Raising the minimum wage leads to job losses in American Samoa

Diana Furchtgott-Roth, former chief economist in the Bush Labor Department, provides an update on how the raising of the minimum wage has been a job killer in American Samoa:

As President Obama considers whether to fulfill his campaign promise to raise the minimum wage from $7.25 to $9.50 per hour by 2011, there’s no better illustration of the consequences of well-intentioned policy-making than recent events in American Samoa, a United States territory in the South Pacific that falls within the purview of Congress.

Chicken of the Sea, the tuna company, announced this month that it will close its canning plant in American Samoa in September. The culprit is 2007 legislation in Washington that gradually increased the islands’ minimum wage until it reaches $7.25 an hour in July 2009, almost double the 2007 levels.

In 2007, the hourly minimum wage in American Samoa for fish canning and processing was $3.76 and the minimum wage for government employees was $3.41. Shipping had the highest minimum wage, at $4.59. Garment manufacturers got the lowest, at $3.18 an hour. A $7.25 wage is a substantial increase for most residents.

Chicken of the Sea will lay off 2,041 employees—12 percent of total employment, almost half of all cannery workers. And the 2,700 workers at StarKist, the other American Samoa tuna canning company and Chicken of the Sea’s rival, are probably concerned that their jobs are the next to go.

American Samoa’s loss is Georgia’s gain. Chicken of the Sea will move to Lyons, Georgia, (2007 population 4,480) employing 200 people in a new $20 million plant on a more capital-intensive production line.

In January 2007 the legislation originally did not include American Samoa, perhaps because Del Monte, at the time the parent company of StarKist, was headquartered in Speaker Nancy Pelosi’s district.

Until then, the Labor Department had set wage rates in American Samoa every two years, following an extensive study on economic conditions on the island. But before final passage, Congress included American Samoa.

Back in 2007 American Samoa Governor Togiola Tulafono worried that increasing the minimum wage “would kill the economy” and Congressional Samoan Delegate Eni F.H. Faleomavaega forecast that it would devastate the local tuna industry.

They knew that industries would go elsewhere if they have to pay $7.25 an hour.

They were right. American Samoa will lose not only the 2,041 jobs at the Chicken of the Sea canning plant, but also secondary jobs from the ripple effect of loss of income—stores and eateries that cater to cannery workers, shops that mend fishing nets, shipyards, and buses that transport workers.

Furchtgott-Roth’s solution?

Rather than having to accept direction from a government thousands of miles away where they have no voting representation, residents of American Samoa should be given the power to decide on their own minimum wage. Congress should leave further minimum wage increases to individual states to choose as they see fit, because wage levels and the cost of living vary substantially between states such as Mississippi and New York.

A Democratic Congress, leaving power to the states on feel-good issues like the minimum wage law? Pinch me if that ever happens, because if it ever did, surely in actuality it would be a dream. This Congress – and this President – aren’t in the business of relinquishing control to the states – especially on issues like this one. They’d much rather expand federal control over wages.

Hey – the feds know best. At least that’s what they want you to think, anyway.

9 Responses to "Raising the minimum wage leads to job losses in American Samoa"

Carlos says:

May 14, 2009 at 11:27 pm

As has been noted before, libs are excellent at coming up with feel-good solutions that make the individual and collective lib feel morally superior to those greedy capitalist pigs, but, as is nearly always the case, they couldn’t care less about what the real consequences of any of their “solutions” are. All that matters is they feel good about themselves and morally superior to any other cretin on earth.
BPT (Australia) says:

May 15, 2009 at 2:34 am

Ouch. When government interferes they also mess things up.
Tom TB says:

May 15, 2009 at 8:04 am

It’s interesting that the proponents of ever-increasing mandatory minimum wages are people like Senator Ted Kennedy; who is an heir to his father’s fortune, and never started and ran his own business in his life. The simple reality is: by forcing business owners to pay more for entry level jobs, they are forced to hire fewer people, thereby leaving more people without work experience and then dependent on the Government, who gets revenue from business owners. Bad cycle, unless you work for the government!
Lorica says:

May 15, 2009 at 9:40 am

These guys are clueless. Imagine paying your bag boy at the local supermarket 9.50 per hour. Some 16 year old kid is making almost as much per hour as some of the local factory workers who actually do make something. This is just nuts, but what can you expect when Dems run the congress. You know it wasn’t so long ago, that the Dem party went to war over the issue of states rights. Funny how time changes things. – Lorica
Great White Rat says:

May 15, 2009 at 10:54 am

The whole idea of minimum wage isn’t to help the poorest people. Historically, every increase in the minimum wage leads to job losses among those people it pretends to help.

No, it’s actually a tool for unions to use in their negotiations. Once the minimum wage is hiked, unions can complain that their people are underpaid in comparison. It’s no coincidence that the unions are among the biggest supporters of minimum wage increases.

And, if you’re a leftist, the job losses have the added benefit of making more people dependent on the government dole, and therefore less likely to vote for terrible ideas like tax cuts and less government spending.

Finally, the leftists will never admit their responsibility for the layoffs – have you ever known a liberal to admit he’s screwed up? They’ll target the tuna companies as the villians.

So the liberals frankly do not care how many cannery workers lose their jobs here. They see it as (1) a good payoff to their union boss masters, (2) a step toward consolidating their power, and (3) a way to bash greedy corporations for the layoffs. To them, this is a no-lose situation.
Philip says:

May 15, 2009 at 5:07 pm

It’s easy to cast blame on the libs for this… but it was actually Republicans who forced American Samoa’s inclusion into the latest federal wage increases. Until then, American Samoa was exempted from the wage rates under the FLSA. But, Am.Samoa became a political football. The GOP blamed AmSam’s wage exclusion on its faint connections with Pelosi… one thing led to another… and bam… AmSam was included in the federal minimum wage act.

sucks for us south of the equator.
Big Dawg says:

May 15, 2009 at 5:22 pm

Want to get a real big thrill: google nancy and Paul Pelosi and see how connected they are to Chicken of the Sea. Nancy just got $25 Billion from stimulus for American Samoa. I am so glad the country finally sees what a liar she is. Recall Pelosi
Rick554 says:

May 15, 2009 at 8:10 pm

Poor Nancy Pelosi, she gets caught in a bald-faced lie, THEN her Tuna canning side job goes bust. Alas…. you’ll do just fine on unemployment Nance.
Carlos says:

May 16, 2009 at 4:27 pm

But gosh, Philip, you’d think Pelosi would be doing handsprings over the fact that the poor, common American Samoan was at least making a minimum wage comparable to ours now. That is what all this donk crap about “living wages” is all about, isn’t it?

And maybe you’d better go back and check your congressional records closer. If the donks really wanted to block the bill, and since they controlled both houses of Congress, I think they probably could have found a way to do that instead of caving to the intense pressure of the Republicans.

And finally, since Pelosi had and has a major interest in the minimum wage level of that place, I wonder if she lobbied against the legislation or even voted on the bill, since it would seem to me to be a major conflict of interest in either case?

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