American Samoa And Commonwealth of the Northern Mariana Islands:

Employment, Earnings, and Status of Key Industries Since Minimum Wage Increases Began

GAO-11-956T: Published: Sep 23, 2011. Publicly Released: Sep 23, 2011.

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In 2007, the United States enacted a law incrementally raising the minimum wages in American Samoa and the Commonwealth of the Northern Mariana Islands (CNMI) until they equal the U.S. minimum wage. American Samoa's minimum wage increased by $.50 three times, and the CNMI's four times before legislation delayed the increases, providing for no increase in American Samoa in 2010 or 2011 and none in the CNMI in 2011. If further increases are implemented as scheduled, American Samoa's minimum wage will equal the current U.S. minimum wage of $7.25 in 2018, and the CNMI's will reach it in 2016. Recent economic declines in both areas reflect the closure of one of two tuna canneries in American Samoa and the departure of the garment industry in the CNMI. GAO is required to report in 2010, 2011, 2013, and biennially thereafter on the impact of the minimum wage increases. This testimony, requested by Congress, summarizes GAO's June 2011 report, which describes, since the increases began, (1) employment and earnings, and (2) the status of key industries. GAO reviewed federal and local information; collected data from employers through a questionnaire and from employers and workers through discussion groups; and conducted interviews during visits to each area.

In American Samoa, employment declined 14 percent--from 17,852 to 15,434--between 2006 and 2009, and average inflation-adjusted earnings of those employed fell by 11 percent over the same period. In addition, roughly 2,000 to 3,000 temporary federal jobs will end when funding is no longer available. Employers in the tuna canning industry attributed most of their past and planned actions, including worker layoffs and hiring freezes, to the minimum wage. Cannery officials also expressed concern about American Samoa's loss of competitive advantage in the global tuna canning industry. Workers principally expressed concern over job security. Analysis of alternate models suggests that moving tuna cannery operations from American Samoa to another tariff-free country with lower labor costs would significantly reduce cannery operating costs. In the CNMI, employment fell 35 percent--from 43,036 to 27,897--between 2006 and 2009, and average inflation-adjusted earnings of those employed remained largely unchanged. Also, fewer than 1,000 temporary federal jobs will end when funding is no longer available. Employers in the tourism industry generally attributed their employment actions to multiple factors, such as immigration law and a decrease in the number of customers, more than to the rising minimum wage. Workers said they would like pay increases to help meet rising prices, but they were concerned about losing jobs and work hours. CNMI hotels have generally absorbed minimum wage costs rather than raise room rates. If this trend continues, scheduled minimum wage increases would increase hotels' operating costs due to payroll from approximately 29 to roughly 34 percent of total operating costs between 2010 and 2016.

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