AM. SAMOA WAGE INCREASE ‘DEVASTATING’

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Governor cites thousands of jobs lost

By Fili Sagapolutele PAGO PAGO, American Samoa (The Samoa News, April 10, 2010) - Gov. Togiola Tulafono has reiterated to the U.S. Congress that American Samoa is "destined for very serious economic difficulties" if nothing is done to change provisions of federal law which mandate annual minimum wage increases.

The governor’s comments were outlined in a Mar.10 letter to the U.S Government Accountability Office (GAO) responding to a draft of the GAO impact study report on the impact of minimum wage hikes in American Samoa and the Commonwealth of the Northern Mariana Islands.

The official 165-page report— which does not make any recommendations— was publicly released Thursday. In his letter the Governor says that the report "seems to be a fairly accurate depiction of the impacts that have resulted from the minimum wage increases in American Samoa."

While the GAO’s wage impact estimates "seem reasonable" Togiola says the report does not address critical conclusions implicit in these wage impacts.

He says one primary conclusion of the report is that the average wage in American Samoa will likely double between 2007 and 2016.

"The devastating effect that this will have on the American Samoa economy, especially in the number of jobs that will be lost— and that have been lost thus far— cannot be overstated," the Governor wrote. "Especially when considering the magnitude of the effects described in the GAO report for the first three minimum wage increases."

The Governor also says that employment impact estimates are also quite reasonable, but again the report does not address critical conclusions implicit in these employment impacts.

After the first three minimum wage increases, total employment fell 4287 (including the cannery closure) or 22%, according to GAO.

"Our study— American Samoa’s Economic Future and the Cannery Industry, February 2008— indicated that the loss of the canneries in 2010 would lead to a total job loss of 7700 by 2015," Togiola points out.

He says the GAO job loss estimates suggest that the minimum wage may be causing serious job losses in industries other than the canneries and that the GAO estimated job losses of 2287 even before the COS Samoa Packing cannery closure.

"If this holds true and this trend continues as expected, American Samoa could lose half of its total jobs by 2016," he noted. "The GAO report anticipates economic decline far more devastating than previously projected."

Togiola says the GAO data implies or suggests more severe consequences due to future minimum increases.

"Median or average wages may continue to increase, but the damage done and the cost to the economy in lost jobs will be extensive," he said. "When compared to GAO job loss estimates, the number of actual jobs lost in the first three years of the incremental minimum wage increases has been much greater than expected."

"Employers have confirmed that this trend will continue and that they will continue to cut their operating costs by terminating positions and laying off employees," the Governor said. "Large employers (representing 84 percent of private sector workers) have indicated that they plan to close or relocate."

He says these large employers and other smaller companies attribute the necessity of these cost cutting measures largely to increases in the minimum wage.

Moreover, both canneries stated that the rise in the minimum wage was a significant contributing factor to the closure of the COS cannery.

While those who are able to remain employed will have greater real incomes, the Governor said one issue which should be mentioned is that the cost of purchasing imported goods, including the fuel used to generate electricity in the territory, will increase substantially.

"The export of cannery products has, historically, facilitated and helped defray a portion of the cost to import goods to American Samoa," said Togiola. "The shipping needs of the canneries have, in significant part, helped dictate and regulate the shipping schedule and the frequency at which shipping vessels land in American Samoa to off-load imported goods on our shores and take exported goods from our shores."

Since the COS closure, the number of shipping vessels coming to American Samoa has declined, he said.

"Increases to the prices of imported goods have already occurred and will likely continue. Should Starkist also close, it is expected that the price of importing goods to American Samoa would quadruple," he continued.

"The attendant increase to the cost of imported goods due to the loss of the COS cannery, and thus the cost of living, should be considered when evaluating any increases to the salaries of those who are able to remain employed despite the minimum wage increases," he added.

GAO says support of minimum wage increase has dwindled and the Governor says that with the closure of COS and the attendant layoffs, workers began questioning the wisdom of raising the minimum wage.

While temporary jobs have been provided through the federal National Emergency Grant following last September’s disaster, Togiola says these jobs are only temporary in nature. Workers realize that they will face tremendous difficulties and great uncertainty when their temporary employment ends.

"The only supportable conclusion is that absent a change to the existing incremental minimum wage increases, American Samoa is unavoidably destined for very serious economic difficulties," the Governor said.

With the COS closure and with continuing, significant job losses in the private sector, the revenue streams that fund ASG services and programs "will likewise continue to see considerable decreases," he points out.

"If losses to private sector jobs continue as projected, decreases to government revenue will necessitate cutbacks to government services and in government employment," Togiola concluded.

The investigative arm of the U.S. Congress said ASG developed and cited its own estimates of employment loss based on the information included in the GAO report.

It stated that after the first three minimum wage increases, total employment fell by 4,287, or by 22 percent, including losses of 2,287 even before the cannery closure.

"Our report does not include an estimate of the total number of jobs lost during this time period; however, we were able to replicate the American Samoa government’s estimate by applying our finding that employment among large-employer questionnaire respondents decreased 12 percent from June 2008 to June 2009 to our statement that SSA data show 19,060 American Samoa workers in 2008," said GAO.

"We did not include this type of estimate because, as noted in the report, although questionnaire responses covered about 72 percent of the American Samoa workforce, they are not necessarily representative of all American Samoa workers and employers," it says.

In addition, GAO says its questionnaire measured employment by respondents in June of each year, while the Social Security Administration (SSA) data measured the entire year’s employment.

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