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entitled 'American Samoa and The Commonwealth of The Northern Mariana 
Islands: Economic Indicators Since Minimum Wage Increases Began' which 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

March 2014: 

American Samoa and The Commonwealth of The Northern Mariana Islands: 

Economic Indicators Since Minimum Wage Increases Began: 

GAO-14-381: 

GAO Highlights: 

Highlights of GAO-14-381, a report to congressional committees. 

Why GAO Did This Study: 

In 2007, the United States enacted a law incrementally raising the 
minimum wages in American Samoa and the CNMI until they equal the U.S. 
minimum wage. American Samoa's minimum wage increased by $.50 per hour 
three times, and the CNMI's four times before legislation delayed the 
increases amid concerns that they would have a detrimental effect on 
the American Samoa and CNMI economies. The most recent increase in 
American Samoa occurred on May 25, 2009. The next is scheduled for 
September 30, 2015, with additional increases every 3 years 
thereafter. Under current law, the minimum wage in American Samoa's 
tuna canning industry will equal the current U.S. minimum wage of 
$7.25 in 2027. The CNMI's most recent increase occurred on September 
30, 2012. The next increase is scheduled for September 30, 2014, with 
additional increases in 2016 and annually thereafter until it reaches 
the U.S. minimum wage. 

GAO is mandated to report in 2014, and every 3 years thereafter, on 
the impact of the minimum wage increases. This report updates our 
previous reports and discusses for each territory (1) changes in 
employment and earnings and (2) changes in key industries since the 
most recent federal minimum wage increase and since the increases 
began. GAO reviewed local and federal earnings information; collected 
data from employers in key industries through a questionnaire and from 
employers and workers through discussion groups and interviews during 
visits to each area. 

American Samoa's government said GAO captured the consensus to 
postpone a 2015 minimum wage increase. CNMI's government said GAO 
captured the general economic condition of the CNMI. 

What GAO Found: 

American Samoa employment and earnings have decreased since 2007, but 
employment increased slightly from 2011 to 2012. Since 2005, the 
American Samoa economy has had a flat or declining real gross domestic 
product (GDP). 

Table: American Samoa Employment: 

Employment: All sectors, 2011-2012; 
Change: +1.5%. 

Employment: All sectors, 2007-2012; 
Change: -11%. 

Employment: Tuna canning hourly workers, 2012-2013; 
Change: -13%. 

Employment: Tuna canning hourly workers, 2007-2013; 
Change: -58%. 

Source: GAO analysis of data from GAO tuna canning industry 
questionnaire and American Samoa tax office data. 

[End of table] 

Average inflation-adjusted earnings of those employed fell by 5 
percent overall from 2007 to 2012 and by 2 percent from 2011 to 2012.
One of American Samoa's two tuna canneries closed in 2009. However, a 
new company is renovating the closed cannery and plans to re-open it 
in 2015. Two employers in the tuna canning industry took cost-cutting 
actions from 2010 to 2013, including labor-saving strategies and 
reduced overtime. The employers attributed to a moderate or large 
extent all but one of their actions to minimum wage increases, but 
also to increased utility and material costs. Two of the three 
employers planned more cost-cutting actions and attributed those plans 
to a moderate or large extent to minimum wage increases, but also to 
other increased costs and business factors.
Commonwealth of the Northern Mariana Islands (CNMI) employment and 
earnings have decreased overall since 2006, but earnings increased 
slightly from 2011 to 2012. After falling rapidly from 2005 to 2009, 
CNMI real GDP remained relatively stagnant from 2009 to 2012. 

Table: CNMI Employment: 

Employment: All sectors, 2011-2012; 
Change: -6%. 

Employment: All sectors, 2006-2012; 
Change: -45%. 

Employment: Hotel industry hourly workers, 2012-2013; 
Change: +3%. 

Employment: Hotel industry hourly workers, 2007-2013; 
Change: -21%. 

Source: GAO analysis of data from GAO hotel industry questionnaire and 
CNMI government tax data. 

[End of table] 

Average inflation-adjusted earnings of those employed fell by about 2 
percent overall from 2006 to 2012 but rose by 1 percent from 2011 to 
2012. 

CNMI hotel occupancy and room rates have risen in recent years, but 
industry representatives we spoke with characterized the recent growth 
as an opportunity to recover and reinvest in their properties. Hotels 
representing the majority of all workers employed by respondents to GAO'
s questionnaire attributed past cost-saving strategies and price 
increases to minimum wage increases. Hotels also attributed their 
actions to other increased costs and changes to U.S. immigration law, 
which reduce the number of available permits for foreign workers in 
the CNMI. Hotels representing 90 percent or more of all workers 
employed by questionnaire respondents attributed plans for further 
cost-cutting to minimum wage increases, but also to increasing 
utility, material, and transportation costs. 

[End of section] 

Contents: 

Letter: 

American Samoa Earnings, Employment, and Status of Key Industries: 

CNMI Earnings, Employment, and Status of Key Industries: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Minimum Wage Increases in American Samoa and CNMI: 

Appendix III: American Samoa: 

Appendix IV: Commonwealth of the Northern Mariana Islands: 

Appendix V: GAO Questionnaire: 

Appendix VI: Comments from the Government of American Samoa: 

Appendix VII: Comments from the Government of the CNMI: 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: American Samoa Key Findings: 

Table 2: CNMI Key Findings: 

Table 3: Alternative Measures of Employment in American Samoa: 

Table 4: Past and Scheduled Minimum Wage Increases in American Samoa: 

Table 5: Past and Scheduled Minimum Wage Increases in CNMI: 

Table 6: Distribution and Increased Annual Cost Since June 2013 Per 
Hourly-wage Worker in the American Samoa Tuna Canning Industry Due to 
Scheduled Minimum Wage Increases: 

Table 7: American Samoa Employer Actions from June 2010 to June 2013 
and Attribution of Those Actions to Minimum Wage Increases. 

Table 8: Attribution of American Samoa Employer Actions from June 2010 
to June 2013 to Other Factors: 

Table 9: American Samoa Employer Planned Actions and Attribution of 
Those Plans to Minimum Wage Increases: 

Table 10: Attribution of Planned American Samoa Employer Actions to 
Other Factors: 

Table 11: Distribution and Increased Annual Cost since June 2013 per 
Hourly-wage CNMI Hotel Worker Due to Scheduled Minimum Wage Increases: 

Table 12: Employee-Weighted CNMI Employer Actions from June 2010 to 
June 2013 and Attribution of Those Actions to Minimum Wage Increases. 

Table 13: Employee-Weighted Attribution of CNMI Employer Actions from 
June 2010 to June 2013 to Other Factors: 

Table 14: Employee-Weighted CNMI Employer Planned Actions and 
Attribution of Those Plans to Minimum Wage Increases: 

Table 15: Employee-Weighted Attribution of Planned CNMI Employer 
Actions to Other Factors: 

Table 16: HANMI Monthly Hotel Occupancy Rates: 

Table 17: HANMI Inflation-Adjusted Monthly Room Rates 2010-2013: 

Figures: 

Figure 1: Map of American Samoa: 

Figure 2: Pago Pago Harbor: 

Figure 3: American Samoa Nominal and Real GDP, 2005-2012: 

Figure 4: Population and Citizenship Status of American Samoa, 1980-
2010: 

Figure 5: American Samoa and Foreign Tuna Exports to the United 
States, 1995-2012: 

Figure 6: Star-Kist Cannery, Pago Pago: 

Figure 7: Tri Marine (former Chicken of the Sea) facility in Pago Pago: 

Figure 8: American Samoa Employment Based on American Samoa Tax Data 
and GAO Questionnaire Data, 2007 through 2012: 

Figure 9: American Samoa Nominal Mean Earnings and Inflation-Adjusted 
Mean Earnings Based on American Samoa Tax Data and GAO Questionnaire 
Data, 2007 through 2012: 

Figure 10: Map of the CNMI: 

Figure 11: CNMI Nominal and Real GDP 2005-2012: 

Figure 12: CNMI Visitor Arrivals, Fiscal Years 1990-2013: 

Figure 13: Saipan, CNMI, and Multi-lingual Sign at Hotel in Saipan: 

Figure 14: Citizenship Status of CNMI Population, 1980-2010: 

Figure 15: CNMI Employment Based on CNMI Government Tax Data, 2006 
through 2012: 

Figure 16: CNMI Average Nominal and Inflation-Adjusted Earnings Based 
on CNMI Government Tax Data, 2006 through 2012: 

Figure 17: Tinian Dynasty Hotel & Casino: 

Figure 18: Plane Preparing for the Saipan to Tinian Flight: 

Figure 19: The Palms Resort Hotel: 

Abbreviations: 

CBO: Congressional Budget Office: 

CNMI: Commonwealth of the Northern Mariana Islands: 

CPI: Consumer Price Index: 

FICA: Federal Insurance Contributions Act: 

FLSA: Fair Labor Standards Act of 1938: 

GDP: gross domestic product: 

HANMI: Hotel Association of the Northern Mariana Islands: 

SSA: Social Security Administration: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

March 31, 2014: 

Congressional Committees: 

For decades, American Samoa and the Commonwealth of the Northern 
Mariana Islands (CNMI) have had minimum wages below the statutory 
minimum wage in the United States and in other U.S. territories. In 
2007, Congress enacted legislation to increase the minimum wages in 
American Samoa and the CNMI in periodic increments until each reaches 
the federal minimum wage, which is currently $7.25 per hour.[Footnote 
1] In 2009, Congress mandated that GAO report on the impact of these 
minimum wage increases.[Footnote 2] Some incremental minimum wage 
increases included in the 2007 law have occurred in each territory; 
however, subsequent legislation delayed further increases amid 
concerns about their impact on the American Samoa and CNMI economies. 
[Footnote 3] Both territories experienced economic downturns between 
2007 and 2009, including the complete exodus of the CNMI's garment 
industry and the closure of one of two tuna canneries in American 
Samoa--a major source of private sector employment. GAO has reported 
twice in response to this mandate, in 2010 and 2011.[Footnote 4] 

This report updates our previous reports and discusses for each 
territory (1) changes in employment and earnings and (2) changes in 
key industries since the most recent federal minimum wage increase and 
since the increases began. 

To identify changes in employment and earnings in American Samoa and 
the CNMI, we reviewed and analyzed prior GAO reporting covering 2006 
through 2009 and information from the American Samoa and CNMI 
governments for 2010 through 2012. We used CNMI tax data to determine 
the number of employees and mean wages in the CNMI. We used combined 
American Samoa tax data and GAO questionnaire data to determine the 
number of employees and mean wages in American Samoa and compared 
these data to Social Security Administration (SSA) data on employment 
and wages. We primarily present the American Samoa tax data in our 
analysis. While the SSA data cover all types of workers in American 
Samoa, three large groups of people in the CNMI were not required to 
report earnings to SSA and thus are excluded from the SSA data--CNMI 
government workers and immigrant workers from the Philippines and 
Korea. In 2012, these three groups represented approximately 40 
percent of all CNMI workers, according to CNMI government tax data. We 
have chosen not to report the CNMI SSA data due to these coverage 
gaps. Our study does not cover workers in the underground economy or 
identify any workers who may have been unlawfully paid below the 
minimum wage. We relied on consumer price index (CPI) data from 
American Samoa and the CNMI to determine inflation-adjusted wages. We 
reviewed technical documentation and compared available data to other 
sources, among other steps, and determined that these data sources 
were sufficiently reliable for our purposes. 

To identify changes in key industries, we reviewed prior GAO reporting 
and analyzed data from the U.S. Department of Commerce, tuna industry 
representatives, and tourism organizations in the CNMI. We analyzed 
the results of a questionnaire we sent to employers in the key 
industries in American Samoa (tuna canning) and the CNMI (hotels). Our 
questionnaire requested 2011-2013 information on their number of 
employees and wage rates, as well as past and planned actions in 
response to the minimum wage.[Footnote 5] We received completed 
questionnaires from all 3 employers in the tuna canning industry and 
from 11 out of the 13 hotels that we sent questionnaires to in the 
CNMI. Questionnaire responses are limited to the American Samoa tuna 
canning industry and the CNMI hotel industry and may not be 
representative of all workers and employers in each area. We also met 
with or obtained data from representatives of the territorial 
governments, businesses, business groups, and workers. In the CNMI, we 
held discussion groups on the impact of minimum wage increases with 
members of the Hotel Association of the Northern Mariana Islands 
(HANMI) and the Chambers of Commerce of Saipan and Tinian islands. We 
also held discussion groups with hotel workers on Saipan and Tinian. 
In American Samoa, we held a discussion group with members of the 
Chamber of Commerce and with workers employed at the Star-Kist 
cannery. Views expressed in discussion groups only represent the views 
of participants in those groups and may not be representative of all 
workers' and employers' views in each industry or area. We reviewed 
technical documentation and compared available data with other 
sources, among other steps, and determined that these data sources 
were sufficiently reliable for our purposes. 

Although our approach yielded information on trends in employment, 
wages, and earnings in both areas, we were not able to distinguish 
between the effects of minimum wage increases and the effects of other 
factors, including the global economy, fluctuations in energy prices, 
global trade liberalization, and the application of U.S. immigration 
law to the CNMI. 

We conducted this performance audit from July 2013 to February 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. See appendix I 
for further details of our methodology. 

American Samoa Earnings, Employment, and Status of Key Industries: 

The minimum wage in American Samoa has increased three times since 
2007, most recently on May 25, 2009. Unlike the United States, 
American Samoa has separate minimum wages for 18 separate industries, 
currently ranging from $4.18 to $5.59 per hour. The tuna canning 
industry, American Samoa's largest source of private sector 
employment, has a current minimum wage of $4.76 per hour and mostly 
employs foreign labor from the neighboring islands of Samoa.[Footnote 
6] There is currently one operating cannery, Star-Kist, and its 
associated can manufacturer in American Samoa. An additional fish 
company has begun limited operations in American Samoa while 
renovating and planning to re-open the former Chicken of the Sea 
cannery in 2015. Each minimum wage in American Samoa will next be 
increased by $.50 per hour on September 30, 2015, with further 
increases every 3 years. Under current law, the minimum wage in the 
tuna canning industry will reach the U.S. minimum of $7.25 per hour in 
2027. 

American Samoa Employment and Earnings Declined from 2007 to 2012: 

* Economy. American Samoa's real gross domestic product (GDP) and 
population have both declined in recent years. American Samoa's 2012 
real GDP of $504 million was 4.5 percent below the 2006 real GDP, and 
also slightly lower than the 2009 real GDP. Real GDP per capita 
increased 12.5 percent to $9,164 from 2006 to 2012. American Samoa's 
population declined from 57,291 in 2000 to 55,519 in 2010.[Footnote 7] 

* Employment. American Samoa tax combined with GAO questionnaire data 
show that the total number of employees in American Samoa increased 
1.5 percent from 2011 to 2012 (from 15,552 to 15,790).[Footnote 8] 
However, from 2007 to 2012, employment declined 11 percent (from 
17,677 to 15,790, with a peak of 19,229 in 2008).[Footnote 9] 
Questionnaire responses from the tuna canning industry show that their 
employment of hourly workers dropped by 13 percent from 2012 to 2013 
and by 58 percent from 2007 to 2013. 

* Earnings. Earnings analysis based on American Samoa tax, GAO 
questionnaire, and consumer price data show that, from 2011 to 2012, 
average inflation-adjusted earnings of those employed in American 
Samoa fell by 2 percent. The decrease resulted from average earnings 
increasing by 2 percent while prices increased 4 percent. For the 
overall period from 2007 to 2012, average inflation-adjusted earnings 
fell by about 5 percent; average annual earnings rose about 27 percent 
but local prices rose by about 34 percent. Although earnings data do 
not allow for a direct comparison of average and minimum wage annual 
earnings or for tracking the earnings of workers who lost their jobs, 
the hourly wage of minimum wage workers who retained their jobs and 
work hours has not increased by more than inflation since 2007. The 
inflation-adjusted earnings of minimum wage cannery workers who 
retained their jobs and work hours fell by about 4 percent from 2011 
to 2012 and by about 5 percent from 2007 to 2012.[Footnote 10] 

* Employer, government, and worker views. The discussion group of 
private sector employers we met with generally opposed additional 
minimum wage increases, citing American Samoa's reliance on the tuna 
canning industry and fears about the effect of further increases on 
the industry and the economy.[Footnote 11] The American Samoa 
government, American Samoa's largest employer, anticipated it would 
have to cut six employees to offset the 2015 minimum wage increase, 
with additional budget impacts resulting from any further increases. 
The Governor of American Samoa has stated that he would pursue changes 
in U.S. law to allow American Samoa to take control of its minimum 
wage. Star-Kist workers who participated in our discussion group 
generally opposed further minimum wage increases rather than supported 
future increases.[Footnote 12] Workers expressed concerns that any 
increase would result in lost jobs or a closure of the cannery. Some 
workers we spoke with also expressed concerns that future increases in 
the minimum wage would lead to an increase in prices in American 
Samoa, as they said occurred as a result of previous minimum wage 
increases. 

American Samoa's Tuna Canning Industry Faces Challenges from Minimum 
Wage Increases and Other Factors. 

* Tuna canning industry wages. Without a minimum wage increase in 
American Samoa from 2011 through 2013, there was no increase in the 
$4.76 median wage of tuna canning workers in that time. Since 2007, as 
a result of previous minimum wage increases, the median wage among 
workers in the tuna canning industry employed by questionnaire 
respondents has risen from $3.30 to $4.76 per hour (44 percent). Based 
on questionnaire responses about workers' wages as of June 2013, the 
future minimum wage increases would affect the wages of 92 percent of 
the current workers in the canning industry by 2018, when the minimum 
wage reaches $5.76. Based on the wages workers currently earn, minimum 
wage increases would increase the average annual cost per worker in 
2018 by an average annual cost of $1,723 per worker. By 2027, when the 
tuna canning minimum wage reaches $7.25, 98 percent of current workers 
in the tuna canning industry would be affected, increasing the average 
annual cost per worker by $4,710.[Footnote 13] 

* Tuna canning employer actions. Two of the three employers in the 
tuna canning industry in American Samoa reported that they had taken 
cost-cutting actions from June 2010 to June 2013 including labor-and 
cost-saving strategies, and reduced overtime. The third employer, 
which was just beginning operations in American Samoa at that time, 
considered the questions not applicable. The two employers attributed 
all but one of their actions to a moderate or large extent to minimum 
wage increases. In addition to minimum wage increases, these two 
employers also attributed their actions to a moderate or large extent 
to increased utility and material costs. Two of three employers stated 
that they planned in the next 18 months to introduce labor-and cost-
saving strategies, delay business expansion, relocate business, and 
reduce overtime hours. The two employers attributed all of these plans 
to a moderate or large extent to the minimum wage increases, but also 
to increased utility and material costs and business factors. 

* Tuna canning industry analysis. Cannery officials stated that wage 
increases are one of many factors affecting the tuna canning industry 
in American Samoa, but that its labor costs, including the minimum 
wage increases, place American Samoa at a significant cost 
disadvantage in comparison with other canned tuna exporting countries. 
Both canneries cited congressional action to defer the next minimum 
wage increase to 2015 as encouraging their ability to invest in 
American Samoa. Cannery officials said that there is a spectrum of 
possible actions in response to increasing costs. For example, 
canneries could lower the staffing level or close certain production 
lines. 

See table 1 for key findings and appendix III for detailed findings 
and tables on American Samoa. 

Table 1: American Samoa Key Findings: 

Employment - all sectors[A]: 

Percentage change in number employed, 2011-2012; 
1.5% increase (from 15,552 to 15,790). 

Percentage change in number employed, 2007-2012; 
11% decrease (from 17,677 to 15,790). 

Employment - tuna canning industry[B]: 

Percentage change in number of hourly workers employed, 2012-2013; 
13% decrease (from 2,193 to 1,915). 

Percentage change in number of hourly workers employed, 2007-2013; 
58% decrease (from 4,593 to 1,915). 

Inflation-adjusted earnings - all sectors[A]: 

Percentage change in average inflation-adjusted earnings of those 
employed, 2011-2012; 
2% decrease. 

Percentage change in average inflation-adjusted earnings of those 
employed, 2007-2012; 
5% decrease. 

Tuna canning industry wages[B]: 

Percentage of hourly-wage tuna canning workers employed by 
questionnaire respondents in 2013 with wages affected by a September 
2015 minimum wage increase; 79%. 

Percentage of hourly-wage tuna canning workers employed by 
questionnaire respondents in 2013 who would be affected by minimum 
wage increases through 2027 (when tuna canning minimum wage reaches 
$7.25); 98%. 

Tuna canning employer actions[B]: 

* Tuna canning industry employers reported using labor-and cost-saving 
strategies, reducing overtime, freezing hiring, and raising prices 
from 2010 to 2013 and attributed these actions to a moderate or large 
extent to minimum wage increases; 
* Two tuna canning industry respondents reported planning to introduce 
labor-and cost-saving strategies, delay business expansion, relocate 
business, and reduce overtime hours. All of these planned actions were 
attributed to a moderate or large extent to the minimum wage increases. 

Tuna canning worker views[C]: 

Workers who participated in our discussion group generally opposed 
further minimum wage increases, expressing concerns that any increase 
would result in lost jobs or a complete closure of Star-Kist. 

Source: GAO analysis of data from GAO tuna canning industry 
questionnaire, American Samoa Tax office data, American Samoa Consumer 
Price Index, and American Samoa discussion groups. 

Notes: Employers responding to GAO's first questionnaire in 2009 
included the two tuna canning employers, as well as other employers 
with 50 or more employees. Questionnaire updates in 2010 covered the 
two tuna canning employers and excluded employers in other industries, 
smaller employers, and employers that had closed between 2007 and the 
date of our questionnaire. The 2013 questionnaire covered the current 
three tuna canning industry employers. Based on American Samoa tax 
data, our respondents represented, in 2012, about 14 percent of the 
total workforce. American Samoa questionnaire respondents represented 
100 percent of the tuna canning-related workforce. Responses are not 
necessarily representative of all American Samoa workers and employers. 

[A] GAO analysis of American Samoa Tax data and GAO questionnaire. 

[B] GAO analysis of responses to GAO's American Samoa tuna canning 
employer questionnaire. 

[C] GAO analysis of American Samoa discussion group results. 

[End of table] 

CNMI Earnings, Employment, and Status of Key Industries: 

The minimum wage in the CNMI has increased five times since 2007, with 
the most recent increase on September 30, 2012, bringing the minimum 
wage to $5.55 per hour. Under current law, the next minimum wage 
increase will occur on September 30, 2014, and the CNMI will reach the 
current U.S. minimum wage on September 30, 2018. The CNMI's sizable 
garment industry has left the territory, leaving tourism as its key 
industry. Tourists are primarily from Japan, Korea, China, and Russia. 
Chinese and Russian tourism has been supported by the Secretary of 
Homeland Security's decision to exercise parole authority, allowing 
tourists from those countries to enter the CNMI.[Footnote 14] The CNMI 
economy heavily relies on a foreign workforce to support its economy; 
as of the 2010 decennial census, noncitizens comprised 43 percent of 
the CNMI population.[Footnote 15] Since the 2009 assumption of U.S. 
control over CNMI immigration, the Department of Homeland Security has 
annually reduced the number of permits for the CNMI's foreign 
workforce in keeping with the requirement to bring the number of such 
permits down to zero by the end of 2014.[Footnote 16] 

CNMI Employment and Earnings Declined from 2006 to 2012: 

* Economy. The CNMI's population and real GDP have both declined in 
recent years. In real terms, CNMI GDP decreased by approximately 36 
percent overall from 2006 to 2012 though it has remained relatively 
flat since 2009. The CNMI's real GDP per capita decreased 
approximately 24 percent from 2006 to 2012. The CNMI population 
declined from 69,221 in 2000 to 53,883 in 2010. 

* Employment. The total number of people employed fell from 25,229 to 
23,720 (about 6 percent) from 2011 to 2012 according to CNMI 
government tax data. For the entire period from 2006 to 2012, the 
number employed has fallen from 43,036 to 23,720 (45 percent), with 
most of the overall decrease occurring from 2006 to 2009.[Footnote 17] 
Decreases before 2009 reflect closure of the CNMI's garment factories, 
which employed many foreign workers. 

* Earnings. From 2011 to 2012, inflation-adjusted average earnings of 
those employed rose by 1 percent, according to CNMI government tax 
data and consumer price data. The increase in earnings resulted from a 
3 percent increase in average earnings offset by a 2 percent increase 
in prices. Over the entire period from 2006 to 2012, average inflation-
adjusted earnings fell by about 2 percent, with an about 29 percent 
increase in average earnings offset by an about 31 percent increase in 
prices. Although earnings data do not allow for a direct comparison of 
average and minimum wage annual earnings or for tracking the earnings 
of workers who lost their jobs, the hourly wage of minimum wage 
workers who retained their jobs and work hours has increased by more 
than inflation since 2006. The inflation-adjusted earnings of minimum 
wage workers who retained their jobs and work hours rose by about 7 
percent from 2011 to 2012 and by about 39 percent from 2006 to 2012. 

* Employer, government, and worker views. CNMI employers we spoke with 
supported the 2013 postponement of minimum wage increases.[Footnote 
18] Participants in our discussion groups stated that businesses, 
particularly small businesses, could not absorb another minimum wage 
increase. However, the minimum wage was not as important a concern for 
discussion group participants as the potential loss of the foreign 
labor force. For hotel representatives we spoke with, providing easier 
access for Russian and Chinese tourists by having the Department of 
Homeland Security continue to parole these individuals into the CNMI 
was a greater concern than the minimum wage. According to the CNMI 
Department of Commerce, the Governor of the CNMI supported the 2013 
postponement of the minimum wage increase. Workers we spoke with on 
Tinian island saw future minimum wage increases as an opportunity to 
increase the amount they could remit to their families living 
elsewhere. Workers on both Saipan and Tinian islands feared that 
prices would increase along with the minimum wage, as they said had 
occurred at the time of previous increases.[Footnote 19] 

Hotel Industry Has Rebounded in Recent Years; Most Hotel Workers Will 
Be Affected by Minimum Wage Increases: 

* Hotel industry wages. From June 2011 to 2013, the median wage among 
workers employed by CNMI hotel industry questionnaire respondents rose 
from $5.33 to $5.86 (10 percent). Based on questionnaire responses 
about workers' wages as of June 2013, the future minimum wage 
increases would affect the wages of 94 percent of current workers in 
the CNMI hotel industry by the time the minimum wage reaches the U.S. 
minimum wage of $7.25 in 2018. Based on the wages workers currently 
earn, minimum wage increases would increase the average annual cost 
per worker in 2018 by $3,051 since June 2013.[Footnote 20] For the 
hotels that responded to our questionnaire, if observed trends 
continue, scheduled minimum wage increases will increase the share of 
hotels' total operating costs attributable to payroll from 
approximately 26 percent of operating costs in 2012 (with minimum wage 
increases representing about 1 percent of total operating costs) to 31 
percent in 2018 (with minimum wage increases representing about 5 
percentage points of the 31 percent increase). 

* Hotel employer actions. Hotels representing the majority of all 
workers employed by questionnaire respondents took cost-cutting 
actions and raised prices from 2010 to 2013. Although employers 
attributed a number of actions to the minimum wage increases, they 
also attributed them to other factors, such as increased costs and 
changes to U.S. immigration law. Hotels representing 90 percent or 
more of all workers employed by questionnaire respondents stated that 
they planned to introduce labor or cost-saving strategies and raise 
prices in the next 18 months, with hotels representing all or almost 
all workers employed by questionnaire respondents attributing that 
plan to minimum wage increases to a moderate or large extent. As with 
their past actions, employers attributed their future plans to a 
moderate or large extent to increasing utility, material, and 
transportation costs in addition to minimum wage increases. 

* Hotel industry analysis. In 2012 and 2013 hotel occupancy rates 
increased from previous years. After adjusting for inflation, yearly 
average room rates increased by 11 percent between 2010 and 2013. In 
addition, according to the Mariana Visitors Authority, two closed 
hotels may re-open and there are current proposals for the 
construction of two new hotels. While acknowledging the recent upturn 
in tourism, industry representatives characterized the growth as an 
opportunity to recover from several down years and reinvest in their 
properties. They attributed the recent growth in tourism to the 
Chinese and Russian markets and feared the loss of Russian and Chinese 
market if the parole program for these tourists is not maintained. 

See table 2 for key findings and appendix IV for detailed findings and 
tables on the CNMI. 

Table 2: CNMI Key Findings: 

Employment - all sectors[A]: 

Percentage change in numbers employed, 2011-2012; 
6% decrease (from 25,229 to 23,720). 

Percentage change in numbers employed, 2006-2012; 
45% decrease (from 43,036 to 23,720). 

Employment - hotel industry[B]: 

Percentage change in number of hourly workers employed by 
questionnaire respondents, 2012-2013; 
3% increase (from 1,715 to 1,763). 

Percentage change in number of hourly workers employed by 
questionnaire respondents, 2007-2013; 
21% decrease (from 1,590 to 1,252)[D]. 

Inflation-adjusted earnings-all sectors[A]: 

Percentage change in average inflation-adjusted earnings of those 
employed, 2011-2012; 
1% increase. 

Percentage change in average inflation-adjusted earnings of those 
employed, 2006-2012; 
2% decrease. 

Hotel industry wages[B]: 

Percentage of hourly-wage hotel workers employed by questionnaire 
respondents in 2013 with wages affected by a September 2014 minimum 
wage increase; 84%. 

Percentage of hourly-wage hotel workers employed by questionnaire 
respondents in 2010 who would be affected by minimum wage increases 
through 2018 (when minimum wage reaches $7.25); 94%. 

Hotel employer actions[B]: 
* Employers representing 30 percent of workers employed by 
questionnaire respondents laid off hourly-wage workers. Of those, 60 
percent attributed layoffs to the minimum wage to a moderate extent; 
none attributed layoffs largely to the minimum wage increases; 
* Employers representing 19 percent of workers employed by private 
sector questionnaire respondents planned additional layoffs of hourly-
wage workers. Of those, all attributed their plans to the minimum wage 
increases. 

Hotel worker views[C]: 
Employment - all sectors[A]: CNMI workers we spoke with said they 
would like pay increases but were concerned about losing jobs and work 
hours. 

Source: GAO analysis of data from GAO hotel industry questionnaire, 
CNMI government tax data, CNMI Consumer Price Index, and CNMI 
discussion groups. 

Notes: Employers responding to GAO's first questionnaire in 2009 
included hotels and other tourism-related employers, as well as other 
employers with 50 or more employees. Questionnaire updates in 2010 
covered hotels and other tourism-related employers and excluded 
employers in other industries, smaller employers, employers that did 
not respond to the 2009 questionnaire, and employers that had closed 
between 2007 and the date of our questionnaire, including garment 
factories. The 2013 questionnaire covered hotels with more than 50 
employees. Based on CNMI tax data, respondents represented about 7 
percent of the total CNMI workforce in 2012. CNMI questionnaire 
respondents provided hourly wage data on a total of 1,249 workers as 
of June 2013. Responses are not necessarily representative of all CNMI 
workers and employers. Percentages of employers reporting actions are 
weighted by each employer's total number of workers in 2013. 
Percentages of employers that attributed each action largely to 
minimum wage increases are weighted to reflect those employers' number 
of workers relative to all workers employed by respondents that 
reported the action. 

[A] Based on CNMI tax data. 

[B] Based on responses to GAO's CNMI hotel industry questionnaire. 

[C] Based on discussion group results. 

[D] The 2007-2013 count differs from the 2012-2013 count because it 
excludes those hotels that did not respond to our survey in 2009 and 
provide 2007 data. 

[End of table] 

Concluding Observations: 

Both American Samoa and the CNMI have experienced decreases in 
employment and earnings since minimum wage increases began in 2007. 
Although minimum wage increases play a role in each economy, factors 
beyond minimum wage increases will also continue to play a role. Both 
American Samoa and the CNMI have short-term potential to grow their 
primary sectors-American Samoa through the opening of a new cannery in 
2015 and the CNMI through the opening of new hotels. However, 
according to cannery officials we spoke with, changes in tariffs 
applicable to other countries exporting tuna or competition from low-
wage foreign competitors could compel the tuna canning industry to 
leave American Samoa. In the CNMI, the projected decrease in the 
permitted foreign labor force remains a concern for CNMI employers. In 
addition, CNMI tourism faces competition from other locations and is 
susceptible to economic trends in its tourist markets and the 
continuing use of parole to support Chinese and Russian tourism. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to officials at the Department of 
Commerce, Department of the Interior, Department of Labor, the Social 
Security Administration, and the governments of American Samoa and the 
CNMI for review and comment. We received written comments from the 
governments of American Samoa and the CNMI, which are reprinted in 
appendixes VI and VII, respectively. We also received technical 
comments from the Departments of the Interior, Commerce and Labor; and 
SSA, which we incorporated as appropriate. We also shared excerpts of 
the draft with several private sector entities and incorporated their 
comments as appropriate. 

Following are summaries of the written comments from American Samoa 
and the CNMI, with our responses. 

The government of American Samoa noted that our draft report captured 
the consensus among American Samoan stakeholders to postpone the 2015 
minimum wage increase, but expressed a number of concerns about the 
information sources we used. The government stated that there is 
significant evidence that the 2010 U.S. census grossly undercounted 
the American Samoa population. We have edited the footnote in the 
report to further describe American Samoa's concerns and have 
reprinted their assertions in the Appendix VI of the report, but the 
employment counts we present are not based on Census data and would 
not be affected by an underestimate in the 2010 decennial census. 

The government next expressed concern that, given the challenges to 
collecting validated data in American Samoa, the data presented in our 
report did not include a wide enough scope of data from other sources 
and, as a result, yielded misleading statements and findings. In 
Appendix I of our report, we reported and evaluated alternative data 
sources. We have worked with the American Samoa Office of Taxation to 
review and verify their data and believe that the use of its data, in 
conjunction with cannery employment data from our questionnaire, is 
appropriate for determining the changes in employment and earnings in 
American Samoa. 

The government additionally stated that our report failed to capture 
the multiplier effect of employment cutbacks in other industries in 
addition to tuna canning and the significant number of business 
closures during this period. However, each of the data series we 
present in Appendix I covers employment in all sectors and so would 
capture employment and earnings throughout the economy. 

The government of American Samoa also restated its opposition to 
further minimum wage increases and proposed that American Samoa set 
its own minimum wage schedule. In expressing its opposition, the 
government cited American Samoa's vulnerability to elements of the 
international and national market place and U.S. international trade 
and national budget policies. The government additionally stated that 
tethering the American Samoa minimum wage to that of the United States 
is misguided; because of the differences between the U.S. and American 
Samoa economies, American Samoa can never attain equality with the 
U.S. minimum wage. The government proposed instead that American Samoa 
be allowed to develop its own minimum wage schedule with appropriate 
guidance and oversight provided by the U.S. Department of Labor and 
U.S. Department of the Interior. See the full text of American Samoa's 
comment in Appendix VI. 

The government of American Samoa also provided us with technical 
comments that included updated CPI data correcting calculation errors 
made by their staff. Correcting these errors slightly changed the 
reported CPI. For example, the CPI for the 4th quarter of 2012 
increased from 130.5 to 131.1. We have recalculated the inflation-
adjusted wages accordingly in this report. Additionally, during the 
comment period, data reviews by American Samoa Office of Taxation and 
GAO resulted in corrections to American Samoa employment and wage data 
for 2007-2009. We have incorporated this corrected data. 

Comments from the Department of Commerce of the CNMI stated that the 
indicators provided an objective overview of CNMI economic conditions 
and the report captured the general condition of what is happening in 
the CNMI. The CNMI comment letter additionally reiterated challenges 
faced by the CNMI from uncertainty regarding the phase-out of foreign 
worker permits, the cost of fuel and utilities, and increases in 
health care costs. The Secretary of Commerce additionally stated that 
he hoped the report will elevate the CNMI's discussion with federal 
agency partners regarding baseline assessments and data, and how a 
wage increase may affect enrollment and eligibility for public 
assistance programs, such as Medicaid. 

We are sending copies of this report to interested congressional 
committees. We also will provide copies of this report to the U.S. 
Secretaries of Commerce, the Interior, Labor, to the Commissioner of 
Social Security, and to the Governors of American Samoa and the CNMI. 
In addition, the report will be available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov]. 

If you or your staffs have questions about this report, please contact 
David Gootnick at (202) 512-3149 or gootnickd@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff who made key 
contributions to this report are listed in appendix VIII. 

Signed by: 

David Gootnick:
Director, International Affairs and Trade: 

List of Committees: 

The Honorable Mary Landrieu: 
Chairwoman: 
The Honorable Lisa Murkowski: 
Ranking Member: 
Committee on Energy and Natural Resources: 
United States Senate: 

The Honorable Tom Harkin: 
Chairman: 
The Honorable Lamar Alexander: 
Ranking Member: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate: 

The Honorable John Kline: 
Chairman: 
The Honorable George Miller: 
Ranking Member: 
Committee on Education and the Workforce: 
House of Representatives: 

The Honorable Barbara Mikulski: 
Chairwoman: 
The Honorable Richard Shelby: 
Ranking Member: 
Subcommittee on Commerce, Justice, Science, and Related Agencies: 
Committee on Appropriations: 
United States Senate: 

The Honorable Jack Reed: 
Chairman: 
The Honorable Lisa Murkowski: 
Ranking Member: 
Subcommittee on Interior, Environment, and Related Agencies: 
Committee on Appropriations: 
United States Senate: 

The Honorable Tom Harkin: 
Chairman: 
The Honorable Jerry Moran: 
Ranking Member: 
Subcommittee on Labor, Health and Human Services, Education, and 
Related Agencies: 
Committee on Appropriations: 
United States Senate: 

The Honorable Frank Wolf: 
Chairman: 
The Honorable Chaka Fattah: 
Ranking Member: 
Subcommittee on Commerce, Justice, Science, and Related Agencies: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Ken Calvert: 
Chairman: 
The Honorable Jim Moran: 
Ranking Member: 
Subcommittee on Interior, Environment, and Related Agencies: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Jack Kingston: 
Chairman: 
The Honorable Rosa DeLauro: 
Ranking Member: 
Subcommittee on Labor, Health and Human Services, Education, and 
Related Agencies: 
Committee on Appropriations: 
House of Representatives: 

The Honorable John Fleming: 
Chairman: 
The Honorable Gregorio Kilili Camacho Sablan: 
Ranking Member: 
Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs: 
Committee on Natural Resources: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report updates our previous reports on the impact of minimum wage 
increases in American Samoa and the Commonwealth of the Northern 
Mariana Islands (CNMI) and discusses for each territory (1) changes in 
employment and earnings and (2) changes in key industries since the 
most recent federal minimum wage increase and since the increases 
began.[Footnote 21] 

To describe employment and earnings, we analyzed tax data from the 
American Samoa and CNMI governments and earnings data from the U.S. 
Social Security Administration (SSA) through 2012. We adjusted the 
earnings data using Consumer Price Index (CPI) data for each area. We 
also analyzed responses from GAO's questionnaire of large employers in 
the American Samoa tuna canning and CNMI hotel industries. To describe 
the status of key industries, we collected responses through the 
industry questionnaire. For both objectives, we conducted discussion 
groups with employers and workers and interviews with public 
officials. We provide additional information on each data source below. 

In preparing this report, we reviewed data and interviewed officials 
from the U.S. Departments of the Interior, Commerce, and Labor, as 
well as from SSA. During visits to American Samoa and the CNMI in 
November 2013, we conducted interviews and discussion groups with 
government officials, employers, other private sector representatives, 
and workers to obtain views and information on the minimum wage 
increases. We also reviewed U.S. minimum wage laws and other relevant 
laws and regulations. We did not review the extent to which laws were 
properly enforced or implemented. The scope of our study also does not 
include workers in the underground economy, which would include any 
employers that may not comply with laws, including tax, minimum wage, 
immigration, and other laws. We did not review compliance with laws as 
part of this study. 

The federal sources generally used to generate data on wages, 
occupations, and employment status for the United States, including 
the Current Population Survey and the Current Employment Statistics 
program, do not cover American Samoa or the CNMI. Because these data 
sources were unavailable, we collected our own data in each area. 

Employer Questionnaire: 

In American Samoa and the CNMI in 2013, we collected updated data on 
employment, wage structure, and past and planned employer actions 
covering 2010 through 2013 from the CNMI's hotels and the American 
Samoa tuna canning industry. 

For our 2013 questionnaire, we defined a large hotel as one that 
employed 50 or more workers in recent years. We sent the questionnaire 
only to hotels with 50 or more workers because we could contact only a 
limited number of hotels in each area, given available resources. We 
confirmed our list of hotels with the Saipan Chamber of Commerce and 
the Hotel Association of the Northern Mariana Islands. We initially 
sent the questionnaire to 15 hotels. Two who responded had less than 
50 employees and were not included in our analysis, bringing the total 
number of hotels in our survey to 13. All but 2 hotels responded. 

In accordance with other federal employment surveys and with our 2009 
and 2010 questionnaires, our 2013 employer questionnaire asked for 
wage data for the pay period containing June 12 of 2011, 2012, and 
2013. The questionnaire asked separately for data regarding workers 
paid an hourly wage and workers paid an annual salary. The 
questionnaire also included detailed questions about employers' past 
and possible future actions, and about the extent to which employers 
attributed these actions to past and future minimum wage increases. 
(The questionnaire is reproduced in appendix V.) 

Before sending the 2009 questionnaire to employers in 2009, we 
pretested it over the phone with three employers in the CNMI and two 
in American Samoa to make sure that the questions were clear and 
comprehensive, the data were readily obtainable, and the questionnaire 
did not place an undue burden on employers. While we eliminated some 
questions in our 2010 and 2013 questionnaires, revisions to remaining 
questions were minor and did not require additional pretesting. 

We administered the questionnaire between September 2013 and December 
2013. Employers received the questionnaire by e-mail in an attached 
form that they could return electronically after marking checkboxes or 
entering responses in open-answer boxes. We conducted nonresponse 
follow-up while in the CNMI. We also contacted nonrespondents by e-
mail and phone. In addition, we contacted respondents to clarify 
responses and request any missing data. 

Because of the lack of data on the entire workforce, it is difficult 
to precisely state the percentage of the workforce that our 
questionnaire represents. In 2013, all three of the American Samoa 
employers that received our questionnaire provided responses, 
resulting in a response rate of 100 percent. Based on American Samoa 
tax data, our respondents represented, in 2012, about 14 percent of 
the total workforce. Based on CNMI tax data, our respondents 
represented, in 2012, about 7 percent of the total workforce. 

In reporting the percentages for questionnaire responses in the CNMI, 
we weighted each percentage to reflect the proportion of workers 
employed by the responding employers relative to all workers employed 
by all questionnaire respondents. As a result, the responses of larger 
employers affect our findings more than those of smaller employers. In 
addition to asking a direct question about number of employees, the 
questionnaire asked respondents to complete a separate table listing 
the number of employees at each wage or salary level. Separate tables 
were required for hourly wage and salaried workers. To apply the 
weights, we multiplied the number of employees by the employer 
response, then divided that number by the total number of employees in 
the sample. For example, if three of five employers attributed an 
action to the minimum wage to a moderate extent, the unweighted 
response would be 60 percent. However, if those three employers 
represented 300 of 400 employees, the weighted response that we report 
would be 75 percent. Among CNMI employer responses, two hotels 
accounted for almost half of workers employed by questionnaire 
respondents, so those hotels' responses substantially affected our 
questionnaire results. 

For our analyses of the effect of minimum wage increases, we obtained 
information from our questionnaire on employment and earnings for both 
hourly wage and salaried workers during the pay periods that included 
June 12, 2011, 2012, and 2013. We analyzed these responses in 
conjunction with data we collected from the same employers for 
previous reports regarding the pay periods that included June 12, 
2007, 2008, 2009, and 2010. For hourly wage workers, respondents were 
asked to provide the number of employees paid at each wage rate. For 
salaried workers, respondents were asked the number of full-time and 
part-time workers paid at each salary level. Hourly wage workers 
represented about 98 percent of American Samoan cannery workers and 90 
percent of CNMI hotel workers. To determine the number of workers 
affected by each minimum wage increase, we assumed that all workers 
employed by questionnaire respondents were legally required to receive 
the minimum wage. If some are not covered or are exempt, the minimum 
wage increases would affect fewer workers. We did not independently 
verify that the wage and other information provided to us were 
correct. After recording the questionnaire data, we verified all 
keypunched records by comparing them with the corresponding 
questionnaires and corrected the errors we found. 

The questionnaire responses cannot be used to make inferences about 
all employers and workers in the CNMI and American Samoa, or about all 
employers and workers in the CNMI hotel industry. First, because the 
lists of employers that received the questionnaire included only those 
in the American Samoa tuna canning and CNMI hotel industries (with 
more than 50 employees), the lists were not representative of all 
employers or of all employers in the CNMI hotel industry. Second, some 
nonresponse bias may exist in some of the questionnaire responses, 
since characteristics of questionnaire respondents may differ from 
those of nonrespondents and nonrecipients in ways that affect the 
responses (e.g., if those that employ a larger number of workers would 
have provided different responses than those that employ a smaller 
number). Last, it is possible that some employers' views of the 
minimum wage increases may have influenced their responses. 

To study CNMI hotel minimum wage and payroll costs in relation to 
operating costs, we analyzed data provided by CNMI hotel questionnaire 
respondents on 2012 annual payroll before deductions for taxes and 
benefits, Social Security and Medicare contributions under the Federal 
Insurance Contributions Act (FICA), payments for employee benefits, 
and other operating expenses. For this and other analyses in this 
report, we excluded nonwage labor costs due to the minimum wage 
increases, such as increases in employer payroll tax contributions 
under FICA. In 2011, for example, employers contributed the equivalent 
of 6.2 percent of employee wages to Social Security and 1.45 percent 
to Medicare, up to $106,800 in employee wages. 

Employment and Earnings Data: 

To report on overall employment and earnings, we relied on local 
government data. The CNMI Department of Finance provided tax data for 
2006 to 2012 with counts of the number of individuals in different 
ranges of earnings for both public and private sector workers and for 
both citizens and noncitizens. For the CNMI, this data source and use 
is the same as in the two prior GAO reviews of minimum wage changes. 
To calculate mean wages in the CNMI, we divided the total sum of 
earnings by the number of workers with non-zero wages. 

In the case of American Samoa, we used a combination of local 
government data and business responses to GAO's questionnaire to 
report on employment and earnings. The American Samoa Office of 
Taxation provided tax data with the number of workers employed by each 
employer from 2007 to 2012, and the total sum of earnings over the 
year. However, the American Samoa tax data excluded cannery employees 
in some years. To address this gap, we added counts of cannery workers 
from our questionnaire. The American Samoa tax data has a count of 
persons employed during the tax year by the employer. The cannery 
employment figure, from GAO's questionnaire, is a count of employees 
at the canneries as of a specific pay period in June of the given 
year. To calculate mean wages for the American Samoa tax data, we 
divided the total sum of earnings by the number of workers across all 
employers. To calculate the mean wages for cannery workers, we assumed 
that all cannery workers earned the minimum wage and worked full-time 
over the year. To calculate the overall mean wage for American Samoa, 
we averaged these estimates, weighting by the number of workers in 
each category. 

The initial data provided by the Office of Taxation had a number of 
gaps, such as missing numbers of employees or wages for several 
employers. At our request, the Office of Taxation researched and 
provided updated data that was far more complete, but lacked employee 
counts for some employers in 2007 and 2010. We used the reported 
number of employees in the adjacent year or years to estimate these 
missing values. In 2007, the American Samoa tax data were missing the 
number of employees for 39 of the 408 employers. We were able to 
estimate the number of employees in 2007 for 34 of these 39 by using 
their reported number of employees in other years. This estimation 
added 391 employees to the 2007 total. Similarly, in 2010, we added 
499 employees to the total by interpolating the 2010 number of 
employees for the American Samoa Community College from the reported 
number of employees in 2009 and 2011. The data in 2008, 2009, 2011, 
and 2012 did not require estimation of such missing values. 

In addition to the tax data, we obtained SSA data (as of November 15, 
2013) on the employment and earnings of individual taxpayers in 
American Samoa to update our analysis of data for the previous report. 
While the SSA data cover all types of workers in American Samoa, three 
large groups of people in the CNMI were not required to report 
earnings to SSA and thus were excluded from the SSA data--CNMI 
government workers and immigrant workers from the Philippines and 
Korea. In 2012, these three groups represented approximately 40 
percent of all CNMI workers, according to CNMI government tax data. We 
have chosen not to report the CNMI SSA data due to these coverage gaps. 

To perform the analysis of SSA data, we first identified American 
Samoa workers by using the recorded territory or state code for the 
worker. However, we determined that, in 2011 and 2012, this method 
resulted in implausibly large counts. After consultation with SSA 
officials, we found that data entry issues had resulted in a number of 
extra entries with the American Samoa state code of "AS." For example, 
some entries for addresses in Texas had entered the last two letters 
of the state, "AS" in the state field. Consequently, we additionally 
checked the American Samoa data to exclude those entries that, though 
they had an American Samoa state code, had a city or zip code that did 
not match American Samoa. We performed an additional inspection of the 
records that had blank city and zip code fields and concluded that the 
vast majority of persons with an "AS" state code but missing city and 
zip code entries had characteristically Samoan names. We therefore 
also included those records that had an "AS" state code and a blank 
city and zip code field. These additional checks reduced the count for 
2011 and 2012 and also slightly reduced the reported count based on 
SSA data in earlier years. SSA officials attributed these data errors 
in 2011 and 2012 to intermittent data entry errors by employers and 
data submitters. 

We compared our counts of employees based on American Samoa tax data 
and GAO questionnaire responses to employment counts based on SSA 
data. In addition, we compared these series to employment counts in 
the American Samoa Statistical Yearbook (based on a combination of 
government sources for public sector employers and business license 
applications for private sector employers). There are some differences 
between the data. For example, a person (as counted in the Social 
Security data) could have multiple positions (as counted in the other 
sources). As table 3 shows, all three employment counts fell from 2007 
to 2012 and also had roughly comparable changes from 2007 to 2009--
years covered by our previous report on the minimum wage in American 
Samoa. However, the trend in the Social Security data was much larger 
in magnitude overall from 2007 to 2012. Specifically, the drop in 
employment from 2007 to 2012 was approximately 41 percent based on SSA 
data but about 11 percent based on combined American Samoa tax and GAO 
questionnaire data and 13 percent in the Statistical Yearbook. 
[Footnote 22] The smaller drop was more in keeping with the Bureau of 
Economic Analysis's calculation of a flat or slightly declining real 
GDP in those years. 

Table 3: Alternative Measures of Employment in American Samoa: 

2007; 
American Samoa tax and GAO questionnaire data: 17,677; 
American Samoa Statistical Yearbook: 17,047; 
Social Security Administration: 18,438. 

2008; 
American Samoa tax and GAO questionnaire data: 19,229; 
American Samoa Statistical Yearbook: 16,990; 
Social Security Administration: 19,034. 

2009; 
American Samoa tax and GAO questionnaire data: 16,897; 
American Samoa Statistical Yearbook: 14,108; 
Social Security Administration: 15,316. 

2010; 
American Samoa tax and GAO questionnaire data: 17,211; 
American Samoa Statistical Yearbook: 18,862; 
Social Security Administration: 11,728. 

2011; 
American Samoa tax and GAO questionnaire data: 15,552; 
American Samoa Statistical Yearbook: 18,028; 
Social Security Administration: 13,006. 

2012; 
American Samoa tax and GAO questionnaire data: 15,790; 
American Samoa Statistical Yearbook: 14,806; 
Social Security Administration: 10,904. 

Source: GAO analysis of Social Security Administration Data, American 
Samoa tax data, GAO questionnaire responses, and American Samoa 
Statistical Yearbook. 

[End of table] 

We could not determine an explanation for the divergence among the 
data sources. Because the drop was larger when persons were counted, 
some of the difference could reflect the loss of cannery workers, who 
may have been less likely than other workers to hold multiple 
positions. However, there were also cases where the year-to-year 
changes differed. For example, from 2011-2012, both the Social 
Security and the Statistical yearbook show decreases of about 16 
percent and 18 percent, respectively, but the figure based on American 
Samoa tax and GAO questionnaire data remained largely unchanged. We 
determined that the data from the American Samoa Office of Taxation 
were more reliable than SSA data for our purpose of describing 
employment and earning trends in more recent years. 

Because the U.S. Bureau of Labor Statistics collects CPI data on the 
U.S. 50 states but not on American Samoa or the CNMI, we relied on 
other sources of data to compare changes in earnings or wage rates to 
changes in prices. We obtained historical data on the CPI from both 
areas to estimate inflation-adjusted earnings.[Footnote 23] For both 
American Samoa and the CNMI, we used quarterly CPI data from the first 
quarter of 2006 to the fourth quarter of 2012. To produce an annual 
CPI series, we averaged the four quarters in each year. In addition, 
for American Samoa, because the CPI was rebased in the fourth quarter 
of 2007, we recalculated the quarterly index series from the fourth 
quarter of 2008 back to the fourth quarter of 2007 by finding a 
rebasing factor such that the old and new indexes in the fourth 
quarter of 2007 were identical. For both CNMI and American Samoa, we 
interviewed agency officials responsible for producing the quarterly 
CPI estimates. 

Discussion Groups: 

We conducted structured discussion groups with Chamber of Commerce 
members in American Samoa and the CNMI to collect information on the 
impact of the minimum wage increases on employers. For each discussion 
group, the Chamber of Commerce invited members to participate. In the 
CNMI, we also held a discussion group with members of the Hotel 
Association of the Northern Mariana Islands and interviewed hotel 
human resource managers. The number of participants in each group 
ranged from 4 to 20 business owners and representatives. 

To collect information on workers' views of the minimum wage 
increases, we conducted structured discussion groups with worker 
groups in the CNMI and American Samoa. In American Samoa, we arranged, 
in cooperation with Star-Kist, a worker discussion group at the Star-
Kist cannery. In the CNMI, we conducted one discussion group with 
employees of hotels in Saipan, arranged by Hotel Association of the 
Northern Mariana Islands and another with employees of the Tinian 
Dynasty, arranged through that hotel. The number of participants in 
each group ranged from 3 to 10. 

All discussion groups were moderated by a GAO employee following a 
structured guide with open-ended questions about the minimum wage 
increases and related topics. Discussion groups are generally designed 
to obtain in-depth information about specific issues that cannot be 
easily obtained from single interviews. Methodologically, they are not 
designed to provide results generalizable to a larger population or 
provide statistically representative samples or quantitative 
estimates. The views represented are those only of the participants in 
our groups and may or may not be representative of the population of 
employers and workers in the CNMI and American Samoa. Therefore, the 
experiences of other employers and workers may be different from those 
who participated in our discussion groups. In addition, the groups and 
participants in the groups were not random samples of employers and 
workers. 

Other Local Data: 

We also analyzed industry data. For example, to determine hotel room 
prices and hotel occupancy rates in the CNMI, we collected data from 
the Hotel Association of the Northern Mariana Islands and conducted 
related follow-up. In addition, the Marianas Visitors Authority 
provided data on arrivals by country of residence. We found the data 
used to be reliable and relevant for the purposes of our report. 

Data Reliability and Limitations: 

In general, to establish the reliability of the data that we used for 
reporting trends and statistics for both American Samoa and the CNMI, 
we systematically obtained information about the way in which data 
were collected and tabulated. When possible, we checked for 
consistency across data sources. While the data had some limitations, 
we determined that the available data were adequate and sufficiently 
reliable for the purposes of our review. 

Our review had certain limitations in addition to those already noted. 
In particular, although our approach yielded information on trends in 
employment, wages, and earnings in both areas, we were not able to 
distinguish between the effects of minimum wage increases and the 
effects of other factors, including the global recession beginning in 
2009, fluctuations in energy prices, global trade liberalization, and 
the application of U.S. immigration law to the CNMI. In addition, our 
review of minimum wage increases is limited to American Samoa and the 
CNMI, and we did not study minimum wage increases in the U.S. economy 
more broadly. 

We conducted this performance audit from July 2013 to February 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Minimum Wage Increases in American Samoa and CNMI: 

The federal minimum wage was first enacted as part of the Fair Labor 
Standards Act of 1938 (FLSA). It had repercussions in the U.S. Virgin 
Islands and Puerto Rico that led the United States, in 1940, to revise 
the application of the law in those territories; the overarching goal 
of the FLSA continued to be pursued there, but at a slower pace than 
in the 50 U.S. states. 

As of July 2009, the federal minimum wage was set at $7.25 per hour. 
[Footnote 24] Federal minimum wage laws apply generally to any 
employee engaged in commerce who meets certain conditions, with 
limited exemptions.[Footnote 25] Certain employees who would otherwise 
be covered under certain requirements of the FLSA may be exempt. For 
example, individuals engaged in agriculture, if their employer is an 
immediate family member, or those catching seafood at sea are exempt 
from FLSA minimum wage and overtime requirements.[Footnote 26] 

Application of Federal Minimum Wage Law to American Samoa and CNMI: 

In 2007, the United States enacted legislation that incrementally 
applies the U.S. minimum wage to American Samoa and the CNMI.[Footnote 
27] The legislation raised the federal minimum wage in the 50 U.S. 
states from $5.15 to $7.25 per hour over 3 years and, for the first 
time, also mandated a series of $.50 per hour increases beginning in 
July 2007 to the minimum wages in both American Samoa and CNMI that 
would eventually bring them to parity with the federal minimum wage. 
[Footnote 28] 

The 2007 legislation changed decades of federal law that had allowed 
both American Samoa and the CNMI to apply minimum wage rates 
significantly lower than the minimum wage for the 50 U.S. states. 
Prior to the 2007 law, American Samoa's minimum wages were set for 
each of 18 industries through biennial reviews by special industry 
committees established by the U.S. Department of Labor. American 
Samoa's minimum wages in 2006 ranged from $2.68 to $4.09. Under the 
2007 law, American Samoa retained its separate minimum wages by 
industry, with each to be increased by $.50 per hour until it reaches 
the U.S. minimum wage. The CNMI had authority to set its own minimum 
wage under its 1976 Covenant with the United States; its minimum wage 
in 2006 was $3.05.[Footnote 29] 

Minimum Wage Law in American Samoa: 

Since 2007, the minimum wages in American Samoa have increased by $.50 
three times, with the minimum wage of the lowest paid workers now set 
at $4.18 and the minimum wage of workers in the tuna canning industry 
set at $4.76. The most recent minimum wage increase in American Samoa 
was on May 25, 2009. In 2010, the U.S. enacted a law delaying the 
scheduled American Samoa minimum wage increases for 2 years, providing 
for no increase in 2010 or 2011.[Footnote 30] Further changes to the 
law in 2012 provided for no increases in 2012, 2013, and 2014 and 
changed the interval of the increases from every year to every 3 
years.[Footnote 31] Under current law, therefore, the next minimum 
wage increase will occur on September 30, 2015, and the minimum wage 
in the American Samoa tuna canning industry will reach the current 
U.S. minimum wage of $7.25 on September 30, 2027. Under current law, 
the minimum wage for American Samoa's lowest-paid workers will reach 
the U.S. minimum wage on September 30, 2033 (see table 4). If the 
original 2007 law increasing the minimum wage had not been 
subsequently amended, the minimum wage in the tuna canning industry 
would have reached the U.S. minimum wage in May 2014. 

Table 4: Past and Scheduled Minimum Wage Increases in American Samoa: 

Date: Before July 25, 2007; 
Minimum wage (tuna canning industry): $3.26; 
Lowest minimum wage (garment manufacturing): $2.68. 

Date: July 25, 2007; 
Minimum wage (tuna canning industry): $3.76; 
Lowest minimum wage (garment manufacturing): $3.18. 

Date: May 25, 2008; 
Minimum wage (tuna canning industry): $4.26; 
Lowest minimum wage (garment manufacturing): $3.68. 

Date: May 25, 2009; 
Minimum wage (tuna canning industry): $4.76; 
Lowest minimum wage (garment manufacturing): $4.18. 

Date: September 30, 2015; 
Minimum wage (tuna canning industry): $5.26; 
Lowest minimum wage (garment manufacturing): $4.68. 

Date: September 30, 2018; 
Minimum wage (tuna canning industry): $5.76; 
Lowest minimum wage (garment manufacturing): $5.18. 

Date: September 30, 2021; 
Minimum wage (tuna canning industry): $6.26; 
Lowest minimum wage (garment manufacturing): $5.68. 

Date: September 30, 2024; 
Minimum wage (tuna canning industry): $6.76; 
Lowest minimum wage (garment manufacturing): $6.18. 

Date: September 30, 2027; 
Minimum wage (tuna canning industry): $7.25; 
Lowest minimum wage (garment manufacturing): $6.68. 

Date: September 30, 2030; 
Minimum wage (tuna canning industry): $7.25; 
Lowest minimum wage (garment manufacturing): $7.18. 

Date: September 30, 2033; 
Minimum wage (tuna canning industry): $7.25; 
Lowest minimum wage (garment manufacturing): $7.25. 

Source: GAO analysis of American Samoa Industry Committee wage 
categories, 29 C.F.R. § 697.2, Pub. L. No. 110-28, Pub. L. No. 111-
244, and Pub. L. No. 112-149. 

[End of table] 

Minimum Wage Law in CNMI: 

Congress raised the CNMI minimum wage from $3.05 to $3.55 per hour in 
July 2007 and required a $.50 increase every year thereafter until the 
CNMI minimum wage equals the full federal minimum wage.[Footnote 32] 
In 2010, the U.S. enacted a law delaying the scheduled minimum wage 
increase for 1 year, providing for no increase in 2011.[Footnote 33] 
On September 30, 2012, the scheduled annual increase raised the CNMI 
minimum wage to the current $5.55 per hour. In September 2013, 
additional legislation canceled the scheduled 2013 and 2015 annual 
increases.[Footnote 34] Under current law, therefore, the next minimum 
wage increase will occur on September 30, 2014, and the CNMI will 
reach the current U.S. minimum wage on September 30, 2018 (see table 
5). If the original 2007 law increasing the minimum wage had not been 
subsequently amended, the minimum wage in the CNMI would have reached 
the U.S. minimum wage in May 2015. 

Table 5: Past and Scheduled Minimum Wage Increases in CNMI: 

Date: Before July 25, 2007; 
Minimum wage: $3.05. 

Date: July 25, 2007; 
Minimum wage: $3.55. 

Date: May 25, 2008; 
Minimum wage: $4.05. 

Date: May 25, 2009; 
Minimum wage: $4.55. 

Date: September 30, 2010; 
Minimum wage: $5.05. 

Date: September 30, 2012; 
Minimum wage: $5.55. 

Date: September 30, 2014; 
Minimum wage: $6.05. 

Date: September 30, 2016; 
Minimum wage: $6.55. 

Date: September 30, 2017; 
Minimum wage: $7.05. 

Date: September 30, 2018; 
Minimum wage: $7.25. 

Source: GAO analysis of Pub. L. No. 110-28, Pub. L. No. 111-244, and 
Pub. L. No. 113-34. 

[End of table] 

CBO Study of Options to Increase the Minimum Wage in the United States: 

In February 2014, the Congressional Budget Office (CBO) issued a study 
of two options for raising the federal minimum wage.[Footnote 35] The 
first option would raise the minimum wage to $10.10 per hour and the 
second would raise it to $9.00 per hour.[Footnote 36] To perform its 
study, CBO identified the number of workers who would be affected by 
these options from Census data. CBO then reviewed existing research 
findings on the elasticity of employment and minimum wage increases--
that is, the percentage change in employment induced by a percentage 
change in the minimum wage--and estimated the effect of each option on 
employment, income, and poverty. CBO chose the value of the elasticity 
for each option based on estimates of this elasticity from previous 
research.[Footnote 37] However, because there is considerable 
uncertainty about the effect of minimum wage increases, CBO developed 
a range of estimates.[Footnote 38] 

The two options of the CBO study each assumed increases in the minimum 
wage that are smaller in size than those that occurred from 2007 to 
2009 in American Samoa and the CNMI.[Footnote 39] CBO also found that 
the two options would affect a much smaller percentage of U.S. workers 
than we found would be affected by future minimum wage increases for 
workers in the key industries of American Samoa and the CNMI.[Footnote 
40] 

[End of section] 

Appendix III: American Samoa: 

Background: 

American Samoa comprises five volcanic islands and two coral atolls 
with a combined land area of 76 square miles--slightly larger than 
Washington, D.C.--located about 2,600 miles southwest of Hawaii (see 
figure 1). 

Figure 1: Map of American Samoa: 

[Refer to PDF for image: Map of American Samoa] 

Source: GAO; Map Resources (map). 

[End of figure] 

The 2010 decennial census found American Samoa's population to be 
55,519, a decrease of 2.5 percent from its 2000 population.[Footnote 
41] Approximately 98 percent of the population lives on the main 
island of Tutuila, and most economic activity and government 
operations take place in and around the harbor of the capital of Pago 
Pago. Most of Tutuila, however, consists of rugged terrain, with 
relatively little level land (see figure 2). 

Figure 2: Pago Pago Harbor: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

American Samoa-U.S. Relations: 

From 1900 through 1904, the U.S. government negotiated control over 
American Samoa,[Footnote 42] and the U.S. Navy subsequently took 
responsibility for federal governance of the territory. In 1951, 
governance was transferred to the Secretary of the Interior.[Footnote 
43] In 1960, American Samoa residents adopted their own constitution. 
Amendments to the constitution of American Samoa can only be made by 
the U.S. Congress.[Footnote 44] Persons born in American Samoa are 
U.S. nationals but may apply to become naturalized U.S. citizens. 
[Footnote 45] U.S. noncitizen nationals from American Samoa have the 
right to travel freely, live, and work throughout the United States. 
[Footnote 46] American Samoa exercises authority over its immigration 
system and customs through locally adopted laws.[Footnote 47] 

Additionally, the U.S. government has supported American Samoa's 
economy through trade policies that have provided tariff-free access 
to the United States for canned tuna and tax policies that have 
reduced federal taxes on income earned by qualifying U.S. corporations 
investing in American Samoa. Changes to various free trade agreements 
within the last decade, however, have lowered U.S. tariffs on tuna 
exported from several other countries, reducing the American Samoa 
canneries' competitive advantage.[Footnote 48] In addition, the 
potential Trans-Pacific Partnership includes one tuna producing 
country, Vietnam, which could pose additional competition if granted 
tariff-free access to the U.S. market.[Footnote 49] Under the Internal 
Revenue Code, qualifying American Samoa tuna canneries have received a 
tax credit for U.S. corporate income taxes.[Footnote 50] Canneries in 
American Samoa have also benefited from exemptions from local taxes. 
[Footnote 51] 

American Samoa Economy: 

The U.S. Department of Commerce's Bureau of Economic Analysis 
estimated American Samoa's 2012 gross domestic product (GDP) at $725 
million. In 2005 dollars, the real 2012 GDP was $504 million, 4.5 
percent below the real GDP of 2006, the last full year prior to 
minimum wage increases and also slightly lower than the 2009 real GDP 
(see figure 3). Real GDP per capita has increased, however, as the 
American Samoa population has declined. American Samoa's 2012 real GDP 
per capita of $9,164 was a 12.5 percent increase over the 2006 real 
GDP per capita of $8,148. 

Figure 3: American Samoa Nominal and Real GDP, 2005-2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2005; 
Real GDP (2005 dollars): $550; 
Nominal GDP: $550. 

Year: 2006; 
Real GDP (2005 dollars): $528; 
Nominal GDP: $546. 

Year: 2007; 
Real GDP (2005 dollars): $533; 
Nominal GDP: $575. 

Year: 2008; 
Real GDP (2005 dollars): $524; 
Nominal GDP: $618. 

Year: 2009; 
Real GDP (2005 dollars): $507; 
Nominal GDP: $725. 

Year: 2010; 
Real GDP (2005 dollars): $513; 
Nominal GDP: $642. 

Year: 2011; 
Real GDP (2005 dollars): $516; 
Nominal GDP: $648. 

Year: 2012; 
Real GDP (2005 dollars): $504; 
Nominal GDP: $725. 

Source: GAO analysis of Bureau of Economic Analysis data. 

[End of figure] 

Personal Income, Poverty, and Unemployment Rates: 

The 2010 decennial census reported that American Samoa's median 
household income remained well below that of the United States, and 
its poverty rate well above. American Samoa's 2009 median household 
income of $23,892 was 47 percent of that of the United States, a 
decline from 2004 when it was about 52 percent of that of the United 
States.[Footnote 52] American Samoa's 2009 poverty rate of 57.8 
percent far exceeded the U.S. rate of 15.1 percent.[Footnote 53] Based 
on the 2010 decennial census, American Samoa's unemployment rate was 
9.2 percent in April 2010. According to the Bureau of Labor 
Statistics' Current Population Survey, the U.S. unemployment rate was 
9.9 percent at that time. 

Key Industries: 

The tuna canning industry and the government sector have historically 
employed the most workers in American Samoa. In 2012, about 36 percent 
of American Samoa's workforce worked in the government sector and 
about 12 percent worked for the canneries.[Footnote 54] Noncitizens, 
mostly from the independent state of Samoa, comprised approximately 36 
percent of American Samoa's 2010 population (see figure 4) and, 
according to Star-Kist, approximately 85 percent of their labor force. 
Many citizens of the independent state of Samoa reside in American 
Samoa on a long-term basis, including spouses and relatives of 
American Samoans. 

Figure 4: Population and Citizenship Status of American Samoa, 1980-
2010: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 1980; 
Neither U.S. citizens nor nationals: 11,514; 
U.S. citizens or nationals: 20,783; 
Total: 32,297. 

Year: 1990; 
Neither U.S. citizens nor nationals: 17,031; 
U.S. citizens or nationals: 29,742; 
Total: 46,773. 

Year: 2000; 
Neither U.S. citizens nor nationals: 20,251; 
U.S. citizens or nationals: 37,040; 
Total: 57,291. 

Year: 2010; 
Neither U.S. citizens nor nationals: 19,395; 
U.S. citizens or nationals: 36,124; 
Total: 55,519. 

Source: GAO analysis of decennial U.S. Census data. 

Note: For 1980, the definition of U.S. citizen includes people born in 
the United States, the CNMI, Guam, and American Samoa. Persons with 
places of birth not reported are classified as not U.S. citizens. 

[End of figure] 

Despite recent declines, in 2012 tuna exports represented more than 99 
percent of American Samoa's approximately $416 million in commodity 
exports to the United States. However, the tuna canning industry faces 
competition from other countries. From 1995 to 2003, the value of 
canned tuna imported into the United States from American Samoa 
exceeded that of tuna imported from all other countries combined. 
Since 2003, however, foreign imports have exceeded those from American 
Samoa. In addition, U.S. per capita consumption of canned tuna fell by 
23 percent from 2003 to 2011. From 2008 to 2011, tuna exports from 
American Samoa to the United States declined, rebounding somewhat in 
2012 (see figure 5). 

Figure 5: American Samoa and Foreign Tuna Exports to the United 
States, 1995-2012: 

[Refer to PDF for image: multiple line graph] 

Nominal dollars in thousands: 

Year: 1995; 
Value of American Samoa container tuna exports to the United States: 
$303,180; 
Customs value of U.S. canned tuna imports from other countries: 
$233,505. 

Year: 1996; 
Value of American Samoa container tuna exports to the United States: 
$322,434; 
Customs value of U.S. canned tuna imports from other countries: 
$215,892. 

Year: 1997; 
Value of American Samoa container tuna exports to the United States: 
$403,920; 
Customs value of U.S. canned tuna imports from other countries: 
$249,963. 

Year: 1998; 
Value of American Samoa container tuna exports to the United States: 
$450,958; 
Customs value of U.S. canned tuna imports from other countries: 
$288,970. 

Year: 1999; 
Value of American Samoa container tuna exports to the United States: 
$446,490; 
Customs value of U.S. canned tuna imports from other countries: 
$335,830. 

Year: 2000; 
Value of American Samoa container tuna exports to the United States: 
$426,293; 
Customs value of U.S. canned tuna imports from other countries: 
$258,531. 

Year: 2001; 
Value of American Samoa container tuna exports to the United States: 
$400,826; 
Customs value of U.S. canned tuna imports from other countries: 
$314,105. 

Year: 2002; 
Value of American Samoa container tuna exports to the United States: 
$470,636; 
Customs value of U.S. canned tuna imports from other countries: 
$398,659. 

Year: 2003; 
Value of American Samoa container tuna exports to the United States: 
$467,610; 
Customs value of U.S. canned tuna imports from other countries: 
$455,450. 

Year: 2004; 
Value of American Samoa container tuna exports to the United States: 
$408,850; 
Customs value of U.S. canned tuna imports from other countries: 
$483,262. 

Year: 2005; 
Value of American Samoa container tuna exports to the United States: 
$445,852; 
Customs value of U.S. canned tuna imports from other countries: 
$533,378. 

Year: 2006; 
Value of American Samoa container tuna exports to the United States: 
$445,078; 
Customs value of U.S. canned tuna imports from other countries: 
$525,598. 

Year: 2007; 
Value of American Samoa container tuna exports to the United States: 
$451,473; 
Customs value of U.S. canned tuna imports from other countries: 
$524,478. 

Year: 2008; 
Value of American Samoa container tuna exports to the United States: 
$579,709; 
Customs value of U.S. canned tuna imports from other countries: 
$661,360. 

Year: 2009; 
Value of American Samoa container tuna exports to the United States: 
$471,111; 
Customs value of U.S. canned tuna imports from other countries: 
$613,006. 

Year: 2010; 
Value of American Samoa container tuna exports to the United States: 
$301,981; 
Customs value of U.S. canned tuna imports from other countries: 
$659,590. 

Year: 2011; 
Value of American Samoa container tuna exports to the United States: 
$272,125; 
Customs value of U.S. canned tuna imports from other countries: 
$719,711. 

Year: 2012; 
Value of American Samoa container tuna exports to the United States: 
$415,493; 
Customs value of U.S. canned tuna imports from other countries: 
$761,315. 

Source: GAO analysis of Bureau of the Census: U.S. Trade with Puerto 
Rico and U.S. Possessions, 1995 through 2012 and National Oceanic and 
Atmospheric Administration, Imports and Exports of Fishery Products, 
1996 through 2012. 

[End of figure] 

Chicken of the Sea International, which operated one of the two 
canneries in American Samoa, closed its cannery operations in the 
territory at the end of September 2009, contributing to the decline of 
tuna exports that began that year. Chicken of the Sea relocated 
canning facilities to the U.S. state of Georgia while outsourcing the 
more labor-intensive processes, including cleaning and cooking the 
tuna loins (a low-tariff U.S. import), to countries with lower labor 
costs. While the Star-Kist cannery has been in American Samoa for more 
than 50 years, it also has production facilities in place or in 
process in Ecuador, Senegal, Thailand, and Papua New Guinea (see 
figure 6).[Footnote 55] 

Figure 6: Star-Kist Cannery, Pago Pago: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

In addition to the closure of Chicken of the Sea in 2009, American 
Samoa suffered another blow on September 29 of that year when a 
tsunami following a strong earthquake left 34 people dead. Although 
the two tuna canneries were mostly spared, the tsunami caused severe 
damage. The federal government issued a disaster declaration and 
assisted with tsunami recovery efforts, including providing direct 
cash assistance to those affected and temporary employment in support 
of recovery efforts. In 2009 and 2010, other temporary jobs included 
Census Bureau enumerators and managers assisting with collection of 
2010 decennial census data, and workers on infrastructure projects and 
in other fields supported by funds made available in the American 
Recovery and Reinvestment Act of 2009.[Footnote 56] 

On October 5, 2010, Tri Marine International acquired the former 
Chicken of the Sea facility in American Samoa, located adjacent to the 
Star-Kist cannery (see figure 7).[Footnote 57] As of November 2013, 
Tri Marine had completed construction of a new cold-storage facility 
on the site and is actively constructing other facilities for expanded 
operations. According to Tri Marine officials, the company plans to 
begin processing sashimi-grade tuna in early 2014 and to re-open the 
tuna cannery in 2015. When the cannery becomes operational, Tri Marine 
expects to employ 1,200 people. 

Figure 7: Tri Marine (former Chicken of the Sea) facility in Pago Pago: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

American Samoa Employment and Average Inflation-Adjusted Earnings in 
2012 Were Lower Than in 2007: 

Employment Declined Overall from 2007 to 2012, but Increased in Some 
Years: 

Overall American Samoa employment declined from 2007 to 2012; however, 
employment increased in some years. As shown in figure 8, employment 
grew from 2007 to 2008 but by 2012 had fallen to a level lower than in 
2007. Specifically, the total number of employees in American Samoa 
increased by 1.5 percent from 2011 to 2012 (from 15,552 to 15,790) but 
fell over the entire period from 2007 to 2012 by 11 percent (from 
17,677 to 15,790, with a peak of 19,229 in 2008).[Footnote 58] Because 
American Samoa tax data are not yet available for 2013, we are unable 
to report on the overall level of employment for that year. However, 
based on our survey of cannery employers, the number of hourly workers 
at the canneries fell by about 13 percent from 2012 to 2013 (from 
2,193 to 1,915) and 58 percent overall from 2007-2013. 

Figure 8: American Samoa Employment Based on American Samoa Tax Data 
and GAO Questionnaire Data, 2007 through 2012: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 2007; 
Non-cannery employment, from American Samoa tax data: 13,084; 
Cannery employment, from GAO questionnaire data: 4,593; 
Total employment estimated from tax and questionnaire data: 17,677. 

Year: 2008; 
Non-cannery employment, from American Samoa tax data: 14,236; 
Cannery employment, from GAO questionnaire data: 4,993; 
Total employment estimated from tax and questionnaire data: 19,229. 

Year: 2009; 
Non-cannery employment, from American Samoa tax data: 12,772; 
Cannery employment, from GAO questionnaire data: 4,125; 
Total employment estimated from tax and questionnaire data: 16,897. 

Year: 2010; 
Non-cannery employment, from American Samoa tax data: 15,342; 
Cannery employment, from GAO questionnaire data: 1,869; 
Total employment estimated from tax and questionnaire data: 17,211. 

Year: 2011; 
Non-cannery employment, from American Samoa tax data: 13,486; 
Cannery employment, from GAO questionnaire data: 2,066; 
Total employment estimated from tax and questionnaire data: 15,552. 

Year: 2012; 
Non-cannery employment, from American Samoa tax data: 13,597; 
Cannery employment, from GAO questionnaire data: 2,193; 
Total employment estimated from tax and questionnaire data: 15,790. 

Source: GAO analysis of American Samoa tax and GAO questionnaire data. 

[End of figure] 

Employment figures are based on our analysis of combined employee data 
from the American Samoa Department of Treasury, Office of Taxation, 
and responses from tuna canning industry employers to our 
questionnaire. The American Samoa tax data are a count of persons 
employed at any point during the tax year by the employer. The cannery 
employment figure, from GAO's questionnaire, is a count of hourly 
employees at the canneries as of a specific pay period in June of the 
given year.[Footnote 59] See appendix I for a full discussion our 
methodology. 

Average Inflation-Adjusted Earnings of Those Employed Have Fallen 
Since 2007: 

Average earnings of workers who maintained employment rose from 2007 
to 2012, but the increase was not sufficient to overcome the increase 
in prices.[Footnote 60] As shown in figure 9, based on American Samoa 
tax and GAO questionnaire data, and consumer price data, from 2011 to 
2012, average inflation-adjusted earnings fell by 2 percent. This 
decline resulted from an increase in average earnings of 2 percent and 
an increase in prices of 4 percent. For the overall period from 2007 
to 2012, average inflation-adjusted earnings fell by about 5 percent 
due to an increase in average annual earnings of about 27 percent and 
a 34 percent increase in prices.[Footnote 61] 

Figure 9: American Samoa Nominal Mean Earnings and Inflation-Adjusted 
Mean Earnings Based on American Samoa Tax Data and GAO Questionnaire 
Data, 2007 through 2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2007; 
Mean earnings: $10,913; 
Inflation-adjusted mean earnings (2006 dollars): $10,526. 

Year: 2008; 
Mean earnings: $10,957; 
Inflation-adjusted mean earnings (2006 dollars): $9,625. 

Year: 2009; 
Mean earnings: $12,686; 
Inflation-adjusted mean earnings (2006 dollars): $10,836. 

Year: 2010; 
Mean earnings: $12,422; 
Inflation-adjusted mean earnings (2006 dollars): $9,894. 

Year: 2011; 
Mean earnings: $13,603; 
Inflation-adjusted mean earnings (2006 dollars): $10,216. 

Year: 2012; 
Mean earnings: $13,872; 
Inflation-adjusted mean earnings (2006 dollars): $9,974. 

Source: GAO analysis of American Samoa tax and GAO questionnaire data. 

[End of figure] 

Although earnings data do not allow for a direct comparison of average 
and minimum wage annual earnings or for tracking the earnings of 
workers who lost their jobs, the hourly wage of minimum wage workers 
who retained their jobs and work hours has not increased by more than 
inflation since 2007. The inflation-adjusted earnings of minimum wage 
cannery workers who retained their jobs and work hours fell by about 4 
percent from 2011 to 2012 (a period that did not include a minimum 
wage increase) and also decreased by about 5 percent overall from 2007 
to 2012. 

Employers, the American Samoa Government, and Workers Generally Oppose 
Minimum Wage Increases: 

The discussion group of private sector employers we met with generally 
opposed additional minimum wage increases and stated that previous 
minimum wage increases had been harmful to the economy.[Footnote 62] 
These employers called the minimum wage the most important issue 
impacting businesses and cited American Samoa's reliance on the tuna 
canning industry and fears about the effect of further increases on 
the industry and the American Samoa economy. In addition, these 
employers said that federal tsunami recovery assistance had cushioned 
the impact of the 2009 closure of the Chicken of the Sea cannery, so 
its full impact had not yet been felt. Finally, the business 
representatives we spoke with expressed frustration with American 
Samoa's lack of success in attracting alternative businesses to the 
territory. Business representatives we spoke with said that the 
American Samoan government had not fostered economic development and 
that its tax policies had created a poor business environment. 

The American Samoan government, American Samoa's largest employer, 
continues to report that any increases in the minimum wage will result 
in reduced government employment. The government anticipates that it 
will reduce staff or hours as part of its response to any future 
increases. It further stated that the scheduled 2015 increase would 
raise its wage bill by approximately $140,000. The government 
anticipated it would have to cut six employees to offset this 
increase. Future increases beyond 2015, it stated, would have a 
drastic budget impact and contribute to the government's already 
critical cash flow problem. In his January 2014 State of the Territory 
address, the Governor of American Samoa stated that he had instructed 
the American Samoa Department of Commerce to prepare and justify a 
request to Congress to permanently remove American Samoa from the 
application of the federal minimum wage. According to the Governor, 
the justification will include a presentation of a locally developed 
"living wage" to address what it described as congressional fears that 
the American Samoa minimum wage does not provide for basic living 
needs in American Samoa. 

Star-Kist workers who participated in our discussion group generally 
opposed further minimum wage increases rather than supported future 
increases.[Footnote 63] Workers expressed concerns that any increase 
would result in lost jobs or a complete closure of Star-Kist. Workers 
we spoke with said that hours and opportunities for overtime have been 
reduced at the cannery. In addition, workers we spoke with said that 
prices for essentials such as rent, food, and utilities are high and 
difficult for them to afford. Some workers we spoke with expressed 
concerns that future increases in the minimum wage would lead to an 
increase in prices in American Samoa, which they said had occurred as 
a result of previous minimum wage increases. 

Minimum Wage Increases through 2018 Would Affect Wages of Almost All 
Workers Employed in American Samoa's Tuna Canning Industry in 2013: 

From 2011 to 2013, there was no increase in the median wage of workers 
in the tuna canning industry--in all years, the median hourly wage for 
tuna canning workers was $4.76. During this period, the minimum wage 
for canning workers also remained unchanged at $4.76. Since 2007, as a 
result of previous minimum wage increases, the median wage among 
workers in the tuna canning industry employed by questionnaire 
respondents has risen from $3.30 to $4.76 per hour (44 percent). 

As the minimum wage increases continue, they will affect a growing 
percentage of workers in American Samoa's tuna canning industry. Based 
on questionnaire responses about workers' wages as of June 2013, 79 
percent of canning industry hourly workers would be affected by the 
scheduled increase of the minimum wage to $5.26 in September 2015. 
Future minimum wage increases would affect the wages of 92 percent of 
current cannery hourly workers when the minimum wage reaches $5.76 in 
September 2018, and 98 percent of current canning industry hourly 
workers when the minimum wage reaches $7.25 in 2027. By 2027, the 
extra annual cost added by minimum wage increases after June 2013 
would be $4,710 per worker (see table 6). We identified the additional 
cost by calculating the difference between the cost per worker in June 
2013 and the cost per hourly worker through 2027, based on the 
scheduled minimum wage increases and averaged across all workers. 

Table 6: Distribution and Increased Annual Cost Since June 2013 Per 
Hourly-wage Worker in the American Samoa Tuna Canning Industry Due to 
Scheduled Minimum Wage Increases: 

Date of scheduled minimum wage increase[A]: September 30, 2015 (next 
increase); 
Percentage of hourly-wage workers in June 2013 at or below the new 
minimum wage: 79%; 
Minimum wage of cannery workers: $5.26; 
Increased average hourly cost since June 2013 per hourly-wage worker: 
$0.37; 
Increased average annual cost since June 2013 per hourly-wage 
worker[B]: $779. 

Date of scheduled minimum wage increase[A]: September 30, 2018 (second 
increase); 
Percentage of hourly-wage workers in June 2013 at or below the new 
minimum wage: 92%; 
Minimum wage of cannery workers: $5.76; 
Increased average hourly cost since June 2013 per hourly-wage worker: 
$0.83; 
Increased average annual cost since June 2013 per hourly-wage 
worker[B]: $1,723. 

Date of scheduled minimum wage increase[A]: September 30, 2027 (fifth 
increase); 
Percentage of hourly-wage workers in June 2013 at or below the new 
minimum wage: 98%; 
Minimum wage of cannery workers: $7.25; 
Increased average hourly cost since June 2013 per hourly-wage worker: 
$2.26; 
Increased average annual cost since June 2013 per hourly-wage 
worker[B]: $4,710. 

Source: GAO analysis of June 12, 2013, wage data provided in American 
Samoa tuna canning industry questionnaire. 

Note: To estimate the annual cost of future minimum wage increases, we 
first calculated the difference between the hourly wage for each 
worker in June 2013 (reflecting the minimum wage of $4.76) and all 
scheduled minimum wage increases through 2027. We multiplied that 
value by 2,080 (annual hours worked per full-time worker) to obtain an 
annual estimate for each worker. Finally, we reported the average of 
that value. For workers in June 2013 paid above a scheduled minimum 
wage, we assumed that the cost of that minimum wage for those workers 
would be zero (that they would receive no increase in pay). The 
average wage of canning industry workers in June 2013 was $5.00. We 
calculated the average cost for all workers, not only workers affected 
by the minimum wage. 

[A] The third and fourth minimum wage increases will occur in 2021 and 
2024. 

[B] The analysis excluded nonwage labor costs due to the minimum wage 
increases, such as increases in employer payroll tax contributions 
under the Federal Insurance Contributions Act. 

[End of table] 

Tuna Canning Employers Cut Costs Due to Minimum Wage Increases and 
Other Factors: 

Two employers in the tuna canning industry in American Samoa reported 
in our questionnaire that they had taken cost-cutting actions from 
June 2010 to June 2013 including labor-and cost-saving strategies and 
reduced overtime.[Footnote 64] All but one of the employer actions 
were attributed to a moderate or large extent to minimum wage 
increases by one or both respondents (see table 7). 

Table 7: American Samoa Employer Actions from June 2010 to June 2013 
and Attribution of Those Actions to Minimum Wage Increases. 

Action: Introduced labor-saving strategies or technology; 
Took action[A]: 2; 
Attributed action to minimum wage increases to a moderate extent: 1; 
Attributed action to minimum wage increases to a large extent: 1; 
Total attributing action to either a moderate or large extent[A]: 2. 

Action: Introduced other cost-saving strategies (e.g., energy-saving 
technologies); 
Took action[A]: 2; 
Attributed action to minimum wage increases to a moderate extent: 0; 
Attributed action to minimum wage increases to a large extent: 2; 
Total attributing action to either a moderate or large extent[A]: 2. 

Action: Reduced operating capacity or services offered; 
Took action[A]: 1; 
Attributed action to minimum wage increases to a moderate extent: 0; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 0. 

Action: Delayed expansion of business; 
Took action[A]: 1; 
Attributed action to minimum wage increases to a moderate extent: 1; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 1. 

Action: Relocated business outside of territory; 
Took action[A]: 0; 
Attributed action to minimum wage increases to a moderate extent: Not 
applicable; 
Attributed action to minimum wage increases to a large extent: Not 
applicable; 
Total attributing action to either a moderate or large extent[A]: Not 
applicable. 

Action: Closed establishment temporarily; 
Took action[A]: 0; 
Attributed action to minimum wage increases to a moderate extent: Not 
applicable; 
Attributed action to minimum wage increases to a large extent: Not 
applicable; 
Total attributing action to either a moderate or large extent[A]: Not 
applicable. 

Action: Laid off salaried employees; 
Took action[A]: 1; 
Attributed action to minimum wage increases to a moderate extent: 1; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 1. 

Action: Laid off employees who are paid an hourly wage; 
Took action[A]: 1; 
Attributed action to minimum wage increases to a moderate extent: 1; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 1. 

Action: Reduced regular work hours for employees paid an hourly wage; 
Took action[A]: 0; 
Attributed action to minimum wage increases to a moderate extent: Not 
applicable; 
Attributed action to minimum wage increases to a large extent: Not 
applicable; 
Total attributing action to either a moderate or large extent[A]: Not 
applicable. 

Action: Reduced overtime work hours for employees paid an hourly wage; 
Took action[A]: 2; 
Attributed action to minimum wage increases to a moderate extent: 2; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 2. 

Action: Decreased level of benefits for salaried employees; 
Took action[A]: 1; 
Attributed action to minimum wage increases to a moderate extent: 1; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 1. 

Action: Decreased level of benefits for employees paid an hourly wage; 
Took action[A]: 0; 
Attributed action to minimum wage increases to a moderate extent: Not 
applicable; 
Attributed action to minimum wage increases to a large extent: Not 
applicable; 
Total attributing action to either a moderate or large extent[A]: Not 
applicable. 

Action: Implemented a hiring freeze; 
Took action[A]: 2; 
Attributed action to minimum wage increases to a moderate extent: 2; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 2. 

Action: Raised prices of goods or services; 
Took action[A]: 2; 
Attributed action to minimum wage increases to a moderate extent: 2; 
Attributed action to minimum wage increases to a large extent: 0; 
Total attributing action to either a moderate or large extent[A]: 2. 

Source: GAO analysis of American Samoa tuna canning industry 
questionnaire responses. 

Note: Attribution response choices for questionnaire recipients 
included "not at all," "to a small extent," and "don't know." See 
appendix V for a copy of the GAO questionnaire. 

[A] Tri Marine responded "not applicable" to the question because the 
company was just beginning operations in American Samoa during that 
time period. 

[End of table] 

In addition to minimum wage increases, both respondents from the tuna 
canning industry who took cost-cutting actions attributed their 
actions to a moderate or large extent to increased utility and 
material costs (see table 8). 

Table 8: Attribution of American Samoa Employer Actions from June 2010 
to June 2013 to Other Factors: 

Factor: Increased utility costs; 
Factor contributed to a moderate extent: 1; 
Factor contributed to a large extent: 1; 
Total where factor contributed to either a moderate or large 
extent[A]: 2. 

Factor: Increased costs of materials; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 2; 
Total where factor contributed to either a moderate or large 
extent[A]: 2. 

Factor: Increased transportation/shipping costs; 
Factor contributed to a moderate extent: 1; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 1. 

Factor: Increased maintenance costs; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 0. 

Factor: Decreased numbers of customers; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 1; 
Total where factor contributed to either a moderate or large 
extent[A]: 1. 

Factor: Changes to U.S. immigration law; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 0. 

Factor: Changes in business taxes or fees; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 0. 

Source: GAO analysis of American Samoa tuna canning industry 
questionnaire responses. 

Note: Attribution response choices for questionnaire recipients 
included "not at all," "to a small extent," and "don't know." See 
appendix V for a copy of the GAO questionnaire. 

[A] Tri Marine responded "not applicable" to the question because the 
company was just beginning operations in American Samoa during that 
time period. 

[End of table] 

When asked about future planned actions, two of the three tuna canning 
industry respondents stated that they planned to take future actions 
to introduce labor-and cost-saving strategies, delay business 
expansion, and reduce overtime hours. One of the three respondents did 
not plan to take any of these actions. Both respondents who planned to 
take these actions attributed them to a moderate or large extent to 
the minimum wage increases (see table 9). 

Table 9: American Samoa Employer Planned Actions and Attribution of 
Those Plans to Minimum Wage Increases: 

Future Action: Introduce labor-saving strategies or technology; 
Plan to take action[A]: 2; 
Attributed planned action to minimum wage increases to a moderate 
extent: 0; 
Attributed planned action to minimum wage increases to a large extent: 
2; 
Total attributing action to either a moderate or large extent[A]: 2. 

Future Action: Introduce other cost-saving strategies (e.g., energy-
saving technologies); 
Plan to take action[A]: 2; 
Attributed planned action to minimum wage increases to a moderate 
extent: 0; 
Attributed planned action to minimum wage increases to a large extent: 
2; 
Total attributing action to either a moderate or large extent[A]: 2. 

Future Action: Reduce operating capacity or services offered; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Delay expansion of business; 
Plan to take action[A]: 2; 
Attributed planned action to minimum wage increases to a moderate 
extent: 2; 
Attributed planned action to minimum wage increases to a large extent: 
0; 
Total attributing action to either a moderate or large extent[A]: 2. 

Future Action: Relocate business outside of territory; 
Plan to take action[A]: 1; 
Attributed planned action to minimum wage increases to a moderate 
extent: 0; 
Attributed planned action to minimum wage increases to a large extent: 
1; 
Total attributing action to either a moderate or large extent[A]: 1. 

Future Action: Close establishment temporarily; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Lay off salaried employees; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Lay off employees who are paid an hourly wage; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Reduce regular work hours for employees paid an hourly 
wage; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Reduce overtime work hours for employees paid an hourly 
wage; 
Plan to take action[A]: 2; 
Attributed planned action to minimum wage increases to a moderate 
extent: 0; 
Attributed planned action to minimum wage increases to a large extent: 
2; 
Total attributing action to either a moderate or large extent[A]: 2. 

Future Action: Decrease level of benefits for salaried employees; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Decrease level of benefits for employees paid an hourly 
wage; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Implement a hiring freeze; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Raise prices of goods or services; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Future Action: Close establishment permanently; 
Plan to take action[A]: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Total attributing action to either a moderate or large extent[A]: not 
applicable. 

Source: GAO analysis of American Samoa tuna canning industry 
questionnaire responses. 

Note: The questionnaire asked about planned actions in the next 18 
months, which would be by March 2015. Attribution response choices for 
questionnaire recipients included "not at all," "to a small extent," 
and "don't know." See appendix V for a copy of the GAO questionnaire. 

[A] One of the three respondents did not plan to take any of these 
actions. 

[End of table] 

In addition to the minimum wage increases, the two respondents to the 
tuna canning industry questionnaire who planned to take future cost-
cutting actions attributed their plans to a moderate or large extent 
to other increased costs and business factors (see table 10). 

Table 10: Attribution of Planned American Samoa Employer Actions to 
Other Factors: 

Factor: Increased utility costs; 
Factor contributed to a moderate extent: 1; 
Factor contributed to a large extent: 1; 
Total where factor contributed to either a moderate or large 
extent[A]: 2. 

Factor: Increased costs of materials; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 2; 
Total where factor contributed to either a moderate or large 
extent[A]: 2. 

Factor: Increased transportation/shipping costs; 
Factor contributed to a moderate extent: 1; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 1. 

Factor: Increased maintenance costs; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 0. 

Factor: Decreased numbers of customers; 
Factor contributed to a moderate extent: 1; 
Factor contributed to a large extent: 1; 
Total where factor contributed to either a moderate or large 
extent[A]: 2. 

Factor: Changes to U.S. immigration law; 
Factor contributed to a moderate extent: 0; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 0. 

Factor: Changes in business taxes or fees; 
Factor contributed to a moderate extent: 2; 
Factor contributed to a large extent: 0; 
Total where factor contributed to either a moderate or large 
extent[A]: 2. 

Source: GAO analysis of American Samoa tuna canning industry 
questionnaire responses. 

Note: Attribution response choices for questionnaire recipients 
included "not at all," "to a small extent," and "don't know." See 
appendix V for a copy of the GAO questionnaire. 

[A] One of the three respondents did not plan to take any of these 
actions. 

[End of table] 

Tuna Canning Industry Faces Challenges; Relocation Could Reduce 
Business Costs: 

Cannery officials stated that wage increases are one of many factors 
affecting the tuna canning industry in American Samoa.[Footnote 65] 
Both Star-Kist and Tri Marine cited American Samoa's proximity to 
Pacific fisheries as a key advantage for the American Samoa tuna 
canning industry, as well as tariff-free access to the U.S. market. 
Star-Kist also cited Pago Pago's protected deep-water harbor. However, 
cannery company officials we interviewed indicated that labor costs, 
including the minimum wage increases, continued to place American 
Samoa at a significant cost disadvantage compared with other canned 
tuna exporting countries. In June 2011, we concluded that the three 
minimum wage increases to date had further widened the gap between 
American Samoa and production sites with lower labor costs, such as 
Thailand.[Footnote 66] Star-Kist estimated the total differential in 
the annual wage bill between American Samoa and an equivalent number 
of employees in Thailand at approximately $17.4 million. In addition, 
Star-Kist also cited disadvantages for American Samoa from U.S. 
regulations, high fuel and re-provisioning (net repairs, ship 
maintenance, crew provisions, and fishing bait) costs, an outdated 
shipyard, and the lack of sufficient dock space. 

Both canneries cited congressional action to defer the next minimum 
wage increase to 2015 as encouraging their ability to invest in 
American Samoa. According to Star-Kist officials, deferring the next 
minimum wage increase helped the company to better plan for future 
activity at the cannery (to better train its workforce, plan 
procurement, negotiate supply contracts, and compete for business that 
requires pricing guarantees for multiple years). Tri Marine stated 
that it carefully considered all of its current and projected costs 
before deciding to invest in American Samoa and that its decision to 
move forward came only after the deferral of increases in the minimum 
wage. 

In our June 2011 report on the minimum wage in American Samoa, we 
modeled four alternative scenarios for the American Samoa tuna 
industry.[Footnote 67] We did not re-run the four models for our 
current report; however, we discussed them with Star-Kist officials, 
and Star-Kist and Tri Marine each provided additional written comments 
on the options available to the tuna industry. Star-Kist officials 
said that the four options are all still possible, but that there is a 
spectrum of possible actions in response to increasing costs. For 
example, Star-Kist could lower the staffing level or close certain 
production lines. Star-Kist reiterated its position that the cost 
savings between a fully U.S. manufacturing process and an outsourced 
manufacturing process is substantial and places American Samoa at a 
disadvantage. Tri Marine stated that any increase in direct costs, 
related to wages or not, will erode the competitiveness of American 
Samoa with a number of low-cost sources, including Thailand, Vietnam, 
Indonesia, and the Philippines, as a source of canned tuna for the 
U.S. market. 

[End of section] 

Appendix IV: Commonwealth of the Northern Mariana Islands: 

Background: 

Part of the Mariana Islands Archipelago, the CNMI is a chain of 14 
islands in the western Pacific Ocean--just north of Guam and about 
3,200 miles west of Hawaii (see figure 10). Most of the CNMI 
population resides on the island of Saipan, with additional residents 
on the islands of Tinian and Rota. 

Figure 10: Map of the CNMI: 

[Refer to PDF for image: Map of the CNMI] 

Source: GAO; Map Resources (map). 

[End of figure] 

CNMI-U.S. Relations: 

The United States took control of the Northern Mariana Islands from 
Japan during the latter part of World War II and, after the war, the 
U.S. Congress approved the Trusteeship Agreement making the United 
States responsible to the United Nations for the administration of the 
islands.[Footnote 68] In 1976, the District of the Mariana Islands 
entered into a covenant with the United States establishing the island 
territory's status as a self-governing commonwealth in political union 
with the United States.[Footnote 69] This covenant grants the CNMI the 
right of self-governance over internal affairs and grants the United 
States complete responsibility and authority for matters relating to 
foreign affairs and defense affecting the CNMI.[Footnote 70] The 
covenant initially made many federal laws applicable to the CNMI, 
including laws that provide federal services and financial assistance 
programs. However, the covenant preserved the CNMI's exemption from 
certain federal laws that had previously been inapplicable to the 
Trust Territory of the Pacific Islands, including federal immigration 
laws, with certain limited exceptions,[Footnote 71] and certain 
federal minimum wage provisions. However, under the terms of the 
covenant, the federal government has the right to apply federal law in 
these exempted areas without the consent of the CNMI government. 
[Footnote 72] 

CNMI Economy: 

The U.S. Department of Commerce's Bureau of Economic Analysis 
estimated CNMI's GDP in 2012 at $701 million. However, in real terms, 
GDP decreased by approximately 36 percent from 2006 to 2012. After 4 
years of consistent decline, the CNMI real GDP has remained relatively 
flat since 2009 (see figure 11). The CNMI's 2012 real GDP per capita 
of $11,537 was an approximately 24 percent decrease from the 2006 real 
GDP per capita of $15,157. 

Figure 11: CNMI Nominal and Real GDP 2005-2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2006; 
Real GDP (2005 dollars): $1.001 billion; 
Nominal GDP: $1.001 billion. 

Year: 2006; 
Real GDP (2005 dollars): $920 million; 
Nominal GDP: $918 million. 

Year: 2007; 
Real GDP (2005 dollars): $849 million; 
Nominal GDP: $867 million. 

Year: 2008; 
Real GDP (2005 dollars): $740 million; 
Nominal GDP: $846 million. 

Year: 2009; 
Real GDP (2005 dollars): $598 million; 
Nominal GDP: $717 million. 

Year: 2010; 
Real GDP (2005 dollars): $604 million; 
Nominal GDP: $716 million. 

Year: 2011; 
Real GDP (2005 dollars): $563 million; 
Nominal GDP: $651 million. 

Year: 2012; 
Real GDP (2005 dollars): $593 million; 
Nominal GDP: $701 million. 

Source: GAO analysis of Bureau of Economic Analysis data. 

[End of figure] 

Personal Income, Poverty, and Unemployment Rates: 

The 2010 decennial census reported that CNMI's median household income 
remained well below that of the United States, and its poverty rate 
well above. CNMI's 2009 median household income of $19,958 was 39 
percent of that of the United States, approximately the same 
percentage as in 2004.[Footnote 73] CNMI's 2009 poverty rate of 52.3 
percent far exceeded the U.S. rate of 15.1 percent.[Footnote 74] Based 
on the 2010 decennial census, CNMI's unemployment rate was 11.2 
percent in April 2010. According to the Bureau of Labor Statistics' 
Current Population Survey, the U.S. unemployment rate was 9.9 percent 
at that time. 

Key Industries: 

For years, the garment and tourism industries were the mainstay of the 
CNMI's economy. In 1999, these two industries accounted for about 85 
percent of the CNMI's total economic activity and 96 percent of its 
exports.[Footnote 75] However, several developments in international 
trade caused the CNMI's garment industry to decline dramatically. In 
January 2005, in accordance with a World Trade Organization 10-year 
phaseout agreement, the United States eliminated quotas on textile and 
apparel imports from other textile-producing countries, exposing the 
CNMI apparel industry's shipments to the United States to greater 
competition. Subsequently, the value of CNMI textile exports to the 
United States dropped from a peak of $1.1 billion in 1998 to $677 
million in 2005 to close to zero in 2010.[Footnote 76] 

After years of decline, fiscal years 2012 and 2013 showed an increase 
in visitor arrivals. However, total visitor arrivals to the CNMI have 
dropped from a peak of 726,690 in fiscal year 1997 to 433,925 in 
fiscal year 2013, a decline of 40 percent, as shown in figure 12. 

Figure 12: CNMI Visitor Arrivals, Fiscal Years 1990-2013: 

[Refer to PDF for image: line graph] 

Year: 1990; 
Visitor arrivals: 417,146. 

Year: 1991; 
Visitor arrivals: 424,459. 

Year: 1992; 
Visitor arrivals: 488,330. 

Year: 1993; 
Visitor arrivals: 536,263. 

Year: 1994; 
Visitor arrivals: 583,557. 

Year: 1995; 
Visitor arrivals: 654,375. 

Year: 1996; 
Visitor arrivals: 721,935. 

Year: 1997; 
Visitor arrivals: 726,690. 

Year: 1998; 
Visitor arrivals: 526,298. 

Year: 1999; 
Visitor arrivals: 491,602. 

Year: 2000; 
Visitor arrivals: 526,111. 

Year: 2001; 
Visitor arrivals: 497,696. 

Year: 2002; 
Visitor arrivals: 424,932. 

Year: 2003; 
Visitor arrivals: 458,444. 

Year: 2004; 
Visitor arrivals: 531,584. 

Year: 2005; 
Visitor arrivals: 529,557. 

Year: 2006; 
Visitor arrivals: 443,812. 

Year: 2007; 
Visitor arrivals: 395,360. 

Year: 2008; 
Visitor arrivals: 396,497. 

Year: 2009; 
Visitor arrivals: 375,808. 

Year: 2010; 
Visitor arrivals: 368,186. 

Year: 2011; 
Visitor arrivals: 338,106. 

Year: 2012; 
Visitor arrivals: 389,475. 

Year: 2013; 
Visitor arrivals: 433,925. 

Source: GAO analysis of Marianas Visitors Authority data. 

[End of figure] 

Japan, Korea, China, and Russia are the CNMI's primary visitor 
markets, with Japan representing the largest share of any country and 
China and Russia representing emerging markets. In fiscal year 2013, 
34 percent of visitors were from Japan, 31 percent from South Korea, 
26 percent from China, and 3 percent from Russia (see figure 13). The 
Department of Homeland Security has exercised parole authority to 
allow, on a case-by-case basis, eligible nationals of China and Russia 
to enter the CNMI temporarily as tourists where there is significant 
public benefit.[Footnote 77] The Consolidated Natural Resources Act of 
2008 required the establishment of a joint visa waiver program for the 
CNMI and Guam by amending the authority for an existing visa waiver 
program for Guam visitors. The Guam-CNMI Visa Waiver Program exempts 
tourism and business visitors from certain countries who are traveling 
to the CNMI and Guam for up to 45 days from the standard U.S. visa 
documentation requirements.[Footnote 78] 

Figure 13: Saipan, CNMI, and Multi-lingual Sign at Hotel in Saipan: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

During the expansion of the CNMI garment and tourism industries prior 
to 1995, the CNMI economy became dependent on foreign labor, as the 
CNMI government used its authority over its own immigration policy to 
bring in large numbers of foreign workers and investors. The number 
and percentage of noncitizens in the CNMI population have decreased 
since 2000, when they were 57 percent of the population, to 
approximately 43 percent as of the 2010 decennial census (see figure 
14). 

Figure 14: Citizenship Status of CNMI Population, 1980-2010: 

[Refer to PDF for image: stacked vertical bar graph] 

Year: 1980[A]; 
Neither U.S. citizens nor nationals: 3,703; 
U.S. citizens or nationals: 13,077; 
Total: 16,780. 

Year: 1990; 
Neither U.S. citizens nor nationals: 23,263; 
U.S. citizens or nationals: 20,082; 
Total: 43,345. 

Year: 2000; 
Neither U.S. citizens nor nationals: 39,089; 
U.S. citizens or nationals: 30,132; 
Total: 69,221. 

Year: 2010; 
Neither U.S. citizens nor nationals: 23,184; 
U.S. citizens or nationals: 30,699; 
Total: 53,883. 

Source: GAO analysis of decennial U.S. Census data. 

Note: 

[A] For 1980, the definition of U.S. citizen includes people born in 
the United States, CNMI, Guam, and American Samoa. Persons with place 
of birth not reported are classified as not a U.S. citizen. 

[End of figure] 

In 2008, federal legislation amended the U.S.-CNMI Covenant to 
establish federal control of CNMI immigration.[Footnote 79] The law 
includes several provisions affecting access to the CNMI by foreign 
workers (using permits referred to as conditional worker, or CW-1, 
permits), tourists, and foreign investors that were implemented 
beginning in November 2009.[Footnote 80] The law mandated an annual 
reduction in the number of CW-1 permits that results in zero permits 
by the end of a transition period, but the law did not mandate 
specific reductions. The current CW-1 transition period expires 
December 31, 2014; however, the Secretary of Labor is authorized to 
extend the program for up to 5 years.[Footnote 81] The Secretary's 
decision to extend the program beyond 2014 must be made no later than 
July 4, 2014. 

The Department of Homeland Security annually determines the numerical 
limitation, terms, and conditions of the CW-1 permits. The department 
set the numerical limitation at 22,417 for fiscal year 2011; 22,416 
for 2012; 15,000 for 2013, and 14,000 for fiscal year 2014.[Footnote 
82] As we concluded in August 2008, although modest reductions in CNMI-
only permits for foreign workers would cause minimal impact, any 
substantial and rapid decline in the availability of work permits for 
needed workers would have a negative effect on the economy, given 
foreign workers' prominence in key CNMI industries.[Footnote 83] As of 
August 13, 2013, employers in the CNMI had requested a total of 7,323 
nonimmigrant transitional worker permits during fiscal year 2013. 

In addition, the CNMI's economy may be affected in the future by the 
planned build-up of the U.S. military in neighboring Guam; however, 
those impacts will likely be smaller than originally anticipated. 
Under original plans, the Department of Defense intended to relocate 
approximately 8,000 Marines and their 9,000 dependents from Okinawa, 
Japan, to Guam by 2014. Current plans are to relocate approximately 
5,000 personnel and 1,300 dependents. DOD is in the process of 
determining what military and public infrastructure facilities and 
live-fire training ranges are necessary to support the proposed 
reduced realignment plan on Guam, as well as Tinian Island in the 
CNMI.[Footnote 84] 

CNMI Employment Fell from 2011 to 2012 and Has Decreased Substantially 
Since 2006; Average Inflation-Adjusted Earnings Have Declined: 

CNMI Employment Decreased Substantially from 2006-2012: 

Overall CNMI employment dropped every year from 2006 to 2012, 
according to CNMI tax data. As shown in figure 15, from 2011 through 
2012 the total number of employed fell by about 6 percent (from 25,229 
to 23,720). For the entire period from 2006 through 2012, the number 
employed fell 45 percent (from 43,036 to 23,720). A large part of this 
decline, especially early in this period, is likely attributable to 
the closure of the CNMI's last remaining garment factories, which 
employed many foreign workers. CNMI tax data show that U.S. citizen 
(combining those that the CNMI tax office labels as "U.S." or "CNMI") 
employment fell by less than 1 percent from 2011 to 2012 (10,006 to 
9,934), and by almost 9 percent from 2006 to 2012 (10,882 to 9,934). 

Figure 15: CNMI Employment Based on CNMI Government Tax Data, 2006 
through 2012: 

[Refer to PDF for image: line graph] 

Year: 2006; 
Employment: 43,036. 

Year: 2007; 
Employment: 36,524. 

Year: 2008; 
Employment: 32,053. 

Year: 2009; 
Employment: 27,897. 

Year: 2010; 
Employment: 26,310. 

Year: 2011; 
Employment: 25,229. 

Year: 2012; 
Employment: 23,720. 

Source: GAO analysis of CNMI annual tax data 

[End of figure] 

Because CNMI tax data are not available for 2013, we are unable to 
report on the overall level of employment for the year. Data from the 
respondents to our 2013 hotel questionnaire show that hourly 
employment in the responding hotels rose by 3 percent from 2012 to 
2013 (from 1,715 to 1,763). Overall hourly employment at hotels that 
responded to both our first survey in 2009 and our most recent survey 
in 2013 fell by 21 percent over the period from 2007 to 2013 (from 
1,590 to 1,252).[Footnote 85] This count excludes those hotels that 
responded to our most recent survey but did not respond to our first 
survey. 

CNMI Average Inflation-Adjusted Earnings of Those Employed Have Fallen 
Since 2006: 

Average earnings for those who maintained employment rose from 2006 to 
2012, but prices increased by a similar amount. As shown in figure 16, 
based on CNMI tax and consumer price data, average inflation-adjusted 
earnings rose by 1 percent from 2011 to 2012. This increase resulted 
from an increase in average earnings of 3 percent and an increase in 
prices of 2 percent. For the period from 2006 to 2012, average 
inflation-adjusted earnings dropped about 2 percent due to a rise in 
average annual earnings of about 29 percent and a 31 percent increase 
in prices.[Footnote 86] 

Figure 16: CNMI Average Nominal and Inflation-Adjusted Earnings Based 
on CNMI Government Tax Data, 2006 through 2012: 

[Refer to PDF for image: multiple line graph] 

Year: 2006; 
Nominal earnings: $11,455; 
Inflation-adjusted earnings: $11,455. 

Year: 2007; 
Nominal earnings: $11,925; 
Inflation-adjusted earnings: $11,027. 

Year: 2008; 
Nominal earnings: $12,781; 
Inflation-adjusted earnings: $11,068. 

Year: 2009; 
Nominal earnings: $13,625; 
Inflation-adjusted earnings: $11,625. 

Year: 2010; 
Nominal earnings: $14,294; 
Inflation-adjusted earnings: $11,584. 

Year: 2011; 
Nominal earnings: $14,282; 
Inflation-adjusted earnings: $11,129. 

Year: 2012; 
Nominal earnings: $14,731; 
Inflation-adjusted earnings: $11,249. 

Source: GAO analysis of CNMI annual tax data and CNMI Consumer Price 
Index data. 

[End of figure] 

Although CNMI tax data do not allow for a direct comparison of average 
and minimum-wage annual earnings or for tracking the earnings of 
workers who lost their jobs, the hourly wage of minimum wage workers 
increased by more than inflation. The inflation-adjusted earnings of 
minimum wage workers who retained their jobs and work hours rose by 
about 7 percent from 2011 to 2012 and by about 39 percent for the 
entire period from 2006 to 2012. 

Employers and the CNMI Government Supported the 2013 Postponement of 
the Minimum Wage Increase; Workers Had Mixed Views: 

CNMI employers we spoke with supported the 2013 deferral of minimum 
wage increases.[Footnote 87] While participants in our discussion 
groups stated that businesses in general could not absorb another 
minimum wage increase, they in particular cited the effect of the 
increases on smaller businesses rather than the effect on hotels. 
However, employer discussion group participants also identified 
minimum wage increases as only one of multiple factors affecting the 
CNMI economy. The minimum wage was not as important a factor for 
discussion group participants as the potential loss of the foreign 
labor force if the conditional worker permit program is not extended. 
For hotel business representatives we spoke with, the U.S. Department 
of Homeland Security's continued use of parole to permit access for 
Russian and Chinese tourists to the CNMI was a greater concern than 
minimum wage increases. Participants asserted that the CNMI economy is 
still weak and cited a general uncertainty about future conditions in 
the CNMI that has caused some businesses to withhold investment. 
Participants also cited the high costs of utilities, imported goods, 
and shipping, as well as restrictions on foreign ownership of land, 
among other factors in expressing their outlook on the CNMI economy. 

According to CNMI government payroll data we reviewed, about 177 
government workers in the three branches of government and the 
Commonwealth HealthCare Corporation would have been affected by the 
postponed 2013 minimum wage increase.[Footnote 88] This figure, 
however, does not include other autonomous or semi-autonomous agencies 
of the government. According to the CNMI Department of Commerce, the 
CNMI Governor supported the 2013 postponement of the minimum wage 
increase. However, the CNMI Commerce Secretary noted that there could 
be additional challenges to the CNMI economy from increases in health 
insurance costs, which could make absorbing future minimum wage 
increases more difficult for the CNMI. 

Workers participating in our CNMI discussion groups expressed mixed 
views regarding the minimum wage increases.[Footnote 89] Workers we 
spoke with said they were helped by previous minimum wage increases, 
but some were concerned about losing jobs and work hours due to future 
increases, as they had in the past. Workers we spoke with stated that 
prices for staples in the CNMI were high, citing in particular high 
costs for electricity and gasoline.[Footnote 90] Workers we spoke with 
reported regularly turning off air conditioning in the CNMI's tropical 
climate and foregoing the use of electric stoves because of the high 
cost of electricity. There is minimal public bus transportation in 
Saipan. In Tinian, some workers at the Tinian Dynasty (see figure 17) 
we spoke with lived in staff housing, and one saw future minimum wage 
increases as an opportunity to increase the amount remitted to family 
living elsewhere. Workers we spoke with in both Saipan and Tinian 
expressed fear that prices would increase along with the minimum wage, 
which they said had occurred at the time of previous increases. 
[Footnote 91] 

Figure 17: Tinian Dynasty Hotel & Casino: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

The 2012 Minimum Wage Increase Increased Median Wage for Hotel 
Workers; Further Increases Would Affect Wages of Almost All Hotel 
Workers: 

From June 2011 to June 2013, the median hourly wage in the CNMI hotel 
industry rose from $5.33 to $5.86, a 10 percent increase, according to 
our questionnaire responses. During this period, the minimum wage 
increased from $5.05 to $5.55, also an increase of 10 percent. 

As the minimum wage increases continue, they will affect a growing 
percentage of hourly workers in the CNMI's hotel industry. Based on 
questionnaire responses about hotel workers' wages as of June 2013, at 
the current distribution of wages, the future minimum wage increases 
would affect the wages of 84 percent of current hourly wage workers 
when the minimum wage reaches $6.05 in September 2014, and 94 percent 
by the time it reaches $7.25 in 2018. By 2018, the extra annual cost 
added by minimum wage increases after June 2013 would be approximately 
$3,051 per worker (see table 11). 

Table 11: Distribution and Increased Annual Cost since June 2013 per 
Hourly-wage CNMI Hotel Worker Due to Scheduled Minimum Wage Increases: 

Date of scheduled minimum wage increase[A]: September 30, 2014 (next 
increase); 
Percentage of hourly-wage workers in June 2013 at or below the new 
minimum wage: 84%; 
Minimum wage: $6.05; 
Increased average hourly cost since June 2013 per hourly-wage worker: 
$0.38; 
Increased average annual cost since June 2013 per hourly-wage 
worker[B]: $795. 

Date of scheduled minimum wage increase[A]: September 30, 2018 (fourth 
increase); 
Percentage of hourly-wage workers in June 2013 at or below the new 
minimum wage: 94%; 
Minimum wage: $7.25; 
Increased average hourly cost since June 2013 per hourly-wage worker: 
$1.46; 
Increased average annual cost since June 2013 per hourly-wage 
worker[B]: $3,051. 

Source: GAO analysis of June 12, 2013, wage data provided in CNMI 
hotel industry questionnaire. 

Notes: To estimate the annual cost of future minimum wage increases, 
we first calculated the difference between the hourly wage for each 
worker in June 2013 (reflecting the 2013 minimum wage of $5.55) and 
all scheduled minimum wage increases through 2018. We multiplied that 
value by 2,080 (annual hours worked per full-time worker) to obtain an 
annual estimate for each worker. Finally, we reported the average of 
that value. For workers in June 2013 paid above a scheduled future 
minimum wage, we assumed that the cost of that minimum wage for those 
workers would be zero (that they would receive no increase in pay). 
The average wage of hotel workers in June 2013 was $5.86. We 
calculated the average cost for all workers, not only workers affected 
by the minimum wage. 

[A] The second and third and minimum wage increases will occur in 2016 
and 2017. 

[B] The analysis excluded nonwage labor costs due to the minimum wage 
increases, such as increases in employer payroll tax contributions 
under the Federal Insurance Contributions Act (FICA). 

If other costs remain stable, payroll will represent an increasing 
share of total operating costs for hotels in the CNMI, due to the 
minimum wage increases. We estimate that, for the hotels that 
responded to our questionnaire, the minimum wage increases from 2013 
through 2018 will raise average annual payroll costs by approximately 
$527,823 at the average hotel of 173 employees. As a result, payroll 
costs as a percentage of total operating costs will increase from 
approximately 26 percent in 2012 to 31 percent in 2018 (with minimum 
wage increases representing about 5 percentage points of the 31 
percent). 

[End of table] 

Hotels Cut Costs and Raised Prices Due to Minimum Wage Increases and 
Other Factors: 

Hotels representing the majority of all workers employed by 
questionnaire respondents reported in our questionnaire that they had 
taken cost-cutting actions and raised prices from 2010 to 2013. Hotels 
representing nearly all workers employed by questionnaire respondents 
stated that they used cost-saving strategies (99 percent) or raised 
prices (95 percent) and attributed that action to a moderate or large 
extent to the minimum wage increases. While hotels representing a 
smaller proportion of workers employed by questionnaire respondents 
introduced labor-saving measures (76 percent), decreased regular hours 
for hourly workers (36 percent), or decreased hourly employee benefits 
(18 percent), all or nearly all hotels attributed those actions to a 
moderate or large extent to the minimum wage increases (see table 12). 

Table 12: Employee-Weighted CNMI Employer Actions from June 2010 to 
June 2013 and Attribution of Those Actions to Minimum Wage Increases. 

Action: Introduced labor-saving strategies or technology; 
Percentage taking action: 76%; 
Attributed action to minimum wage increases to a moderate extent: 67%; 
Attributed action to minimum wage increases to a large extent: 33%; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Introduced other cost-saving strategies (e.g., energy-saving 
technologies); 
Percentage taking action: 99%; 
Attributed action to minimum wage increases to a moderate extent: 56%; 
Attributed action to minimum wage increases to a large extent: 37%; 
Percentage attributing action to either a moderate or large extent[A]: 
93%. 

Action: Reduced operating capacity or services offered; 
Percentage taking action: 54%; 
Attributed action to minimum wage increases to a moderate extent: 66%; 
Attributed action to minimum wage increases to a large extent: 0; 
Percentage attributing action to either a moderate or large extent[A]: 
66%. 

Action: Delayed expansion of business; 
Percentage taking action: 21%; 
Attributed action to minimum wage increases to a moderate extent: 34%; 
Attributed action to minimum wage increases to a large extent: 0; 
Percentage attributing action to either a moderate or large extent[A]: 
34%. 

Action: Relocated business outside of territory; 
Percentage taking action: 0; 
Attributed action to minimum wage increases to a moderate extent: not 
applicable; 
Attributed action to minimum wage increases to a large extent: not 
applicable; 
Percentage attributing action to either a moderate or large extent[A]: 
not applicable. 

Action: Closed establishment temporarily; 
Percentage taking action: 0; 
Attributed action to minimum wage increases to a moderate extent: not 
applicable; 
Attributed action to minimum wage increases to a large extent: not 
applicable; 
Percentage attributing action to either a moderate or large extent[A]: 
not applicable. 

Action: Laid off salaried employees; 
Percentage taking action: 23%; 
Attributed action to minimum wage increases to a moderate extent: 0; 
Attributed action to minimum wage increases to a large extent: 0; 
Percentage attributing action to either a moderate or large extent[A]: 
0. 

Action: Laid off employees who are paid an hourly wage; 
Percentage taking action: 30%; 
Attributed action to minimum wage increases to a moderate extent: 60%; 
Attributed action to minimum wage increases to a large extent: 0; 
Percentage attributing action to either a moderate or large extent[A]: 
60%. 

Action: Reduced regular work hours for employees paid an hourly wage; 
Percentage taking action: 36%; 
Attributed action to minimum wage increases to a moderate extent: 78%; 
Attributed action to minimum wage increases to a large extent: 20%; 
Percentage attributing action to either a moderate or large extent[A]: 
98%. 

Action: Reduced overtime work hours for employees paid an hourly wage; 
Percentage taking action: 86%; 
Attributed action to minimum wage increases to a moderate extent: 39%; 
Attributed action to minimum wage increases to a large extent: 29%; 
Percentage attributing action to either a moderate or large extent[A]: 
68%. 

Action: Decreased level of benefits for salaried employees; 
Percentage taking action: 25%; 
Attributed action to minimum wage increases to a moderate extent: 0; 
Attributed action to minimum wage increases to a large extent: 0; 
Percentage attributing action to either a moderate or large extent[A]: 
0. 

Action: Decreased level of benefits for employees paid an hourly wage; 
Percentage taking action: 18%; 
Attributed action to minimum wage increases to a moderate extent: 100%; 
Attributed action to minimum wage increases to a large extent: 0; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Implemented a hiring freeze; 
Percentage taking action: 58%; 
Attributed action to minimum wage increases to a moderate extent: 21%; 
Attributed action to minimum wage increases to a large extent: 31%; 
Percentage attributing action to either a moderate or large extent[A]: 
52%. 

Action: Raised prices of goods or services; 
Percentage taking action: 95%; 
Attributed action to minimum wage increases to a moderate extent: 73%; 
Attributed action to minimum wage increases to a large extent: 27%; 
Percentage attributing action to either a moderate or large extent[A]: 
99%. 

Source: GAO analysis of CNMI hotel questionnaire responses. 

Notes: Percentages are weighted by the respondent's number of 
employees. Response choices for questionnaire recipients included "not 
at all," "to a small extent," and "don't know." See appendix V for a 
copy of the GAO questionnaire. 

[A] Totals may not add due to rounding. 

[End of table] 

Though hotels attributed a number of cost-cutting actions to the 
minimum wage increases, they also attributed their actions to a number 
of other factors. Hotels representing nearly all workers employed by 
questionnaire respondents also attributed their cost-cutting actions 
to a moderate or large extent to increased utility, material, and 
transportation costs. Employers representing 60 percent or more of 
workers employed by questionnaire respondents cited other factors, 
including changes to U.S. immigration law, as contributing to their 
actions to a moderate or large extent (see table 13). 

Table 13: Employee-Weighted Attribution of CNMI Employer Actions from 
June 2010 to June 2013 to Other Factors: 

Factor: Increased utility costs; 
Factor contributed to a moderate extent: 11%; 
Factor contributed to a large extent: 89%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 99%. 

Factor: Increased costs of materials; 
Factor contributed to a moderate extent: 35%; 
Factor contributed to a large extent: 64%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 99%. 

Factor: Increased transportation/shipping costs; 
Factor contributed to a moderate extent: 39%; 
Factor contributed to a large extent: 60%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 99%. 

Factor: Increased maintenance costs; 
Factor contributed to a moderate extent: 21%; 
Factor contributed to a large extent: 64%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 86%. 

Factor: Decreased numbers of customers; 
Factor contributed to a moderate extent: 6%; 
Factor contributed to a large extent: 57%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 63%. 

Factor: Changes to U.S. immigration law; 
Factor contributed to a moderate extent: 83%; 
Factor contributed to a large extent: 4%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 87%. 

Factor: Changes in business taxes or fees; 
Factor contributed to a moderate extent: 38%; 
Factor contributed to a large extent: 22%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 60%. 

Source: GAO analysis of CNMI hotel questionnaire responses. 

Notes: Percentages are weighted by the respondent's number of 
employees. Response choices for questionnaire recipients included "not 
at all," "to a small extent," and "don't know." See appendix V for a 
copy of the GAO questionnaire. 

[A] Totals may not add due to rounding. 

[End of table] 

Looking to the future, hotels representing 90 percent or more of 
workers employed by questionnaire respondents stated that they planned 
to take further actions to introduce labor-or cost-saving strategies 
and to raise prices, with nearly all of these hotels attributing that 
plan to minimum wage increases (see table 14). Hotels representing 
smaller than 90 percent of workers employed by questionnaire 
respondents planned to reduce operations, delay expansion, lay off 
hourly employees, reduce hours, or reduce overtime. However, 100 
percent of hotels that planned to take these actions attributed that 
plan to minimum wage increases to a moderate or large extent. 

Table 14: Employee-Weighted CNMI Employer Planned Actions and 
Attribution of Those Plans to Minimum Wage Increases: 

Action: Introduce labor-saving strategies or technology; 
Percentage planning to take action: 92%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 55%; 
Attributed planned action to minimum wage increases to a large extent: 
45%; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Introduce other cost-saving strategies (e.g., energy-saving 
technologies); 
Percentage planning to take action: 92%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 55%; 
Attributed planned action to minimum wage increases to a large extent: 
45%; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Reduce operating capacity or services offered; 
Percentage planning to take action: 14%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 100%; 
Attributed planned action to minimum wage increases to a large extent: 
0; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Delay expansion of business; 
Percentage planning to take action: 14%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 100%; 
Attributed planned action to minimum wage increases to a large extent: 
0; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Relocate business outside of territory; 
Percentage planning to take action: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Percentage attributing action to either a moderate or large extent[A]: 
not applicable. 

Action: Close establishment temporarily; 
Percentage planning to take action: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Percentage attributing action to either a moderate or large extent[A]: 
not applicable. 

Action: Lay off salaried employees; 
Percentage planning to take action: 19%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 0; 
Attributed planned action to minimum wage increases to a large extent: 
0; 
Percentage attributing action to either a moderate or large extent[A]: 
0. 

Action: Lay off employees who are paid an hourly wage; 
Percentage planning to take action: 19%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 0; 
Attributed planned action to minimum wage increases to a large extent: 
100%; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Reduce regular work hours for employees paid an hourly wage; 
Percentage planning to take action: 58%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 54%; 
Attributed planned action to minimum wage increases to a large extent: 
46%; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Reduce overtime work hours for employees paid an hourly wage; 
Percentage planning to take action: 60%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 27%; 
Attributed planned action to minimum wage increases to a large extent: 
73%; 
Percentage attributing action to either a moderate or large extent[A]: 
100%. 

Action: Decrease level of benefits for salaried employees; 
Percentage planning to take action: 37%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 37%; 
Attributed planned action to minimum wage increases to a large extent: 
14%; 
Percentage attributing action to either a moderate or large extent[A]: 
51%. 

Action: Decrease level of benefits for employees paid an hourly wage; 
Percentage planning to take action: 37%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 37%; 
Attributed planned action to minimum wage increases to a large extent: 
14%; 
Percentage attributing action to either a moderate or large extent[A]: 
51%. 

Action: Implement a hiring freeze; 
Percentage planning to take action: 38%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 2%; 
Attributed planned action to minimum wage increases to a large extent: 
62%; 
Percentage attributing action to either a moderate or large extent[A]: 
64%. 

Action: Raise prices of goods or services; 
Percentage planning to take action: 95%; 
Attributed planned action to minimum wage increases to a moderate 
extent: 68%; 
Attributed planned action to minimum wage increases to a large extent: 
20%; 
Percentage attributing action to either a moderate or large extent[A]: 
87%. 

Action: Close establishment permanently; 
Percentage planning to take action: 0; 
Attributed planned action to minimum wage increases to a moderate 
extent: not applicable; 
Attributed planned action to minimum wage increases to a large extent: 
not applicable; 
Percentage attributing action to either a moderate or large extent[A]: 
not applicable. 

Source: GAO analysis of CNMI hotel questionnaire responses. 

Notes: The questionnaire asked about planned actions in the next 18 
months, which would be by March 2015. Percentages are weighted by the 
respondent's number of employees. Response choices for questionnaire 
recipients included "not at all," "to a small extent," and "don't 
know." See appendix V for a copy of the GAO questionnaire. 

[A] Totals may not add due to rounding. 

[End of table] 

As with past actions, employers attributed their future planned 
actions to a moderate or large extent to factors other than minimum 
wage increases. All respondent hotels attributed their plans to a 
moderate or large extent to other increasing costs. Other factors also 
contributed to the plans of hotels representing 75 percent or more of 
workers employed by questionnaire respondents to a moderate or large 
extent (see table 15). 

Table 15: Employee-Weighted Attribution of Planned CNMI Employer 
Actions to Other Factors: 

Factor: Increased utility costs; 
Factor contributed to a moderate extent: 10%; 
Factor contributed to a large extent: 90%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 100%. 

Factor: Increased costs of materials; 
Factor contributed to a moderate extent: 35%; 
Factor contributed to a large extent: 65%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 100%. 

Factor: Increased transportation/shipping costs; 
Factor contributed to a moderate extent: 35%; 
Factor contributed to a large extent: 65%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 100%. 

Factor: Increased maintenance costs; 
Factor contributed to a moderate extent: 35%; 
Factor contributed to a large extent: 65%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 100%. 

Factor: Decreased numbers of customers; 
Factor contributed to a moderate extent: 24%; 
Factor contributed to a large extent: 51%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 75%. 

Factor: Changes to U.S. immigration laws; 
Factor contributed to a moderate extent: 61%; 
Factor contributed to a large extent: 32%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 93%. 

Factor: Changes in business taxes or fees; 
Factor contributed to a moderate extent: 52%; 
Factor contributed to a large extent: 22%; 
Percentage where factor contributed to either a moderate or large 
extent[A]: 75%. 

Source: GAO analysis of CNMI hotel questionnaire responses. 

Notes: Percentages are weighted by the respondent's number of 
employees. Response choices for questionnaire recipients included "not 
at all," "to a small extent," and "don't know." See appendix V for a 
copy of the GAO questionnaire. 

[A] Totals may not add due to rounding. 

[End of table] 

CNMI Hotel Occupancy and Room Rates Have Increased in Recent Years: 

Data from the Hotel Association of the Northern Mariana Islands 
(HANMI), which, prior to November 2013, covered 12 CNMI hotels, show 
that in 2012 and 2013 occupancy rates for its member hotels have 
increased over average rates between 2006 and 2011. Occupancy rates in 
the January to March peak season topped 90 percent in 2013 (see table 
16). 

Table 16: HANMI Monthly Hotel Occupancy Rates: 

Percentages: 

January; 
2006: 70; 
2007: 72; 
2008: 77; 
2009: 80; 
2010[A]: 74; 
2011: 81; 
2012: 85; 
2013[A]: 91. 

February; 
2006: 73; 
2007: 74; 
2008: 76; 
2009: 80; 
2010[A]: 83; 
2011: 86; 
2012: 87; 
2013[A]: 94. 

March; 
2006: 60; 
2007: 63; 
2008: 58; 
2009: 59; 
2010[A]: 71; 
2011: 71; 
2012: 80; 
2013[A]: 93. 

April; 
2006: 56; 
2007: 49; 
2008: 55; 
2009: 54; 
2010[A]: 51; 
2011: 47; 
2012: 68; 
2013[A]: 76. 

May; 
2006: 65; 
2007: 52; 
2008: 57; 
2009: 49; 
2010[A]: 50; 
2011: 53; 
2012: 60; 
2013[A]: 73. 

June; 
2006: 66; 
2007: 55; 
2008: 58; 
2009: 47; 
2010[A]: 57; 
2011: 55; 
2012: 64; 
2013[A]: 78. 

July; 
2006: 64; 
2007: 57; 
2008: 62; 
2009: 55; 
2010[A]: 62; 
2011: 57; 
2012: 66; 
2013[A]: 83. 

August; 
2006: 66; 
2007: 65; 
2008: 60; 
2009: 66; 
2010[A]: 69; 
2011: 70; 
2012: 83; 
2013[A]: 94. 

September; 
2006: 63; 
2007: 49; 
2008: 55; 
2009: 63; 
2010[A]: 60; 
2011: 60; 
2012: 67; 
2013[A]: 75. 

October; 
2006: 59; 
2007: 49; 
2008: 59; 
2009: 39; 
2010[A]: 54; 
2011: 52; 
2012: 59; 
2013[A]: 72. 

November; 
2006: 59; 
2007: 59; 
2008: 61; 
2009: 48; 
2010[A]: 62; 
2011: 64; 
2012: 75; 
2013[A]: 81[A]. 

December; 
2006: 61; 
2007: 61; 
2008: 62; 
2009: 57; 
2010[A]: 68[A]; 
2011: 68; 
2012: 85; 
2013[A]: Not available. 

12-month average; 
2006: 64; 
2007: 59; 
2008: 62; 
2009: 58; 
2010[A]: 63; 
2011: 64; 
2012: 73; 
2013[A]: 85 through November 2013. 

Source: GAO analysis of HANMI data. 

Note: December 2013 statistics were not yet available at the time of 
our report. 

[A] One hotel did not report statistics to HANMI in December 2010 and 
November 2013. 

[End of table] 

As occupancy has increased in recent years, room rates have also 
risen. After adjusting for inflation, yearly average room rates 
increased by 11 percent between 2010 and 2013 (see table 17). 

Table 17: HANMI Inflation-Adjusted Monthly Room Rates 2010-2013: 

January; 
2010: $102.65; 
2011: $103.83; 
2012: $108.62; 
2013: $113.09. 

February; 
2010: $89.74; 
2011: $90.74; 
2012: $92.44; 
2013: $103.77. 

March; 
2010: $83.01; 
2011: $79.92; 
2012: $82.96; 
2013: $88.35. 

April; 
2010: $81.42; 
2011: $83.58; 
2012: $81.76; 
2013: $90.69. 

May; 
2010: $87.07; 
2011: $81.44; 
2012: $85.30; 
2013: $92.51. 

June; 
2010: $80.20; 
2011: $76.49; 
2012: $81.02; 
2013: $90.34. 

July; 
2010: $90.05; 
2011: $92.03; 
2012: $94.36; 
2013: $105.64. 

August; 
2010: $104.03; 
2011: $106.14; 
2012: $108.41; 
2013: $115.55. 

September; 
2010: $81.29; 
2011: $81.55; 
2012: $81.47; 
2013: $94.25. 

October; 
2010: $82.81; 
2011: $80.28; 
2012: $82.49; 
2013: $94.05. 

November; 
2010: $80.98; 
2011: $79.06; 
2012: $81.59; 
2013: $93.18. 

December; 
2010: $96.22; 
2011: $91.48; 
2012: $99.15; 
2013: not available. 

12-month average; 
2010: $88.29; 
2011: $87.21; 
2012: $89.96; 
2013: $98.31[A]. 

Source: GAO analysis of HANMI data and CNMI CPI data. 

Note: Data cover HANMI members only. 

[A] December 2013 data were not yet available at the time of our 
report; therefore, the 2013 yearly average is for 11 months. 

[End of table] 

According to the Marianas Visitors Authority, CNMI tourism is 
dependent on the availability of air service and hotel accommodations. 
According to the Marianas Visitors Authority (citing 2013 data), there 
is at present a good balance between the number of flight seats and 
the number of resort hotel rooms in the CNMI. In 2011 Saipan began 
receiving twice-weekly direct flights from Beijing, China.[Footnote 
92] According to tourism industry representatives, there is currently 
no international jet service to Tinian, making Tinian visitors and 
residents dependent on "air taxis" that run several daily flights from 
Saipan, as well as charter flights (see figure 18). There is no 
ferryboat service between the two islands. Similarly, according to the 
Marianas Visitors Authority, the island of Rota receives only charter 
flights from Japan at the end of the calendar year. 

Figure 18: Plane Preparing for the Saipan to Tinian Flight: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

According to the Marianas Visitors Authority, there are approximately 
667 daily hotel rooms in the CNMI that are currently off-line or 
closed, which could support an additional 133,400 visitors.[Footnote 
93] The Authority is hopeful that the currently closed Palms (see 
figure 19) and Riviera Resort Hotels will soon re-open. In addition, 
there are requests for proposals for development of two tracts of land 
on Saipan that could, according to the Authority, add 800 to 1,000 
daily rooms, accommodating an additional 160,000 to 200,000 annual 
visitors. 

Figure 19: The Palms Resort Hotel: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

While discussing the recent upturn in tourism, industry 
representatives characterized the growth as an opportunity to recover 
from several down years and to reinvest in their properties. In 
addition, they attributed the recent growth in tourism to the Chinese 
and Russian markets, whose access to the CNMI is aided by the U.S. 
Department of Homeland Security's current practice of paroling 
tourists from Russia and China into the CNMI. This makes the CNMI an 
attractive destination for tourists from China and Russia, which are 
relatively close to the CNMI. Tourism industry representatives fear 
that loss of the Russian and Chinese market would be devastating. 

[End of section] 

Appendix V: GAO Questionnaire: 

United States Government Accountability Office: 
GAO: 

2013 Questionnaire Update: 

Introduction: 

The U.S. Government Accountability Office (GAO), an agency of the 
Congress, is mandated under the American Recovery and Reinvestment Act 
of 2009, as amended, to assess the impact of minimum wage increases in 
American Samoa and the Commonwealth of the Northern Mariana Islands 
(CNMI). 

As part of our review, we are distributing a questionnaire update to 
establishments, following our 2009 and 2010 questionnaires of the 
largest employers. This questionnaire will take several hours to 
complete and will require you to consult your financial accounting and 
payroll records for 2010 through 2013. The data you provide in this 
questionnaire will be a critical input in GAO's report to Congress. 

We understand that there are great demands on your time, and we 
appreciate your time and effort in completing this questionnaire 
update. 

GAO acknowledges that any business sensitive information and non-
public information provided to us must be safeguarded against release 
in accordance with 18 U.S.C. § 1905, or such other law, rule, or 
regulation as may apply. 

GAO Contacts: 

If you have any questions, please e-mail Minimum Wage(dgao.gov or 
fremonti(dgao.gov or call Jon Fremont at 202512-6990 or Michael Simon 
at 202-512-4808. 

Completing and Returning the Questionnaire: 

Please complete and return this questionnaire as soon as possible, but 
no later than October 15, 2013. After receiving your responses, we may 
follow up with a brief telephone call or visit to clarify your 
responses. 

This questionnaire can be completed by filling it out onscreen using 
MS Word, and returned via e-mail to MinimumWage@gao.gov. However, you 
may also print a copy of the questionnaire, complete it by hand, and 
fax it to the attention of Minimum Wage Increases at 202-512-2514. 

[End of section] 

Appendix VI: Comments from the Government of American Samoa: 

Note: GAO comments supplementing those in the report text appear at 
the end of this appendix. 

Office of The Governor: 
American Samoa Government: 
Lolo M. Mouga: 
Governor: 
Lemanu P. Mauga: 
Lieutenant Governor: 
Telephone: (684) 633-4116 Fax: (684) 633-2269 

March 21, 2014: 

Mr. David Gootnick: 
Director, International Affairs and Trade: 
United States Government Accountability Office: 
411 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Gootnick: 

Thank you for the draft report "American Samoa and the Commonwealth of 
the Northern Mariana's Islands--Economic Indicators since Minimum Wage 
Increases Began" and the opportunity to provide comments to the US GAO 
office. 

First, while the draft report on the whole captures the consensus 
among the key stakeholders in the territory to postpone the 
incremental increase of the minimum wage set for September 30, 2015, 
it does so in a fragmented manner thus diffuses the substance of our 
position which is statistically and categorically supported. 

Second, there is significant evidence that the 2010 US Census grossly 
undercounted the American Samoa population (see Attachment A). The 
ASDOC statistics division estimated the mid-year 2010 population to be 
64,919 while the 2010 US Census counted the territory's population at 
55,519 which depicts a 14% undercount. The ASDOC population estimates 
yield much lower GDP per capita data, i.e. $7,925 dollars vs. $9,164 
dollars for 2012 - a 13.5% differential (see Attachment B). While it 
is understood that the US GAO will base your report to Congress 
Committees on officially published statistics (i.e. US Census, BEA), 
it would be a gross oversight of the aforementioned total population 
undercount to be relegated a mere footnote--attributing it to "the 
omission of undocumented immigrants who feared deportation" (see 
attachment A for explanation of the undercount). [See comment 1] 

Third, we are very concerned that your findings are derived from a 
narrower spectrum of information sources - ASG/Tax Office, tuna 
canning industry questionnaire, and group discussions. Given serious 
challenges in the collection of validated data in the territory
especially with government agencies, the US GAO study could have 
solicited a wider scope of data by canvassing information from the 
Social Security Administration (SSA), US Census Bureau's County 
Business Patterns (CBP), and ASGIDOC; and industry questionnaire and 
group discussions be extended to other industries as well (for measure 
of the multiplier effect). As a result, your draft report yields key 
misleading statements and findings not supported by available data as 
given below: [See comment 2] 

* The draft report does not capture the severity of employment 
decreases since 2007; employment rate decreases an average of 2.4% to 
10% annually since 2007 to 2012 according to data from CBP, SSA, and 
ASG/DOC; ASG/Tax Office is the only source of information that 
recorded an increase in employment in 2012 (see attachment C). 
Further, ASDOC estimated the unemployment rate in 2012 to be 18%, up 
from 12% in 2011. Hence it is highly unlikely employment increased at 
all in 2012. [See comment 3] 

* The draft report puts more stock on the GDP trend from 2007 to 
2012 - as flat or slightly declining; whereas more emphasis should be 
placed on the multiplier effect of percentage changes in GDP, however 
small to employment. For example, the employment decline implicit in 
the ASG/Tax Office data is accounted for entirely by the COS Samoa 
Packing cannery closure in 2009 (2000 jobs), allowing for no 
multiplier effects and no employment effects on other industries that 
might not have been able to absorb the minimum wage increases. Hence, 
the draft report failed to capture employment cutbacks in other 
industries and the significant number of business closures during this 
period. [See comment 4] 

Further, American Samoa's economic base is narrow and fragile, 
supported primarily by the two pillars of ASG and the tuna industry. 
The tuna industry is a function of the global market forces of demand 
and supply and U.S. government policies on trade liberalization; while 
the American Samoa government cannot operate without U.S. budget 
allocations and federal grants. Hence, the territory is extremely 
vulnerable to elements of the international and national market place
and U.S. international trade and national budget policies (to which 
American Samoa has little or no control over). Any move to tilt the 
already unsteady balance such an increase in the minimum wage would 
bear dire circumstances which I strongly believe American Samoa cannot 
recover from in the foreseeable future. 

Our new administration is merely 14 months old, and we need about 
three to five years to diversify the base and grow our economy before 
we could consider an increase in current minimum wages. 

Moreover, tethering the American Samoa minimum wage to the federal 
minimum wage by law in 2007 with the objective of equaling the US 
minimum wage at some point in the future is flawed and misguided. 
Culminating these factors: average median income of about 45% of that
of the United States; real GDP per capita of about 16% of that of the 
United States poverty rate of about 60% of the population as oppose to 
15% in the United States, American Samoa can never attain the 
objective of equaling the US minimum wage set forth in the 2007 federal
minimum wage law. 

Undergoing this exercise every two or three years is meaningless and a 
waste of resources. A better alternative would be to have American 
Samoa develop its own minimum wage schedule with appropriate guidance 
and oversight provided by the US Department of Labor and US
Department of Interior. 

For reasons stated above, I strongly urge you and US GAO to send a 
clear and strong message to the Congressional Committees to postpone 
once more the looming minimum wage increase in 2015. Please bear in 
mind this federal minimum wage set for 2015 is nothing but a 
prescription for total economic ruin for the territory of American 
Samoa. 

Sincerely, 

Signed by: 

Lolo M. Moliga: 
Governor of American Samoa: 

Cc: Honorable Lemanu P. Mauga, Lieutenant Governor: 
Honorable Congressman Faleomavaega Eni Hunkin: 
Michael 1. Simon, GAO Senior Analyst: 
Keniseli Lafaele, ASG DOC Director: 
Iulogologo J. Pereira. Governor's Executive Assistant: 

Encl: Attachments A, B and C. 

Attachment A: 

American Samoa Mid-Year Population Estimates for the years 2010 to 2013
(Report): 

Purpose: Purpose of this exercise was to estimate a reasonable 
population count for American Samoa because it is believed that the 
2010 census data is distorted by serious miss~reporting. 

Rationale: A cross examination of data available with the various 
Government agendas indicate that the census 2010 population count 
should have been more than 55,519. Hence it was of the interest of DOC
Statistic Division and Government of American Samoa to re-examine the 
existing available 2010 data's from various Government agencies and to 
come up with a reasonable population estimate using a simple 
calculation: 2010 population = census 2000 Population + inter-censual 
births - inter censual death +/- net migration. 

Following data were used to cross examine: 

1. Vital statistics data: 
- Inter-censual birth (16,782);
- IMR Data; 
- Inter-censual death (2,912); 
- Census 2010 data shows 13,146 (0 to 10 populations). 

2. School enrollment data for the year 2010 from statistical Year Book: 
- Total school enrollment was 22,476; 
- Census 2010 data shows students enrollment as 18,829. 

3. Emigration ID issued data for the year by Attorney General's office: 
- In 2010 total number of 10 issued was 26,687; 
- Census 2010 data shows the total number of foreign born population 
as 19,695. 

4. Cross examination of legal resident Indian population at the time 
of 2010 census: 
- In 2010 immigration data shows 34 Indian legal residents; 
- Census 2010 data shows 2 Indians. 

5. Employment count provided by statistical year book for the year 2010
- Total employed in 2010 was 18,662; 
- Census 2010 data shows 16,616 employed. 

6. GAO report (In 2010 the total employment was 17,211, non-cannery 
employment 15,342 and cannery 1,869). 

7. Migration Data was not accurate as Attorney General's office was 
not able to provide an accurate data due to missing information for 
the years 2002, 2003 and 2004, but we can use alternate procedure to 
estimate net migration using in and out population for a long period 
of time (10 years or more). Every movement from American Samoa ,in or 
out) is International movement. People can move in and out from 
American Samoa using sea port or airport and these are recorded. 

8. Moreover, a statistical test was conducted to assess the 
completeness of the 2010 census relative to 2000 census using 
Mortpack. The analysis shows the completeness of 2010 census compared
to 2000 census for the age range 5 to 60 is just 81.8 percent. After 
adjusting with natural increase and estimated migration to 2010 census 
population, the completeness of second census went up to 92 percent. 

Attachment B: 

Estimated mid-year population per ASDOC (row #7); Real Gross Domestic 
Product in 2005 chained dollars (row #8); Per capita real GOP (chained
dollars) based on estimated mid-year population per 2010 US Census and 
Bureau of Economic Analysis (BEA) releases 2011 and 2012 (row #9 );
Per capita real GOP (chained dollars) based on estimated mid-year 
population per ASOOC (row #10). 

Number: 1. 2002 census population: 
Estimated population 2009: 57,391; 
Estimated population 2010: 57,291; 
Estimated population 2011: 57,291; 
Estimated population 2012: 57,291; 
Estimated population 2013: 57,291. 

Number: 2. Total number of birth since 2000 to: 
2009: 15,503; 
2010: 16,782; 
2011: 18,069; 
2012: 19,244; 
2013: 20,405. 

Number: 3. Total number of death since 2000 to: 
2009: -2,665; 
2010: -2,912; 
2011: -3,195; 
2012: -3,477; 
2013: -3,747. 

Number: 4. Natural increase in the population since 2000 to: 
2009: 12,838; 
2010: 13,870; 
2011: 14,874; 
2012: 15,767; 
2013: 16,658. 

Number: 5. Net migration[A]: 
2009: -4,786; 
2010: -6,664; 
2011: -8,077; 
2012: -9,954; 
2013: -11,832. 

Number: 6. Estimated population on December 31: 
2009: 65,343; 
2010: 64,497; 
2011: 64,088; 
2012: 63,104; 
2013: 62,117. 

Number: 7. Estimated mid-year population: 
2009: 65,177; 
2010: 64,919; 
2011: 64,292; 
2012: 63,596; 
2013: 62,610. 

Number: 8. Real Gross Domestic Product taken from Bureau of Economic 
Analysis (BEA) releases (millions of chained 2005 dollars): 
2009: $507; 
2010: $513; 
2011: $516; 
2012: $504. 

Number: 9. Per capita real GPD (chained dollars) taken from BEA 
releases (millions of chained 2005 dollars) based on 2010 census 
population: 
2009: $8,125; 
2010: $9,243; 
2011: $9,331. 
2012: $9,1645. 

Number: 10. Per capita real GPD (chained dollars) adjusted based on 
estimated mid-year population per ASDOC (row #7) and BEA releases 2011 
and 2012: 
2009: $7,788; 
2010: $7,904; 
2011: $8,025; 
2012: $7,925. 

[A] Net migration estimated for the years 202, 2003, and 2004 using 
trend analysis (+/- 5.00% error in total estimate. 

[End of table] 

Attachment C: 

Employment Data from Available Sources: 

ASC Tax Office (ASG/Tax Office): 

Year: 2007; 
Employment: 17,791. 

Year: 2008; 
Employment: 19,340; 
Employment Percent Change: 8.7; 
GDP Percent Change: -1.6 

Year: 2009; 
Employment: 17,001; 
Employment Percent Change: -12.1; 
GDP Percent Change: -3.3. 

Year: 2010; 
Employment: 17,211; 
Employment Percent Change: -1.2; 
GDP Percent Change: 1.3. 

Year: 2011; 
Employment: 15,552; 
Employment Percent Change: -9.6; 
GDP Percent Change: 0.5. 

Year: 2012; 
Employment: 15,790; 
Employment Percent Change: 1.5; 
GDP Percent Change: -2.4. 

Annual Average; 
Employment Percent Change: -2.4; 
GDP Percent Change: -1.1. 

[See comment 5] 

ASC Department of Commerce (ASG/DOC): 

Year: 2007; 
Employment: 17,047. 

Year: 2008; 
Employment: 16,990; 
Employment Percent Change: -0.3; 
GDP Percent Change: -1.6. 

Year: 2009; 
Employment: 14,108; 
Employment Percent Change: -17.0; 
GDP Percent Change: -3.3. 

Year: 2010; 
Employment: 18,862; 
Employment Percent Change: 33.7; 
GDP Percent Change: 1.3. 

Year: 2011; 
Employment: 18,028; 
Employment Percent Change: -4.4; 
GDP Percent Change: 0.5. 

Year: 2012; 
Employment: 14,806; 
Employment Percent Change: -17.9; 
GDP Percent Change: -2.4. 

Annual Average; 
Employment Percent Change: -2.8; 
GDP Percent Change: -1.1 

Social Security Administration (SSA): 

Year: 2007; 
Employment: 18,438. 

Year: 2008; 
Employment: 19,034; 
Employment Percent Change: 3.2; 
GDP Percent Change: -1.6. 

Year: 2009; 
Employment: 15,316; 
Employment Percent Change: -19.5; 
GDP Percent Change: -3.3. 

Year: 2010; 
Employment: 11.728; 
Employment Percent Change: -23.4; 
GDP Percent Change: 1.3. 

Year: 2011; 
Employment: 13,006; 
Employment Percent Change: 10.9; 
GDP Percent Change: 0.5. 

Year: 2012; 
Employment: 10,904; 
Employment Percent Change: -16.2; 
GDP Percent Change: -2.4. 

Annual Average; 
Employment Percent Change: -10.0; 
GDP Percent Change: -1.1. 

[See comment 6] 

US Department of Commerce County Business Patterns (CBP): 

Year: 2007; 
Employment: 16,851[A]. 

Year: 2008; 
Employment: 16,014; 
Employment Percent Change: -5.0; 
GDP Percent Change: -1.6. 

Year: 2009; 
Employment: 16,026; 
Employment Percent Change: 0.1; 
GDP Percent Change: -3.3. 

Year: 2010; 
Employment: 12,860; 
Employment Percent Change: -19.8; 
GDP Percent Change: 1.3. 

Year: 2011; 
Employment: 13,573; 
Employment Percent Change: 5.5; 
GDP Percent Change: 0.5. 

Year: 2012; 
Employment: 12,654[2]; 
Employment Percent Change: -6.8; 
GDP Percent Change: -2.4. 

Annual Average; 
Employment Percent Change: -5.7; 
GDP Percent Change: -1.1. 

[See comment 7] 

[1] 2007 US Economic Census private sector employees (11,247) less 
unpaid employees (448) plus government employment (6052) 16,851 total 
2007 employment. 

[2] CBP private sector employment in 2011 (7,396) plus 2012 government 
employment {5,258) equals 12,654 total 2012 employment. 

The following are GAO's responses to comments from the American Samoa 
Government dated March 21, 2014. 

GAO Comments: 

1. The government of American Samoa stated that there is significant 
evidence that the 2010 U.S. Census grossly undercounted the American 
Samoa population. We have edited the note in the report to expand on 
the American Samoa government's concern about a population undercount 
in the census. However, an undercount of the American Samoa population 
by the Census would not affect the employment counts we include in our 
report. Our employment counts are not based on Census data but on data 
from the American Samoa Office of Taxation and from responses to the 
questionnaire we submitted to tuna canning industry employers. 

2. The government of American Samoa stated that it is very concerned 
that GAO's findings are derived from a narrow spectrum of information 
sources and, as a result, yield misleading statements and findings not 
supported by available data. As noted in the report, U.S. territories 
are not included in some federal data collection that is routinely 
done for the 50 U.S. states. We have carefully reviewed the available 
data from the American Samoa Office of Taxation and have worked with 
the office to review and verify its data. As a result of our review, 
the office has also reviewed its data for completeness and accuracy. 
We believe that the use of these data is appropriate for determining 
the changes in employment and earnings in American Samoa over time. We 
recognize that different data series can provide different specific 
numbers because of their varied methodologies or coverage; therefore 
we have reported other data series to provide full disclosure, and 
have included a discussion of potential reasons for the differences. 
Because we reviewed and discussed the alternate data sources, and 
included our analysis of the GAO questionnaire and interviews with 
multiple stakeholders in American Samoa, we do not believe that we are 
presenting a misleading picture of the impact of minimum wage 
increases in American Samoa. 

With the exception of the County Business Patterns data, each of the 
data sources included in Attachment C of the American Samoa letter was 
included in our report's Appendix I as part of our discussion of the 
different data sources and was included in the draft report. County 
Business Patterns data have limitations in their coverage for American 
Samoa. For example, County Business Patterns data do not include most 
government employees. Government employees were approximately 29 
percent of total employment in American Samoa in 2012 according to the 
data from the American Samoa Office of Taxation. In addition, the 
County Business Patterns data are currently available for only 2008 to 
2011 and are not available for 2007 or 2012. The other series we 
report are available for 2007 through 2012. The American Samoa 
government has used the 2007 Economic Census to substitute for the 
missing County Business Patterns data for 2007, but these data have a 
different basis. For example, according to Census Bureau officials, 
the Economic Census includes FICA and non-FICA workers, while County 
Business Patterns data include only FICA workers. In addition, the 
2012 data the American Samoa government presents assume that there was 
no change in private sector employment from 2011 to 2012. 

3. The American Samoa government stated that our report does not 
capture the severity of employment decreases since 2007 and the 
government presents an estimation of the 2012 unemployment rate by the 
American Samoa Department of Commerce stating that the unemployment 
rate in 2012 was 18 percent, up from 12 percent in 2011. We have added 
unemployment rates to the report that were calculated based on the 
2010 decennial census to the report, for reference. The 2012 
unemployment rates calculated by American Samoa are based on an 
extrapolation of 2000 and 2010 census data, and American Samoa 
Statistical Yearbook data, and therefore do not include actual data 
from 2012. Therefore, the American Samoa government's 2012 
unemployment calculation may not capture changes in the actual labor 
force during this period, which would affect the unemployment rate. 
For example, in their responses to our questionnaire, cannery 
employers reported a 6 percent increase in hourly employment from 2011 
to 2012. Additionally, if some portion of the unemployed individuals 
leaves American Samoa, the unemployment rate would be less than that 
estimated by the American Samoa government. 

4. The American Samoa government comments that more emphasis should be 
placed on the multiplier effect of percentage changes in GOP, however 
small, to employment. Each of the three data series we present in 
Appendix I covers employment in all sectors, therefore any change in 
employment and wages that occurred as a result of the 2009 cannery 
closure would also be captured in data we present. We agree that it is 
likely that a major closure such as that of the cannery in 2009 will 
have larger effects on the economy. 

5. The American Samoa government presents employment data labeled as 
from the American Samoa Government Office of Taxation. The Office of 
Taxation data presented by the American Samoa government are from our 
draft report and are a combination of data from that office and from 
our questionnaire of cannery employers. As a result of data reviews by 
the American Samoa Office of Taxation and GAO during the report 
comment period, we made corrections to American Samoa employment and 
wage data for 2007-2009 that revised these employment data slightly 
downward for those years in the final report. 

6. The American Samoa government presents employment data from the 
SSA. We prepared these data as part of an analysis of SSA data 
undertaken specifically for this report. As Appendix I of our report 
notes, the SSA data had data entry errors for 2011 and 2012 that 
resulted in implausibly large counts. While we took steps to account 
for these errors, we determined that the data from the American Samoa 
Office of Taxation were more reliable than SSA data for our purpose of 
describing employment and earning trends in those years. 

7. The American Samoa government presents employment data labeled as 
being from the U.S. Department of Commerce County Business Patterns. 
However, the County Business Patterns data from 2007 are U.S. Economic 
Census data, which have a different basis for the count than the 
County Business Patterns data. In addition, the 2012 data presented by 
the American Samoa government assume no change in private sector 
employment between 2011 and 2012. However, there is likely to have 
been a change in total employment between those years. For example, in 
their responses to our questionnaire, cannery employers reported a 6 
percent increase in hourly employment from 2011 to 2012. 

[End of section] 

Appendix VII: Comments from the Government of the CNMI: 

Department of Commerce: 
Commonwealth Of The Northern Mariana Islands: 
Caller Box 10007 CK, Saipan, MP 96950: 
Tel. (670) 664-3000: 
Fax: (670) 664-3067: 
[hyperlink, http://www.commerce.gov.mp] 

March 7, 2014: 

David Gootnick: 
Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Subject: Comments on Draft GAO-14-381 "Economic Indicators Since Minimum
Wage Increases Began" 

Dear Mr. Gootnick: 

The CNMI is pleased with the opportunity to comment on this document.
The indicators provide an objective overview of our economic 
conditions, although we understand that we are missing key data sets 
that are normally used for minimum wage study as stated in your 
report. We also understand that the survey response is from businesses 
hiring more than 50 employees representing only 7% of the total CNMI 
labor force. The approach is welcoming in a sense that it attempts to 
construe our economic conditions with limited data, and it is 
important to note that this report does capture the general condition 
of what is happening in our CNMI Territory. 

I echo the industry representatives in characterizing the recent 
growth as an opportunity to recover from several down years and to 
reinvest into our community. Key challenges faced by our businesses 
range from uncertainties surrounding the availability of qualified 
workers or a labor force, pending a decision from U.S. Department of 
Labor on the Contract Workers' (CW) program extension. The workforce 
population is mainly supported by non-U .S. citizens and although the 
CNRA (PL 110-229) intends to phase-out these workers, the opportunity 
will be cost prohibitive as there is insufficient availability and 
trained Qualified U.S. Workers to replace the current CW workers. The 
CMI continues to work with federal partners in the transition process, 
but as our Governor had requested from U.S. Secretary of Labor, Mr. 
Thomas Perez, an ex tension for the CW is imperative at this time. 
Furthermore, as this report points out, businesses are predisposed to 
a high cost of transacting business in an isolated island economy
that is dependent on imported goods to operate the lone tourism 
service industry, amongst others. The cost of fuel locally and 
globally affects local utility and transportation costs, as well as the
opportunity for airlines to service our tourism industry. 

Similarly, the cost of living for our residents is exponentially high, 
relative to other U.S. States. The already meager disposable income of 
a community whose poverty rate more than triples that of the U.S. at 
52.5%, is further threatened and compromised by both a reduction in 
work hours and a diminished workforce in both private and public 
sector jobs. Although the CNMI does not have a specific disposable 
income ratio, the average income should negotiate the cost of basic
necessities, which it does not. Our residents must cope with the 
additional burden of high utility and health care costs. This year, 
the CNMI government and its employees must cover a more than 30% 
increase in the government employee health insurance plan premiums, 
while government retirees saw a 25% pension reduction. This hurdle for 
government employees is dwarfed by the complete lack of health 
insurance coverage in the private market for new insured lives in the 
year 2014--due to implications of the Affordable Care Act. 

Although our economy is experiencing positive signs of growth with a 
5.2% GDP increase in 2012 and appears to be a favorable environment 
for a Minimum Wage Increase, it is important that we take into 
consideration the overall vital statistics of our economy to assist us 
in our endeavor to provide a self-sustaining government and better 
living conditions for our people. With the current outlook, an 
increase in minimum wage may be the most favorable option if we
desensitize ourselves from business reinvestment needs. However, as 
the small businesses are an important fabric within our economic 
success, we must strike a balance and support our small businesses 
through this change with a plan for transition. I hope this report 
will elevate our discussion with federal agency partners to access 
baseline assessments and availability of key data points for the CNMI, 
and to explore how a wage increase may affect enrollment and
eligibility for public assistance programs, such as Medicaid. 
Additionally, I hope we are able to learn more about the people who 
work these low-wage jobs, so that we may effectively prevent the 
working poor from being pushed further into poverty. 

Thank you for working with our government agencies in collecting the 
data necessary to provide the reported economic indicators, and we 
hope we can continue to dialogue as we push proactive solutions to 
weather the outcome of our future decisions. 

Sincerely, 

Signed by: 

Sixto K. Igisomar: 
Secretary: 

Cc: The Honorable Eloy S. Inos, Governor: 
The Honorable Jude U. Hofschneider, Lt. Governor: 
The Honorable Joey San Nicolas, Attorney General: 
Edith Deleon Guerrero, Secretary, Dept. of Labor: 
Esther Fleming, Special Assistant to the Administration: 
Central Statistics Division, Commerce: 
File: 

[End of section] 

Appendix VIII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

David Gootnick, (202) 512-3149 or gootnickd@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Emil Friberg, Assistant 
Director; Ashley Alley; Benjamin Bolitzer; Karen Deans; Jon Fremont; 
Jill Lacey; Michael Simon; Vanessa Taylor; and Eddie Uyekawa made key 
contributions to this report. Technical assistance was provided by 
Lynn Cothern and C. Etana Finkler. 

[End of section] 

Footnotes: 

[1] U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq 
Accountability Appropriations Act, 2007, Pub. L. No. 110-28, § 8103, 
121 Stat. 188 (May 25, 2007); 29 U.S.C. § 206(a). 

[2] Pub. L. No. 111-5, § 802(a), 123 Stat. 115, 186 (Feb. 17, 2009), 
as amended by Pub. L. No. 111-244, § 2(b), 124 Stat. 2618 (Sep. 30, 
2010) and Pub. L. No. 112-149, § 4(b), 126 Stat. 1145 (July 26, 2012). 
Under the current law, GAO is required to report by April 1, 2014, and 
every 3 years thereafter until the minimum wage in the respective 
territory meets the federal minimum wage. 

[3] See appendix II for a summary of the minimum wage law and changes 
to the law for both American Samoa and the CNMI. 

[4] GAO, American Samoa and Commonwealth of the Northern Mariana 
Islands: Wages, Employment, Employer Actions, Earnings, and Worker 
Views Since Minimum Wage Increases Began, [hyperlink, 
http://www.gao.gov/products/GAO-10-333] (Washington, D.C.: Apr. 8, 
2010), and American Samoa and Commonwealth of the Northern Mariana 
Islands: Employment, Earnings, and Status of Key Industries Since 
Minimum Wage Increases Began [hyperlink, 
http://www.gao.gov/products/GAO-11-427] (Washington, D.C.: June 23, 
2011). 

[5] GAO's questionnaire is reproduced in appendix V of this report. 

[6] American Samoa operates both its customs and immigration programs 
independent of the U.S. government. See American Samoa: Performing a 
Risk Assessment Would Better Inform U.S. Agencies of the Risks Related 
to Acceptance of Certificates of Identity, [hyperlink, 
http://www.gao.gov/products/GAO-10-638] (Washington, D.C.: June 11, 
2010). 

[7] The American Samoa government believes the 2010 census to be an 
undercount. See the American Samoa comment letter in Appendix VI of 
this report for additional detail. 

[8] The American Samoa tax data are a count of persons employed during 
the tax year by the employer. The cannery employment figure, from 
responses to GAO's questionnaire, is a count of employees at the 
canneries as of a specific pay period in June of the given year. See 
appendix I for a full discussion our methodology. 

[9] American Samoa tax data from 2013 on total employment are not yet 
available. If many foreign workers left American Samoa, the impact on 
the unemployment rate would be smaller than if those workers remained 
because the foreign workers would no longer be included in the 
calculation. 

[10] Although American Samoa has multiple minimum wages, we use the 
tuna canning industry, American Samoa's largest private sector 
industry, as an example throughout this report. 

[11] Twenty business representatives participated in the discussion 
group. Views expressed in discussion groups only represent the view of 
participants in those groups and may not be representative of all 
businesses' views in American Samoa. 

[12] Ten Star-Kist workers participated in the discussion group. Views 
expressed in discussion groups only represent the view of participants 
in those groups and may not be representative of all workers' views in 
the tuna canning industry. 

[13] This analysis excluded nonwage labor costs due to the minimum 
wage increases, such as increases in employer payroll tax 
contributions under the Federal Insurance Contributions Act (FICA). 

[14] The Guam-CNMI Visa Waiver Program exempts tourism and business 
visitors from certain countries, who are traveling to the CNMI and 
Guam for up to 45 days, from the standard U.S. visa documentation 
requirements (8 C.F.R. § 212.1(q)). 

[15] During the expansion of the CNMI garment and tourism industries 
prior to 1995, the CNMI economy became dependent on foreign labor, as 
the CNMI government used its authority over its own immigration policy 
to bring in large numbers of foreign workers and investors. 

[16] Under current law, the Secretary of Labor may extend the 
transition by an additional 5 years. For additional information, see 
GAO, Commonwealth of the Northern Mariana Islands: Additional DHS 
Actions Needed on Foreign Worker Permit Program, [hyperlink, 
http://www.gao.gov/products/GAO-12-975] (Washington, D.C.: Sept. 27, 
2012). 

[17] If many foreign workers left the CNMI, the impact on the 
unemployment rate would be smaller than if those workers remained 
because the foreign workers would no longer be included in the 
calculation. 

[18] A total of 24 business representatives participated in one of 
four discussion groups. Views expressed in discussion groups only 
represent the views of participants in those groups and may not be 
representative of all businesses' views in the CNMI. 

[19] A total of eight workers participated in one of two discussion 
groups. Views expressed in discussion groups only represent the views 
of participants in those groups and may not be representative of all 
workers' views in the CNMI. 

[20] The analysis excluded nonwage labor costs due to the minimum wage 
increases, such as increases in employer payroll tax contributions 
under the Federal Insurance Contributions Act. 

[21] GAO, American Samoa and Commonwealth of the Northern Mariana 
Islands: Wages, Employment, Employer Actions, Earnings, and Worker 
Views Since Minimum Wage Increases Began, [hyperlink, 
http://www.gao.gov/products/GAO-10-333] (Washington, D.C.: Apr. 8, 
2010), and American Samoa and Commonwealth of the Northern Mariana 
Islands: Employment, Earnings, and Status of Key Industries Since 
Minimum Wage Increases Began [hyperlink, 
http://www.gao.gov/products/GAO-11-427] (Washington, D.C.: June 23, 
2011). 

[22] As with the count of employment, the drop in inflation adjusted 
earnings based on SSA data was larger than the drop based on American 
Samoa tax data. Specifically, inflation-adjusted mean wages in 
American Samoa based on SSA data showed an 11 percent decrease and 
based on American Samoa tax and GAO questionnaire data showed a 3.7 
percent decrease. 

[23] For further information on the CPI, see CNMI quarterly reports on 
the CNMI Department of Commerce website, [hyperlink, 
http://commerce.gov.mp/divisions/central-statistics/], accessed 
February 24, 2014. For American Samoa quarterly reports, see the 
American Samoa Department of Commerce website, [hyperlink, 
http://americansamoa.gov/index.php/2012-04-25-19-44-32/2012-04-25-19-
52-04/departments/commerce], accessed February 24, 2014. 

[24] 29 U.S.C. § 206(a)(1)(C). 

[25] The federal minimum wage laws apply to employees engaged in 
commerce or the production of goods for commerce and to employees who 
work for enterprises engaged in commerce or the production of goods 
for commerce (29 U.S.C. § 206(a)). An enterprise is deemed to be 
engaged in commerce or the production of goods for commerce only if it 
is an activity of a public agency, if its annual gross volume of 
business is at least $500,000, or if it is engaged in the operation of 
a hospital, health facility, or school (29 U.S.C. § 203(s)). 
Businesses in which the only regular employees are immediate family 
members of the owner are not considered to be enterprises engaged in 
commerce. 

[26] 29 U.S.C. § 213(a)(5)-(6). The seafood exemption only applies to 
these activities when performed at sea, so employees engaged in these 
activities on shore would not qualify for the exemption. See 29 C.F.R. 
§ 784.130 for definition of "at sea." 

[27] Pub. L. No. 110-28, § 8103, 121 Stat. 112, 188 (May 25, 2007). 

[28] In addition to the mandated GAO reports on the minimum wage in 
American Samoa and CNMI, the federal government has conducted or 
funded several reports on minimum wage increases in American Samoa and 
the CNMI in recent years. For a summary of previous federal reports, 
see appendix II of [hyperlink, 
http://www.gao.gov/products/GAO-11-427]. The Departments of Commerce, 
Labor, and Interior have not conducted any additional studies of the 
minimum wage since our previous report. 

[29] Covenant to Establish a Commonwealth of the Northern Mariana 
Islands in Political Union with the United States of America, §503(b). 
See 48 U.S.C. §1801 note. 

[30] Pub. L. No. 111-244, § 2,124 Stat. 2618 (Sept. 30, 2010). 

[31] Pub. L. No. 112-149, § 4,126 Stat. 1145 (July 26, 2012). 

[32] Pub. L. No. 110-28, § 8103(b)(1), 121 Stat. 112, 188 (May 25, 
2007). 

[33] Pub. L. No. 111-244, § 2, 124 Stat. 2618 (Sept. 30, 2010). 

[34] Pub. L. No. 113-34, § 2, 127 Stat. 518 (Sept. 18, 2013). 

[35] Congressional Budget Office, The Effects of a Minimum-Wage 
Increase on Employment and Family Income, (Washington, D.C.: Feb. 
2014). 

[36] The $10.10 option would increase the U.S. minimum wage in three 
steps: to $8.20 on July 1, 2014; to $9.15 one year after that; and to 
$10.10 after another year. After reaching $10.10 in 2016, the minimum 
wage would be adjusted annually for inflation as measured by the 
consumer price index. The $9.00 option would increase the U.S. minimum 
wage from $7.25 per hour to $8.10 on July 1, 2015, and to $9.00 on 
July 1, 2016. After reaching $9.00 in 2016, the minimum wage would not 
be subsequently adjusted for inflation. 

[37] We similarly noted in a previous report on the CNMI in August 
2008 that, based on a review of economic literature, there may have 
been consensus that the overall effect of minimum wage increases on 
employment is negative, but there was no consensus on the size of the 
effect. See [hyperlink, http://www.gao.gov/products/GAO-08-791]. 

[38] At the midpoint of its range of estimates, CBO found that the 
$10.10 option would decrease total U.S. employment by about 500,000 
workers, but would increase the earnings of about 16.5 million workers 
and raise 900,000 people above the poverty level. CBO estimated that 
the $9.00 option would decrease total U.S. employment by about 100,000 
workers, but would increase the earnings of about 7.6 million workers 
and raise 300,000 people above the poverty level. 

[39] Under the $10.10 option the U.S. minimum wage would increase 39 
percent in 2 years; under the $9 option, it would increase 24 percent 
in one year. Minimum wages in American Samoa for tuna canning workers 
increased 46 percent in 22 months (between July 24, 2007 and May 25, 
2009); there have been no increases since 2009. The CNMI minimum wage 
increased 49 percent in the same time period and 82 percent from July 
24, 2007 to September 30, 2012; there have been no increases since 
2012. 

[40] CBO found that the next increase under the $10.10 option would 
affect about 6 percent of U.S. workers in 2014 and the 2016 increase 
would affect 14 percent of workers. Under the $9.00 option, the 2015 
increase would affect about 4 percent of U.S. workers and the 2016 
increase would affect 8 percent. In contrast, the next 50 cent per 
hour increase in American Samoa in 2015 would affect 79 percent of 
current hourly tuna canning workers. All minimum wage increases 
through 2027, when the American Samoa tuna canning minimum wage 
reaches $7.25, would affect 98 percent of current hourly tuna canning 
workers. See GAO's analysis in Appendix III. The next 50 cent increase 
in the CNMI, in 2014, would affect 84 percent of current hourly hotel 
workers. Minimum wage increases through 2018, when the CNMI minimum 
wage reaches $7.25, would affect 94 percent of current hourly hotel 
workers. See GAO's analysis in Appendix IV. 

[41] The American Samoa government has stated that it believes the 
2010 census to be an undercount due to a mismatch between the Census 
count and American Samoa data on births, deaths, outmigration and 
other data, as well as the omission of undocumented immigrants who 
feared deportation. See the American Samoa comment letter in Appendix 
VI of this report for additional detail. 

[42] Two deeds of cession were initially completed between Samoan 
chiefs, or matai, and the United States in 1900 and 1904 and were 
ratified by the federal government in 1929. In these deeds, the United 
States pledged to promote peace and welfare, establish a good and 
sound government, and preserve the rights and property of the people. 
See 45 Stat. 1253, c. 281 (Feb. 20, 1929), codified at 48 U.S.C. §1661. 

[43] Transfer of Administration of American Samoa, Exec. Order No. 
10,264, 16 Fed. Reg. 6419 (1951). The Secretary exercised broad powers 
with regard to American Samoa, including "all civil, judicial, and 
military powers" of government in American Samoa. 48 U.S.C. § 1661(c). 

[44] 48 U.S.C. § 1662a. 

[45] American Samoa residents have many of the rights of citizens of 
the 50 states but cannot vote in U.S. national elections and do not 
have voting representation in the final approval of legislation by the 
full Congress. The congressional delegate from American Samoa has many 
of the same congressional privileges as other representatives, 
including a vote in committee, but cannot vote in the House of 
Representatives. 

[46] 22 C.F.R. § 53.2, § 41.0. Noncitizen nationals do not have the 
same preferences as U.S. citizens for sponsoring immediate family 
members for family-based immigration visas. To qualify for the same 
preference categories as citizens, noncitizen nationals must become 
naturalized citizens of the United States, which includes a 
requirement to reside in the United States for 3 months (8 C.F.R. 
§325.2). Additionally, individuals who are residents of the U.S. 
insular areas pay no federal income tax on income from sources within 
the insular areas; however, their wages are subject to Social Security 
and Medicare taxes. 

[47] American Samoa is the only insular area that operates both its 
own customs and immigration programs. The U.S. government operates the 
immigration functions in other insular areas, such as Guam, the CNMI, 
and the U.S. Virgin Islands; however, each of these insular areas 
operates under its own customs laws. 

[48] In August 2002, tariffs decreased on pouched tuna exported from 
countries covered by the Andean Trade Preference Act. The authority to 
extend duty-free treatment to the remaining eligible Andean Trade 
Preference Act beneficiary countries expired on July 31, 2013, and has 
not been renewed. In January 2008, provisions of the North American 
Free Trade Agreement lifted tariffs imposed on canned tuna and other 
tuna products exported from Canada and Mexico. Nevertheless, some of 
American Samoa's foreign competitors still did not qualify for tariff-
free access to the U.S. market. 

[49] The Trans-Pacific Partnership is a free trade agreement currently 
being negotiated among 12 countries that aims to liberalize trade in 
goods and services and remove barriers to foreign investment. 
Participating countries as of December 2013 are Australia, Brunei, 
Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, 
Vietnam, and the United States. 

[50] The tax credits under section 936 of the Internal Revenue Code 
expired for taxable years beginning after December 31, 2005. Section 
30A of the Internal Revenue Code extended the Section 936 credits for 
American Samoa until January 1, 2012, subject to certain limitations. 
Corporations that were actively conducting business in American Samoa 
by 1995 who elected Section 936 status in the last taxable year before 
January 1, 2006, can claim a section 30A tax credit for taxable years 
that begin before January 1, 2012. See 26 U.S.C. §30A note, as amended 
by Pub. L. No. 111-312, §756, 124 Stat. 3296, 3322 (Dec. 17, 2010). 
For tax years beginning January 1, 2012, or later, there are new 
requirements, including that corporations must meet a "qualified 
production activities income" requirement. 

[51] On December 20, 2012, the American Samoa government agreed to a 
new local tax exemption for Star-Kist covering the period from January 
1, 2013, to December 31, 2022. On October 5, 2010, Tri Marine received 
exemption from any taxes from the American Samoa government for 10 
years on the condition that it meets minimum requirements for capital 
investment and employment after 5 years. 

[52] Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, 
U.S. Census Bureau, Current Population Reports, Income, Poverty, and 
Health Insurance Coverage in the United States: 2010 (Washington, 
D.C.: U.S. Government Printing Office, 2011). For 2004 figures, see 
American Samoa Government, Department of Commerce, Statistics 
Division, Report on the 2005 American Samoa HIES (draft) and Carmen 
DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, U.S. Census 
Bureau, Current Population Reports, Income, Poverty, and Health 
Insurance Coverage in the United States: 2009 (Washington, D.C.: U.S. 
Government Printing Office, 2010). 

[53] DeNavas-Walt, Proctor, and Smith, 2011. 

[54] Department of Commerce, Statistics Division, American Samoa 
Statistical Yearbook, 2012. 

[55] Star-Kist Co. is a subsidiary of the South Korean-based Dongwon 
Group. Dongwon acquired Star-Kist in 2008 from Del Monte Foods, which 
had acquired Star-Kist from the H.J. Heinz Company in 2002. 

[56] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). The great 
majority of those were disaster recovery positions related to the 
tsunami. In a previous report we estimated that there were from 2,000 
to 3,000 temporary jobs funded by the U.S. Census Bureau, the Recovery 
Act, and tsunami recovery efforts [hyperlink, 
http://www.gao.gov/products/GAO-11-427]. As a result, counts of the 
total number employed during this period are higher than the number of 
long-term positions. 

[57] Samoa Tuna Processors, Inc., is part of Tri Marine, a privately 
owned group of companies primarily engaged in fishing, procurement, 
processing, and trading of tuna and other seafood products, and in 
supplying tuna and tuna products to various brands. 

[58] Employees at the Chicken of the Sea cannery, which closed 
September 30, 2009, are included in the 2009 employee count. 

[59] We also calculated trends in employment in American Samoa using 
data from the Social Security Administration and the American Samoa 
Statistical Yearbook. The series were not directly comparable, since a 
person (as counted in the Social Security data) could have multiple 
positions (as counted in the other sources). While all of the series 
showed negative trends, the trend in the Social Security data was much 
larger in magnitude. See appendix I for additional detail on our 
methodology. 

[60] The American Samoa Consumer Price Index increased 4 percent from 
to 2006 to 2007, 10 percent from 2007 to 2008, 3 percent from to 2008 
to 2009, 7 percent from 2009 to 2010, 6 percent from 2010 to 2011 and 
4 percent from 2011 to 2012. In comparison, the U.S. Consumer Price 
Index increased 2.8 percent from 2006 to 2007 and 3.8 percent from 
2007 to 2008, but declined 0.4 percent from 2008 to 2009. The U.S. 
Consumer Price Index then increased by 1.6 percent from 2009 to 2010, 
by 3.2 percent from 2010 to 2011, and by 2.1 percent from 2011 to 2012. 

[61] As with data on total employment, the trend in inflation-adjusted 
earnings as measured by Social Security data was also negative but 
larger in magnitude. See appendix I for additional detail. 

[62] A total of 20 business representatives representing 18 American 
Samoa businesses, including two of the three cannery industry 
employers, participated in the discussion group. Views expressed in 
discussion groups only represent the views of participants in those 
groups and may not be representative of all businesses' views in 
American Samoa. 

[63] Ten Star-Kist workers participated in the discussion group. Views 
expressed in discussion groups only represent the views of 
participants in those groups and may not be representative of all 
workers' views in the tuna canning industry. 

[64] The response of the third employer, Tri Marine, to the question 
was "not applicable" because the company was just beginning operations 
in American Samoa during that time period. 

[65] Our tuna industry questionnaire asked respondents about the 
extent to which they attributed each action they took or planned to 
take to the minimum wage increases, regardless of whether other 
factors also contributed. In interviews, officials provided more 
information about contributing factors. 

[66] [hyperlink, http://www.gao.gov/products/GAO-11-427]. 

[67] GAO's model considered only labor costs and tariffs to show the 
effect of variation in different countries. The models were (A) 
maintaining loining (the labor-intensive cleaning, cooking, and 
cutting of the fish) and canning in American Samoa, (B) relocating 
loining to a lower-wage country and canning to the United States, (C) 
relocating all loining and canning to a tariff-free country, and (D) a 
hybrid model with one half of production, including for U.S. 
government contracts, located in American Samoa and the other half 
relocated to a tariff-free country. Model A had higher costs than the 
other alternatives. Model C, relocating operations to a tariff-free 
country, had the greatest cost savings, but operations under this 
model may lose eligibility for some U.S. government contracts for 
canned tuna. In addition, savings from moving the loining operations 
to a lower-wage country (Model B) also would be partially offset by 
the loss of U.S. government contracts. Model D would retain 
eligibility for these contracts. See appendix III of [hyperlink, 
http://www.gao.gov/products/GAO-11-427] for a full discussion of these 
alternatives. 

[68] In 1947, the United Nations gave the United States authority to 
administer the Trust Territory of the Pacific Islands, which included 
the Northern Mariana Islands. The trusteeship over the Northern 
Mariana Islands was formally dissolved in 1986. 

[69] Covenant to Establish a Commonwealth of the Northern Mariana 
Islands in Political Union with the United States of America, Pub. L. 
No. 94-241, § 1, 90 Stat. 263 (Mar. 24, 1976), 48 U.S.C. § 1801 note. 
See also Howard P. Willens and Deanne C. Siemer, An Honorable Accord: 
The Covenant between the Northern Mariana Islands and the United 
States (Honolulu, Hawaii: University of Hawaii Press, 2002). 

[70] Under the covenant, the U.S. government may enact legislation in 
accordance with its constitutional processes that will be applicable 
to the CNMI. To respect the CNMI's right of self-government under the 
covenant, certain provisions of the covenant may be modified only with 
the consent of both the federal government and the CNMI government. 
These provisions include those relating to the political relationship 
between the United States and the CNMI; the CNMI constitution, 
citizenship, and nationality; the application of the U.S. constitution 
to the CNMI; and the land ownership rights of CNMI citizens. Most 
other provisions of the CNMI covenant may be modified by the federal 
government without the consent of the CNMI government, and local CNMI 
laws that were not inconsistent with federal laws or treaties of the 
United States when the covenant was enacted remained in effect. In 
addition, international treaty obligations between the United States 
and other countries apply to the CNMI through the covenant. 

[71] Prior to November 2009, Section 506 of the covenant applied to 
the CNMI certain provisions of the Immigration and Nationality Act of 
1952 (INA) relating to citizenship and family-based permanent 
immigration. Certain other nonimmigrant provisions of the act, related 
to victims of human trafficking and other crimes, also applied to the 
CNMI. See 8 U.S.C. § 1101(a)(15)(T)-(U). In addition, the covenant 
provided U.S. citizenship to legally qualified CNMI residents. 

[72] The Consolidated Natural Resources Act of 2008 created a 
nonvoting delegate seat in the U.S. House of Representatives for the 
CNMI (48 U.S.C. § 1751). In January 2009, the CNMI elected its first 
representative to the United States Congress. The Delegate from the 
CNMI has many of the same congressional privileges as other 
representatives, including a vote in committee, but cannot vote in the 
House of Representatives. 

[73] Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, 
U.S. Census Bureau, Current Population Reports, Income, Poverty, and 
Health Insurance Coverage in the United States: 2010 (Washington, 
D.C.: U.S. Government Printing Office, 2011). For 2004 figures, see 
Commonwealth of the Northern Mariana Islands, Department of Commerce, 
Central Statistics Division, Report on the 2005 CNMI HIES (Apr, 1, 
2008) and Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. 
Smith, U.S. Census Bureau, Current Population Reports, Income, 
Poverty, and Health Insurance Coverage in the United States: 2009 
(Washington, D.C.: U.S. Government Printing Office, 2010). 

[74] DeNavas-Walt, Proctor, and Smith, 2011. 

[75] Northern Marianas College, Business Development Center, An 
Economic Study for the Commonwealth of the Northern Mariana Islands, 
with funding provided by the U.S. Department of the Interior, Office 
of Insular Affairs (Saipan, Commonwealth of the Northern Mariana 
Islands: October 1999). See also [hyperlink, 
http://www.gao.gov/products/GAO-08-791]. 

[76] U.S. Department of Commerce, Economic and Statistics 
Administration, Foreign Trade Division, U.S. Trade with Puerto Rico 
and U.S. Possessions 2011 (Washington, D.C.: 2012). 

[77] Russian and Chinese tourists must (1) be solely entering and 
staying in the CNMI for a period not to exceed 45 days; (2) be in 
possession of a round-trip ticket that is nonrefundable and 
nontransferable and bears a confirmed departure date not exceeding 45 
days from the date of entry to the CNMI; (3) be in possession of a 
completed and signed Guam-CNMI Visa Waiver Information form; (4) be in 
possession of a completed I-94, Arrival-Departure Record; and (5) be 
in possession of a valid unexpired, machine-readable passport. 

[78] 8 C.F.R. § 212.1(q). 

[79] Consolidated Natural Resources Act of 2008, Pub. L. No. 110-229, 
Title VII, 122 Stat. 754, 853 (May 8, 2008). The legislation's stated 
intent is to ensure effective border control procedures and to protect 
national and homeland security, while minimizing the potential adverse 
economic and fiscal effects of phasing out the CNMI's foreign worker 
permit program and while maximizing the CNMI's potential for economic 
and business growth. CNMI immigration law was in effect until the 
start of the transition period under the federal legislation; however, 
federal restrictions on the total number of foreign workers in the 
CNMI applied immediately. 

[80] Under the regulations issued by DHS in December 2010, previous 
long-term business investors with a minimum of $50,000 in investments; 
foreign investors with a minimum of $100,000 in an aggregate approved 
investment in excess of $2,000,000, or a minimum of $250,000 in a 
single approved investment; and certain retiree investors can remain 
in the CNMI through the transition period that is scheduled to end in 
2014. See 8 C.F.R. § 214.2(e)(23)(iii). 

[81] 48 U.S.C. § 1806(d)(5)(A). For additional information, see 
[hyperlink, http://www.gao.gov/products/GAO-12-975]. 

[82] See Commonwealth of Northern Mariana Islands (CNMI)-Only 
Transitional Worker Numerical Limitation for Fiscal Year 2014, 78 Fed. 
Reg. 58867 (Sept. 25, 2013). 

[83] GAO, Commonwealth of the Northern Mariana Islands: Managing 
Potential Economic Impact of Applying U.S. Immigration Law Requires 
Coordinated Federal Decisions and Additional Data, [hyperlink, 
http://www.gao.gov/products/GAO-08-791] (Washington, D.C.: Aug. 4, 
2008). 

[84] GAO, Defense Management: Further Analysis Needed to Identify 
Guam's Public Infrastructure Requirements and Costs for DOD's 
Realignment Plan, [hyperlink, http://www.gao.gov/products/GAO-14-82] 
(Washington, D.C.: Dec. 17, 2013). 

[85] This count differs from the 2012-2013 count because it excludes 
those hotels that did not respond to our first survey and provide 2007 
data. 

[86] The CNMI Consumer Price Index increased 8.1 percent from 2006 to 
2007, 6.8 percent from 2007 to 2008, 1.5 percent from 2008 to 2009, 
5.28 percent from 2009 to 2010, 4 percent from 2010 to 2011 and 2 
percent from 2011 to 2012. In comparison, the U.S. Consumer Price 
Index increased 2.8 percent from 2006 to 2007 and 3.8 percent from 
2007 to 2008, but declined 0.3 percent from 2008 to 2009. The U.S. 
Consumer Price Index then increased by 1.6 percent from 2009 to 2010, 
by 3.2 percent from 2010 to 2011, and by 2.1 percent from 2011 to 2012. 

[87] A total of 24 business representatives participated in one of 
four discussion groups. Views expressed in discussion groups only 
represent the views of participants in those groups and may not be 
representative of all businesses' views in the CNMI. 

[88] The 177 workers were 7.4 percent of the 2,389 workers included in 
the review. 

[89] A total of eight workers participated in one of two discussion 
groups. Views expressed in discussion groups only represent the views 
of participants in those groups and may not be representative of all 
workers' views in the CNMI. 

[90] At the time of our site visit, we observed regular gasoline 
prices in Saipan of $4.85 or $4.86 per gallon. The American Automobile 
Association reported an average U.S. price per gallon of $3.19 per 
gallon on November 11, 2013. 

[91] Our discussion groups had eight participants, who were not 
randomly selected. The views expressed are not generalizable. 

[92] In the past, flights have been dropped. For example, in September 
2005, Japan Airlines discontinued service to the CNMI. Northwest 
Airlines added routes from Narita and Osaka, Japan, to the CNMI in 
2005, but the Osaka flight was suspended the next year. 

[93] The Marianas Visitors Authority's calculations assume that each 
room would support approximately 200 additional visitors per year. 

[End of section] 

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