Private sector officials said minimum wage was one of a  number of factors, including the high cost of goods and utilities,  making it difficult to do business in American Samoa. For  the entire period from 2006 to 2009, the number employed fell 35  percent. The decrease largely reflected the early 2009 closure of the  CNMI’s last remaining garment factories, which employed many  foreign workers. Private sector employers reported in discussion groups some  layoffs and hiring freezes, and they said minimum wage increases  imposed additional costs during a time in which multiple factors made  it difficult to operate. Tourism employer actions. Few employers—weighted by numbers of employees—  attributed their past actions largely to the minimum wage increases,  and one half or less did so for each of the planned actions. Appendix I: Objectives, Scope, and Methodology

This report updates our 2010 report on American Samoa and the  Commonwealth of the Northern Mariana Islands (CNMI) with an  additional year of information and describes, since the minimum wage  increases began, (1) employment and earnings, and (2) the status of key  industries. Local Administrative Data

The U.S. Bureau of Labor Statistics collects CPI data on the U.S. 50 states  but not the insular areas. Data from 2010 on total employment are not yet  available. Questionnaire responses show that tuna canning employment  dropped by 55 percent from 2009 to 2010, reflecting the September 2009  closure of one cannery and layoffs in the remaining cannery. Average inflation-adjusted earnings in American Samoa fell by 5  percent from 2008 to 2009 and by 11 percent from 2006 to 2009. However,  over both periods, the minimum wage increased by significantly more than  inflation. Cannery officials we interviewed expressed  concern about American Samoa’s dwindling competitive advantage in the  global tuna canning industry. Though the cannery faces some near-term  obstacles to relocating, our analysis suggests that relocating tuna cannery  operations from American Samoa to a tariff-free country with lower labor  costs would significantly reduce cannery operating costs and reduce  American Samoa jobs; however, maintaining some operations in American  Samoa would allow the facility to continue to compete for U.S.  government contracts. Some workers said they were disappointed to see  the minimum wage increase delayed in 2010 and 2011; however, more  workers expressed concern over job security than favored a minimum  wage increase with the potential for subsequent layoffs. Specifically, available data show that  from 2008 to 2009, the total number of people employed in American  Samoa fell by 19 percent (from 19,171 to 15,434) and that over the entire  period from 2006 to 2009, employment fell by 14 percent (from 17,852 to  15,434, with a peak of 19,171 in 2008). American Samoa Tuna Canning Industry Has Continued to Lay off Workers and Has Considered Alternate Locations

		Minimum Wage Increases through 2016 Would Affect Wages of Almost All Workers in American Samoa’s Tuna Canning Industry Employed in 2010

Minimum Wage Increases in 2007-2010 Increased Median Wage for  Tuna Canning Industry Employees  Without a minimum wage increase in American Samoa in 2010, there was  no increase in the median wage of workers in the tuna canning industry— in both 2009 and 2010, the median tuna canning worker wage was $4.76. Inflation-adjusted average earnings  of CNMI workers who maintained employment rose by 3 percent from  2008 to 2009 and remained largely unchanged, with a slight drop of .5  percent, from 2006 to 2009, according to CNMI government data. In  addition, over both periods, the minimum wage increased by significantly  more than inflation. Tourism questionnaire employers reported that they took cost- cutting actions from June 2009 to June 2010, including reducing hours and  freezing hiring; employers also reported plans to take the same types of  actions by early 2012, as well as laying off workers. If  observed trends continue, payroll will represent an increasing share of  total operating cost for hotels in the CNMI, due to the minimum wage  increases. In discussion groups, some tourism employers and managers  expressed concern about the minimum wage increases, but others said the  minimum wage increases were needed and manageable and that the  primary difficulty was the CNMI tourism industry’s general decline. CNMI Tourism Industry Experienced Declines in Visitor Arrivals, and Hotels Have Absorbed Minimum Wage Increases Rather than Raising Room Rates

		Minimum Wage Increases in 2007-2010 Increased Median Wage for Workers in Tourism Industry, and 2010-2018 Increases Would Affect Wages of Almost All Tourism Workers

Minimum Wage Increases in 2007-2010 Increased Median Wage for  Tourism Industry Employees  From June 2007 to June 2010, the median hourly wage in the CNMI  tourism industry rose from $3.65 to $4.60, a 26 percent increase, according  to our questionnaire responses (see table 8). The future minimum wage increases would affect the  wages of 95 percent of current workers by the time the minimum wage  reaches $7.25 in 2016. Tourism Employers Reported Plans to Take Cost-Cutting Actions  by Early 2012, and One-Half or Less Attributed Each Action  Largely to the Minimum Wage Increases  Hotel and other employers in the tourism industry reported in our  questionnaire plans to take additional cost-cutting actions in the next 18  months, by early 2012. Tourism and Other Workers Said They Would Like Pay Increases but Were Concerned about Job Availability

Workers participating in our CNMI discussion groups expressed mixed  views regarding the minimum wage increases and said they would like pay  increases but were concerned about losing jobs and work hours.
Why GAO Did This Study

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. 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 report updates GAO's 2010 report and 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.

What GAO Found

In American Samoa, employment fell 19 percent from 2008 to 2009 and 14 percent from 2006 to 2009. Data for 2010 total employment are not available. GAO questionnaire responses show that tuna canning employment fell 55 percent from 2009 to 2010, reflecting the closure of one cannery and layoffs in the remaining cannery. Average inflation-adjusted earnings fell by 5 percent from 2008 to 2009 and by 11 percent from 2006 to 2009; however, the hourly wage of minimum wage workers who remained employed increased by significantly more than inflation. Private sector officials said the minimum wage was one of a number of factors making business difficult. In the tuna canning industry, future minimum wage increases would affect the wages of 99 percent of hourly-wage workers employed by the two employers included in GAO's questionnaire. The employers reported taking cost-cutting actions from June 2009 to June 2010, including laying off workers and freezing hiring. The employers attributed most of these actions largely to the minimum wage increases. Cannery officials expressed concern in interviews about American Samoa's dwindling global competitive advantage. Available data suggest that relocating tuna canning operations to a tariff-free country with lower labor costs would significantly reduce operating costs but reduce American Samoa jobs; however, maintaining some operations in American Samoa would allow continued competition for U.S. government contracts. Some workers said they were disappointed by the 2010 minimum wage increase delay; however, more workers expressed concern over job security than favored a wage increase with potential for layoffs. In the CNMI, employment fell 13 percent from 2008 to 2009 and 35 percent from 2006 to 2009. Average inflation-adjusted earnings rose by 3 percent from 2008 to 2009 and remained largely unchanged from 2006 to 2009. Over the same periods, the hourly wage of minimum wage workers who remained employed increased by significantly more than inflation. In discussion groups, private sector employers said minimum wage increases imposed additional costs during a time in which multiple factors made it difficult to operate. In the tourism industry, scheduled minimum wage increases through 2016 would affect 95 percent of workers employed by questionnaire respondents. Tourism employers reported that they took cost-cutting actions from June 2009 to June 2010 and planned to take additional actions, including laying off workers. Few of these tourism employers attributed past actions largely to the minimum wage increases, and one half or less did so for each of the planned actions. Available data suggest that hotels generally absorbed minimum wage costs rather than raise room rates. Hotel payroll will represent an increasing share of total operating costs due to the minimum wage increases. In discussion groups, some tourism employers expressed concern about the minimum wage increases, but others said the increases were needed and manageable and that the primary difficulty was the CNMI tourism industry's decline. Workers participating in GAO's CNMI discussion groups expressed mixed views regarding the minimum wage increases and said they would like pay increases but were concerned about losing jobs and work hours. GAO shared the report with relevant federal agencies and the governments of American Samoa and the CNMI. While generally agreeing with the findings, they raised a number of technical concerns that have been incorporated as appropriate.