This is the accessible text file for GAO report number GAO-14-381
entitled 'American Samoa and The Commonwealth of The Northern Mariana
Islands: Economic Indicators Since Minimum Wage Increases Began' which
was released on March 31, 2014.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as
part of a longer term project to improve GAO products' accessibility.
Every attempt has been made to maintain the structural and data
integrity of the original printed product. Accessibility features,
such as text descriptions of tables, consecutively numbered footnotes
placed at the end of the file, and the text of agency comment letters,
are provided but may not exactly duplicate the presentation or format
of the printed version. The portable document format (PDF) file is an
exact electronic replica of the printed version. We welcome your
feedback. Please E-mail your comments regarding the contents or
accessibility features of this document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
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]
GAO's Mission:
The Government Accountability Office, the audit, evaluation, and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the
performance and accountability of the federal government for the
American people. GAO examines the use of public funds; evaluates
federal programs and policies; and provides analyses, recommendations,
and other assistance to help Congress make informed oversight, policy,
and funding decisions. GAO's commitment to good government is
reflected in its core values of accountability, integrity, and
reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's website [hyperlink, http://www.gao.gov]. Each
weekday afternoon, GAO posts on its website newly released reports,
testimony, and correspondence. To have GAO e-mail you a list of newly
posted products, go to [hyperlink, http://www.gao.gov] and select
"E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO's actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black
and white. Pricing and ordering information is posted on GAO's
website, [hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
Connect with GAO:
Connect with GAO on facebook, flickr, twitter, and YouTube.
Subscribe to our RSS Feeds or E mail Updates. Listen to our Podcasts.
Visit GAO on the web at [hyperlink, http://www.gao.gov].
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm];
E-mail: fraudnet@gao.gov;
Automated answering system: (800) 424-5454 or (202) 512-7470.
Congressional Relations:
Katherine Siggerud, Managing Director, siggerudk@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, DC 20548.
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, DC 20548.
[End of document]