibility to adjust American Samoa’s minimum wage rates as needed,” it says.

Data provided in the report, using U.S. dollars, shows that in Thailand, the cannery industry wage is US$325 a month or US$1.88 an hour. In Vietnam, it’s between $119-$172 a month or US$0.69-$0.99 per hour.

Minimum wages in Samoa and Fiji are also included in the report. In Samoa - using US currency, as outlined in the report -  the private sector minimum wage is $0.80 cents per hour, while the public sector is US$1 per hour. In Fiji, its a set US$1.04 per hour for both public and private sectors.

“These are the competitive advantages to production costs that we and others in the region must take into account,” the report says. “Locally, decision-makers of the minimum wage for American Samoa need to understand the competitive arena of the region, and make sound decisions that take into account all the variables to determine reasonable local minimum wage rates.”

American Samoa has the highest minimum wage in the immediate area, compared to its most direct competitors in the region. “It cannot be overstated how sensitive the cannery industry and the region are to these types of critical factors for reducing costs, increasing productivity, and driving up profitability,” the report notes.