Tuna cannery officials said that minimum wage increases  were a significant contributing factor in the closure of one cannery, in  addition to other factors. Workers participating in discussion groups said that their  support for the minimum wage increases had dwindled because of the  closure of one cannery and uncertainty about the future of the remaining  cannery, as well as concern about job security and reductions in benefits  related to the wage increases. Small employers and  other private sector officials expressed mixed views about the future  minimum wage increases, including concern that they would make it more  difficult to attract new industries to the CNMI; however, many expressed  greater concerns about changes to immigration law. CNMI employers responding to our questionnaire  reported having taken cost-cutting actions, such as freezing hiring, since  the minimum wage increases began. In addition, participants  expressed concern about the implementation of U.S. immigration law. In preparing this report, we interviewed officials from the U.S. We also collected detailed data from large employers in each  area including through a questionnaire, as described below. Later, the Northern Mariana Islands sought self-government and  permanent ties with the United States. By the end of the  first quarter of 2009, the last garment factory in the CNMI had closed. As of July 2009, the federal minimum wage  was set at $7.25 per hour. Appendix III: American Samoa Wages, Employment, Employer Actions, Inflation- Adjusted Earnings, and Worker Views

In American Samoa, the first minimum wage increase raised the wages of  about three-quarters of workers of large private sector employers that  responded to GAO’s questionnaire. Based on June 2009 wage data from  our questionnaire, the future minimum wage increases would affect the  wages of 95 percent of those private sector workers by 2016. Federal data  show that employment grew from 2006 to 2008, while questionnaire  responses show that employment dropped from 2008 to 2009. Since the  September 2009 closure of one tuna cannery, employment has continued  to drop. Private sector employers also reported planning actions  such as leaving American Samoa or closing by the end of 2010. In discussion  groups, workers generally said that their support for the wage increases  had dwindled because of concerns such as the cannery closure, job  insecurity, and loss of benefits. Minimum Wage Increases through 2016 Would Affect Wages of Almost All American Samoa Private Sector Workers Employed in 2009, Particularly in Canning Industry

		Wages of Most Private Sector Workers Were Low Enough to Be Raised By Minimum Wage Increases in 2007-2009

According to wage data provided in large private sector employers’  responses to our questionnaire, before the first minimum wage increase in  July 2007 about 74 percent of those employers’ workers earned wages  close enough to the minimum to be affected by that first increase   (see fig. Selected planned employer action and attribution to minimum wae increaClose or relocate  (private sector)
Lay off hourly workers (public and private  sectors)

		Fewer Employers Attributed Their Actions to Factors Other Than the Minimum Wage Increases Than Attributed Actions to the Increases

Employers also reported that, in addition to the minimum wage increases,  factors such as rising costs of utilities and of transportation and shipping  contributed to their decisions and plans to cut costs and raise prices. The tariff on cleaned loins is $11 per metric ton under model B.

	American Samoa Median Annual Inflation-Adjusted Earnings Declined, but Estimated Earnings for Minimum Wage Workers Who Remained Employed Increased

		Median Inflation-Adjusted Earnings Declined from 2006 to 2008

Although data show that median annual earnings of workers employed in  American Samoa rose from 2006 to 2008, inflation eroded these income  gains; as a result, median inflation-adjusted annual earnings in American  Samoa declined by about 6 percent from 2006 to 2008. CNMI government data show that  following the 2007 wage increase, employment continued an existing  downward trend largely reflecting the garment factory closures. In questionnaire responses, employers  reported having taken cost-cutting actions, such as freezing hiring, since  the increases began. Employers attributed their actions both to the minimum wage  increases and to other factors. Based on an analysis of responses from  CNMI employers in the hotel industry, we found that raising room rates to  cover higher wage costs may cause a 2.6 to 13.7 percent decline in visits to  the CNMI. CNMI government tax data show that average annual inflation- adjusted earnings declined by about 6 percent from 2006 to 2008. 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, GAO estimated that annual inflation-adjusted earnings  for minimum wage full-time workers who retained their jobs and hours  rose by about 12 percent. In discussion groups, CNMI workers generally  expressed support for the minimum wage increases and cited other factors  affecting living standards. The American Recovery and  Reinvestment Act of 2009 requires that GAO report annually on the  impact of past and future minimum wage increases in American Samoa  and the CNMI, and the reports are due between March 15 and April 15  of each year.
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). The law applied the first $.50 per hour increase in July 2007 and mandated additional increases in each subsequent year until the minimum wages reach the level of the U.S. minimum wage--currently $7.25 per hour. American Samoa's lowest paid will reach that wage in 2016, and the CNMI in 2015. In American Samoa, one of two tuna canneries employing almost a third of workers closed in September 2009. In the CNMI, where the garment industry was one of two major employers, the last garment factory closed in early 2009. The American Recovery and Reinvestment Act requires GAO to report annually on the impact of the minimum wage increases in American Samoa and the CNMI. In this report GAO describes, since the increases began, wages, employment, employer actions, inflation-adjusted earnings, and worker views. GAO reviewed existing information from federal and local sources. GAO also collected data from large employers (at least 50 employees) through a questionnaire and from small employers and workers through discussion groups, in addition to conducting interviews during visits to each area. GAO shared the report with relevant federal agencies and the governments of American Samoa and the CNMI and incorporated their comments as appropriate.

What GAO Found

In American Samoa, the first minimum wage increase raised the wages of about three-quarters of workers at private sector employers that responded to GAO's questionnaire. June 2009 wage data from GAO's questionnaire indicate that by 2016, the minimum wage increases would affect the wages of close to 95 percent of those employers' private sector workers. Earnings data show that employment grew from 2006 to 2008, while questionnaire responses show that employment dropped from 2008 to 2009; since the September 2009 closure of one tuna cannery, employment has very likely continued to drop. Cannery officials said that minimum wage increases were a significant contributing factor in the closure of one cannery, in addition to other factors. Public and private sector officials expressed concern about the significant impact on employment if future minimum wage increases lead the remaining cannery to close or make attracting new industries more difficult. Many employers reported having taken cost-cutting actions, such as freezing hiring and cutting worker benefits, since the increases began. Employers also reported planning actions such as leaving American Samoa or closing by the end of 2010. More employers attributed their actions to the minimum wage increases than to other factors. Federal data show that median annual inflation-adjusted earnings in American Samoa declined by about 6 percent from 2006 to 2008. GAO estimated that inflation-adjusted earnings for full-time minimum wage workers who retained their jobs and hours rose by about 14 percent. In discussion groups, workers generally said that their support for the wage increases had dwindled because of concerns about issues such as the cannery closure, job insecurity, and loss of benefits. In the CNMI, the first minimum wage increase raised wages for about a third of workers at private sector employers that responded to GAO's questionnaire. June 2009 wage data from GAO's questionnaire indicate that the future increases will affect the wages of more than 80 percent of those employers' workers by 2015. CNMI government data show that following the 2007 wage increase, employment continued an existing downward trend largely reflecting the garment factory closures. Small employers and other private sector officials expressed mixed views about the future increases, and many expressed greater concern about immigration changes. In questionnaire responses, employers reported having taken cost-cutting actions, such as freezing hiring, since the increases began and also reported planning such actions by the end of 2010. Employers attributed their actions both to the minimum wage increases and to other factors. Based on an analysis of responses from CNMI employers in the hotel industry, GAO found that raising room rates to cover higher wage costs may cause a 2.6 to 13.7 percent decline in visits to the CNMI. CNMI government tax data show that average annual inflation-adjusted earnings declined by about 6 percent from 2006 to 2008. GAO estimated that annual inflation-adjusted earnings for minimum wage full-time workers who retained their jobs and hours rose by about 12 percent. In discussion groups, CNMI workers generally expressed support for the minimum wage increases and cited other factors affecting living standards.