American Samoa and Commonwealth of the Northern Mariana Islands
Wages, Employment, Employer Actions, Earnings, and Worker Views Since Minimum Wage Increases Began Gao ID: GAO-10-333 April 8, 2010In 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.
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.
GAO-10-333, American Samoa and Commonwealth of the Northern Mariana Islands: Wages, Employment, Employer Actions, Earnings, and Worker Views Since Minimum Wage Increases Began
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
April 2010:
American Samoa And Commonwealth Of The Northern Mariana Islands:
Wages, Employment, Employer Actions, Earnings, and Worker Views Since
Minimum Wage Increases Began:
GAO-10-333:
GAO Highlights:
Highlights of GAO-10-333, a report to congressional committees.
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.
View [hyperlink, http://www.gao.gov/products/GAO-10-333] or key
components. For more information, contact David Gootnick at (202) 512-
3149 or gootnickd@gao.gov.
[End of section]
Contents:
Letter:
American Samoa Wages, Employment, Employer Actions, Inflation-Adjusted
Earnings, and Worker Views:
CNMI Wages, Employment, Employer Actions, Inflation-Adjusted Earnings,
and Worker Views:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Background:
Appendix III: American Samoa Wages, Employment, Employer Actions,
Inflation-Adjusted Earnings, and Worker Views:
Appendix IV: CNMI Wages, Employment, Employer Actions, Inflation-
Adjusted Earnings, and Worker Views:
Appendix V: American Samoa Employers' Reported Actions and
Contribution of Minimum Wage Increases and Other Factors, Based on GAO
Large-Employer Questionnaire Responses:
Appendix VI: CNMI Employers' Reported Actions and Contribution of
Minimum Wage Increases and Other Factors, Based on GAO Large-Employer
Questionnaire Responses:
Appendix VII: GAO Questionnaire Used in Report:
Appendix VIII: Comments from the Department of the Interior:
Appendix IX: Comments from the American Samoa Government:
Appendix X: Comments from the Commonwealth of the Northern Mariana
Islands Government:
Appendix XI: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: American Samoa Key Findings:
Table 2: CNMI Key Findings:
Table 3: American Samoa Large-Employer Questionnaire Respondent
Coverage:
Table 4: CNMI Questionnaire Respondent Coverage:
Table 5: American Samoa Scheduled Minimum Wage Increases for Tuna
Canning Industry Workers and for Workers Paid the Lowest Minimum Wage:
Table 6: CNMI Scheduled Minimum Wage Increases:
Table 7: Median Hourly Wage Rates of Private Sector Workers Employed
by American Samoa Respondents in 2007-2009, Based on GAO Large-
Employer Questionnaire Wage Data:
Table 8: Change in Median Annual Inflation-Adjusted Earnings of
American Samoa Workers, 2006-2008:
Table 9: Change in Estimated Inflation-Adjusted Annual Earnings of
Minimum Wage Workers Retaining Full-time Employment in American Samoa,
2006-2008:
Table 10: Participation in WIC Nutrition Program in American Samoa,
Fiscal Years 2005-2008:
Table 11: Median Hourly Wage Rates of Workers Employed by CNMI Private
Sector Respondents to GAO Large-Employer Questionnaire, 2007-2009:
Table 12: Simulated Impact on CNMI Visitor Trip Cost from Hotel
Workers' Minimum Wage Increases from 2009 through 2015, Compared to
2008:
Table 13: Change in Average Annual Inflation-Adjusted Earnings of CNMI
Workers, 2006-2008:
Table 14: Change in Estimated Inflation-Adjusted Annual Earnings of
Minimum Wage Workers Retaining Full-time Employment in the CNMI, 2006-
2008:
Table 15: CNMI Nutrition Assistance Program Beneficiaries, 2006-2009:
Table 16: American Samoa Employers' Reported Actions in June 2007-June
2009 and Contribution of Minimum Wage Increases, Based on GAO Large-
Employer Questionnaire Responses:
Table 17: American Samoa Employers' Reported Contribution of Other
Factors, Based on GAO Large-Employer Questionnaire Responses:
Table 18: American Samoa Employers' Reported Actions Planned by End of
2010 and Contribution of Minimum Wage Increases, Based on American
Samoa Large-Employer Questionnaire Responses:
Table 19: American Samoa Employers' Reported Contribution of Other
Factors to Future Actions, Based on GAO Large-Employer Questionnaire
Responses:
Table 20: CNMI Employers' Reported Actions in June 2007-June 2009 and
Contribution of Minimum Wage Increases, Based on GAO Large-Employer
Questionnaire Responses:
Table 21: CNMI Employers' Reported Contribution of Other Factors,
Based on GAO Large-Employer Questionnaire Responses:
Table 22: CNMI Employers' Reported Actions Planned by the End of 2010
and Contribution of Minimum Wage Increases, Based on GAO Large-
Employer Questionnaire Responses:
Table 23: CNMI Employers' Reported Contribution of Other Factors to
Future Actions, Based on GAO Large-Employer Questionnaire Responses:
Figures:
Figure 1: Citizenship Status of American Samoa Population, 1980-2005:
Figure 2: American Samoa Tuna Exports to the United States, 1997-2008:
Figure 3: CNMI Textile Exports to the United States, 1995-2009:
Figure 4: CNMI Visitor Arrivals, 1990-2009:
Figure 5: Citizenship Status of CNMI Population, 1980-2005:
Figure 6: American Samoa Private Sector Workers with Wages Low Enough
to Be Affected by July 2007 Increase, Based on GAO Large-Employer
Questionnaire Wage Data:
Figure 7: Changes in Wages of All Workers Employed by Questionnaire
Respondents, Based on American Samoa Large-Employer Questionnaire Wage
Data:
Figure 8: Percentage of American Samoa Private Sector Questionnaire
Respondents' Employees in June 2009 Whose Wages Would Be Affected by
2010-2016 Minimum Wage Increases, Based on GAO Large-Employer
Questionnaire Wage Data:
Figure 9: American Samoa Employment in 2005-2008, Based on SSA Data
and GAO Large-Employer Questionnaire Wage Data:
Figure 10: Selected American Samoa Reported Employer Actions in 2007-
2009 and Planned by End of 2010, with Attribution to Past Minimum Wage
Increases:
Figure 11: Comparison of Wage and Tariff Costs for Tuna Canneries
Using Separate Business Models:
Figure 12: CNMI Private Sector Workers Outside the Garment Industry
with Wages Low Enough to Be Affected by the July 2007 Increase, Based
on GAO Large-Employer Questionnaire Wage Data:
Figure 13: Change in Wages of All CNMI Employees of Respondents to GAO
Large-Employer Questionnaire:
Figure 14: Percentage of CNMI Private Sector Questionnaire
Respondents' Employees in June 2009 Whose Wages Would Be Affected by
2010-2015 Minimum Wage Increases, Based on GAO Large-Employer
Questionnaire Wage Data:
Figure 15: CNMI Employment Based on CNMI Government Tax Data, 2005-
2008:
Figure 16: Selected CNMI Reported Employer Actions in 2007-2009 and
Planned by End of 2010, with Attribution to Past Minimum Wage
Increases:
Figure 17: Estimated Average Impact of Minimum Wage Increases on CNMI
Hotels' Payroll Costs in 2010 and 2015, Relative to Average Payroll
and Other Costs in 2008:
Abbreviations:
CNMI: Commonwealth of the Northern Mariana Islands:
CPI: Consumer Price Index:
DOC: U.S. Department of Commerce:
DOI: U.S. Department of the Interior:
DOL: U.S. Department of Labor:
FLSA: Fair Labor Standards Act:
GDP: Gross Domestic Product:
HIES: Household, Income, and Expenditures Survey:
SSA: U.S. Social Security Administration:
WIC: Women, Infants, and Children:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
April 8, 2010:
Congressional Committees:
In 2007, the United States enacted legislation that incrementally
applies the U.S. minimum wage to American Samoa and the Commonwealth
of the Northern Mariana Islands (CNMI).[Footnote 1] The law applied
the first minimum wage increase of $.50 per hour to American Samoa and
the CNMI in July 2007 and mandated subsequent $.50 increases each year
until the minimum wages reach the U.S. minimum wage--currently $7.25
per hour.[Footnote 2] Previously, both U.S. insular areas had minimum
wages lower than that of the 50 U.S. states. American Samoa's minimum
wage was set for each of 18 industries by the U.S. Department of Labor
(DOL) under biennial reviews; its minimum wages ranged from $2.68 to
$4.09 in 2006, and the lowest paid workers will reach a minimum wage
of $7.25 in 2016. The CNMI had authority to set its own minimum wage
under its 1976 Covenant with the United States; the CNMI's minimum
wage was $3.05 as of 2006 and is scheduled to reach $7.25 in 2015. To
date, the minimum wages in both American Samoa and the CNMI have been
increased by $.50 three times since enactment of the law.
The economies of both American Samoa and the CNMI face major
challenges. American Samoa's private sector economy is largely based
on the tuna canning industry, and the closure of one of its two tuna
canneries in September 2009 significantly affects the labor market and
economy. Before the first minimum wage increase in 2007, about one-
third of workers in American Samoa were employed by the two canneries,
and more than three-quarters of cannery employees were foreign workers
from neighboring Samoa, an independent country. The CNMI's economy has
been affected by the departure of its garment industry and fluctuation
in its tourism industry. Until recently, the garment industry was
central to the CNMI economy and employed close to a third of all
workers; however, by early 2009, the last garment factory had closed.
The CNMI also faces uncertainty due to the application of U.S.
immigration law to the commonwealth, ending decades of the CNMI's
control over its own immigration system.[Footnote 3] U.S. law
established federal control of CNMI immigration on November 28, 2009,
[Footnote 4] with provisions affecting employers' access to foreign
workers.[Footnote 5] In 2005, foreign workers represented a majority
of the CNMI labor force and outnumbered U.S. citizens in most
industries.
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.[Footnote 6] This report
describes, since the minimum wage increases began, (1) wages, (2)
employment, (3) employer actions, (4) inflation-adjusted earnings, and
(5) workers' views regarding the minimum wage increases.
In preparing this report, we reviewed and analyzed existing
information from federal sources:
* We interviewed officials from the U.S. Departments of the Interior
(DOI), Commerce (DOC), and DOL and from the Social Security
Administration (SSA). We reviewed relevant reports and data from DOL
and other U.S. government sources. We also reviewed U.S. minimum wage
laws and other relevant laws and regulations. We did not focus on the
extent to which laws were properly enforced or implemented, although
we considered enforcement as appropriate.[Footnote 7]
* We obtained SSA data on the earnings, employment, and demographic
characteristics of individual taxpayers in American Samoa and the CNMI
from 2005 to 2008. While the SSA data cover all types of workers in
American Samoa and were sufficiently reliable for our purposes, they
exclude CNMI workers who are not subject to SSA withholding
taxes.[Footnote 8] We have chosen not to report the CNMI SSA data
because of these coverage gaps.
In addition, because key federal sources of data on the U.S. labor
market do not cover the insular areas, we collected our own data in
each area.[Footnote 9]
* In both American Samoa and the CNMI we collected detailed data from
large employers--those with at least 50 employees--including through a
questionnaire that covered employment, wage structure, past and
planned employer actions, and related topics for 2006 to 2009. The
respondents to our questionnaire employed about 72 percent of the
American Samoa total workforce and about 29 percent of the CNMI total
workforce, excluding garment factories, which had all closed by the
time of our questionnaire.[Footnote 10] American Samoa questionnaire
respondents included the two tuna canneries and other employers in the
sectors of manufacturing, wholesale and retail trade, food services,
hotel, construction, transportation, publishing and communication, and
health care, as well as the American Samoa government and other public
sector employers. CNMI questionnaire respondents included hotels and
other employers in the sectors of food service, utilities,
construction, manufacturing, retail, and transportation, as well as
the CNMI government and other public sector employers. Particularly
for the CNMI, questionnaire responses are not necessarily
representative of all workers and employers in each area. We weighted
employers' responses by the number of workers they employ, and results
of questionnaire responses are significantly affected by the responses
of the two tuna canneries and the local government in American Samoa
and by the local government in the CNMI.
* During visits to American Samoa and the CNMI, we conducted
interviews and discussion groups with government officials, smaller
employers, other private sector representatives, workers, and
community members to obtain views and information on the minimum wage
increases and related topics. In each area, we held an open public
meeting, and we established e-mail accounts to obtain comments from
the public. We visited American Samoa in August 2009, after one tuna
cannery had announced that it would close, and we visited the CNMI in
September 2009, after the closure of all garment factories.
We also analyzed available information from the local American Samoa
and CNMI governments:
* We analyzed American Samoa administrative and survey data, including
Consumer Price Index data and the American Samoa Department of the
Treasury's tax data.
* We analyzed available CNMI administrative and survey data, including
Consumer Price Index data and CNMI data on the number and earnings of
workers from the CNMI Department of Finance's tax returns. The CNMI
tax data provide ranges of earnings for both public and private sector
workers and for both citizens and noncitizens, for 2005 to 2008.
* We also analyzed data on federally funded income-based programs
administered by the insular area governments.
Our review had certain limitations in addition to those already noted.
In particular, although our approach yielded information on trends in
employment, wages, and earnings in both areas, it is difficult to
distinguish between the effects of minimum wage increases and of other
factors, including the global recession in 2009, fluctuations in
energy prices, global trade liberalization, and the application of
U.S. immigration law to the CNMI. However, we determined that the
available data were, apart from these limitations, adequate and
sufficiently reliable for the purposes of our review. We conducted our
work from April 2009 to April 2010 in accordance with all sections of
GAO's Quality Assurance Framework that are relevant to our objectives.
The framework requires that we plan and perform the engagement to
obtain sufficient and appropriate evidence to meet our stated
objectives and to discuss any limitations in our work. We believe that
the information and data obtained, and the analysis conducted, provide
a reasonable basis for the findings in this product. See appendix I
for further details of our methodology, appendix II for additional
background, and appendix VII for our questionnaire.
American Samoa Wages, Employment, Employer Actions, Inflation-Adjusted
Earnings, and Worker Views:
* Wages. Responses to our American Samoa large-employer questionnaire
indicate that the hourly wages of about three-quarters of private
sector workers employed by respondents were low enough to be affected
by the first $.50 minimum wage increase, in July 2007. From 2007 to
2009, as a result of the first three wage increases, median hourly
wages rose by almost $1.50 (44 percent) among tuna canning workers
employed by questionnaire respondents, compared with $1.00 (25
percent) among other private sector respondents' employees. In
addition, the 2007 through 2009 wage increases narrowed the wage gap
between the lowest and highest paid employees of questionnaire
respondents by 37 percent. Based on American Samoa large-employer
questionnaire responses about workers' wages as of June 2009, the
minimum wage increases scheduled for 2010 through 2016 would affect
the wages of close to 95 percent of those private sector workers by
2016.
* Employment. Available data show that from 2006 to 2007, the total
number of people employed in American Samoa grew by 5.5 percent (from
17,551 to 18,518) and that from 2007 to 2008, employment growth slowed
to 3 percent (from 18,518 to 19,060). Questionnaire responses show
that employment of workers employed by respondents dropped about 12
percent from 2008 to 2009. Although data for all of 2009 are not yet
available, employment in American Samoa dropped further with the loss
of 2,000 jobs when the cannery closed in September 2009. Public and
private sector officials expressed concern about the significant
impact on employment if future minimum wage increases led the
remaining cannery to close or made it more difficult to attract new
industries to the territory.
* Employer actions. American Samoa employers responding to our
questionnaire reported having taken cost-cutting actions, including
freezing hiring and reducing workers' benefits, since the minimum wage
increases began. Employers also reported plans to reduce costs by the
end of 2010, including laying off workers. Employers representing 84
percent of private sector workers employed by respondents, including
the cannery that has now closed, said they planned to close or
relocate. More employers attributed their actions largely to the
minimum wage increases than attributed their actions to other factors,
such as transportation and shipping costs. Tuna cannery officials said
that minimum wage increases were a significant contributing factor in
the closure of one cannery, in addition to other factors. Our analysis
shows that outsourcing cleaning operations from low labor-cost areas,
such as Thailand, provides opportunities to significantly reduce
cannery operating costs.
* Inflation-adjusted earnings. Earnings data from SSA and consumer
price data show that from 2006 to 2008, median inflation-adjusted
earnings dropped by about 6 percent, resulting from a rise in median
annual earnings of about 8 percent while local prices rose by about 15
percent. Although earnings data do not allow for a direct comparison
of median and minimum-wage annual earnings or for tracking the
earnings of workers who lost their jobs, we estimate that inflation-
adjusted earnings of full-time minimum wage workers who retained their
jobs and full benefits rose by about 14 percent from 2006 to 2008.
* Worker views. 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. Workers also
expressed an obligation to support extended families and the broader
community negatively affected by the minimum wage increases. In
addition, workers expressed a belief that wages had increased less
than the cost of living. Cannery workers we spoke with generally
opposed future minimum wage increases, but the attitudes of other
community members varied.
See table 1 for key findings and appendixes III and V for detailed
findings and tables on American Samoa.
Table 1: American Samoa Key Findings:
Wages: Percentage of private sector workers employed by large-employer
questionnaire respondents in June 2007 with wages affected by first
minimum wage increase (July 2007): 74 percent[A].
Wages: Percentage of private sector workers employed by large-employer
questionnaire respondents in June 2007 with wages affected by first
three minimum wage increases (July 2007, May 2008, and May 2009):
86 percent[A].
Wages: Percentage of private sector workers employed by large-employer
questionnaire respondents in 2009 who would be affected by minimum
wage increases through 2016: 95 percent[A].
Employment: Percentage change in numbers employed, 2006-2007: 5.5
percent increase[B].
Employment: Percentage change in numbers employed, 2007-2008: 3
percent increase[B].
Employment: Percentage change in numbers employed by large-employer
questionnaire respondents, 2008-2009: 12 percent decrease,[A] as well
as direct loss of 2,000 jobs due to cannery closure; full extent of
employment change unknown[C].
Employer actions: Percentage of all employers that laid off hourly
workers in 2007-2009 and percentage of those that attributed the
action largely to past minimum wage increases (weighted by numbers of
workers):
* Employers representing 24 percent of workers employed by
questionnaire respondents laid off hourly workers;
* Of those, employers representing 68 percent of workers employed by
those respondents attributed the layoffs to past minimum wage
increases[A].
Employer actions: Percentage of private sector employers that plan to
close or relocate by the end of 2010, and percentage of those that
attributed the action largely to minimum wage increases (weighted by
numbers of workers);
* Employers representing 84 percent of workers employed by private
sector questionnaire respondents planned to close or relocate;
* For each of those planned actions, employers representing 85-87
percent of workers employed by those respondents attributed their
plans to minimum wage increases[A].
Inflation-adjusted earnings: Percentage change in inflation-adjusted
earnings of median earners, 2006-2008: 6 percent decrease[B,D].
Inflation-adjusted earnings: Estimated percentage change in inflation-
adjusted earnings of minimum wage earners who kept full-time
employment, 2006-2008: 14 percent increase[C,D].
Worker views: Workers said that their support for the minimum wage
increases had dwindled.[E].
Source: GAO analysis of data from GAO large-employer questionnaire,
SSA, Consumer Price Index, and GAO discussion groups.
Notes: Employers responding to GAO's questionnaire generally include
those with 50 or more employees and exclude smaller employers,
employers that had closed between 2007 and the date of our
questionnaire, or employers that did not respond to the questionnaire.
Although questionnaire responses covered about 72 percent of the
American Samoa workforce, they are not necessarily representative of
all American Samoa workers and employers. Percentages of employers
reporting actions are weighted by each employer's total number of
workers in 2009. Percentages of employers that attributed an action
largely to minimum wage increases are weighted to reflect those
employers' number of workers relative to all workers employed by
respondents that reported the action. Because the tuna canneries and
local government covered a large percentage of workers employed by all
questionnaire respondents, these employers' responses significantly
affected reported questionnaire data.
[A] GAO analysis of responses to GAO's American Samoa large-employer
questionnaire.
[B] GAO analysis of SSA data.
[C] GAO estimate.
[D] GAO analysis of Consumer Price Index data.
[E] GAO analysis of American Samoa discussion group results.
[End of table]
CNMI Wages, Employment, Employer Actions, Inflation-Adjusted Earnings,
and Worker Views:
* Wages. About a third of private sector workers employed by CNMI
questionnaire respondents were directly affected by the first minimum
wage increase, in July 2007, according to large-employer questionnaire
responses. From 2007 through 2009, as a result of the first three wage
increases, the median wage rose by about 19 percent in the tourism
industry compared with about 18 percent for the rest of the private
sector, for workers employed by questionnaire respondents. The gap
between the lowest and highest paid workers narrowed by 9 percent.
Based on questionnaire responses about workers' wages as of June 2009,
the future minimum wage increases would affect the wages of 82 percent
of those private sector workers by 2015.
* Employment. From 2006 through 2008, the total number of people
employed fell by about 27 percent, according to CNMI government tax
data, largely reflecting the garment factories' closure. 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. Public sector officials said CNMI government employees will be
more directly affected by future increases, increasing budget
pressures.
* Employer actions. CNMI employers responding to our questionnaire
reported having taken cost-cutting actions, such as freezing hiring,
since the minimum wage increases began. Employers also reported
planning to take such actions by the end of 2010, and some attributed
their planned actions largely to the minimum wage increases. Employers
also noted other factors, such as changes to immigration law and
increased shipping and maintenance costs, that contributed to their
actions. 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.
* Inflation-adjusted earnings. CNMI government tax data and consumer
price data show that, from 2006 to 2008, average inflation-adjusted
earnings dropped by about 6 percent, resulting from a rise in average
annual earnings of about 12 percent while local prices rose by about
19 percent. 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, we estimate that
inflation-adjusted earnings for CNMI minimum wage workers who retained
their jobs and full hours rose by about 12 percent from 2006 to 2008.
* Worker views. Workers participating in our discussion groups
generally expressed support for the minimum wage increases and cited
other factors affecting living standards. Participants observed that
although the wage increases had led some employers to reduce benefits
for foreign workers, the wage increases had benefited local workers.
In addition, participants expressed concern about the implementation
of U.S. immigration law.
See table 2 for key findings and appendixes IV and VI for detailed
findings and tables on the CNMI.
Table 2: CNMI Key Findings:
Wages: Percentage of private sector workers employed by large-employer
questionnaire respondents in June 2007 with wages affected by first
minimum wage increase (July 2007): 36 percent[A].
Wages: Percentage of private sector workers employed by large-employer
questionnaire respondents in June 2007 with wages affected by first
three minimum wage increases (July 2007, May 2008, and May 2009): 61
percent[A].
Wages: Percentage of private sector workers employed by large-employer
questionnaire respondents in 2009 who would be affected by minimum
wage increases through 2015: 82 percent[A].
Employment: Percentage change in numbers employed, 2006-2008: 27
percent decrease[B].
Employment: Percentage change in numbers employed by large-employer
questionnaire respondents, 2008-2009: 6 percent decrease[A].
Employer actions: Percentage of employers that laid off hourly workers
2007-2009 and percentage of those employers that attributed the action
largely to past minimum wage increases (weighted by numbers of
workers);
* Employers representing 11 percent of workers employed by
questionnaire respondents laid off hourly workers;
* Of those, employers representing 2 percent of workers employed by
those respondents attributed layoffs to past minimum wage increases[A].
Employer actions: Percentage of private sector employers that planned
to close or relocate by the end of 2010 and percentage of those
employers that attributed the planned action largely to minimum wage
increases (weighted by numbers of workers);
* Employers representing 5 percent of workers employed by private
sector questionnaire respondents planned to close or relocate;
* For each of those planned actions, employers representing 3 percent
of workers employed by those respondents attributed their plans to
minimum wage increases[A].
Inflation-adjusted earnings: Percentage change in inflation-adjusted
earnings of average earners, 2006-2008: 6 percent decrease[B,C].
Inflation-adjusted earnings: Estimated percentage change in inflation-
adjusted earnings of minimum wage earners who kept full-time
employment, 2006-2008: 12 percent increase[C,D].
Worker views: CNMI workers generally expressed support for the minimum
wage increases.[E].
Source: GAO analysis of data from GAO large-employer questionnaire,
CNMI government, Consumer Price Index, and GAO discussion groups.
Notes: Employers responding to GAO's questionnaire generally include
those with 50 or more employees and exclude smaller employers,
employers that did not respond to the questionnaire, and employers
that had closed between 2007 and the date of our questionnaire,
including garment factories. Questionnaire responses covered about 29
percent of the CNMI workforce and are not necessarily representative
of all CNMI workers and employers. Percentages of employers reporting
actions are weighted by each employer's total number of workers in
2009. Percentages of employers that attributed action largely to
minimum wage increases are weighted to reflect those employers' number
of workers relative to all workers employed by respondents that
reported the action. Because the CNMI government covered a large
percentage of workers employed by all questionnaire respondents, those
responses significantly affected reported questionnaire data.
[A] Based on responses to GAO's CNMI large-employer questionnaire.
[B] Based on CNMI tax data.
[C] Based on analysis of Consumer Price Index data.
[D] Based on GAO estimate.
[E] Based on discussion group results.
[End of table]
Agency Comments and Our Evaluation:
We provided a draft of this report to officials in DOC, DOI, DOL, SSA,
and in the governments of American Samoa and the CNMI for review and
comment. We received written comments from DOI, the American Samoa
government, and the CNMI government, which are reprinted in appendixes
VIII, IX, and X, respectively. We also received technical comments
from DOL and DOC, which we incorporated as appropriate. SSA had no
comments. We shared excerpts of the draft with several private sector
entities and experts and incorporated their comments as appropriate.
Following are summaries of the written comments from DOI, the American
Samoa government, and the CNMI government, with our responses.
* Department of the Interior. In its written comments, DOI agreed with
our findings and noted that the report contained useful information on
American Samoa and the CNMI. However, DOI commented that the report
included insufficient commentary on the future impact of minimum wage
increases in American Samoa and the CNMI. We note that information on
the potential impact of future minimum wage increases appears in the
report's discussions of employment, employer actions, and worker views
for both American Samoa and the CNMI.
* American Samoa. In its written comments, the American Samoa
government generally agreed with our findings. In addition, the
comments stated that the report findings lead to the conclusion that
without a change to the existing incremental minimum wage increases,
American Samoa will face very serious economic difficulties. The
comments further stated that the economy was losing jobs more quickly
than expected and that with the closure of one cannery and continuing
significant job losses in the private sector, government revenues and
funding available for government services and employment will
decrease. American Samoa's comments also noted that increases in
shipping costs due to decreased tuna exports will likely further
increase the cost of imported goods and the overall cost of living.
Appendix IX provides our more detailed evaluation of the American
Samoa government's letter.
* CNMI. In its written comments, the CNMI government agreed with some
of our findings but raised concerns about several aspects of our
report methodology and analysis. Specifically, the CNMI government
expressed concerns about our large-employer questionnaire's coverage,
noting that the questionnaire covers employers with 50 or more
employees but excludes smaller employers. In response, we note that
because key federal sources of data on the U.S. labor market do not
cover the insular areas, we collected our own data on employers
through the questionnaire, discussion groups, and other methods such
as interviews. Our report appropriately states the limitations of the
questionnaire data and repeatedly observes that the data may not be
representative of all CNMI workers and employers. Moreover, our report
summarizes the views of small employers based on the method that we
determined would be most effective and efficient in collecting
information from them--through discussion groups targeting small
employers (see appendix IV, employment section). The CNMI government
also expressed concern about the questionnaire's response rate, given
that 33 of 61 employers responded to our questionnaire. While we spent
considerable effort to obtain as high a response rate as possible,
employers were not required to respond, and the response rate reflects
the individual decisions of CNMI employers who received the
questionnaire about whether to provide information regarding the
extent to which minimum wage increases had affected their operations.
Further, the CNMI government states that it questions our findings
related to worker views based on our discussion groups, because of the
limitations of this approach. Given the relevance of the minimum wage
increases to workers, we considered it critical to include their
views; however, no existing federal data source provided this
information. We believe the discussion groups were an appropriate and
worthwhile approach for collecting and including the views of workers.
In addition to expressing concerns about our methodology, the CNMI
government expressed concern that the annual minimum wage increases
will greatly and negatively affect the CNMI economy, particularly
small employers. The CNMI government proposes capping the minimum wage
in the CNMI at the current rate of $4.55 to allow an in-depth
assessment of the effects of the minimum wage increases on the private
and public sectors, including small employers, and it proposes
allowing the economy to adjust to the $4.55 minimum wage level. The
CNMI government also stated that we should ask for more time to study
the effects of the minimum wage increases; however, the American
Recovery and Reinvestment Act does not permit additional time for this
report. Appendix X provides our more detailed evaluation of the CNMI
government's letter.
We are sending copies of this report to interested congressional
committees. We also will provide copies of this report to the U.S.
Secretaries of Commerce, the Interior, Labor, to the Commissioner of
Social Security, and to the Governors of American Samoa and the CNMI.
In addition, the report will be available at no charge on the GAO Web
site at [hyperlink, http://www.gao.gov].
If you or your staffs have questions about this report, please contact
David Gootnick at (202) 512-3149 or gootnickd@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff who made key
contributions to this report are listed in appendix XI.
Signed by:
David Gootnick:
Director, International Affairs and Trade:
Signed by:
Tom McCool:
Director, Center for Economics,
Applied Research and Methods:
List of Committees:
The Honorable Jeff Bingaman:
Chairman:
The Honorable Lisa Murkowski:
Ranking Member:
Committee on Energy and Natural Resources:
United States Senate:
The Honorable Tom Harkin:
Chairman:
The Honorable Michael B. Enzi:
Ranking Member:
Committee on Health, Education, Labor, and Pensions:
United States Senate:
The Honorable Barbara Mikulski:
Chairwoman:
The Honorable Richard Shelby:
Ranking Member:
Subcommittee on Commerce, Justice, Science, and Related Agencies:
Committee on Appropriations:
United States Senate:
The Honorable Dianne Feinstein:
Madame Chairman:
The Honorable Lamar Alexander:
Ranking Member:
Subcommittee on Interior, Environment, and Related Agencies:
Committee on Appropriations:
United States Senate:
The Honorable Tom Harkin:
Chairman:
The Honorable Thad Cochran:
Ranking Member:
Subcommittee on Labor, Health and Human Services, Education, and
Related Agencies:
Committee on Appropriations:
United States Senate:
The Honorable George Miller:
Chairman:
The Honorable John P. Kline:
Ranking Member:
Committee on Education and Labor:
House of Representatives:
The Honorable Alan B. Mollohan:
Chairman:
The Honorable Frank R. Wolf:
Ranking Member:
Subcommittee on Commerce, Justice, Science, and Related Agencies:
Committee on Appropriations:
House of Representatives:
The Honorable James P. Moran:
Chairman:
The Honorable Michael K. Simpson:
Ranking Member:
Subcommittee on Interior, Environment, and Related Agencies:
Committee on Appropriations:
House of Representatives:
The Honorable David R. Obey:
Chairman:
The Honorable Todd Tiahrt:
Ranking Member:
Subcommittee on Labor, Health and Human Services, Education, and
Related Agencies:
Committee on Appropriations:
House of Representatives:
The Honorable Madeleine Z. Bordallo:
Chairwoman:
The Honorable Henry E. Brown:
Ranking Member:
Subcommittee on Insular Affairs, Oceans and Wildlife:
Committee on Natural Resources:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This report describes, for American Samoa and the Commonwealth of the
Northern Mariana Islands (CNMI) since 2007--the year the minimum wage
increases began--(1) wages, (2) employment, (3) employer actions, (4)
inflation-adjusted earnings, and (5) workers' views regarding the
minimum wage increases.
To describe wages, we collected wage data through a large-employer
questionnaire during site visits in each area. To describe employment,
we analyzed data from the large-employer questionnaire, earnings data
from the Social Security Administration (SSA), and tax data from the
CNMI government, and we conducted interviews with public and private
sector officials. To describe employer actions, we collected responses
through the large-employer questionnaire. To describe inflation-
adjusted earnings, we analyzed SSA data and tax data from the CNMI
government, and we adjusted earnings data using Consumer Price Index
(CPI) data for each area. To describe workers' views, we conducted
discussion groups with workers. We provide additional information on
each data source below.
In preparing this report, we interviewed officials from the U.S.
Departments of the Interior (DOI), Commerce (DOC), and Labor (DOL), as
well as from SSA. We reviewed relevant reports and data from DOL and
other U.S. government sources. We also reviewed U.S. minimum wage laws
and other relevant laws and regulations. We did not focus on the
extent to which laws were properly enforced or implemented, although
we considered enforcement as appropriate. The scope of our study also
does not include workers in the underground economy.
Site Visits:
Because key federal sources of data on the U.S. labor market do not
cover the insular areas, we collected our own data in each area.
[Footnote 11] We visited American Samoa in August 2009, after one tuna
cannery announced it would close and just before it actually closed,
and we visited the CNMI in September 2009, after the closure of all
garment factories. During our visits, we conducted interviews and
discussion groups with government officials, smaller employers, other
private sector representatives, workers, and community members to
obtain views and information on the minimum wage increases and related
topics. In each area, we held an open public meeting and established e-
mail accounts to obtain comments from the public. We also collected
detailed data from large employers in each area including through a
questionnaire, as described below.
In American Samoa, we visited the island of Tutuila and interviewed
officials in the Office of the Governor, the Department of Commerce,
the Department of Human Resources, the Department of the Treasury, the
Department of Program Planning and Budget Development, the Office of
Samoan Affairs, and other American Samoa agencies, as well as the
legislature. We also interviewed representatives of the private
sector, including representatives from the tuna canneries, and workers.
In the CNMI, we visited the islands of Saipan and Tinian and
interviewed officials in the Office of the Governor, the Department of
Commerce, the Department of Labor, the Department of Finance, and the
Marianas Visitors Authority, as well as several other CNMI agencies.
We also interviewed representatives of the private sector, including
representatives from hotels, and workers. We also visited the island
of Rota in January 2010 and interviewed several employers.
Employer Questionnaire:
We collected detailed data from large employers in each area through a
questionnaire on employment, wage structure, past and planned employer
actions, and related topics for the years 2006 to 2009. We defined a
large employer as one that employed 50 or more workers in recent
years. The employers selected to receive the questionnaire comprised
for-profit, not-for-profit, and public sector employers. We sent the
questionnaire only to employers with 50 or more workers because we did
not have sufficiently reliable frames from which to draw a probability
sample of employers and because we could contact only a limited number
of employers in each area, given available resources. By limiting our
questionnaire to the largest employers, we were able to concentrate
data collection efforts on those who employed a disproportionately
large percentage of the workforce.
For American Samoa, we used local tax return data to identify
employers that filed 50 or more employee wage and tax statements
(i.e., Form W-2) in either 2007 or 2008, and we verified this list
with the American Samoa government and Chamber of Commerce. We sent
questionnaires to 40 employers in American Samoa, covering
approximately 84 percent of the American Samoa public and private
sector workforce.
For the CNMI, we did not receive local tax return data in time to
develop our list. We generated our original list from 2007 Labor and
Immigration Identification and Documentation System data from the CNMI
government. Because the data include only foreign workers, the CNMI
government and Saipan Chamber of Commerce identified additional
employers that likely had more than 50 employees. We sent
questionnaires to 63 employers in the CNMI, covering approximately 37
percent of the CNMI public and private sector workforce, with greater
coverage among public sector workers. The percentage of the workforce
covered by our large-employer questionnaire was later calculated by
the CNMI government's Department of Finance.
In accordance with other federal employment surveys, our large-
employer questionnaire asked for wage data for the 2007, 2008, and
2009 pay periods containing June 12. We selected June as the reference
month because it spanned one month before the first minimum wage
increase (July 2007) and one month after the most recent increase (May
2009), allowing us to study changes since before the first minimum
wage increase and through the most recent increase. The questionnaire
asked separately for data regarding workers paid an hourly wage and
workers paid an annual salary. The questionnaire also included
detailed questions about changes in benefits, about employers' past
and possible future actions, and about the extent to which employers
attributed these actions to past and future minimum wage increases.
(The questionnaire is reproduced in appendix VII.)
Before sending the questionnaire to employers, we pretested it over
the phone with three employers in the CNMI and two in American Samoa
to make sure that the questions were clear and comprehensive, the data
were readily obtainable, and the questionnaire did not place an undue
burden on employers. Pretest participants included business owners or
general managers and, where applicable, financial personnel
responsible for maintaining the payroll system. The questionnaire was
also reviewed by members of the American Samoa, Saipan, and Tinian
Chambers of Commerce, which also provided their endorsements, and an
independent GAO reviewer. We made appropriate changes to the content
and format of the questionnaire after the pretests and independent
reviews.
Most employers received the questionnaire by e-mail in an attached
Microsoft Word form that they could return electronically after
marking checkboxes or entering responses in open-answer boxes.
Questionnaires were sent 1 to 2 weeks prior to the start of our visits
to each insular area. If we could not obtain an e-mail address for an
employer, we delivered a paper copy of the questionnaire during our
visits. Employers returned questionnaires by e-mail, mail, or fax. The
deadline for the questionnaire was set midway through our visits so
that we could conduct nonresponse follow-up in person and by phone
while in the insular areas. We also contacted nonrespondents by e-mail
and phone after returning from the insular areas. In addition, we
contacted respondents to clarify responses and request any missing
data.
In American Samoa, 20 of the 40 employers completed the questionnaire,
resulting in an unweighted response rate of 50 percent, as shown in
table 3. These respondents represented about 87 percent of the
workforce employed by questionnaire recipients (those with 50 or more
employees) in 2008 and about 72 percent of the total workforce,
including 57 percent of the private sector workforce. Questionnaire
respondents represented about 99 percent of the public sector
workforce in 2008 (all public sector employers received the
questionnaire). American Samoa questionnaire respondents provided wage
data on a total of 9,685 full-time workers as of June 2009. American
Samoa questionnaire respondents included the two tuna canneries and
other employers in the sectors of manufacturing, wholesale and retail
trade, food services, hotel, construction, transportation, publishing
and communication, and health care, as well as the American Samoa
government and other public sector employers.
Table 3: American Samoa Large-Employer Questionnaire Respondent
Coverage:
Percentage of total workforce covered: 72 percent.
Percentage of private sector workforce covered;: 57 percent.
Percentage of public sector workforce covered: 99 percent.
Unweighted response rate: 50 percent (20/40).
Response rate weighted by number of employees: 87 percent.
Source: GAO analysis of GAO large-employer questionnaire and American
Samoa government tax data.
[End of table]
In the CNMI, 33 of the 61 employers completed the questionnaire,
resulting in an unweighted response rate of 54 percent, as shown in
table 4. We confirmed that two employers had closed, and thus we did
not count them in the final response rate. The respondents represented
about 79 percent of the workforce employed by questionnaire recipients
(those with 50 or more employees) in 2008 and about 29 percent of the
total workforce, including 20 percent of the total private sector
workforce. Questionnaire respondents represented about 89 percent of
the public sector workforce employed by questionnaire recipients and
about 87 percent of the total public workforce in 2008 (4 public
sector employers were not covered by questionnaire because they had
fewer than 50 employees). CNMI questionnaire respondents provided wage
data on a total of 7,535 full-time workers as of June 2009. CNMI
questionnaire respondents included hotels and other employers in the
sectors of food service, utilities, construction, manufacturing,
retail, and transportation, as well as the CNMI government and other
public sector employers.
Table 4: CNMI Questionnaire Respondent Coverage:
Percentage of total workforce covered: 29 percent.
Percentage of private sector workforce covered: 20 percent.
Percentage of public sector workforce covered: 87 percent.
Unweighted response rate: 54 percent (33/61).
Response rate weighted by number of employees: 79 percent.
Source: GAO analysis of GAO large-employer questionnaire and
information from the CNMI Department of Finance.
[End of table]
In reporting the percentages for questionnaire responses throughout
our report, we weighted each percentage to reflect the proportion of
workers employed by the responding employers relative to all workers
employed by all questionnaire respondents. As a result, the responses
of larger employers affect our findings more than those of smaller
employers. We determined the number of employees at each employer by
summing the number of hourly and salaried workers that employers
reported in questionnaire responses. In addition to asking a direct
question about number of employees, the questionnaire asked
respondents to complete a separate table listing the number of
employees at each wage or salary level. Separate tables were required
for hourly wage and salaried workers. In cases in which the employers
completed the table but did not answer the direct question, the sum of
the tabled responses were used as the weight. In the few cases in
which employers did not report any employees, they were assigned a
weight of zero. To apply the weights, we cross-multiplied the number
of employees by the employer response, then divided by the total
number of employees in the sample. For example, if three of five
employees attributed an action to the minimum wage to a moderate
extent, the unweighted response would be 60 percent. However, if those
three employers represented 300 of 400 employees, the weighted
response that we report would be 75 percent.
From our questionnaire, we obtained information on earnings and
employment for both hourly wage and salaried workers during the pay
periods that included June 12, 2007, 2008, and 2009. For hourly wage
workers, respondents were asked to provide the number of employees
paid at each wage rate, and the number of both regular and overtime
hours worked during the pay period. For salaried workers, respondents
were asked the number of full-time and part-time workers paid in
salary ranges (such as from $10,000 to $19,999). In order to determine
the wage rate for salaried workers, we assumed that each worker was
paid at the midpoint of the range. Because it was unclear the hours
each worked, we excluded part-time employees. For any given employer,
this may either over or under estimate the wage rate, depending on
whether more employees for that employer tend to be at the top or
bottom of the range. This particularly affected our reported data
regarding government workers. To determine the number of workers
affected by each minimum wage increase, we assumed that all workers
employed by questionnaire respondents were legally required to receive
the minimum wage. If some are not covered or are exempt, the minimum
wage increases would affect fewer workers.
After recording the questionnaire data, we verified all keypunched
records by comparing them with the corresponding questionnaires and
corrected the errors we found. Less than 0.5 percent of the data items
we checked had random keypunch errors that would not have been
corrected during data processing. Analysis programs were also
independently verified. However, we did not independently verify that
the wage and other information provided to us were correct.
The questionnaire responses cannot be used to make inferences about
all employers and workers in each insular area, particularly in the
CNMI. First, because the lists of employers that received the
questionnaire were intended to include only those with more than 50
employees, the lists were not representative of all employers.
[Footnote 12] Second, we were unable to survey employers that had
closed between 2007 and our questionnaire date, including those in the
CNMI garment industry. Third, some nonresponse bias may exist in some
of the questionnaire responses, since characteristics of questionnaire
respondents may differ from those of nonrespondents in ways that
affect the responses (e.g., if those that employ a larger number of
workers would have provided different responses than those that employ
a smaller number). Last, it is possible that some employers' views of
the minimum wage increases may have influenced their responses.
In addition, the tuna canneries and local government in American Samoa
employed a large percentage of workers employed by all questionnaire
respondents, as in the actual American Samoa workforce; as a result,
these employers' responses significantly affected our reported
questionnaire data. Among CNMI employer responses, the CNMI government
accounted for a higher percentage of workers employed by questionnaire
respondents than in the actual CNMI workforce, so the government's
responses disproportionately affect our questionnaire results on the
public and private sectors combined.
SSA Data:
We obtained SSA data on the earnings, employment, and demographic
characteristics of individual taxpayers in American Samoa and the CNMI
from 2005 to 2008. While the SSA data cover all types of workers in
American Samoa and were sufficiently reliable for our purposes, three
large groups of people in the CNMI were not required to report
earnings to SSA and thus are excluded from the SSA data--Filipino,
Korean, and CNMI government workers. In 2008, these three groups
represented approximately half of all CNMI workers, according to CNMI
government tax data. We have chosen not to report the CNMI SSA data
due to these coverage gaps.
For American Samoa, SSA told us that all employees were subject to SSA
withholding--no group was systematically excluded. In addition, the
data were generally consistent with information from other sources,
including local American Samoa W-2 data and our questionnaire results.
We used SSA data to review trends in employment in American Samoa
since the federal minimum wage increases were implemented. We used SSA
earnings data to determine two aspects of employment of American Samoa
workers from 2005 to 2008. First, we used SSA data to determine the
level of employment. Our count of employed people was based on the
number of people that had positive reported earnings to SSA. Second,
we reported the median earnings per employed person in American Samoa.
Because of data limitations, we were unable to report earnings that
were not reported to SSA, either because of a failure on the part of
the employer or because the earnings were not subject to SSA
withholding. We also were unable to report on earnings that exceeded
the SSA withholding cap.
To assess the reliability of the data, we interviewed agency officials
at SSA. As discussed above, to the extent possible, we compared
employment counts from the SSA data to counts from other sources. We
determined that the available data were adequate and sufficiently
reliable for the purposes of depicting trends in employment and
earnings in American Samoa.
Discussion Groups:
We conducted structured discussion groups with Chamber of Commerce
members in American Samoa, Saipan, and Tinian to collect information
on the impact of the minimum wage increases on employers not covered
by our large-employer questionnaire, although several participants did
receive the questionnaire. For each discussion group, the president of
the Chamber of Commerce invited members to participate. In the CNMI,
we also held discussion groups with hotel human resources managers and
members of the Korean and Chinese business communities. Participants
in these groups were also invited by their organizations' leadership.
The number of participants in each group ranged from 4 to 10 business
owners or managers.
To collect information on current living standards and workers' views
of the minimum wage increases, we conducted structured discussion
groups with various worker and community groups with different
organizational affiliations. In each case, we asked the organizations'
leadership to invite members to the discussion groups. In American
Samoa, we conducted two worker discussion groups at each of the two
canneries, one group with the U.S. Department of Agriculture's Women,
Infants, and Children (WIC) program recipients, and one group
recruited by the Office of Samoan Affairs in the American Samoa
government. In the CNMI, we conducted discussion groups with hotel
workers at two different hotels, one group with the U.S. Department of
Agriculture's Nutrition Assistance Program (NAP) recipients, one group
with Filipino workers, one group with former garment factory workers,
and one group recruited by the DOI Labor Ombudsman's Office in the
CNMI. The number of participants in each group ranged from 4 to 13. We
also distributed questionnaires to WIC recipients in Saipan and Tinian
who visited the WIC office on the day we were there.[Footnote 13] The
questionnaires asked about changes in living standards and views on
the minimum wage increases.
All discussion groups were moderated by a GAO employee following a
structured guide with open-ended questions about current living
standards and the effects of the minimum wage. At the end of each
discussion group, we also collected written responses to our
questionnaire about changes in living standards and views on the
minimum wage increases. Discussion groups are generally designed to
obtain in-depth information about specific issues that cannot be
easily obtained from single interviews. Methodologically, they are not
designed to provide results generalizable to a larger population or
provide statistically representative samples or quantitative
estimates. They represent the views only of the participants in our 18
groups and may or may not be representative of the population of
employers and workers in these insular areas. Therefore, the
experiences of other employers and workers may be different from those
who participated in our discussion groups. In addition, while we
attempted to hold discussion groups with as many groups as our
resources allowed, the groups and participants in the groups were not
random samples of employers and workers in these insular areas.
Local Administrative Data:
We also analyzed available American Samoa administrative and survey
data, including the American Samoa Department of the Treasury's tax
revenues and demographic data from the American Samoa Department of
Commerce. We analyzed available CNMI administrative and survey data,
including CNMI data on the number and wages of workers from the CNMI
Department of Finance's tax returns. The CNMI tax data provide ranges
of earnings, including all payments to employees such as overtime,
shift differentials, cash housing and meal allowances, bonuses, etc.
The data cover both public and private sector workers and both
citizens and noncitizens, and we analyzed data for 2005 to 2008.
We also obtained data on federally funded income-based programs
administered by the insular area governments. We obtained data from
the U.S. Department of Agriculture's Food and Nutrition Service on the
beneficiaries' participation in the WIC Nutrition Program in American
Samoa for fiscal years 2005 to 2008. We also obtained data on
approved, withdrawn and terminated cases, as well as submitted and
denied applications from the CNMI Division of Nutrition Assistance
Program for 2006 to 2009. We estimated the number of active cases as
the difference between those approved and those withdrawn and
terminated.
In addition, we obtained historical data on the CPI from both areas.
[Footnote 14] The quarterly CPI series for American Samoa cover the
time period from the third quarter in 1997 to the second quarter in
2009, and those for CNMI cover the period from the second quarter of
1988 to the second quarter of 2009. However, both areas have revised
the CPI series at several points in time, including updating the
weights of individual components and adding more groups in the CPI
composition. For American Samoa, because the CPI was rebased in the
fourth quarter of 2007, we recalculated the quarterly index series
from the fourth quarter of 2008 back to the fourth quarter of 2007 by
finding a rebasing factor such that the old and new indexes in the
fourth quarter of 2007 were identical. We averaged the quarterly price
indexes to compute an annual price level to use in computing year-to-
year changes in earnings. We also use the annual price indexes to
estimate annual inflation for the 2006 through 2008 period on a
consistent basis.[Footnote 15]
Limitations and Data Reliability:
Our review had certain limitations in addition to those already noted.
In particular, although our approach yielded information on trends in
employment, wages, and earnings in both areas, it is difficult to
distinguish between the effects of minimum wage increases and of other
factors, including the global recession in 2009, fluctuations in
energy prices, global trade liberalization, and the application of
U.S. immigration law to the CNMI.
In general, to establish the reliability of the data that we used for
reporting trends and statistics for both American Samoa and the CNMI,
we systematically obtained information about the way in which data
were collected and tabulated. When possible, we checked for
consistency across data sources. While the data had some limitations,
we determined that the available data were adequate and sufficiently
reliable for the purposes of our review.
We conducted our work from April 2009 to April 2010 in accordance with
all sections of GAO's Quality Assurance Framework that are relevant to
our objectives. The framework requires that we plan and perform the
engagement to obtain sufficient and appropriate evidence to meet our
stated objectives and to discuss any limitations in our work. We
believe that the information and data obtained, and the analysis
conducted, provide a reasonable basis for any findings and conclusions
in this product.
[End of section]
Appendix II: Background:
American Samoa:
American Samoa comprises five volcanic islands and two coral atolls,
covering a land area of 76 square miles--slightly larger than
Washington, D.C.--about 2,600 miles southwest of Hawaii. In 2005,
American Samoa had a population of about 63,780.[Footnote 16] Its
capital, Pago Pago, is on the main island of Tutuila, which consists
mostly of rugged terrain with relatively little level land; most
economic activity and government operations on Tutuila take place in
the Pago Pago Bay area.
American Samoa--U.S. Relations:
U.S. interest in the Samoan islands began in 1872 with the efforts of
the U.S. Navy to establish a naval station in Pago Pago harbor. The
protectorate over the Samoan islands established by the United States,
Britain, and Germany ended in 1899, when the islands comprising
American Samoa were placed under U.S. control. The U.S. Naval Station
was established in 1900.[Footnote 17] From 1900 through 1904, the U.S.
government negotiated control over American Samoa,[Footnote 18] and
the U.S. Navy subsequently took responsibility for federal governance
of the territory. In 1951, governance was transferred to the Secretary
of the Interior.[Footnote 19] In 1960, American Samoa residents
adopted their own constitution. All amendments to the Constitution of
American Samoa must be approved by Congress.[Footnote 20] American
Samoa exercises authority over its immigration system and customs
through locally adopted laws.
In fiscal year 2008, the American Samoa government spent approximately
$114.4 million in grants from several federal agencies, including the
Departments of the Interior (DOI), Education, Agriculture,
Transportation, and Health and Human Services.[Footnote 21] For
example, in 2008, the American Samoa government spent $15.5 million
[Footnote 22] provided by DOI.[Footnote 23] American Samoa also has
begun receiving federal funds under the American Recovery and
Reinvestment Act (Recovery Act) that temporarily supplement local
government revenues.[Footnote 24]
Additionally, the U.S. government has supported American Samoa's
economy through trade and tax policies that, respectively, have
provided tariff-free access to the United States for tuna canned in
America Samoa and have reduced federal taxes on income earned by
qualifying U.S. corporations investing in American Samoa.[Footnote 25]
However, changes scheduled to take effect in existing free trade
agreements, as well as several pending agreements, are likely to lower
tariffs on tuna exported from several other countries, reducing the
American Samoa canneries' competitive advantage.[Footnote 26]
Moreover, certain U.S. tax policies, designed to encourage U.S.
corporations to invest in the U.S. insular areas and create jobs,
recently expired.[Footnote 27]
American Samoa Economy:
The tuna canning industry and the government sector are American
Samoa's two largest employers.[Footnote 28] In 2006, about a third of
American Samoa's workforce was employed by the two tuna canneries;
about a third was employed by other businesses, many supporting the
tuna industry; and about a third worked in the government sector.
[Footnote 29] Noncitizens, mostly from the independent state of Samoa,
comprised approximately a third of American Samoa's population of
63,780 in 2005 (see figure 1) and roughly four-fifths of the
canneries' employees. Many citizens of the independent state of Samoa
reside in American Samoa on a long-term basis, including spouses and
relatives of American Samoans.
Figure 1: Citizenship Status of American Samoa Population, 1980-2005:
[Refer to PDF for image: stacked vertical bar graph and accompanying
data]
Year: 1980[A];
Neither U.S. citizens nor nationals: 11,514 (36.7%);
U.S. citizens or nationals: 20,783 (64.3%);
Total: 32,297.
Year: 1990;
Neither U.S. citizens nor nationals: 17,031 (36.4%);
U.S. citizens or nationals: 29,742 (63.6%);
Total: 46,773.
Year: 2000;
Neither U.S. citizens nor nationals: 20,251 (35.3%);
U.S. citizens or nationals: 37,040 (64.7%);
Total: 57,291.
Year: 2005;
Neither U.S. citizens nor nationals: 21,370 (33.5%);
U.S. citizens or nationals: 42,410 (66.5%);
Total: 63,780.
[Text box: American Samoa government 2009 population estimate: 70,100.
In 2008, the American Samoa Department of Commerce estimated that
between 45 and 55 percent of the population was foreign born. End of
text box]
Sources: GAO analysis of decennial U.S. Census data and 2005 (draft)
report by American Samoa government on household, income, and
expenditures survey (bar chart); American Samoa Department of
Commerce, ’American Samoa Population: 2009,“ official estimate of the
population of American Samoa as of July 1, 2009 and Immigration and
Population Growth in the Territory of American Samoa from 1980 to 2008”
Analysis and Trends, January 20, 2009 (text box).
[A] For 1980, the definition of U.S. citizen includes people born in
the United States, the CNMI, Guam, and American Samoa. Persons with
place of birth not reported are classified as not U.S. citizens.
[End of figure]
The tuna canning industry, a mainstay of the American Samoa economy
since the 1950s, has maintained a relatively constant flow of exports
to the United States despite competition from other countries. Figure
2 shows the combined value of tuna that the two canneries exported to
the United States from 1997 through 2008. Tuna exports represented 98
percent of the total value of American Samoa's commodity exports (over
$591 million) to the United States in 2008.
Figure 2: American Samoa Tuna Exports to the United States, 1997-2008:
[Refer to PDF for image: line graph]
Year: 1997;
Export amount: $455.42 million.
Year: 1998;
Export amount: $491.45 million.
Year: 1999;
Export amount: $458.45 million.
Year: 2000;
Export amount: $445.48 million.
Year: 2001;
Export amount: $414.05 million.
Year: 2002;
Export amount: $484.82 million.
Year: 2003;
Export amount: $478.97 million.
Year: 2004;
Export amount: $422.65 million.
Year: 2005;
Export amount: $455.56 million.
Year: 2006;
Export amount: $452.33 million.
Year: 2007;
Export amount: $462.34 million.
Year: 2008;
Export amount: $508 million.
Source: GAO analysis of U.S. Department of Commerce data.
[End of figure]
On May 1, 2009, Chicken of the Sea, Inc. (Tri-Union Samoa Packing),
which operated one of the two canneries in American Samoa, notified
the American Samoa government of plans to terminate its cannery
operations in the territory; the cannery closed at the end of
September 2009.[Footnote 30] Chicken of the Sea indicated that the
company would relocate canning facilities to the U.S. state of Georgia
while outsourcing the more labor-intensive processes, including
cleaning and cooking the tuna loins (a low-tariff U.S. import), to
countries with lower labor costs. The remaining tuna cannery,
StarKist, has expressed concerns about the costs of operating in
American Samoa. Following consultations with local government and
industry officials, on September 16, 2009, American Samoa's Delegate
in Congress introduced legislation[Footnote 31] providing for
subsidies to canneries in the territory and to fishing vessels
delivering to the territories.[Footnote 32]
On September 29, 2009, a tsunami following a strong earthquake left 34
people dead in American Samoa. Although the two tuna canneries were
mostly spared, the tsunami caused severe damage to homes, businesses,
and water and electrical infrastructure. The federal government issued
a disaster declaration and is assisting with tsunami recovery efforts.
As of December 9, 2009, the Federal Emergency Management Agency had
approved $15.5 million to assist with tsunami relief, and the Small
Business Administration had approved more than $7 million in low-
interest disaster loans.[Footnote 33]
Current federal data on income and poverty levels in American Samoa do
not exist; however, the most recent available data show that American
Samoa had lower income and higher poverty rates than the mainland
United States. For example:
* In 2004, the median household income in American Samoa was $22,930,
[Footnote 34] while the U.S. 50-state median household income was
$44,389.[Footnote 35]
* In 2004, the poverty rate for persons age 25 and older in American
Samoa was 49.9 percent,[Footnote 36] while the U.S. 50-state poverty
rate for persons age 15 and older was 12.7 percent.[Footnote 37]
Commonwealth of the Northern Mariana Islands:
The CNMI is a group of 14 islands in the western Pacific Ocean, lying
just north of Guam and 5,500 miles from the U.S. mainland. Most of the
CNMI population--65,927 in 2005--[Footnote 38] resides on the island
of Saipan, with additional residents on the islands of Tinian and Rota.
CNMI-U.S. Relations:
The United States took control of the Northern Mariana Islands from
Japan during the latter part of World War II. After World War II, the
U.S. Congress approved the Trusteeship Agreement that made the United
States responsible to the United Nations for the administration of the
islands.[Footnote 39] Later, the Northern Mariana Islands sought self-
government and permanent ties with the United States. In 1976, after
almost 30 years as a trust territory, the District of the Mariana
Islands entered into a covenant with the United States establishing
the island territory's status as a self-governing commonwealth in
political union with the United States.[Footnote 40] This covenant
grants the CNMI the right of self-governance over internal affairs and
grants the United States complete responsibility and authority for
matters relating to foreign affairs and defense affecting the
CNMI.[Footnote 41] The covenant initially made many federal laws
applicable to the CNMI, including laws that provide federal services
and financial assistance programs.[Footnote 42] The covenant preserved
the CNMI's exemption from certain federal laws that had previously
been inapplicable to the Trust Territory of the Pacific Islands,
including federal immigration laws with certain limited exceptions
[Footnote 43] and certain federal minimum wage provisions. However,
under the terms of the covenant, the federal government has the right
to apply federal law in these exempted areas without the consent of
the CNMI government.[Footnote 44]
Until recently, the CNMI retained legislative authority over most
aspects of immigration, regulating entry into the CNMI through a
permit system. In 2008, federal legislation amended the U.S.-CNMI
Covenant to establish federal control of CNMI immigration; the law
includes several provisions affecting access to the CNMI by foreign
workers, tourists, and foreign investors that were implemented
beginning in November 2009.[Footnote 45] As we reported in August
2008, the potential impact of the legislation's implementation on the
CNMI's labor market will largely depend on decisions that the U.S.
Departments of Homeland Security and DOL make in implementing a
program to provide foreign workers temporary permits to work in the
CNMI during a transition period that ends in 2014.[Footnote 46]
Although modest reductions in CNMI-only permits for foreign workers
would cause minimal impact, any substantial and rapid decline in the
availability of CNMI-only work permits for needed workers would have a
negative effect on the economy, given foreign workers' prominence in
key CNMI industries.
In fiscal year 2008, the CNMI government spent approximately $51.5
million in grants from several federal agencies, including DOI, DOC,
DOL, the Department of Homeland Security, and the Department of Health
and Human Services. For example, in 2008, the CNMI government spent
$9.35 million provided by DOI.[Footnote 47] The CNMI also has begun
receiving federal funds under the Recovery Act that temporarily
supplement local government revenues.[Footnote 48]
CNMI Economy:
The CNMI's garment and tourism industries have contributed directly to
its economy by generating employment and bringing revenue from outside
the CNMI via exports.[Footnote 49] For example, in 1999, these two
industries accounted for about 85 percent of the CNMI's total economic
activity and 96 percent of its exports.[Footnote 50]
Several developments in international trade caused the CNMI's garment
industry to decline dramatically. In January 2005, in accordance with
a World Trade Organization 10-year phaseout agreement, the United
States eliminated quotas on textile and apparel imports from other
textile-producing countries, exposing the CNMI apparel industry's
shipments to the United States to greater competition.[Footnote 51]
Subsequently, the value of CNMI textile exports to the United States
dropped from a peak of $1.1 billion in 1998, to $98.2 million in 2008,
to close to zero in 2009 (see figure 3).[Footnote 52] The number of
licensed CNMI apparel manufacturers decreased rapidly, from 34 firms
in 1999 to 6 firms as of July 2008. By the end of the first quarter of
2009, the last garment factory in the CNMI had closed.
Figure 3: CNMI Textile Exports to the United States, 1995-2009:
[Refer to PDF for image: vertical bar graph]
Year: 1995;
Textile Exports: $426 million.
Year: 1996;
Textile Exports: $555 million.
Year: 1997;
Textile Exports: $798 million.
Year: 1998;
Textile Exports: $1,078 million.
Year: 1999;
Textile Exports: $1,048 million.
Year: 2000;
Textile Exports: $1,025 million.
Year: 2001;
Textile Exports: $947 million.
Year: 2002;
Textile Exports: $815 million.
Year: 2003;
Textile Exports: $817 million.
Year: 2004;
Textile Exports: $807 million.
Year: 2005;
Textile Exports: $677 million.
Year: 2006;
Textile Exports: $495 million.
Year: 2007;
Textile Exports: $317 million.
Year: 2008;
Textile Exports: $104 million.
Year: 2009;
Textile Exports: $46 million.
Source: GAO analysis of U.S Department of Commerce data.
[End of figure]
In addition, the CNMI economy has been negatively affected by trends
in the tourism industry. For example, tourism in the CNMI experienced
a sharp decline in the late 1990s as a result of the Asian financial
crisis. In 2003, according to CNMI officials, tourism slowed for
several months in reaction to the SARS epidemic, which originated in
Asia, and the war in Iraq. Visitors from Japan account for the
greatest share of visitor arrivals in the CNMI--56 percent of the
total in fiscal year 2009. Total visitor arrivals to the CNMI dropped
from a peak of 726,690 in 1997 to 375,808 in 2009, a decline of 48
percent (see figure 4).[Footnote 53] The CNMI tourism industry also
may be affected by the November 28, 2009, implementation of final
rules for a joint visa waiver program for visitors to the CNMI and
Guam, as part of the application of U.S. immigration law.[Footnote 54]
Figure 4: CNMI Visitor Arrivals, 1990-2009:
[Refer to PDF for image: vertical bar graph]
Year: 1990;
Visitor arrivals: 417,146.
Year: 1991;
Visitor arrivals: 424,459.
Year: 1992;
Visitor arrivals: 488,330.
Year: 1993;
Visitor arrivals: 536,263.
Year: 1994;
Visitor arrivals: 583,557.
Year: 1995;
Visitor arrivals: 654,375.
Year: 1996;
Visitor arrivals: 721,935.
Year: 1997;
Visitor arrivals: 726,690.
Year: 1998;
Visitor arrivals: 526,298.
Year: 1999;
Visitor arrivals: 491,602.
Year: 2000;
Visitor arrivals: 526,111.
Year: 2001;
Visitor arrivals: 497,696.
Year: 2002;
Visitor arrivals: 424,932.
Year: 2003;
Visitor arrivals: 458,444.
Year: 2004;
Visitor arrivals: 531,584.
Year: 2005;
Visitor arrivals: 529,557.
Year: 2006;
Visitor arrivals: 443,812.
Year: 2007;
Visitor arrivals: 395,360.
Year: 2008;
Visitor arrivals: 396,497.
Year: 2009;
Visitor arrivals: 375,808.
Source: GAO analysis of Marianas Visitors Authority arrivals data.
[End of figure]
During the expansion of the CNMI garment and tourism industries prior
to 1995, the CNMI economy became dependent on foreign labor, as the
CNMI government used its authority over its own immigration policy to
bring in large numbers of foreign workers and investors. In 1995, two-
thirds of the CNMI working population were temporary residents,
including about 93 percent of workers in the garment industry and
slightly over 72 percent in the tourism industry. In contrast, in the
same year, U.S. citizens and permanent residents of the CNMI held
about 96 percent of jobs in the public sector. As a result, the CNMI
economy developed a two-tiered wage structure, with U.S. citizens and
permanent residents earning 3.5 times more than temporary residents in
1995.[Footnote 55] However, with the decline of the garment and
tourism industries, the number and proportion of noncitizens in the
CNMI labor force and population has decreased (see figure 5).
Noncitizen workers in the CNMI are predominantly Chinese or Filipino.
As noted above, the application of U.S. immigration law might result
in further changes in the composition of the CNMI's workforce.
Figure 5: Citizenship Status of CNMI Population, 1980-2005:
[Refer to PDF for image: stacked vertical bar graph and associated
data]
Year: 1980[A];
Neither U.S. citizens nor nationals: 3,703 (22.1%);
U.S. citizens or nationals: 13,077 (77.9%);
Total: 16,780.
Year: 1990;
Neither U.S. citizens nor nationals: 22,263 (53.7%);
U.S. citizens or nationals: 20,082 (46.3%);
Total: 43,345.
Year: 2000;
Neither U.S. citizens nor nationals: 31,457 (53.3%);
U.S. citizens or nationals: 27,489 (46.7%);
Total: 58,846.
Year: 2005;
Neither U.S. citizens nor nationals: 32,749 (49.7%);
U.S. citizens or nationals: 33,178 (50.3%);
Total: 65,927.
Text box: CNMI government 2009 population estimate: 52,000. CNMI
Department of Labor reports that guest workers account for 16,500 (59
percent) of the CNMI workforce of 28,000 persons. [End of text box]
[A] For 1980, the definition of U.S. citizen includes people born in
the United States, CNMI, Guam and American Samoa. Persons with place
of birth not reported are classified as not a U.S. citizen.
[End of figure]
In addition, the CNMI's economy may be affected in the future by the
planned build-up of the U.S. military in neighboring Guam, possibly
bringing new business and tourism opportunities for the CNMI. The U.S.
Department of Defense aims to move 8,000 Marines and an estimated
9,000 dependents from Okinawa, Japan, to Guam by 2014, increasing
Guam's current population by an estimated 25,000 active duty military
personnel and dependents.[Footnote 56]
Current federal data on income and poverty levels in the CNMI do not
exist; however, the most recent available data show that the CNMI had
lower income and higher poverty rates than the mainland United States.
For example:
* In 2004, the CNMI median household income was $17,138,[Footnote 57]
while the U.S. 50-state median household income was $44,389.[Footnote
58]
* In 2004, the CNMI poverty rate for all persons was 53.5
percent,[Footnote 59] while the U.S. 50-state poverty rate for persons
age 15 and older was 12.7 percent.[Footnote 60]
Minimum Wage Law:
U.S. Minimum Wage Law:
The federal minimum wage was first enacted as part of the Fair Labor
Standards Act of 1938 (FLSA). As of July 2009, the federal minimum
wage was set at $7.25 per hour.[Footnote 61] Federal minimum wage laws
apply generally to any employee engaged in commerce, with limited
exceptions and exemptions.[Footnote 62] Certain employees who would
otherwise be covered under the FLSA definitions are exempted by law
from the minimum wage requirements--for example, employees involved
with seafood at sea are exempt.[Footnote 63] Employees not covered by
FLSA include, for example, individuals engaged in agriculture, if the
employer is an immediate family member.
DOL's Wage and Hour division enforces a variety of U.S. labor laws,
including laws related to minimum wage, overtime pay, child labor, and
family medical leave. The division uses a number of strategies,
including investigations and partnerships with external groups, such
as states, foreign consulates, and employee and employer organizations.
Minimum Wage Law in American Samoa:
From 1956 to 2007, employers in American Samoa were allowed to pay
their employees at hourly rates less than the federal minimum wage.
During that period, rates were set by special industry committees
established by DOL.[Footnote 64] The special industry committees
system continued to exist until May 2007, when Congress required an
incremental increase in the minimum wage for all industries in
American Samoa, at $.50 per year in each industry, until it reaches
the full federal minimum wage.[Footnote 65] For example, if the
current federal minimum wage of $7.25 remains unchanged, the minimum
wage for American Samoa tuna canning industry workers will reach $7.25
in 2014 (see table 5).
Table 5: American Samoa Scheduled Minimum Wage Increases for Tuna
Canning Industry Workers and for Workers Paid the Lowest Minimum Wage:
Date: Before July 25, 2007;
Minimum wage (tuna canning industry): $3.26;
Lowest minimum wage: $2.68.
Date: July 25, 2007;
Minimum wage (tuna canning industry): $3.76;
Lowest minimum wage: $3.18.
Date: May 25, 2008;
Minimum wage (tuna canning industry): $4.26;
Lowest minimum wage: $3.68.
Date: May 25, 2009;
Minimum wage (tuna canning industry): $4.76;
Lowest minimum wage: $4.18.
Date: September 30, 2010;
Minimum wage (tuna canning industry): $5.26;
Lowest minimum wage: $4.68.
Date: September 30, 2011;
Minimum wage (tuna canning industry): $5.76;
Lowest minimum wage: $5.18.
Date: September 30, 2012;
Minimum wage (tuna canning industry): $6.26;
Lowest minimum wage: $5.68.
Date: September 30, 2013;
Minimum wage (tuna canning industry): $6.76;
Lowest minimum wage: $6.18.
Date: September 30, 2014;
Minimum wage (tuna canning industry): $7.25;
Lowest minimum wage: $6.68.
Date: September 30, 2015;
Minimum wage (tuna canning industry): no change;
Lowest minimum wage: $7.18.
Date: September 30, 2016;
Minimum wage (tuna canning industry): no change;
Lowest minimum wage: $7.25.
Source: GAO review of American Samoa Industry Committee wage
categories, H.R. Rep. No. 111-386, and Pub. L. No. 110-28.
Note: Under Pub.L. No.110-28, any future changes to the minimum wage
enacted under U.S. law also will apply to American Samoa and the CNMI.
Wage rates vary for workers in the 17 industries other than tuna
canning.
[End of table]
Minimum Wage Law in the CNMI:
Under the terms of the CNMI-U.S. covenant, until May 2007, the CNMI
was exempt from the minimum wage provisions of the FLSA and maintained
control over its own minimum wage system.[Footnote 66] The most recent
legislative changes to the federal minimum wage specified that the
CNMI would be subject to the federal minimum wage, through a staged
$.50 incremental approach. The law raised the CNMI established minimum
wage from $3.05 to $3.55 per hour in July 2007 and requires a $.50
increase every year thereafter until the FLSA-CNMI minimum wage equals
the full federal minimum wage[Footnote 67] (see table 6).
Table 6: CNMI Scheduled Minimum Wage Increases:
Date: Before July 25, 2007;
Minimum wage in the CNMI: $3.05.
Date: July 25, 2007;
Minimum wage in the CNMI: $3.55.
Date: May 25, 2008;
Minimum wage in the CNMI: $4.05.
Date: May 25, 2009;
Minimum wage in the CNMI: $4.55.
Date: September 30, 2010;
Minimum wage in the CNMI: $5.05.
Date: September 30, 2011;
Minimum wage in the CNMI: $5.55.
Date: September 30, 2012;
Minimum wage in the CNMI: $6.05.
Date: September 30, 2013;
Minimum wage in the CNMI: $6.55.
Date: September 30, 2014;
Minimum wage in the CNMI: $7.05.
Date: September 30, 2015;
Minimum wage in the CNMI: $7.25.
Source: GAO review of H.R. Rep. No. 111-386 and Pub. L. No. 110-28.
Note: Under Pub.L. No. 110-28, any future changes to the minimum wage
enacted under U.S. law also will apply to American Samoa and the CNMI.
[End of table]
Prior Studies of Minimum Wage Increases in American Samoa and the CNMI:
The federal government has conducted or funded several reports on
minimum wage increases in American Samoa and the CNMI in recent years.
* In May 2007, DOL's Wage and Hour Division issued a report on the
minimum wage in American Samoa as part of DOL's biennial review
process under the special industry committees.[Footnote 68] The report
analyzes American Samoa's wage and employment structure based on a
2006 employment and wage survey, and it provides the numbers of
employees in each industry who would be affected by a range of
possible minimum wage increases.
* In January 2008, DOL issued a report on the economic impact of
minimum wage increases in both American Samoa and the CNMI,[Footnote
69] as required by the 2007 supplemental appropriations bill.[Footnote
70] For American Samoa, the study noted concern that the tuna
canneries would close before the minimum wage reached the U.S. federal
minimum wage of $7.25 per hour, causing substantial job losses. For
the CNMI, the study found that although data were not available to
precisely quantify the impact of the scheduled minimum wage increases,
it seemed likely that the CNMI's existing economic decline would be
made worse and that the CNMI population would continue to decline.
* DOI funded studies of the American Samoa and CNMI economies,
including the minimum wage increases.[Footnote 71]
- A February 2008 study assessing the relationships between different
sectors of the American Samoa economy found that a doubling of
American Samoa's minimum wage in a 7-year period could result in the
end of the fish processing industry and serious consequences for the
economy.[Footnote 72]The authors predicted that costs would rise, and
that, under a worst-case scenario, American Samoa could lose 46
percent of all jobs in the territory.
- An October 2008 study of the CNMI examined the impact of both
federal immigration policy and the minimum wage increases.[Footnote
73] In framing this analysis, the study found that lifting of quotas
on garment imports to the United States had rendered the CNMI's
garment industry unfeasible and estimated that the loss of 16,800
garment jobs could ultimately cost the CNMI economy about 25,200 jobs,
about 60 percent of peak employment in 2004. The study projects the
combined effect of the closure of the garment industry with the
implementation of the federal minimum wage and an application of
federal immigration policy, whereby almost the entire foreign
workforce is removed from the CNMI economy. In this projection, the
employment of U.S.-qualified residents increases by 21 percent from
2005 to 2015, but real wages and salaries of U.S.-qualified residents
fall by 19 percent. In addition, immigration-policy changes quickly
remove foreign workers on government-approved contracts from the
economy, and U.S.-qualified residents take jobs in the visitor
industry. Despite the increased minimum wage, most of the jobs are
projected to pay lower wages than U.S.-qualified residents had come to
expect. The study also provides an alternative projection under which
the minimum wage is held at $4.05, foreign labor is not restricted,
and an aggressive promotion program successfully doubles visitor
arrivals by 2015. In this projection, the employment of U.S.-qualified
residents increases by 4 percent from 2005 to 2015, and real wages and
salaries of U.S.-qualified residents increase by 15 percent. The
authors suggested, among other recommendations, that the law extending
the minimum wage requires further analysis and notes that officials
are seeking to modify the scheduled increases. Possible modifications
include lengthening the period over which the minimum wage is
increased, basing increases on measures of worker productivity, or
using a special program for adjustment as had previously been done in
American Samoa.
[End of section]
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. Public and private sector officials expressed concern that
future increases could impact the remaining cannery and American
Samoa's ability to attract new industries. Employers representing many
workers employed by questionnaire respondents reported taking cost-
cutting actions, including those affecting workers' income and
benefits, since the increases began. Private sector employers also
reported planning actions such as leaving American Samoa or closing by
the end of 2010. More employers attributed their past and planned
actions to the minimum wage increases than to other factors. Cannery
company officials said in interviews that the minimum wage increases
were a significant contributing factor in the cannery's closure, in
addition to other factors. Our analysis shows that outsourcing
cleaning operations from low labor-cost areas, such as Thailand,
provides opportunities to significantly reduce cannery operating
costs. Earnings data from SSA show that median annual inflation-
adjusted earnings in American Samoa declined by about 6 percent from
2006 to 2008. Although earnings data do not allow for a direct
comparison of median and minimum-wage annual earnings or for tracking
the earnings of workers who lost their jobs, we 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 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
figure 6).[Footnote 74]
* Tuna canning industry. About 80 percent (3,784 of 4,751) of canning
industry workers employed by questionnaire respondents earned no more
than 50 cents over that industry's minimum wage.
* Other private sector industries. About 35 percent (260 of 747) of
hourly workers employed by questionnaire respondents in other private
sector industries earned no more than 50 cents over the minimum wages
for those industries.
Figure 6: American Samoa Private Sector Workers with Wages Low Enough
to Be Affected by July 2007 Increase, Based on GAO Large-Employer
Questionnaire Wage Data:
[Refer to PDF for image: stacked vertical bar graph]
Private sector industry: Tuna canning;
Workers with wages more than $.50 over minimum wage: 967 (20%);
Workers with wages no more than $.50 over minimum wage: 3,784 (80%).
Private sector industry: Other;
Workers with wages more than $.50 over minimum wage: 487 (65%);
Workers with wages no more than $.50 over minimum wage: 260 (35%).
Source: GAO analysis of wage data provided in the American Samoa large-
employer questionnaire.
Notes: Data shown are based on wage data for the pay period including
June 12, 2007, provided in responses to our American Samoa large-
employer questionnaire. In June 2007 in American Samoa, the minimum
wage was $3.26 for the canning industry and ranged from $2.70 to $3.63
for other private sector industries; minimum wage increases occurred
in July 2007. "Tuna canning" comprises the two tuna canneries and the
manufacturer of cans. Wages shown are those of hourly wage workers and
full-time salaried workers. Data shown cover large employers--
generally, those with at least 50 employees. Questionnaire wage data
do not include smaller employers, employers that did not respond, and
employers that have closed. Although questionnaire respondents
represented about 72 percent of the American Samoa workforce,
questionnaire wage data may not be representative of all American
Samoa workers and employers.
[End of figure]
For the first three minimum wage increases in 2007 through 2009, wage
data provided by respondents to our large-employer questionnaire
showed the following:
* In July 2007, about 86 percent of private sector workers in American
Samoa had wages no more than $1.50 over the minimum and therefore
would have been affected by the minimum wage increases in 2007 through
2009.
* In the public sector, according to American Samoa responses to our
questionnaire, at most 30 percent of government workers earned wages
no more than $1.50 over the minimum in 2007[Footnote 75] and therefore
were directly affected by the first three minimum wage increases.
Footnote 76]
Rise in Median Wage after Three Increases Was Greatest for Canning
Industry Employees:
After the first three minimum wage increases, the median wage for the
tuna canning industry increased more than for other parts of the
private sector.[Footnote 77] Based on large employers' responses to
our questionnaire, our analysis shows that from June 2007 to June
2009--the period of the $1.50 total increase in the minimum wage--the
median wage for the canning industry rose by $1.46 (44 percent) while
the median wage for the rest of the private sector rose by $1.00 (25
percent) (see table 7). For American Samoa public sector workers, the
median salary, based on questionnaire responses, remained unchanged in
a range between $10,000 and $20,000.[Footnote 78]
Table 7: Median Hourly Wage Rates of Private Sector Workers Employed
by American Samoa Respondents in 2007-2009, Based on GAO Large-
Employer Questionnaire Wage Data:
Sector (employees in 2009): Tuna canning industry (4,269 employees);
2007: $3.30;
2009: $4.76;
Percentage change in median hourly wage rate, 2007-2009: 44%
Absolute change in median hourly wage rate: $1.46.
Sector (employees in 2009): Other private sector (747 employees);
2007: $4.00;
2009: $5.00;
Percentage change in median hourly wage rate, 2007-2009: 25%
Absolute change in median hourly wage rate: $1.00.
Source: GAO analysis of wage data provided in the American Samoa large-
employer questionnaire.
Notes: Table shows the median hourly wage rates of hourly workers' and
salaried workers' wages converted to a per hour rate; these rates are
based on wage data for the pay period including June 12 of each year,
provided in responses to our American Samoa large-employer
questionnaire. Data shown cover large employers--generally, those with
at least 50 employees. Questionnaire wage data do not include smaller
employers, employers that did not respond, and employers that had
closed. Although questionnaire respondents represented about 72
percent of the American Samoa workforce, questionnaire wage data may
not be representative of all American Samoa workers and employers.
In June 2007 there was no minimum wage increase in American Samoa; in
June 2009 there had been three minimum wage increases of 50 cents each
(totaling $1.50).
[End of table]
Minimum Wage Increases in 2007-2009 Narrowed Wage Gap between Lower-
and Higher-Paid Workers Employed by Questionnaire Respondents:
Responses to our questionnaire indicate that the minimum wage
increases narrowed the gap between the wages of lower-and higher-paid
workers in American Samoa (see figure 7).[Footnote 79] Workers earning
the 25th percentile of wages--that is, higher than 25 percent of all
American Samoa workers employed by questionnaire respondents--
experienced a larger increase in wages than workers earning the 75th
percentile of wages. Workers earning the 75th percentile of wages
experienced no increase in wages. Specifically, the gap between wages
of workers at the 25th percentile and workers at the 75th percentile
dropped from $3.91 in 2007 to $2.45 in 2009, a decline of 37 percent.
Figure 7: Changes in Wages of All Workers Employed by Questionnaire
Respondents, Based on American Samoa Large-Employer Questionnaire Wage
Data:
[Refer to PDF for image: multiple line graph and associated data]
Year: June 2007;
75th percentile of wage earners: $7.21;
25th percentile of wage earners: $3.30;
Gap: $3.91.
Year: June 2008 (after two minimum wage increases);
75th percentile of wage earners: $7.21;
25th percentile of wage earners: $4.26;
Gap: $2.95.
Year: June 2009 (after three minimum wage increases);
75th percentile of wage earners: $7.21;
25th percentile of wage earners: $4.76;
Gap: $2.45.
Source: GAO analysis of wage data provided in the American Samoa large-
employer questionnaire.
Notes: Wage rates shown are based on wage data for the pay period
including June 12 of each year, provided in responses to our American
Samoa large-employer questionnaire, and include both hourly wage
workers and full-time salaried workers in the private and public
sectors. Data shown cover large employers--generally, those with at
least 50 employees. Questionnaire wage data do not include smaller
employers, employers that did not respond, and employers that had
closed. Although questionnaire respondents represented about 72
percent of the American Samoa workforce, questionnaire wage data may
not be representative of all American Samoa workers and employers. In
addition, the tuna canneries and local government employed a large
percentage of workers employed by all questionnaire respondents, as in
the actual American Samoa workforce; as a result, these employers'
responses significantly affected our reported questionnaire data.
The minimum wage for workers in the tuna canning industry in American
Samoa was $3.26 in June 2007, $4.26 in June 2008, and $4.76 in June
2009. From June 2007 to June 2008 there were two minimum wage
increases of 50 cents each, and from June 2008 to June 2009 there was
one minimum wage increase of 50 cents. The different numbers of
increases in each time period may have affected the extent of
contraction of the wage distribution in each period.
[End of figure]
Minimum Wage Increases in 2010-2016 Would Affect Wages of Very High
Percentage of American Samoa Private Sector Workers, but Several
Variables Remain Uncertain:
As the minimum wage increases continue, they will affect a growing
percentage of workers in American Samoa. Based on large employers'
questionnaire responses about workers' wages as of June 2009, in the
private sector, the minimum wage increases scheduled for 2010 through
2016 would affect the wages of roughly 95 percent of those employers'
workers by 2016 (see figure 8). Information provided in the large-
employer questionnaire also show that in the public sector, the
scheduled increases would affect at most about 69 percent of workers
by 2016.[Footnote 80]
Figure 8: Percentage of American Samoa Private Sector Questionnaire
Respondents' Employees in June 2009 Whose Wages Would Be Affected by
2010-2016 Minimum Wage Increases, Based on GAO Large-Employer
Questionnaire Wage Data:
[Refer to PDF for image: line graph]
Year: 2009;
Percentage: 66.3.
Year: 2010;
Percentage: 84.9.
Year: 2011;
Percentage: 88.3.
Year: 2012;
Percentage: 90.4.
Year: 2013;
Percentage: 91.8.
Year: 2014;
Percentage: 93.4.
Year: 2015;
Percentage: 93.7.
Year: 2016;
Percentage: 94.6.
Source: GAO analysis of wage data provided in the American Samoa large-
employer questionnaire.
Notes: The percentages shown for 2010 to 2016 are based on the June
2009 distribution of workers' wages for the private sector, according
to wage data provided in responses to our American Samoa large-
employer questionnaire. Our analysis assumes that wages of workers not
directly affected by the minimum wage increase will not rise and that
the distribution of workers' wages will not change over the period for
reasons other than the increases. Our analysis includes all workers
employed by questionnaire respondents in June 2009. However, if we
excluded from the analysis the employees for the cannery that closed
in September 2009, the percentage of private sector employees affected
by the minimum wage by 2016 would be 93 percent, instead of the 95
percent shown above. The analysis does not take into account possible
impacts of the cannery's closure, such as job losses in other sectors.
Moreover, if the remaining tuna cannery closes or lays off workers,
fewer workers will be affected by each subsequent minimum wage
increase than we project. The tuna canneries and local government
employed a large percentage of workers employed by all questionnaire
respondents, as in the actual American Samoa workforce; as a result,
these employers' responses significantly affected our reported
questionnaire data.
Federal minimum wage increases in American Samoa occurred in July
2007, May 2008, and May 2009; additional $.50 increases are scheduled
for September of each year through 2016.
Our analysis assumes full compliance with minimum wage increases
required by law. If future minimum wage increases are not fully
implemented, they will affect a lower percentage of workers than we
project.
[End of figure]
However, uncertainty about the future of the American Samoa labor
market and economy makes it difficult to project the distribution of
wages in American Samoa in 2010 and subsequent years. In particular,
the cannery closure in September 2009, the consequent losses of
cannery jobs and cannery industry-related jobs, and the loss of
cannery demand for supplies and services may impact the labor market,
as well as the general economy, in ways that our analysis does not
reflect. Moreover, if the remaining cannery were to close, the labor
market and the economy would be affected still further.
American Samoa Employment Dropped after Minimum Wage Increases Began:
Employment in American Samoa Grew after First Minimum Wage Increase
but Dropped after Second Increase and Cannery Closure:
Total employment in American Samoa grew from 2006 to 2008, before
dropping from 2008 to 2009. As shown in figure 9, according to SSA
data, total employment increased by 5.5 percent (from 17,551 to
18,518) from 2006 to 2007 and then slowed to 3 percent (from 18,518 to
19,060) from 2007 to 2008. SSA data for 2009 were not available at the
time of our work.
Questionnaire responses from employers representing about 72 percent
of the American Samoa workforce indicate that employment among the
workers employed by respondents increased by 2 percent from June 2007
to June 2008 (from 10,865 to 11,050) and dropped by about 12 percent
from June 2008 to June 2009 (from 11,050 to 9,685).[Footnote 81]
Moreover, the September 2009 closure of one cannery, which employed
more than 2,000 workers,[Footnote 82] as well as reductions in staff
at the other cannery, have very likely led to further decreases in
overall employment. Public and private sector officials told us it
would be difficult for laid-off workers to find new jobs. Many laid-
off workers may leave American Samoa rather than seeking new jobs; 84
percent of the laid off workers from the closed tuna cannery are from
independent Samoa, and some may return to their home country.[Footnote
83] However, some of the laid-off workers may have been temporarily re-
employed to assist with reconstruction after the September 2009
tsunami. The federal government has paid approximately $8 million
under the Recovery Act and approved roughly $23 million for tsunami
relief, both of which have funded the creation of temporary jobs.
Additional temporary jobs are available to assist with the 2010 Census.
Figure 9: American Samoa Employment in 2005-2008, Based on SSA Data
and GAO Large-Employer Questionnaire Wage Data:
[Refer to PDF for image: vertical bar graph and associated data]
Year: 2005;
Employment: 17,694.
Year: 2006;
Employment: 17,551.
Year: 2007;
Employment: 18,518.
Year: 2008;
Employment: 19,060.
[Text box: From 2008 to 2009, GAO large-employer questionnaire data
show that employment of workers employed by respondents dropped by
about 12 percent. In addition, the September 2009 closure of one tuna
cannery”-which employed more than 2,000 workers-”and reductions in
staff at the other cannery very likely led to further decreases in
overall employment. End of text box]
Source: GAO analysis of SSA data and wage data provided in the
American Samoa large-employer questionnaire.
Notes: Minimum wage increases occurred in American Samoa in July 2007,
May 2008, and May 2009.
Total employment counts are based on SSA data. SSA data were not
available for 2009.
[End of figure]
Small Employers and Public and Private Sector Officials Expressed
Concern about Impact of Future Wage Increases on Remaining Cannery and
Ability to Attract New Industries and Jobs:
Public and private sector officials expressed concern that the ripple
effect from the closure of one cannery, increasing costs, and future
minimum wage increases may force the remaining cannery to close. The
closure of one cannery is likely to raise operating costs for the
remaining cannery and has ripple effects on other businesses. The
remaining cannery will now be responsible for all waste water, waste
discharge, and maintenance costs, which the two canneries previously
shared. The utility company has announced that it was raising utility
rates on remaining customers once one cannery closed. In addition, the
closure of one cannery reduced shipping needs and therefore is likely
to increase shipping costs of imported goods, including produce and
consumer products. Officials expressed concern that closure of the
remaining cannery would cause further loss of employment.
Employers who participated in our discussion groups for small
employers also discussed the effects that cannery closure would have
on their operations.[Footnote 84] Many said cannery closure would not
only affect the employment and income of the cannery workers, but also
consumer confidence and spending and government revenues. In addition,
many small employers said that as a result of the minimum wage
increases, they had to lay off workers; cut benefits, hours, and
overtime pay; and increase costs for customers, when possible. Some
said that they had raised pay only for minimum wage workers, which had
decreased the morale of workers who did not receive raises.
Furthermore, some small employers said that they wanted workers to
earn as much as possible because the cost of living is continuously
increasing. While many opposed the minimum wage increases as
scheduled, some said they did not oppose minimum wage increases in
general but rather advocated a rational approach for setting the
increases.
Public sector officials also expressed concern about increased fiscal
strain and difficulties in attracting new businesses to American
Samoa. In their view, the minimum wage increases will raise costs to
the government as more public sector employees are covered by the
increases and will coincide with increased fiscal stress on the
American Samoa government. A report for the American Samoa legislature
on the consequences of one cannery's closure estimated that government
revenue would decline by roughly 25 percent in fiscal year 2010
compared to fiscal year 2009 revenues.[Footnote 85] Officials we
interviewed said rising minimum wages add to the challenges the
territory faces in attracting new industries, such as call centers, in
addition to existing factors.[Footnote 86] For example, a person from
a group interested in opening call centers in American Samoa said that
local workers must be prepared to work for wages lower than those in
the United States until their skill levels improve, and that the U.S.
government's failure to consider this in imposing the U.S. minimum
wage had caused potential investors to shy away from the territory. In
July 2009, the American Samoa government reported that it had
collected 12,000 signatures to a petition to the President to repeal
the minimum wage increases in American Samoa, leaving only the first
$.50 increase.[Footnote 87]
American Samoa Employers Reported Past and Planned Actions to Reduce
Costs and Raise Prices, with More Attributing Actions to Minimum Wage
Increases Than to Other Factors:
Respondents to our large-employer questionnaire reported having taken
a number of cost-cutting actions--some of which affect workers' income
or benefits--as well as raising prices since the minimum wage
increases began in June 2007. Employers also reported planning to take
additional such actions within 18 months of completing our
questionnaire, or by the end of 2010. Widely varying percentages of
employers--weighted by numbers of employees--attributed these actions
largely to the minimum wage increases, and more attributed their
actions largely to the wage increases than to other factors.[Footnote
88] (See appendix V for a complete listing of American Samoa
employers' past and planned actions, as well as the percentages that
reported them and that attributed them to the minimum wage increases
and other factors.)
Employers Reported Actions to Cut Costs and Raise Prices from 2007 to
2009, and Many Attributed Actions to Minimum Wage Increases:
Cost-Cutting Actions Affecting Workers' Income and Benefits in 2007-
2009:
* Closed or relocated. Employers, including one of the canneries,
representing 43 percent of workers employed by private sector
respondents reported closing temporarily or relocating outside
American Samoa (see figure 10). Of employers that reported closing
temporarily, none attributed the action largely to the past minimum
wage increases.[Footnote 89] Of those that reported relocating,
employers representing 4 percent of workers employed by these
respondents attributed the action largely to the past minimum wage
increases.[Footnote 90]
* Laid off hourly workers. Employers representing 24 percent of
workers employed by all respondents reported having laid off hourly
workers (see figure 10). Of these, employers representing 68 percent
of workers employed by these respondents attributed the action largely
to the past minimum wage increases.[Footnote 91]
* Froze hiring. Employers representing 93 percent of workers employed
by all respondents reported having implemented a hiring freeze. Of
these, employers representing 23 percent of workers employed by these
respondents attributed the action largely to the past minimum wage
increases.
* Decreased benefits. Employers representing 42 percent of workers
employed by all respondents reported that they had decreased the level
of hourly workers' benefits. Of these, employers representing 41
percent or workers employed by these respondents attributed the action
largely to the past minimum wage increases.
Additional Cost-Cutting Actions in 2007-2009:
* Implemented labor-saving strategies or technology. Employers
representing 29 percent of workers employed by all respondents
reported that they had implemented labor-saving strategies or
technology.[Footnote 92] Of these, employers representing 67 percent
of workers employed by these respondents attributed the action largely
to the past minimum wage increases.
* Implemented other cost-saving strategies. Employers representing 94
percent of workers employed by all respondents reported that they had
implemented other cost-saving strategies, such as energy-saving
technologies. Of these, employers representing 23 percent of workers
employed by these respondents attributed the action largely to the
past minimum wage increases.
* Reduced capacity or services. Employers representing 45 percent of
workers employed by all respondents reported that they had reduced
their operating capacity or customer services. Of these, employers
representing 1 percent of workers employed by these respondents
attributed the action largely to the past minimum wage increases.
Price Increases in 2007-2009:
* Raised prices. Employers representing 96 percent of workers employed
by all respondents reported that they had raised prices of goods or
services. Of these, employers representing 1 percent of workers
employed by these respondents attributed the action largely to the
past minimum wage increases.
Employers Reported Plans to Close or Relocate and Take Other Actions
by the End of December 2010, with Many Citing Minimum Wage Increases:
Planned Cost-Cutting Actions Affecting Workers' Income or Benefits:
* Close or relocate. Employers representing 84 percent of all private
sector workers employed by questionnaire respondents--including the
cannery that closed in September 2009--reported planning to relocate
their business outside American Samoa or close permanently by the end
of 2010 (see figure 10).[Footnote 93] Of those planning to relocate,
employers representing 87 percent of workers employed by these
respondents attributed the planned action largely to the minimum wage
increases. Of those planning to close, employers representing 85
percent of workers employed by these respondents attributed the
planned action largely to the minimum wage increases.
* Lay off hourly workers. Employers representing 46 percent of all
workers employed by questionnaire respondents reported planning to lay
off hourly workers (see figure 10). Of these, employers representing
91 percent of workers employed by these respondents attributed the
planned action largely to the minimum wage increases.
* Freeze hiring. Employers representing 31 percent of all workers
employed by questionnaire respondents reported planning to freeze
hiring. Of these, employers representing 35 percent of workers
employed by these respondents attributed the planned action largely to
the minimum wage increases.
* Decrease benefits. Employers representing 25 percent of all workers
employed questionnaire respondents reported planning to decrease
hourly workers' benefits. Of these, employers representing 85 percent
of workers employed by these respondents attributed the planned action
largely to the minimum wage increases.
Additional Planned Cost-Cutting Actions:
* Implement labor-saving strategies. Employers representing 50 percent
of all workers employed by questionnaire respondents reported planning
to implement labor-saving strategies or technology. Of these,
employers representing 88 percent of workers employed by these
respondents attributed the planned action largely to the minimum wage
increases.
* Implement other cost-saving strategies. Employers representing 97
percent of all workers employed by questionnaire respondents reported
planning to implement other cost-saving strategies, such as energy-
saving technologies. Of these, employers representing 28 percent of
workers employed by these respondents attributed the planned action
largely to the minimum wage increases.
* Reduce capacity or services. Employers representing 89 percent of
all workers employed by questionnaire respondents reported planning to
reduce operating capacity or customer services. Of these, employers
representing 29 percent of workers employed by these respondents
attributed the planned action largely to the minimum wage increases.
Planned Price Increases:
* Raise prices. Employers representing 7 percent of all workers
employed by questionnaire respondents reported planning to raise
prices of goods and services. Of these, employers representing 8
percent of workers employed by these respondents attributed the
planned action largely to the minimum wage increases.
Figure 10: Selected American Samoa Reported Employer Actions in 2007-
2009 and Planned by End of 2010, with Attribution to Past Minimum Wage
Increases:
[Refer to PDF for image: 4 pie-charts and sub-charts]
Selected employer actions 2007-2009 and attribution to past minimum
wage increases:
Closed temporarily or relocated (private sector): 43%;
Of that 43%:
Attributed relocation largely to past minimum wage increases: 4%.
Laid off hourly workers (public and private sectors): 24%;
Of that 24%:
Attributed largely to past minimum wage increases: 68%.
Selected planned employer actions and attribution to minimum wage
increases:
Close or relocate (private sector): 84%;
Of that 84%:
Attributed planned relocation largely to minimum wage increases: 87%.
Lay off hourly workers (public and private sectors): 46%;
Of that 46%:
Attributed largely to minimum wage increases: 91%.
Source: GAO analysis of American Samoa large-employer questionnaire
responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers. Because only private sector
employers can choose to close or relocate, we limited our analysis for
these actions to private sector respondents. Data shown cover large
employers--generally, those with at least 50 employees. Data do not
include smaller employers and employers that have closed, none of whom
are covered by our questionnaire. Data also do not include employers
that did not respond to our questionnaire. Although questionnaire
responses covered 72 percent of the American Samoa workforce, they may
not be representative of all American Samoa workers and employers. In
addition, the tuna canneries and local government employed a large
percentage of workers employed by all questionnaire respondents, as in
the actual American Samoa workforce; as a result, these employers'
responses significantly affected our reported questionnaire data.
[End of figure]
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. However, fewer employers attributed
their actions, in general, largely to these other factors than
attributed specific actions to the minimum wage increases. (See
appendix V for a complete list of the other reported factors and the
percentages of employers reporting these factors.) For example, in
contrast to the double-digit percentages of employers citing minimum
wage increases for many of the actions above, employers representing 6
percent or less of workers employed by questionnaire respondents
attributed actions from June 2007 to June 2009 to each possible
contributing factor named in our questionnaire.[Footnote 94]
Company Officials Said Minimum Wage Increases Played Role in Cannery
Closure:
By raising the hourly minimum wage for cannery workers in American
Samoa from $3.26 in 2006 to $4.76 in May 2009--a total increase of 46
percent--the three minimum wage increases to date have further widened
the wage gap between American Samoa and other Pacific regions with
tuna canning facilities, such as Thailand, which has a minimum wage
level of less than $1 an hour. Cannery company officials we met with
stated that minimum wage increases were a significant factor in the
closure of one of the two canneries in American Samoa. According to
cannery representatives, in addition to minimum wage increases, other
factors that contributed to the cannery's closing include (1) the
highly competitive market for tuna products, limiting canneries'
ability to pass on increased labor and operating costs to consumers;
(2) an attractive environment for investment in alternative locations;
[Footnote 95] (3) the rising cost of shipping and utility costs--owing
to increased fuel costs in recent years; (4) the lessening of the
value of tariff protection, owing to global trade liberalization;
[Footnote 96] (5) loss of certain U.S. tax benefits;[Footnote 97] and
(6) high costs associated with environmental regulations.
Officials from the remaining cannery report that its operations in
American Samoa are no longer viable at the current $4.76 minimum wage
for cannery workers. The company testified to Congress that it had
reduced employment by nearly 1,000 workers since May 2008.[Footnote
98] The company also reported that its costs to operate in American
Samoa were $23 million higher than they would be in alternative
locations. In addition, officials said trade liberalization made it
easier for domestic competitors to outsource labor-intensive work away
from American Samoa and into low-wage countries.[Footnote 99]
The firm that owned the American Samoa cannery that closed adopted a
business model aimed at reducing labor costs by moving the labor-
intensive part of the operation--cleaning, cutting, and cooking the
fish to produce cleaned loins ready to be canned--to low labor-cost
locations and exporting cleaned loins to the United States for
canning. (See text box and figure 11 for a comparison of the cost
factors of the new business model with those of the model previously
used by both firms operating canneries in American Samoa.)
[Text box: Comparison of Two Tuna Canning Business Models:
Different business models exist in the tuna canning industry. We
compared the two models used by firms that produce for the U.S. market
to illustrate how the major cost components differ under each model.
Under model A, used by the firm that owns the cannery remaining in
American Samoa, a firm conducts loining (cleaning, cutting, and
cooking the fish) and canning in American Samoa and exports canned
tuna to the U.S. market tariff-free. Under model B, used by the firm
that closed its cannery in American Samoa and now operates in the U.S.
state of Georgia, the firm sources fish loins from low labor-cost
regions outside American Samoa, exports the frozen loins to the United
States, pays U.S. tariffs, and cans tuna in the United States.
Assuming that the production and employment level are similar to those
of the firm that closed its cannery in American Samoa, we found that
the annual savings on labor costs ($12 million) under model B will
more than offset the increased tariff costs ($320,000) per year. We
were not able to quantify other production costs, such as utility
costs and shipping costs.
* Wage costs. Wage costs are significantly lower under model B than
under model A. After May 2009 and before the May 2010 increase, the
minimum wage for tuna cannery workers in American Samoa is $4.76 per
hour; in contrast, the minimum wage in Thailand is less than $1 per
hour. Assuming that a plant employs 2,000 people, under model A, all
2,000 employees would earn a minimum wage of $4.76 per hour, while
under model B, 1,700 foreign employees would earn $0.75 per hour for
loining and 300 U.S.-based employees would earn $7.25 per hour for
canning. We estimate that the firm that closed its cannery in American
Samoa can save approximately $12 million in wages in the first year
using model B.
* Tariff costs. Tariff costs will be higher under model B than under
model A. American Samoa exports benefit from tariff-free access to the
U.S. market, while the United States imposes tariffs on imported
loins. Assuming that a firm imports the same amount of cleaned loin to
produce the same amount of canned tuna under model B as under model A,
we estimate the additional tariff on cleaned loins from Thailand under
model B to be around $320,000 annually.
* Other costs. It is not clear which business model has an advantage
in terms of shipping cost and prices of fish. According to one cannery
official, because tuna is harvested throughout the western Pacific
Ocean, and given American Samoa's location, fishing vessels generally
deliver directly to the Samoan canneries. Shipping fish to Thailand
for cleaning might be more costly than shipping directly to American
Samoa. However, an official from a different cannery said economies of
scale and other factors may lead to lower cost for fish in Thailand
than in American Samoa and to little or no difference in shipping
costs. Additionally, the firm using model B may save on other shipping
costs. For example, a high-level firm representative told us that
under the new business model, the firm will now avoid the high costs
of shipping cans and condiments to American Samoa. The company
representative also said that the firm will pay less for utilities in
Thailand than in American Samoa. In addition, company representatives
said the Thai government offers incentives that provide advantages
over American Samoa. (Other costs are not shown in figure 11)
[End of text box]
Figure 11: Comparison of Wage and Tariff Costs for Tuna Canneries
Using Separate Business Models:
[Refer to PDF for image: illustrated map and associated data]
Map depicts the following:
Model A:
Loining and canning in American Samoa;
Boat exporting tariff-free canned fish to the United States.
Model B:
Boat for fishing at American Samoa;
Loining in Thailand;
Boat transporting loined, frozen fish to the United States to be
canned.
Model A:
* Canneries located in American Samoa hire local and foreign workers
to loin (clean, cook, and cut) and can the fish.
* The canned tuna from American Samoa is exported to the United States
and benefits from tariff-free access to the U.S. market.
Estimate wage cost (U.S. dollars), 2006: $13 million;
Estimate wage cost (U.S. dollars), 2009: $19 million;
Estimate wage cost (U.S. dollars), 2014: $29 million;
Tariff cost (U.S. dollars): 0.
Model B:
* The loining operation-”the most labor-intensive part of the
operation-”moves to low labor-cost countries, such as Thailand,
Trinidad, Fiji, or Mauritius, where the fish loin is frozen.
* The frozen fish is exported to the United States, where it is canned.
Estimate wage cost (U.S. dollars), 2006: $5.6 million;
Estimate wage cost (U.S. dollars), 2009: $6.9 million;
Estimate wage cost (U.S. dollars), 2014: $6.9 million;
Tariff cost (U.S. dollars): Cleaned fish: 1.1¢/kg or $11/metric ton;
$320,000.
Cost differences between Model A and Model B:
* Model B results in net cost savings as compared to Model A.
* Under Model B, annual labor cost savings are significantly greater
then the annual tariff cost:
Estimated annual cost savings under Model B, 2006: $7.4 million;
Estimated annual cost savings under Model B, 2006: $12.1 million;
Estimated annual cost savings under Model B, 2006: $22.1 million;
Annual tariff cost under Model B: $320,000.
Sources: GAO analysis of information from tuna companies; Art
Explosion (clip art); Map Resources (map).
Notes: Our analysis assumes that the two models produce the same
amount of canned tuna and workers under the two models have same
productivity. We also assume the wage rate remains constant in
Thailand from 2006 to 2014. If the wage increases in Thailand, the
wage cost under model B will be higher and the wage cost differential
between model A and model B will be lower than what is presented in
the figure above.
The minimum wage for the tuna canning industry in American Samoa was
$3.26 in 2006 and $4.76 as of May 25, 2009. The minimum wage is
scheduled to increase to $7.25 on September 30, 2014.
Annual wage cost of business model A in 2009: $4.76/hour*2000
hours*2,000 employees=$19 million. Annual wage cost of business model
B in 2009: $0.75/hour*2000 hours*1,700 employees + $7.25/hour*2,000
hours*300 employees=$6.9 million. Our analysis assumes that all
cannery workers in American Samoa are paid the minimum wage; however,
some workers would likely earn somewhat higher wages.
The tariff on cleaned loins is $11 per metric ton under model B.
[End of figure]
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.
According to earnings data from the federal government, median annual
earnings rose by about 8 percent to $7,858 from 2006 to 2008.[Footnote
100] However, average prices increased by about 15 percent over the
same period (see table 8).
Table 8: Change in Median Annual Inflation-Adjusted Earnings of
American Samoa Workers, 2006-2008:
Median annual earnings in nominal dollars:
2006: $7,253;
2007: $7,470;
2008: $7,858;
Percentage change: 2006-2007: 3.0%;
Percentage change: 2007-2008: 5.2%;
Percentage change: 2006-2008: 8.3%.
Median annual earnings in inflation-adjusted dollars:
2006: $7,253;
2007: $7,205;
2008: $6,854;
Percentage change: 2006-2007: -0.7%;
Percentage change: 2007-2008: -4.9%;
Percentage change: 2006-2008: -5.5%.
Change in Consumer Price Index:
Percentage change: 2006-2007: 3.7%;
Percentage change: 2007-2008: 10.6%;
Percentage change: 2006-2008: 14.6%.
Source: GAO analysis of SSA data and American Samoa Consumer Price
Index data.
Note: Earnings in inflation-adjusted dollars are in 2006 constant
dollars. Inflation is estimated using the American Samoa Consumer
Price Index.
[End of table]
Estimated Inflation-Adjusted Earnings for Minimum Wage Workers Who
Remained Employed Rose from 2006 to 2008:
Although earnings data do not allow for a direct comparison of median
and minimum wage annual earnings or for tracking the earnings of
workers who lost their jobs, we estimate that inflation-adjusted
earnings of a full-time minimum wage worker who retained a job and
full hours rose by about 14 percent from 2006 to 2008.[Footnote 101]
We assume, based on minimum wage data, that a minimum wage worker
earned $3.26 per hour in 2006 and $4.26 per hour in 2008.[Footnote
102] Using these assumptions, we estimate that a minimum wage worker
who worked 2,000 hours per year in each calendar year earned $6,520 in
2006 and $8,520 in 2008.
While the minimum wage for many workers increased by 31 percent from
2006 to 2008 (from $3.26 to $4.26), local prices increased by a
smaller percentage, resulting in a rise in estimated inflation-
adjusted earnings for a minimum wage worker who retained full
employment and hours. In 2007, average prices rose by about 3.7
percent but earnings rose by 15.3 percent; as a result, inflation-
adjusted earnings of a minimum wage worker increased by about 11.2
percent. In 2008, the rise in inflation-adjusted earnings was smaller,
owing to higher average prices (see table 9).
Table 9: Change in Estimated Inflation-Adjusted Annual Earnings of
Minimum Wage Workers Retaining Full-time Employment in American Samoa,
2006-2008:
Estimated annual earnings in nominal dollars:
2006: $6,520;
2007: $7,520;
2008: $8,520;
Percentage change: 2006-2007: 15.3%;
Percentage change: 2007-2008: 13.3%;
Percentage change: 2006-2008: 30.7%.
Estimated annual earnings in inflation-adjusted dollars:
2006: $6,520;
2007: $7,253;
2008: $7,432;
Percentage change: 2006-2007: 11.2%;
Percentage change: 2007-2008: 2.5%;
Percentage change: 2006-2008: 14.0%.
Change in Consumer Price Index:
Percentage change: 2006-2007: 3.7%;
Percentage change: 2007-2008: 10.6%;
Percentage change: 2006-2008: 14.6%.
Source: GAO analysis of minimum wage data and American Samoa Consumer
Price Index data.
Note: Earnings in inflation-adjusted dollars are in 2006 constant
dollars. Inflation is estimated using the American Samoa Consumer
Price Index.
[End of table]
Inflation in 2006-2008 Was Mostly Due to Rising Prices of Imported
Goods:
According to the American Samoa government, 90 percent of the economy
of American Samoa is dependent on foreign and U.S. imports.[Footnote
103] As a result, the increase in local prices from 2006 to 2008
appears to have been largely due to rising prices of imported goods
such as food, utilities, and transportation. The American Samoa
Consumer Price Index shows that prices rose by about 14.6 percent from
2006 to 2008. Over the same period, the price of imports such as food
rose by more than 22.2 percent; the price of transportation, including
the price of new cars and fuel costs, which are primarily imports,
rose by 13.5 percent; and the price of housing and utilities such as
electricity rose by 18.4 percent.[Footnote 104] In contrast, the price
of education and communication services, mostly a domestic product,
increased by only 0.3 percent in 2008.
Available Data for 2006-2008 Do Not Suggest Link Between Changes in
Poverty-related Program Participation and Changes in Inflation-
Adjusted Earnings:
Minimum wage increases disproportionately affect households at the
lower end of the income distribution. However, direct measures of
American Samoa poverty rates are not available for recent years.
[Footnote 105] Available data for federal need-based assistance in
American Samoa in 2006 to 2008 do not suggest that changes in
inflation-adjusted earnings led to significant changes in poverty-
related program participation.
Data from the U.S. Department of Agriculture's WIC Nutrition Program
show that the program participation trend in American Samoa remained
stable for the last 4 years, as shown in table 10. Assuming that there
was no change in the percentage of the eligible population actually
reached and covered by the program, this suggests that the number of
people earning less than 185 percent of the U.S. poverty line in
American Samoa did not change much during the period.[Footnote 106]
Table 10: Participation in WIC Nutrition Program in American Samoa,
Fiscal Years 2005-2008:
American Samoa program participation;
2005: 6,644;
2006: 6,934;
2007: 6,779;
2008: 6,804.
Year-to-year percentage change;
2005: [Empty];
2006: 4.36%;
2007: -2.24%;
2008: 0.37%.
Source: U.S. Department of Agriculture Food and Nutrition Service data
as of January 8, 2010.
[End of table]
American Samoa Workers Said Support for Increases Had Dwindled over
Time, Particularly Due to Cannery Closure:
Workers Said in Discussion Groups That Their Support for the Increases
Has Diminished over Time:
Discussion group participants said that their views about the minimum
wage increases had grown more negative over time.[Footnote 107]
Participants gave various reasons for their dwindling support of
minimum wage increases. For example:
* Cannery closure. Discussion group participants said that their views
related to the minimum wage increases had been negatively affected by
the closure of one cannery, which they attributed to the wage
increases, as well as uncertainty about the remaining cannery's
future. Participants told us they worried about the large number of
unemployed workers and their families and possible additional layoffs
at the remaining cannery. One cannery worker said that cannery
management had attributed layoffs and benefit cuts to the wage
increases.
* Job insecurity. Participants said that businesses were laying people
off because they could not afford to pay all workers the minimum wage.
Participants commented that they would rather have a secure job
without the minimum wage increases than lose their jobs because of the
increases. Participants also told us that if a person resigns or
retires, companies eliminate the position instead of hiring a new
person and that store owners are not hiring but are relying on family
members for help. Cannery workers also indicated that keeping their
jobs was particularly important because there were no alternative
employment opportunities.
* Loss of benefits. Participants said that they have experienced
reduction in benefits. Cannery workers told us that they had lost many
benefits, including free night shift transportation, paid holidays,
end-of-year bonuses, overtime pay, pensions, and sick leave.
Workers Expressed Obligation to Support Extended Families and Broader
Community Negatively Affected by Minimum Wage Increases:
Many residents we spoke with told us that they live in large
households of extended family members and that when a household member
experiences a loss of income, the family experiences an obligation to
help. Workers reported that Samoans are also expected to share their
resources with unemployed relatives who are not immediate family
members. Therefore, residents expressed concern about relatives
getting laid off as a result of the minimum wage increases and their
responsibility to provide for them.
Workers Said Purchasing Power Shrank because Wages Grew Less Than
Prices:
Participants stated that their incomes had been stretched owing to
increases in the prices of groceries, such as infant formula, as well
as increases in the prices of fuel, water and electricity, bus fares,
hospital care, and private school tuition. In addition, workers said
that minimum wage increases have not kept pace with the cost of
living. Workers stated that they still cannot afford things despite
the raises because the cost of living has increased more.
Cannery Workers Generally Opposed Future Minimum Wage Increases:
Comments by the cannery workers who participated in our discussion
groups indicated that although the higher wage was welcomed by some,
the past wage increases were unpopular among many cannery workers and
most opposed the future minimum wage increases as scheduled. All of
the discussion group participants in one cannery strongly opposed
future minimum wage increases, and the majority of participants in the
second cannery said they wanted minimum wage increases to stop for
fear of company closure and job losses.
Non-Cannery-Workers Expressed Various Views on Future Minimum Wage
Increases:
Among discussion group participants outside the canneries, views on
the minimum wage increases varied. Among those who welcomed the wage
increases, some participants said that they supported future minimum
wage increases because of inevitable growth in the cost of living. One
participant said that the minimum wage increase was needed and would
have positive effects in the long term and that the economy would have
to adjust. Among those who opposed the increases, participants said
that the wage increases would have no lasting benefit because
inflation would diminish purchasing power. Another participant argued
for revisiting the question of whether to continue raising the minimum
wage after the wage reached about $5 per hour.
The text box lists some of the comments by discussion group
participants.
[Text box:
American Samoa Workers' Views Based on Discussion Groups:
Support for the American Samoa minimum wage increases has dwindled
over time for several reasons:
* Cannery closure:
"I'm worried about the cannery closure, the unemployed thousands, and
their families";
"This is the worst nightmare here at the plant— with the worries";
"The cannery next door is closing next month. It is the impact of the
minimum wage increase, and we don't want that to happen here";
"When management has announced layoffs and benefit cuts, they have
said it's because of the wage increases";
* Job insecurity:
"We would rather have little pay than zero pay";
"We just want to make sure jobs are secure";
"As wages increase there are no jobs";
"There is nothing else to do once we lose jobs";
* Loss of benefits:
"Since the minimum wage went into effect, there have been no more
benefits or paid holidays";
"Businesses are laying people off because they can't afford to pay
everyone the minimum wage";
Workers expressed obligation to support extended families and the
broader community affected by minimum wage increases:
"We have family obligations in American Samoa, including [community]
and church obligations— If your family needs help, you help them. My
family asks for more money, because more is available. I see relatives
hungry and can't be selfish. We can budget for what we need now and
can share with unemployed relatives. I'm worried about relatives
getting laid off, getting hungry, and knocking on my door. Who will
feed the cannery layoffs? We will. I think about it day and night."
[Others participants nodding];
"I have dependents who are sisters and brothers. Since the raise, I've
been trying hard to support my family. We are expected to respect and
support our parents. Like for the funeral yesterday, we are required
to contribute a lot of money, such as $100 per person. We will have to
ask people at work if they can share money. Right now, if someone at
work has a coffee, we all share it."
Workers said purchasing power has decreased because wages rose less
than prices:
"Prices have gone up, stretching incomes";
"We still can't afford things with the raise, because the cost of
living is going up more."
Cannery workers generally oppose future minimum wage increases,
although the higher wage is welcomed by some:
"They should stop increasing wages. It's enough--we should stop right
now. Everyone wants the minimum wage to stop right now";
"We are begging--we don't want the $.50";
"I don't support any more increases in the minimum wage and don't
support petitions to reduce it to the first $.50 increase level.
Because going back to the initial increase when cost of living is so
high doesn't make sense, unless there is a system to reduce the cost
of living. I support leaving the minimum wage as is, with no increase
or decrease."
Non-cannery-workers expressed varying views about the future minimum
wage increases:
"It [the wage increase] has to happen. The cost of living will go up
whether you have the raise or not. I support the minimum wage because
of this."
"The person who goes from $4 to $7.25 won't come out ahead, because
everything they purchase will cost more, decreasing buying power";
"With the prospect of losing the canneries, it is not good in the
short term. But it is positive in the long term: 10 to 15 years from
now. The economy will have to adjust. It will not be in a poverty
state. It will be painful, but it has to happen."
[End of text box]
[End of section]
Appendix IV: CNMI Wages, Employment, Employer Actions, Inflation-
Adjusted Earnings, and Worker Views:
In the CNMI, the first minimum wage increase raised wages for about a
third of workers of 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 82 percent
of those private sector 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 minimum wage increases, and many
expressed greater concerns about changes to immigration law. In
questionnaire responses, employers reported having taken cost-cutting
actions, such as freezing hiring, since the increases began. They 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, 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.
Minimum Wage Increases through 2016 Would Affect Wages of the Majority
of CNMI Private Sector Workers Employed in 2009:
Wages of Some CNMI Private Sector Workers Were Low Enough to Be Raised
by Minimum Wage Increases in 2007-2009:
Responses to our questionnaire show that before the first minimum wage
increase, in July 2007, about a third (36 percent) of private sector
workers employed by the respondents earned wages close enough to the
$3.05 minimum to be affected by the increase (see figure 12).[Footnote
108]
* Tourism industry. About 40 percent (897 of 2,217) of tourism workers
earned no more than $.50 over the $3.05 minimum wage.
* Other private sector industries. About 30 percent (542 of 1,774) of
workers in other private sector industries earned no more than $.50
over the $3.05 minimum wage. Although we were unable to include
garment factories in our questionnaire because they had closed before
the time of our work, based on past work, we assume that a large
percentage of employed garment workers were affected by the minimum
wage increases.[Footnote 109]
Figure 12: CNMI Private Sector Workers Outside the Garment Industry
with Wages Low Enough to Be Affected by the July 2007 Increase, Based
on GAO Large-Employer Questionnaire Wage Data:
[Refer to PDF for image: stacked vertical bar graph]
Private sector industry: Tourism;
Workers with wages more than $.50 over minimum wage: 1,320 (60%);
Workers with wages no more than $.50 over minimum wage: 897 (40%).
Private sector industry: Other;
Workers with wages more than $.50 over minimum wage: 1,232 (69%);
Workers with wages no more than $.50 over minimum wage: 542 (31%).
Source: GAO analysis of wage data provided in the CNMI large-employer
questionnaire.
Notes: Numbers shown are from wage data for the pay period including
June 12, 2007, provided in responses to our CNMI large-employer
questionnaire. Numbers include both hourly wage workers and full-time
salaried workers. Data shown cover large employers--generally, those
with at least 50 employees. Questionnaire wage data do not include
smaller employers, employers that did not respond, and employers that
had closed, in particular garment factories. Questionnaire responses
cover about 29 percent of the CNMI public and private sector
workforce. As a result, the data may not be representative of all CNMI
workers and employers.
[End of figure]
In June 2007, the local minimum wage was $3.05. The first minimum wage
increase occurred in July 2007.
For the first three minimum wage increases in 2007 through 2009, wage
data provided by respondents to our large-employer questionnaire
showed the following:
* About 61 percent of CNMI private sector workers outside the garment
industry earned wages low enough--that is, no more than $1.50 over the
minimum--in July 2007 to be affected by the three minimum wage
increases.
* In the public sector in 2007, according to data provided by the CNMI
government, only about 2 percent of CNMI government workers earned
wages within $1.50 over the minimum--that is, close enough to the
minimum to be affected by the first three increases.
Rise in Median Wage Was Slightly Larger for CNMI Tourism Workers:
After the first three minimum wage increases, median wages for the
tourism industry rose slightly more than for other sectors of the CNMI
economy.[Footnote 110] Our analysis, based on large employers'
responses to our questionnaire, shows that from June 2007 to June
2009--the period of the $1.50 total increase in the minimum wage--the
median wage for the tourism sector rose by 19.2 percent compared with
17.6 percent for the rest of the private sector (see table 11). For
CNMI public sector workers, the median annual salary, based on
questionnaire responses, remained unchanged in a range between $20,000
and $30,000.[Footnote 111]
Table 11: Median Hourly Wage Rates of Workers Employed by CNMI Private
Sector Respondents to GAO Large-Employer Questionnaire, 2007-2009:
Sector: (employees in 2009): Tourism industry (2,089);
2007: $3.90;
2009: $4.65;
Percentage change in median hourly wage rate, 2007-2009: 19.2%;
Absolute change in median hourly wage rate: $0.75.
Sector: (employees in 2009): Other private sector industries (1,441);
2007: $4.25;
2009: $5.00;
Percentage change in median hourly wage rate, 2007-2009: 17.6;
Absolute change in median hourly wage rate: $0.75.
Source: GAO analysis of wage data provided in CNMI large-employer
questionnaire.
Notes: Rates shown are based on wage data for the pay period including
June 12 of each year, provided in responses to our CNMI large-employer
questionnaire. Wage rates shown are for hourly wage workers and full-
time salaried workers. Data shown cover large employers--generally,
those with at least 50 employees. Questionnaire wage data do not
include smaller employers, employers that did not respond, and
employers that had closed, including garment factories. Questionnaire
responses cover about 29 percent of the CNMI public and private sector
workforce. As a result, the data may not be representative of all CNMI
workers and employers.
In June 2007, there had been no federal minimum wage increase in the
CNMI, and in June 2009 there had been three minimum wage increases of
$.50 each (totaling $1.50).
[End of table]
Minimum Wage Increases in 2007-2009 Somewhat Narrowed Wage Gap between
Lower-and Higher-Paid Workers Employed by Questionnaire Respondents:
The minimum wage increases in 2007 through 2009 somewhat narrowed the
gap between the wages of lower-and higher-paid workers employed by
questionnaire respondents. As figure 13 shows, based on employer
questionnaire responses, the wages of workers at the 25th percentile
rose while the wages of workers at the 75th percentile remained
constant. Specifically, the gap between wages of workers at the 25th
percentile and workers at the 75th percentile dropped from $8.04 in
2007 to $7.32 in 2009, a decline of 9 percent.
Figure 13: Change in Wages of All CNMI Employees of Respondents to GAO
Large-Employer Questionnaire:
[Refer to PDF for image: multiple line graph and associated data]
Year: June 2007;
75th percentile of wage earners: $12.02;
25th percentile of wage earners: $3.98;
Gap: $8.04.
Year: June 2008 (after two minimum wage increases);
75th percentile of wage earners: $12.02;
25th percentile of wage earners: $4.25;
Gap: $7.77.
Year: June 2009 (after three minimum wage increases);
75th percentile of wage earners: $12.02;
25th percentile of wage earners: $4.70;
Gap: $7.32.
Source: GAO analysis of wage data provided in the CNMI large-employer
questionnaire.
Notes: Wage rates shown are based on wage data for the pay period
including June 12 of each year, provided in responses to our large-
employer questionnaire. Wage rates include both hourly wage workers
and full-time salaried workers in the public and private sectors. Data
shown cover large employers--generally, those with at least 50
employees. Questionnaire wage data do not include smaller employers,
employers that did not respond, and employers that have closed,
including garment factories. Questionnaire responses cover about 29
percent of the CNMI public and private sector workforce. As a result,
the data may not be representative of all CNMI workers and employers.
In addition, the CNMI government accounted for a higher percentage of
workers employed by questionnaire respondents than in the actual CNMI
workforce, so the government's responses disproportionately influence
our questionnaire results on the public and private sectors combined.
From June 2007 to June 2008 there were two federal minimum wage
increases of $.50 each in the CNMI, and from June 2008 to June 2009,
there was one minimum wage increase of $.50. The different numbers of
increases in each time period may have affected the extent of
contraction of the wage distribution in each period.
[End of figure]
Minimum Wage Increases in 2010-2015 Would Affect Wages of a Growing
Share of Workers, but Several Variables Remain Uncertain:
As the minimum wage increases continue, they will affect a growing
number of workers in the CNMI. Based on large employers' questionnaire
responses about workers' wages as of June 2009, in the private sector,
the increases scheduled for 2010 through 2015 would affect the wages
of about 82 percent of those employers' workers by 2015 (see figure
14).[Footnote 112] In the public sector, the scheduled increases would
affect at most about 38 percent of workers by 2015.[Footnote 113]
Figure 14: Percentage of CNMI Private Sector Questionnaire
Respondents' Employees in June 2009 Whose Wages Would Be Affected by
2010-2015 Minimum Wage Increases, Based on GAO Large-Employer
Questionnaire Wage Data:
[Refer to PDF for image: line graph]
Year: 2009;
Percentage: 44.
Year: 2010;
Percentage: 61.
Year: 2011;
Percentage: 67.7.
Year: 2012;
Percentage: 73.8.
Year: 2013;
Percentage: 77.4.
Year: 2014;
Percentage: 80.
Year: 2015;
Percentage: 81.9.
Source: GAO analysis of wage data provided in the CNMI large-employer
questionnaire.
Notes: The percentages shown for 2010 to 2015 are based on the June
2009 distribution of workers' wages for the private sector, according
to wage data provided in employers' responses to our questionnaire.
Our analysis assumes that workers not directly affected by the minimum
wage will not experience an increase and that the distribution of
workers' wages will not change over the period for reasons other than
the increases. However, any significant changes in the CNMI labor
market would change the percentage of workers affected by the minimum
wage.
Federal minimum wage increases in the CNMI occurred in July 2007, May
2008, and May 2009; additional $.50 increases are scheduled for
September of each year through 2016.
Our analysis assumes full compliance with minimum wage increases
required by law. If future minimum wage increases are not fully
implemented, they will affect a smaller percentage of workers than we
project.
[End of figure]
However, uncertainty about several critical variables not reflected in
our analysis makes it difficult to project the distribution of wages
in the CNMI following the minimum wage increases in September 2010 and
subsequent years.
* Impact of U.S. immigration law. Although the application of U.S.
immigration law in the CNMI as of November 2009 may affect the size
and composition of the CNMI workforce, it is too soon to assess the
extent of such impacts.[Footnote 114]
* Changes in CNMI labor market. Changes in the CNMI labor market could
affect the wage distribution of workers. For example, the departure of
the garment industry may continue to affect other industry sectors,
decreasing the number of workers at the lower end of the wage
distribution.[Footnote 115]
CNMI Employment Continued to Drop as Minimum Wage Increased, and
Future Increases Could Have Growing Impact on Employment:
Total CNMI Employment Continued to Drop as Minimum Wage Rose:
During the period following the first minimum wage increase, total
employment in the CNMI continued a downward trend that existed before
the minimum wage increases went into effect. From 2006 through 2008,
total employment fell by about 27 percent, from 48,945 to 35,907,
according to CNMI government tax data (see figure 15).[Footnote 116]
In addition, questionnaire responses from large employers representing
about 30 percent of the CNMI workforce indicate that among the
represented workers, employment dropped by about 6 percent from June
2008 to June 2009.[Footnote 117]
Figure 15: CNMI Employment Based on CNMI Government Tax Data, 2005-
2008:
Year: 2005;
Number of workers: 49,224.
Year: 2006;
Number of workers: 43,036.
Year: 2007;
Number of workers: 36,524.
Year: 2008;
Number of workers: 32,053.
Source: GAO analysis of CNMI government annual tax data for 2005-2008.
Note: Minimum wage increases occurred in July 2007 and May 2008.
[End of figure]
Some employment loss coincided with increases in the minimum wage, and
the closure of the garment factories, for multiple reasons, likely
contributed substantially to employment loss. According to CNMI tax
data, much of the decline in employment was due to the reduction in
the number of foreign workers, many of whom worked in the garment
industry. These data show that in 2006 there were approximately 14,000
tax records for garment industry workers and that by 2008, the number
of garment worker tax records was approximately 3,000.[Footnote 118]
According to a CNMI economic study, the phasing out of quotas for
garment trade led to the decline of the CNMI industry prior to the
minimum wage increases. According to industry officials, the wage
increases caused the remaining factories to close more quickly.
[Footnote 119]
Small Employers and Other Private Sector Officials Expressed Mixed
Views about Future Increases, While Government Officials Were
Concerned about Growing Budget Pressures:
Small business owners and managers told us in discussion groups that
they wanted workers to have higher incomes and that CNMI employers had
not paid workers enough before the minimum wage increases were
implemented. However, they expressed concern that local businesses
might not be able to afford future cost increases, and they stated
that it would be difficult for the economy to sustain wage increases
while it was experiencing other difficulties. For example, the owners
stated that the garment factory closures have resulted in increased
shipping costs, decreased government tax revenues, and decreased
demand for goods and services provided by local businesses. Some small
business owners said that they could more easily afford to cover the
costs of scheduled minimum wage increases if they did not provide room
and board, medical insurance, and work permit fees for foreign workers.
Small employers participating in discussion groups also said that the
application of U.S. immigration law had increased uncertainty for
small businesses and was more important than the minimum wage
increases. Participants noted that without a policy regarding foreign
workers, it was difficult to plan for the future. Because of the
uncertainty regarding U.S. immigration law, participants said that
firms preferred not to hire foreign workers, but they needed to train
local residents before they would be able to replace foreign workers.
In addition, small business owners from other countries expressed
anxiety about not knowing whether they will be able to remain in the
CNMI under U.S. immigration law.
Similarly, many larger private sector employers we interviewed
expressed greater concern about the economic effects of U.S.
immigration law on the CNMI economy than about the effects of minimum
wage increases. For example, the CNMI's tourism industry association
observed that although the minimum wage increases could lead to
greater interest in tourism-related employment among locally-born CNMI
residents, application of U.S. immigration law would result in the
elimination of some tourism-related jobs in the CNMI. Other private
sector officials expressed concern that the scheduled wage increases
would make it more difficult to attract new businesses, such as call
centers and new tourism businesses, to the CNMI. For example, the
CNMI's dial-tone provider said that although past minimum wage
increases in the CNMI had not impeded the company's ability to offer
call-center services in the CNMI, the wage increases had affected the
company's subscriber base by causing other businesses to close. The
company also said that future minimum wage increases could prevent the
company from competing internationally for call-center services from
the CNMI.
In addition, public sector officials said that the CNMI government
will be more directly affected by future than past minimum wage
increases as budget pressures grow. CNMI government officials whom we
interviewed noted that although past minimum wage increases had not
substantially increased their agencies' labor costs, subsequent
increases could cover more employees and thus raise costs. Although we
found that the minimum wage increases would not substantially affect
CNMI government workers until 2014 and 2015, they will likely coincide
with an existing high degree of fiscal stress on the CNMI government.
For example, the NMI Retirement Fund's actuarial assessment for fiscal
year 2007 reports unfunded pension liabilities of $369 million. In
addition, the financial audit conducted of the Fund's Group Health and
Life Insurance Trust Fund for fiscal years 2007 to 2008 indicates a
net deficit in the government's group health and life insurance trust
fund of $18.3 million.[Footnote 120]
CNMI Employers Reported Past and Planned Actions to Reduce Costs and
Raise Prices, Attributing Actions Both to Minimum Wage Increases and
to Other Factors:
Respondents to our CNMI large-employer questionnaire reported having
taken a number of cost-cutting actions, some of which directly affect
workers' wages or benefits, and raising prices. However, few--weighted
by numbers of employees--attributed these actions largely to the
minimum wage increases. Employers also reported planning to take such
actions by the end of 2010, and some attributed their plans largely to
the minimum wage increases. CNMI employers also attributed their
actions largely to other factors.[Footnote 121] (See appendix VI for a
complete listing of employers' past and planned actions, as well as
the percentages that reported them and that attributed them to the
minimum wage increases and other factors to a small, moderate, or
large extent.)
CNMI Employers Reported Cutting Costs and Raising Prices in June 2007-
June 2009, but Few Attributed These Actions Largely to Minimum Wage
Increases:
Cost-Cutting Actions Directly Affecting Wages and Benefits:
* Closed or relocated. Employers representing 2 percent of all private
sector workers employed by questionnaire respondents reported closing
temporarily or relocating outside the CNMI (see figure 16).[Footnote
122] Of these employers, none attributed the decisions to close
temporarily or to relocate largely to past minimum wage increases.
* Laid off hourly workers. Employers representing 11 percent of all
workers employed by questionnaire respondents reported having laid off
hourly workers (see figure 16). Of these, employers representing 2
percent of workers employed by these respondents attributed the action
largely to the past minimum wage increases.[Footnote 123]
* Froze hiring. Employers representing 72 percent of all workers
employed by questionnaire respondents reported having implemented a
hiring freeze. Of these, employers representing 17 percent of workers
employed by these respondents attributed the action largely to the
past minimum wage increases.
* Decreased benefits. Employers representing 17 percent of all workers
employed by questionnaire respondents reported that they had decreased
the level of hourly workers' benefits. Of these, employers
representing 2 percent of workers employed by these respondents
attributed the action largely to the past minimum wage increases.
Additional Cost-Cutting Actions in 2007-2009:
* Implemented labor-saving strategies or technology. Employers
representing 42 percent of all workers employed by questionnaire
respondents reported that they had implemented labor-saving strategies
or technology.[Footnote 124] Of these, employers representing 10
percent of workers employed by these respondents attributed the action
largely to the past minimum wage increases.
* Implemented other cost-saving strategies. Employers representing 44
percent of all workers employed by questionnaire respondents reported
that they had implemented other cost-saving strategies, such as energy-
saving technologies. Of these, employers representing 20 percent of
workers employed by these respondents attributed the action largely to
the past minimum wage increases.
* Reduced capacity or services. Employers representing 27 percent of
all workers employed by questionnaire respondents reported that they
had reduced their operating capacity or customer services. Of these,
employers representing 8 percent of workers employed by these
respondents attributed the action largely to the past minimum wage
increases.
Price Increases in 2007-2009:
* Raised prices. Employers representing 75 percent of all workers
employed by questionnaire respondents reported that they had raised
prices of goods or services. Of these, employers representing 6
percent of workers employed by these respondents attributed the action
largely to the past minimum wage increases.
CNMI Employers Reported Planning to Cut Costs and Raise Prices by
December 2010, and Some Attributed These Actions Largely to Minimum
Wage Increases:
Planned Cost-Cutting Actions Directly Affecting Wages or Benefits:
* Close or relocate. Employers representing 5 percent of all private
sector workers employed by questionnaire respondents reported planning
to close permanently or to relocate their business outside the CNMI
(see figure 16).[Footnote 125] Of these, employers representing 3
percent of workers employed by these respondents attributed the
decision to close, and employers representing 3 percent attributed the
decision to relocate, largely to the minimum wage increases.
* Lay off hourly workers. Employers representing 15 percent of all
workers employed by questionnaire respondents reported planning to lay
off hourly workers (see figure 16). Of these, employers representing
12 percent of workers employed by these respondents attributed the
planned action largely to the minimum wage increases.
* Freeze hiring. Employers representing 72 percent of all workers
employed by questionnaire respondents reported planning to freeze
hiring. Of these, employers representing 54 percent of workers
employed by these respondents attributed the planned action largely to
the minimum wage increases.
* Decrease benefits. Employers representing 19 percent of all workers
employed by questionnaire respondents reported planning to decrease
hourly workers' benefits. Of these, employers representing 11 percent
of workers employed by these respondents attributed the planned action
largely to the minimum wage increases.
Additional Planned Cost-Cutting Actions:
* Implement labor-saving strategies. Employers representing 22 percent
of all workers employed by questionnaire respondents reported planning
to implement labor-saving strategies or technology. Of these,
employers representing 44 percent of workers employed by these
respondents attributed this planned action largely to the minimum wage
increases.
* Implement other cost-saving strategies. Employers representing 79
percent of all workers employed by questionnaire respondents reported
planning to implement other cost-saving strategies (e.g., energy-
saving technologies). Of these, employers representing 29 percent of
workers employed by these respondents attributed the planned action
largely to the minimum wage increases.
* Reduce capacity or services. Employers representing 22 percent of
all workers employed by questionnaire respondents reported planning to
reduce operating capacity or customer services. Of these, employers
representing 34 percent of workers employed by these respondents
attributed the planned action largely to the minimum wage increases.
Planned Price Increases:
* Raise prices. Employers representing 34 percent of all workers
employed by questionnaire respondents reported planning to raise
prices of goods and services. Of these, employers representing 15
percent of workers employed by these respondents attributed the
planned action largely to the minimum wage increases.
Figure 16: Selected CNMI Reported Employer Actions in 2007-2009 and
Planned by End of 2010, with Attribution to Past Minimum Wage
Increases:
[Refer to PDF for image: 4 pie-charts and sub-charts]
Selected employer actions 2007-2009 and attribution to past minimum
wage increases:
Closed temporarily or relocated (private sector): 2%;
Of that 2%:
Attributed relocation largely to past minimum wage increases: 0%.
Laid off hourly workers (public and private sectors): 11%;
Of that 11%:
Attributed largely to past minimum wage increases: 2%.
Selected planned employer actions and attribution to minimum wage
increases:
Close or relocate (private sector): 5%;
Of that 5%:
Attributed planned relocation largely to minimum wage increases: 3%.
Lay off hourly workers (public and private sectors): 15%;
Of that 15%:
Attributed largely to minimum wage increases: 12%.
Source: GAO analysis of CNMI large-employer questionnaire responses.
Notes: Percentages of employers that reported actions are weighted by
each employer's total number of workers in 2009, which gives more
weight to responses from employers with larger numbers of workers.
Because only private sector employers can choose to close or relocate,
we limited our analysis for these actions to private sector
respondents. Data shown cover large employers--generally, those with
at least 50 employees. Data do not include smaller employers and
employers that have closed, including garment factories, none of whom
are covered by our questionnaire. Data also omit employers that did
not respond to our questionnaire. Questionnaire responses cover about
29 percent of the CNMI public and private sector workforce. As a
result, the data may not be representative of all CNMI workers and
employers. In addition, the CNMI government accounted for a higher
percentage of workers employed by questionnaire respondents than in
the actual CNMI workforce, so the government's responses
disproportionately influence our questionnaire results on the public
and private sectors combined.
[End of figure]
CNMI Employers Attributed Past Actions Largely to Several Factors
Other Than Minimum Wage:
CNMI employers reported that, in addition to the minimum wage
increases, factors such as changes to U.S. immigration laws and
increased transportation and shipping costs contributed to their past
actions and plans to cut costs and raise prices. Questionnaire
respondents identified factors other than the minimum wage increases
that contributed largely to the actions they reported having taken.
(See appendix VI for a complete list of the other reported factors and
the percentages of employers reporting these factors.) For example,
employers representing 64 percent of workers employed by respondents
cited changes to U.S. immigration laws; employers representing 45
percent of workers cited fewer customers; employers representing 33
percent of workers cited increased transportation or shipping costs;
and employers representing 26 percent of workers cited increased cost
of materials as contributing to a large extent to their reported
actions.
[Text box:
Minimum Wage Increases and CNMI Hotels:
Like other employers in the CNMI, hotels' payroll costs will rise as
the minimum wage increases. A hotel's capacity to absorb the higher
payroll costs, given its number of workers and wage structure, will
depend in part on its ability to raise prices of rooms and services to
cover the higher costs. All hotels that responded to our large-
employer questionnaire reported having raised prices from June 2007 to
June 2009, and hotels representing 75 percent of hotel workers
employed by respondents to our questionnaire reported planning to
raise prices in the future. We estimate that for the hotels that
responded to our questionnaire, the minimum wage increases through
2010 and 2015 will raise average annual payroll costs by approximately
$300,000 and $1.3 million, respectively, from their average payroll
costs in 2008. As a result, payroll costs as a percentage of total
operating costs will increase from approximately 27 percent in 2008 to
38 percent in 2015. Figure 17 shows the estimated average impact of
the minimum wage increases on these hotels' payroll costs in 2010 and
2015, assuming that the number of employees and other operating costs
remain at the levels reported by the hotels for 2008.
Whether the hotels can increase their prices to cover the additional
wage costs will depend on price elasticity--that is, how visitors
respond to the higher prices of visiting the CNMI. To estimate the
effect of higher hotel prices on total trip cost, we used data from a
2009 survey by the Hotel Association of the Northern Mariana Islands
and estimated that the ratio of workers to hotel rooms sold is
approximately 1.18. Using our projection of the percentage of hotel
workers who will be affected by the future minimum wage increases, we
estimated that the total trip cost per visitor will need to increase
by approximately 3.2 percent to cover the minimum wage increases for
the hotel workers through 2015 (see table 12). Using the elasticity
estimates from the literature, including one used in a study
commissioned by the Department of Homeland Security study, we found
that raising prices to cover higher costs from the minimum wage
increases through 2015 for hotel workers may cause visits to the CNMI
to decline by approximately 2.6 percent to 13.7 percent. However,
hotels may have different abilities to raise prices. For example,
hotels that cater to budget conscious visitors might be less able to
raise prices than hotels catering to visitors for whom prices are less
important. In addition, the current business environment may make it
difficult to increase prices. The CNMI hotel industry group noted
recent declines in the tourism sector, reflected in declining room
rates from 2008 to 2009, declining occupancy rates from 2005 to 2009,
and declining revenues from 2006 to 2009.
[End of text box]
Figure 17: Estimated Average Impact of Minimum Wage Increases on CNMI
Hotels' Payroll Costs in 2010 and 2015, Relative to Average Payroll
and Other Costs in 2008:
[Refer to PDF for image: stacked vertical bar graph]
Year: 2008;
Operating cost excluding payroll costs in 2008: $8.674 million;
Payroll costs in 2008: $3.157 million.
Year: 2009;
Operating cost excluding payroll costs in 2008: $8.674 million;
Payroll costs in 2008: $3.157 million.
Increases in payroll costs due to minimum wage increases since 2008:
$0.305 million.
Year:
Operating cost excluding payroll costs in 2008: $8.674 million;
Payroll costs in 2008: $3.157 million.
Increases in payroll costs due to minimum wage increases since 2008:
$1.293 million.
Source: GAO analysis of wage data provided in responses to GAO large-
employer questionnaire.
Notes: Our estimates of hotels' average costs in 2010 and 2015 are
based on hotels' responses to our large-employer questionnaire. These
estimates assume that numbers of workers and other operating costs
will remain constant at the 2008 level and that only workers directly
affected by the minimum wage increases will receive raises as a result
of increases.
"Operating costs excluding payroll costs" includes FICA contributions,
payments for employee benefits, and other operating expenses. "Payroll
costs" includes payroll before deductions for taxes and benefits.
"Increases in payroll costs due to minimum wage" is the annual cost of
payroll increases that would be required to comply with the minimum
wages since 2008, based on the 2008 distribution of wages.
Costs shown are unweighted average costs for CNMI hotels that
responded to our questionnaire.
[End of figure]
Table 12: Simulated Impact on CNMI Visitor Trip Cost from Hotel
Workers' Minimum Wage Increases from 2009 through 2015, Compared to
2008:
Airfare;
2008: $594;
Rates to cover minimum wage increases for hotel workers from 2009 to
2015: $594;
Percentage change: 0.
Hotel room cost;
2008: $163;
Rates to cover minimum wage increases for hotel workers from 2009 to
2015: $204;
Percentage change: 25.3%.
Other expenditure per person;
2008: $531;
Rates to cover minimum wage increases for hotel workers from 2009 to
2015: $531;
Percentage change: 0.
Total trip cost per visitor;
2008: $1,288;
Rates to cover minimum wage increases for hotel workers from 2009 to
2015: $1,329;
Percentage change: 3.2%.
Source: GAO analysis based on data from the Marianas Visitors
Authority, as presented in the Department of Homeland Security
Economic Analysis of the Interim Rule.
Note: This analysis focuses on the effect of minimum wage increases on
hotel workers. Per visit cost can also be affected by other factors,
such as visa requirements, which we do not investigate in this
simulation. We averaged costs for visitors from Japan and Korea, where
the majority of the visitors to the CNMI originate.
[End of table]
CNMI Average Inflation-Adjusted Earnings Dropped as Estimated Earnings
of Minimum Wage Workers Who Remained Employed Rose:
Average Inflation-Adjusted Earnings Declined in 2006-2008:
From 2006 to 2008, average annual inflation-adjusted earnings in the
CNMI declined by about 6 percent.[Footnote 126] In particular,
according to CNMI government tax data, average annual earnings rose by
about 12 percent to $12,781 in 2008. However, from 2006 to 2008
average prices increased by about 19 percent. Therefore, inflation
eroded all income gains over the 2006-2008 period. (See table 13.)
Table 13: Change in Average Annual Inflation-Adjusted Earnings of CNMI
Workers, 2006-2008:
Average annual earnings in nominal dollars;
2006: $11,460;
2007: $11,925;
2008: $12,781;
Percentage change: 2006-2007: 4.1%;
Percentage change: 2007-2008: 7.2%;
Percentage change: 2006-2008: 11.5%.
Average annual earnings in inflation-adjusted dollars;
2006: $11,460;
2007: $10,506;
2008: 10,747;
Percentage change: 2006-2007: -8.3%;
Percentage change: 2007-2008: 2.3%;
Percentage change: 2006-2008: -6.2%.
Change in Consumer Price Index;
Percentage change: 2006-2007: 13.5%;
Percentage change: 2007-2008: 4.8%;
Percentage change: 2006-2008: 18.9%.
Source: GAO analysis of CNMI Division of Revenue and Tax data and CNMI
Consumer Price Index data.
Note: Earnings in inflation-adjusted dollars are in 2006 constant
dollars. Inflation is estimated using the CNMI Consumer Price Index.
[End of table]
Estimated Inflation-Adjusted Earnings of Minimum Wage Workers Who
Remained Employed Rose in 2006-2008:
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, we estimate that inflation-adjusted
earnings for CNMI minimum wage workers who retained their jobs and
full hours rose by about 12 percent from 2006 to 2008. We estimate
that annual minimum wage earnings increased by 33 percent from 2006 to
2008 (from $3.05 to $4.05),[Footnote 127] while Consumer Price Index
data show that local prices increased by 19 percent.
To estimate total annual earnings of a minimum wage worker from 2006
to 2008, we assumed that a minimum wage worker earned $3.05 per hour
in 2006 and $4.05 per hour in 2008[Footnote 128] and that a minimum
wage worker worked 2,000 hours per year in each calendar year. As a
result, we estimate that total earnings of a minimum wage worker were
$6,100 in 2006 and $8,100 in 2008. Because in 2007 average prices rose
by about 13.5 percent but earnings rose by 16.4 percent, inflation-
adjusted earnings of a minimum wage worker increased by about 2.5
percent. In 2008, the increase in purchasing power was larger (8.9
percent) owing to a similar increase in annual earnings (about 14.1
percent) but a smaller increase of average prices (4.8 percent) (see
table 14).
Table 14: Change in Estimated Inflation-Adjusted Annual Earnings of
Minimum Wage Workers Retaining Full-time Employment in the CNMI, 2006-
2008:
Estimated annual earnings in nominal dollars;
2006: $6,100;
2007: $7,100;
2008: $8,100;
Percentage change: 2006-2007: 16.4%;
Percentage change: 2007-2008: 14.1%;
Percentage change: 2006-2008: 32.8%.
Estimated annual earnings in inflation-adjusted dollars;
2006: $6,100;
2007: $6,256;
2008: $6,811;
Percentage change: 2006-2007: 2.5%;
Percentage change: 2007-2008: 8.9%;
Percentage change: 2006-2008: 11.7%.
Change in Consumer Price Index;
Percentage change: 2006-2007: 13.5%;
Percentage change: 2007-2008: 4.8%;
Percentage change: 2006-2008: 18.9%.
Source: GAO analysis of minimum wage data and CNMI Consumer Price
Index data.
Note: Earnings in inflation-adjusted dollars are in 2006 constant
dollars. Inflation is estimated using the CNMI Consumer Price Index.
[End of table]
However, for foreign workers whose employers chose to add charges for
food and lodging after the minimum wage increases, inflation-adjusted
earnings may have increased less or have decreased since 2006.
According to the CNMI government, employers providing room and board
are permitted to deduct up to $100 for lodging and $100 for food per
month from the wages of foreign workers. Employers and workers we
spoke with told us that in response to minimum wage increases, some
employers started to make these deductions from foreign workers'
paychecks.[Footnote 129] Therefore, we estimate that in 2008, foreign
workers could earn from $5,700 to $8,100, depending on deductions for
food and lodging.[Footnote 130] As a result, those workers may have
experienced a range of changes in their inflation-adjusted earnings
from 2006 to 2008, from a 12 percent increase with no change in
deductions to a 21.4 percent decrease with the maximum allowable
deduction.[Footnote 131]
Inflation in 2006-2008 Resulted Mainly from Higher Import Prices:
According to the CNMI government, most consumer goods in the CNMI are
imported.[Footnote 132] As a result, the increase in local prices from
2006 to 2008 appears to have been largely due to price increases in
imported goods such as food and utilities. In particular, the CNMI
Consumer Price Index shows that prices rose by about 19 percent from
2006 to 2008. Over the same period, the price of imports such as food
increased by about 8 percent and the price of housing and utilities
such as electricity increased by 53.5 percent.[Footnote 133] According
to data from the CNMI's Commonwealth Utilities Corporation,
electricity rates increased by 25 percent in 2007 alone. In contrast,
the price of education and communication services, mostly a domestic
product, has dropped from 2006 to 2008 by 0.5 percent.
Data Available for 2006-2008 Do Not Suggest Link between Changes in
Poverty-Related Program Participation and Changes in Inflation-
Adjusted Earnings:
Minimum wage increases generally disproportionately affect households
at the lower end of the income distribution. However, direct measures
of the CNMI poverty rate are not available for recent years. Available
data for federal need-based assistance in the CNMI in 2006 to 2008 do
not suggest that changes in inflation-adjusted earnings, resulting
from the wage increases, led to changes in poverty-related program
participation.[Footnote 134]
Our analysis of CNMI Nutrition Assistance Program data shows that from
2006 to 2009, there was no significant observable trend in the number
of program beneficiaries (local residents and U.S.-born children of
nonlocal residents) (see table 15).[Footnote 135] The relatively
constant number of program beneficiaries suggests that the low-income
population remained about constant.[Footnote 136]
Table 15: CNMI Nutrition Assistance Program Beneficiaries, 2006-2009:
Number of beneficiaries (annual average);
2006: 7,995;
2007: 8,027;
2008: 7,579;
2009: 8,074.
Year-to-year percentage change;
2006: [Empty];
2007: 0.40%;
2008: -5.58%;
2009: 6.52%.
Source: CNMI Division of Nutrition Assistance Program, data as of
December 2009.
[End of table]
CNMI Workers Generally Expressed Support for Minimum Wage Increases
and Cited Other Factors Affecting Living Standards:
Discussion Group Participants Generally Supported Higher Wages for
Workers:
Salaried and hourly workers we spoke with generally expressed support
for the minimum wage increases. For example, the majority of WIC
recipients we spoke with in Saipan and Tinian favored future minimum
wage increases. Hotel human resources staff also stated that the
minimum wage increases were long overdue. Local workers in the
discussion groups expressed their desire to earn higher wages to cope
with increasing costs. However, some workers also said they were
uncertain whether increases in labor costs due to the minimum wage
increases had been responsible for price increases.
Workers Said Closure of Garment Factories and Events Affecting Tourist
Arrivals Had Lowered Living Standards for Residents:
Discussion group participants said that the closure of the garment
factories and external factors affecting tourist arrivals had
negatively affected living standards for CNMI residents.[Footnote 137]
Workers stated that the closure of the garment factories had a ripple
effect in the economy. Statements by discussion group participants
indicated that they were less concerned about the minimum wage
increases than about other factors beyond their control that affect
living standards. For example, as human resource managers from the
hotel industry observed, the week before we convened the group,
hundreds of reservations were canceled as a result of the global alarm
over the H1N1 virus. Other participants mentioned the effects on the
CNMI of the SARS virus and the recent financial crises in the Korean
and Japanese markets. Hotel employees noted that hours worked depend
on occupancy rates and any factors that negatively affect tourist
arrivals decrease earnings.
Local Workers Stated That Minimum Wage Increases Had Helped Improve
Their Living Standards, but They Need Additional Training to Replace
Foreign Workers:
Discussion group participants also told us the minimum wage increases
had benefited some local workers. For example, hotel human resources
staff said that local workers were learning how to plan rather than
live from paycheck to paycheck, as their income earned became more
significant. The hotel staff told us that as the workers' spending
power had increased, they had become more careful in budgeting their
expenses. Other local workers also indicated that the higher wages had
helped their families better cover their living expenses. However,
discussion group participants said local workers needed additional
training to replace foreign workers. Workers participating in
discussion groups expressed concern that it is difficult for locals to
find jobs because many local workers lack skills needed for minimum
wage jobs previously held by foreign workers.
Workers Indicated That Minimum Wage Increases Had Not Improved Living
Standards of Foreign Workers:
Workers we talked with stated that the minimum wage increases had
generally not directly improved the living standards of foreign
workers. According to workers participating in our discussion groups,
benefits had decreased as income increased; for example, some foreign
workers reported that since the first minimum wage increase, their
employers had begun requiring them to pay up to $200 per month for
housing and food. Further, many foreign workers lost their jobs as a
result of the demise of the garment industry, and many of these
workers have left the CNMI.[Footnote 138] Ex-garment workers still
living in Saipan told us that they were drawing on their savings,
relying on help for their U.S.-born children from the Nutrition
Assistance Program,[Footnote 139] and looking for work.
Foreign Workers Expressed Concern about Immigration Changes and
Requirements:
Discussion group participants in Saipan and Tinian said that the
application of U.S. immigration law had increased uncertainty about
the employment of foreign workers. Foreign workers expressed anxiety
over not knowing whether they will be able to remain in the CNMI under
U.S. immigration law. Moreover, laid-off foreign workers said that
employers had begun asking job applicants whether they were U.S.
citizens because employers did not know how long they would be able to
retain foreign workers under U.S. immigration law.
The text box lists some comments by CNMI discussion group participants.
[Text box:
CNMI Workers' Views Based on Discussion Groups:
Some discussion group participants supported higher wages for workers:
"There is no price control, minimum wage is up and prices are up.
Prices have been going up regardless of the minimum wage. Without the
minimum wage increases we would have been worse off";
"Minimum wage is way overdue. We can't deny raises. People come in and
want a job and it is hard to deny them that."
Workers said closure of garment factories and decreased tourist
arrivals had lowered living standards for all residents:
"This week hundreds of nights [were] canceled due to the H1N1.
Occupancy rates were sad";
"If Japan goes into recession, so does the CNMI";
"I was a manager in the [garment] factory for 9 years—December of 2008
the factory closed. This was the last factory that closed. Now the
factory's wall is torn and the place is deserted. I am on a student
visa now, using up my savings."
Local workers stated that minimum wage increases had helped improve
their living standards, but they need additional training to replace
foreign workers:
"The minimum wage has had some good impact due to the increased
spending power. People are trying to make their pay check last longer";
"Now local people are more careful what they can afford. Before they
used to live paycheck to paycheck, the paycheck would be spent by the
end of the weekend. It is re-education of the population";
"Before, the wages were so insignificant, people just went out and
spent it. Now they are learning how to plan";
"Coming from someone [who] has a home here, is a local resident, it's
definitely more positive. The wages are good for my family";
"It is hard to find a job, need to have degrees, finished college,
employers want experience."
Workers indicated that minimum wage increases have not improved the
living standards of foreign workers:
"Income has increased but benefits have decreased [for foreign workers]—
the employer gets more back";
"[Before]--low minimum wage, benefits for [foreign] contract workers.
Now, higher minimum wage, lower benefits—we lose more";
"Reductions for staff housing, before it was free. Same for food.
Deduction is $100 for housing and same for food."
Foreign workers expressed concern about immigration changes and
requirements:
"I think [the] economy [is] very low because of [the] immigration
problem—Some people who have been here [a] long time can't stay";
"I am using an extension, after an extension. Federalization is the
issue for me";
"I have a family, [the] company is [our] source of bread and butter.
If I need to leave, [this will have a] big impact on life...I don't
have [any] idea if I can stay."
[End of text box]
[End of section]
Appendix V: American Samoa Employers' Reported Actions and
Contribution of Minimum Wage Increases and Other Factors, Based on GAO
Large-Employer Questionnaire Responses:
Table 16: American Samoa Employers' Reported Actions in June 2007-June
2009 and Contribution of Minimum Wage Increases, Based on GAO Large-
Employer Questionnaire Responses:
Employer action: a. Introduce labor-saving strategies or technology;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 8;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 29%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 5%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 67%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 3%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 74%.
Employer action: b. Introduce other cost-saving strategies (e.g.,
energy-saving technologies);
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 15;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 94%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 68%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 23%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 67%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 25%.
Employer action: c. Reduce operating capacity or services offered [to
customers];
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 3;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 45%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 87%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 1%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 58%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 31%.
Employer action: d. Delay expansion of business;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 4;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 43%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 2%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 80%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 0;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 84%.
Employer action: e. Relocate business outside of American Samoa;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 2;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 22%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 65%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 3%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 1%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 68%.
Employer action: f. Close establishment temporarily;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 1;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 21%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 67%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 0;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 1%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 0.
Employer action: g. Lay off salaried employees;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 2;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 22%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 0;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 68%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 4%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 4%.
Employer action: h. Lay off employees who are paid an hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 6;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 24%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 3%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 68%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 2%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 74%.
Employer action: i. Reduce regular work hours for employees paid an
hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 7;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 24%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 4%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 5%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 2%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 76%.
Employer action: j. Reduce overtime work hours for employees paid an
hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 13;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 30%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 3%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 73%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 2%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 76%.
Employer action: k. Decrease level of benefits for salaried employees;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 1;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 1%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 3%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 3%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 5%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 3%.
Employer action: l. Decrease level of benefits for employees paid an
hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 4;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 42%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 41%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 41%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 40%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 45%.
Employer action: m. Implement a hiring freeze;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 11;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 93%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 68%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 23%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 66%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 26%.
Employer action: n. Raise prices of goods or services;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 12;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 96%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 71%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 1%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: 49%;
Percentage of employers reporting action that said expectations of
future minimum wage increases contributed to a moderate or large
extent, weighted by percentage of workers employed by respondents
taking action: Moderate extent: 4%.
Source: GAO analysis of American Samoa large-employer questionnaire
responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers. Numbers of employers
reporting taking each action ranged from 1 to 15.
Data shown cover large employers--generally, those with at least 50
employees. Data do not include smaller employers and employers that
have closed, none of whom are covered by our questionnaire. Data also
do not include employers that did not respond to our questionnaire.
Although questionnaire responses covered about 72 percent of the
American Samoa workforce, they may not be representative of all
American Samoa workers and employers. In addition, the tuna canneries
and local government employed a large percentage of workers employed
by all questionnaire respondents, as in the actual American Samoa
workforce; as a result, these employers' responses significantly
affected our reported questionnaire data.
[End of table]
Table 17: American Samoa Employers' Reported Contribution of Other
Factors, Based on GAO Large-Employer Questionnaire Responses:
a. Increased utility costs;
Not at all: 0;
To a small extent: 0;
To a moderate extent: 94;
To a large extent: 6.
b. Increased costs of materials;
Not at all: 0;
To a small extent: 93;
To a moderate extent: 1;
To a large extent: 6.
c. Increased transportation/shipping costs;
Not at all: 0;
To a small extent: 72;
To a moderate extent: 22;
To a large extent: 6.
d. Increased maintenance costs;
Not at all: 88;
To a small extent: 5;
To a moderate extent: 1;
To a large extent: 6.
e. Decreased number of customers;
Not at all: 73;
To a small extent: 23;
To a moderate extent: 1;
To a large extent: 3.
f. Changes to U.S. immigration laws;
Not at all: 97;
To a small extent: 1;
To a moderate extent: 0;
To a large extent: 0.
g. Changes in business taxes or fees;
Not at all: 96;
To a small extent: 0;
To a moderate extent: 1;
To a large extent: 1.
Source: GAO analysis of American Samoa large-employer questionnaire
responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers.
Data shown cover large employers--generally, those with at least 50
employees. Data do not include smaller employers and employers that
have closed, none of whom are covered by our questionnaire. Data also
do not include employers that did not respond to our questionnaire.
Although questionnaire responses covered about 72 percent of the
American Samoa workforce, they may not be representative of all
American Samoa workers and employers. In addition, the tuna canneries
and local government employed a large percentage of workers employed
by all questionnaire respondents, as in the actual American Samoa
workforce; as a result, these employers' responses significantly
affected our reported questionnaire data.
Some rows do not add up to 100 percent due to rounding or the category
"do not know," which is not reported here.
[End of table]
Table 18: American Samoa Employers' Reported Actions Planned by End of
2010 and Contribution of Minimum Wage Increases, Based on American
Samoa Large-Employer Questionnaire Responses:
Employer action: a. Introduce labor-saving strategies or technology;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 12;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 50%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 1%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 88%.
Employer action: b. Introduce other cost-saving strategies (e.g.,
energy-saving technologies);
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 14;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 97%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 45%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 28%.
Employer action: c. Reduce operating capacity or services offered [to
customers];
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 10;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 89%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 49%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 29%.
Employer action: d. Delay expansion of business;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 8;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 27%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 1%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 49%.
Employer action: e. Relocate business outside of American Samoa;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 4;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 43%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 0;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 87%.
Employer action: f. Close establishment temporarily;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 1;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 1%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 4%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 4v.
Employer action: g. Lay off salaried employees;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 8;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 44%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 1%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 9%1.
Employer action: h. Lay off employees who are paid an hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 11;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 46%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 2%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 91%.
Employer action: i. Reduce regular work hours for employees paid an
hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 11;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 27%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 4%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 86%.
Employer action: j. Reduce overtime work hours for employees paid an
hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 13;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 31%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 0;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 78%.
Employer action: k. Decrease level of benefits for salaried employees;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 7;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 25%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 2%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 85%.
Employer action: l. Decrease level of benefits for employees paid an
hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 8;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 25%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 2%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 85%.
Employer action: m. Implement a hiring freeze;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 12;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 31%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 61%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 35%.
Employer action: n. Raise prices of goods or services;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 9;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 7%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 62%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 8%.
Employer action: o. Close establishment permanently;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 3;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 41%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Moderate
extent: 0;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 85%.
Source: GAO analysis of American Samoa large-employer questionnaire
responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers. Numbers of employers
reporting taking each action ranged from 1 to 14.
Data shown cover large employers--generally, those with at least 50
employees. Questionnaire responses do not include smaller employers;
employers that had closed, or employers that did not respond to our
questionnaire. Although questionnaire responses covered about 72
percent of the American Samoa workforce, they are not necessarily
representative of all American Samoa workers and employers. In
addition, the tuna canneries and local government employed a large
percentage of workers employed by all questionnaire respondents, as in
the actual American Samoa workforce; as a result, these employers'
responses significantly affected our reported questionnaire data.
Employers reported actions that they planned to take within 18 months
of our August 2009 questionnaire.
[End of table]
Table 19: American Samoa Employers' Reported Contribution of Other
Factors to Future Actions, Based on GAO Large-Employer Questionnaire
Responses:
a. Increased utility costs;
Not at all: 0;
To a small extent: 25;
To a moderate extent: 69;
To a large extent: 6.
b. Increased costs of materials;
Not at all: 20;
To a small extent: 72;
To a moderate extent: 2;
To a large extent: 6.
c. Increased transportation/shipping costs;
Not at all: 0;
To a small extent: 93;
To a moderate extent: 2;
To a large extent: 5.
d. Increased maintenance costs;
Not at all: 88;
To a small extent: 5;
To a moderate extent: 2;
To a large extent: 5.
e. Decreased number of customers;
Not at all: 71;
To a small extent: 3;
To a moderate extent: 1;
To a large extent: 26.
f. Changes to U.S. immigration laws;
Not at all: 96;
To a small extent: 1;
To a moderate extent: 1;
To a large extent: 0.
g. Changes in business taxes or fees;
Not at all: 92;
To a small extent: 1;
To a moderate extent: 2;
To a large extent: 1.
Source: GAO analysis of American Samoa large-employer questionnaire
responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers.
Data shown cover large employers--generally, those with at least 50
employees. Data do not include smaller employers and employers that
have closed, none of whom are covered by our questionnaire. Data also
do not include employers that did not respond to our questionnaire.
Although questionnaire responses covered about 72 percent of the
American Samoa workforce, they may not be representative of all
American Samoa workers and employers. In addition, the tuna canneries
and local government employed a large percentage of workers employed
by all questionnaire respondents, as in the actual American Samoa
workforce; as a result, these employers' responses significantly
affected our reported questionnaire data.
Some rows do not add up to 100 percent due to rounding or the category
"do not know," which is not reported here.
Employers reported contribution to actions that they planned to take
within 18 months of our August 2009 questionnaire.
[End of table]
[End of section]
Appendix VI: CNMI Employers' Reported Actions and Contribution of
Minimum Wage Increases and Other Factors, Based on GAO Large-Employer
Questionnaire Responses:
Table 20: CNMI Employers' Reported Actions in June 2007-June 2009 and
Contribution of Minimum Wage Increases, Based on GAO Large-Employer
Questionnaire Responses:
Employer action: a. Introduce labor-saving strategies or technology;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 24;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 42%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 43%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 10%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 30%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 46%.
Employer action: b. Introduce other cost-saving strategies (e.g.,
energy-saving technologies);
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 27;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 44%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 48%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 20%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 36%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 39%.
Employer action: c. Reduce operating capacity or services offered [to
customers];
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 14;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 27%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 31%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 8%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 32%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 16%.
Employer action: d. Delay expansion of business;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 17;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 27%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 12%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 27%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 3%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 19%.
Employer action: e. Relocate business outside of CNMI;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 0;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 0;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 0;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 0;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 0;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 0.
Employer action: f. Close establishment temporarily;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 1;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 1%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 2%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 0;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 4%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 0.
Employer action: g. Lay off salaried employees;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 9;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 10%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 16%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 0;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 8%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 7%.
Employer action: h. Lay off employees who are paid an hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 10;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 11%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 13%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 2v;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 2%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 10%.
Employer action: i. Reduce regular work hours for employees paid an
hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 17;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 36%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 47%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 7%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 38%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 13%.
Employer action: j. Reduce overtime work hours for employees paid an
hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 28;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 68%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 55%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 14%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 50%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 27%.
Employer action: k. Decrease level of benefits for salaried employees;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 10;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 18%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 14%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 2%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 4%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 11%.
Employer action: l. Decrease level of benefits for employees paid an
hourly wage;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 9;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 17%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 19%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 2%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 3%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 14%.
Employer action: m. Implement a hiring freeze;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 19;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 72%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 57%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 17%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 69%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 13%.
Employer action: n. Raise prices of goods or services;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Number of employers: 26;
Percentage of employers that reported action, weighted by percentage
of workers employed by all respondents: Percent: 75%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 65%;
Percentage of employers reporting action that said past minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 6%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 76%;
Percentage of employers reporting action that said future minimum wage
increases contributed to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 6%.
Source: GAO analysis of responses to CNMI large-employer questionnaire.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers. Numbers of employers
reporting each action ranged from 0 to 28.
Data shown cover large employers--generally, those with at least 50
employees. Data do not include smaller employers and employers that
have closed, including garment factories, none of whom are covered by
our questionnaire. Data also omit employers that did not respond to
our questionnaire. Questionnaire responses cover about 29 percent of
the CNMI public and private sector workforce. As a result, the data
may not be representative of all CNMI workers and employers. In
addition, the CNMI government accounted for a higher percentage of
workers employed by questionnaire respondents than in the actual CNMI
workforce, so the government's responses disproportionately influence
our questionnaire results on the public and private sectors combined.
[End of table]
Table 21: CNMI Employers' Reported Contribution of Other Factors,
Based on GAO Large-Employer Questionnaire Responses:
Increased utility costs;
Not at all: 0;
To a small extent: 13;
To a moderate extent: 66;
To a large extent: 19.
Increased costs of materials;
Not at all: 3;
To a small extent: 38;
To a moderate extent: 30;
To a large extent: 26.
Increased transportation/shipping costs;
Not at all: 7;
To a small extent: 36;
To a moderate extent: 22;
To a large extent: 33.
Increased maintenance costs;
Not at all: 7;
To a small extent: 37;
To a moderate extent: 31;
To a large extent: 23.
Decreased number of customers;
Not at all: 0;
To a small extent: 12;
To a moderate extent: 39;
To a large extent: 45.
Changes to U.S. immigration laws;
Not at all: 0;
To a small extent: 8;
To a moderate extent: 17;
To a large extent: 64.
Changes in business taxes or fees;
Not at all: 23;
To a small extent: 13;
To a moderate extent: 32;
To a large extent: 24.
Source: GAO analysis of CNMI large-employer questionnaire responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers. Numbers of employers ranged
from 0 to 28.
Data shown cover large employers--generally, those with at least 50
employees. Data do not include smaller employers and employers that
have closed, including garment factories, none of whom are covered by
our questionnaire. Data also omit employers that did not respond to
our questionnaire. Questionnaire responses cover about 29 percent of
the CNMI public and private sector workforce. As a result, the data
may not be representative of all CNMI workers and employers. In
addition, the CNMI government accounted for a higher percentage of
workers employed by questionnaire respondents than in the actual CNMI
workforce, so the government's responses disproportionately influence
our questionnaire results on the public and private sectors combined.
Some rows do not add up to 100 percent due to rounding or the category
"do not know," which is not reported here.
[End of table]
Table 22: CNMI Employers' Reported Actions Planned by the End of 2010
and Contribution of Minimum Wage Increases, Based on GAO Large-
Employer Questionnaire Responses:
Employer actions: a. Introduce labor-saving strategies or technology;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 12;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 22v;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 21%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 44%.
Employer actions: b. Introduce other cost-saving strategies (e.g.,
energy-saving technologies);
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 26;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 79%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 15%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 29%.
Employer actions: c. Reduce operating capacity or services offered [to
customers];
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 12;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 22%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 7%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 34%.
Employer actions: d. Delay expansion of business;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 14;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 23%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 17%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 20%.
Employer actions: e. Relocate business outside of CNMI;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 1;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 1%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 0;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 3%.
Employer actions: f. Close establishment temporarily;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 0;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 0;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 5%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 0.
Employer actions: g. Lay off salaried employees;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 5;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 6%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 1%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 10%.
Employer actions: h. Lay off employees who are paid an hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 9;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 15%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 25%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 12%.
Employer actions: i. Reduce regular work hours for employees paid an
hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 18;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 35%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 37%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 16%.
Employer actions: j. Reduce overtime work hours for employees paid an
hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 27;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 44%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 44%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 23%.
Employer actions: k. Decrease level of benefits for salaried employees;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 11;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 18%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 26%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 11%.
Employer actions: l. Decrease level of benefits for employees paid an
hourly wage;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 12;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 19%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 26%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 11%.
Employer actions: m. Implement a hiring freeze;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 23;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 72%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 28%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 54%.
Employer actions: n. Raise prices of goods or services;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 23;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 34%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 45%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 15%.
Employer actions: o. Close establishment permanently;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Number of
employers: 1;
Percentage of employers that reported planning action, weighted by
percentage of workers employed by all respondents: Percent: 2%;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: 0;
Percentage of employers planning action that said minimum wage
increases will contribute to a moderate or large extent, weighted by
percentage of workers employed by respondents taking action: Large
extent: 3%.
Source: GAO analysis of CNMI large-employer questionnaire responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers. Numbers of employers
reporting each planned action ranged from 0 to 27.
Data shown cover large employers--generally, those with at least 50
employees. Questionnaire responses do not include smaller employers;
employers that have closed, including garment factories; or employers
that did not respond to our questionnaire. Questionnaire responses
cover about 29 percent of the CNMI public and private sector
workforce. As a result, the data may not be representative of all CNMI
workers and employers. In addition, the CNMI government accounted for
a higher percentage of workers employed by questionnaire respondents
than in the actual CNMI workforce, so the government's responses
disproportionately influence our questionnaire results on the public
and private sectors combined.
Employers reported actions that they planned to take within 18 months
of our September 2009 questionnaire.
[End of table]
Table 23: CNMI Employers' Reported Contribution of Other Factors to
Future Actions, Based on GAO Large-Employer Questionnaire Responses:
a. Increased utility costs;
Not at all: 2;
To a small extent: 60;
To a moderate extent: 8;
To a large extent: 24.
b. Increased costs of materials;
Not at all: 4;
To a small extent: 33;
To a moderate extent: 18;
To a large extent: 28.
c. Increased transportation/shipping costs;
Not at all: 8;
To a small extent: 29;
To a moderate extent: 12;
To a large extent: 40.
d. Increased maintenance costs;
Not at all: 4;
To a small extent: 31;
To a moderate extent: 20;
To a large extent: 34.
e. Decreased number of customers;
Not at all: 2;
To a small extent: 12;
To a moderate extent: 47;
To a large extent: 37.
f. Changes to U.S. immigration laws;
Not at all: 0;
To a small extent: 14;
To a moderate extent: 19;
To a large extent: 60.
g. Changes in business taxes or fees;
Not at all: 5;
To a small extent: 13;
To a moderate extent: 36;
To a large extent: 27.
Source: GAO analysis of CNMI large-employer questionnaire responses.
Notes: Percentages of responses are weighted by each employer's total
number of workers in 2009, which gives more weight to responses from
employers with larger numbers of workers.
Data shown cover large employers--generally, those with at least 50
employees. Data do not include smaller employers and employers that
have closed, including garment factories, none of whom are covered by
our questionnaire. Data also omit employers that did not respond to
our questionnaire. Questionnaire responses cover about 29 percent of
the CNMI public and private sector workforce. As a result, the data
may not be representative of all CNMI workers and employers. In
addition, the CNMI government accounted for a higher percentage of
workers employed by questionnaire respondents than in the actual CNMI
workforce, so the government's responses disproportionately influence
our questionnaire results on the public and private sectors combined.
Some rows do not add up to 100 percent due to rounding or the category
"do not know," which is not reported here.
Employers reported actions that they planned to take within 18 months
of our September 2009 questionnaire.
[End of table]
[End of section]
Appendix VII: GAO Questionnaire Used in Report:
Note: The questionnaire reproduced below was provided to American
Samoa large employers. CNMI large employers received a questionnaire
with nearly identical wording, except as noted and except where
"American Samoa" was replaced with "CNMI."
Instructions for Completing the Questionnaire Onscreen:
* Please use your mouse to navigate, clicking on the field or check
box you wish to answer.
* To select a check box or a button, click on the center of the box.
* To change or deselect a check box response, click on the check box
and the 'X' will disappear.
* To answer a question that requires that you write a comment, click
on the answer box and begin typing.
The box will expand to accommodate your answer.
Start Here:
Note: The reporting unit for this questionnaire is an establishment.
An establishment is generally (1) a single physical location where
business is conducted or where services or industrial operations are
performed or (2) a permanent office, payroll office, or other place
where business activities are conducted.
Part I. Establishment Information:
These questions cover basic information about this establishment.
Responses will be used to classify the establishment based on
location, years in operation, ownership structure, and type of
business. These questions also ask about this establishment's
competitors and position in the global marketplace. These responses
will be used to assess how susceptible this establishment is to global
competition in the goods-and-services market.
1. What is the 9-digit Employer Identification Number (EIN) for this
establishment?
If you or your employer operates establishment in American Samoa with
more than one EIN, please fill out one questionnaire per EIN.
(Please enter numerals only)
2. What is this establishment's name?
3. Since what year has this establishment been in continuous operation?
If this establishment has ever shut down temporarily but later
reopened under the same EIN (e.g., seasonal closure or remodel),
please count this temporary shutdown as part of the continuous
operation. (Please enter in YYYY format)
4. Which category listed below best describes this establishment?
(Please check only One box)
For-profit business: Continue with Question 5;
Not-for-profit organization: Skip to Question 12;
Government administrative agency or government-owned enterprise (e.g.
public utility or hospital): Skip to Question 12;
Other: Please specify: Skip to Question 12.
5. Are the majority of this establishment's owners U.S. citizens or
nationals, U.S. or American Samoan permanent residents, or citizens of
the Freely Associated States (FAS)?
(Please check only One box)
Yes: Continue with Question 6;
No: Skip to Question 7;
Don't know: Skip to Question 8.
[Note: For the CNMI questionnaire, question 5 was worded as follows:
Which of the following best describes the majority ownership of this
establishment? (Please check only One box)
U.S. citizen - CNMI born (Chamorro or Carolinian):
U.S. citizen - CNMI born (NOT Chamorro or Carolinian):
U.S. citizen - not CNMI born:
Chinese citizen:
Filipino citizen:
Japanese citizen:
Korean citizen:
Other: Please specify:
Don't know/unable to determine:
6. Are the majority of this establishment's owners of American Samoan
heritage? (Please check only One box)
Yes: Continue with Question 8;
No: Skip to Question 8;
Don't know: Skip to Question 8.
7. What is the citizenship status of the majority ownership of this
establishment? (Please check only One box)
Australian citizen:
Chinese citizen:
Filipino citizen:
Japanese citizen:
Korean citizen:
New Zealand citizen:
Other: Please specify:
Don't know: Please explain:
8. Which one of the following best describes this establishment's
principal kind of business? (Please check only One box)
Agriculture, forestry, fishing and hunting:
Mining, quarrying, and oil and gas extraction:
Utilities:
Construction:
Manufacturing:
Wholesale trade:
Retail trade:
Transportation and warehousing:
Publishing, broadcasting, and telecommunications:
Finance and insurance:
Real estate and rental and leasing:
Professional, scientific, and technical services:
Educational services:
Health care/social assistance:
Accommodations (i.e., hotels):
Food service:
Arts, entertainment, and recreation:
Repair and maintenance services:
Other: Please specify:
9. Thinking about where your customers primarily reside, approximately
what percentage of the goods or services that this establishment
provides is sold to (a) local residents of American Samoa, (b)
temporary visitors to American Samoa, and (c) consumers who reside
outside of American Samoa?
The percentages across the three groups should roughly equal 100
percent (Please check only One box per customer group)
a. Local residents of American Samoa:
None:
Less than 20 percent:
20 to 39 percent:
40 to 59 percent:
60 to 79 percent:
More than 80 percent:
Don't know:
b. Temporary visitors to American Samoa, such as tourists or business
travelers:
None:
Less than 20 percent:
20 to 39 percent:
40 to 59 percent:
60 to 79 percent:
More than 80 percent:
Don't know:
c. Consumers who reside outside of American Samoa and are not
temporary visitors:
None:
Less than 20 percent:
20 to 39 percent:
40 to 59 percent:
60 to 79 percent:
More than 80 percent:
Don't know:
10. Does this establishment compete for customers with others that
provide similar goods or services in the following markets, and if
yes, where are the other establishments located in each market listed
below?
If this establishment does not compete in the market, please check the
box in column 1.
a. Goods or services sold to local residents of American Samoa:
Establishment does compete in this market:
Establishment does not compete in this market:
(Please check all that apply)
Within AS:
Other U.S. territories or states:
Outside the U.S.:
Don't know:
b. Goods or services sold to temporary visitors to American Samoa,
such as tourists or business travelers:
Establishment does compete in this market:
Establishment does not compete in this market:
(Please check all that apply)
Within AS:
Other U.S. territories or states:
Outside the U.S.:
Don't know:
c. Goods or services sold to consumers outside of American Samoa:
Establishment does compete in this market:
Establishment does not compete in this market:
(Please check all that apply)
Within AS:
Other U.S. territories or states:
Outside the U.S.:
Don't know:
11. What are this establishment's competitive advantages, if any, in
the markets for which you compete for customers?
(Please check One box per advantage)
a. State-of-the-art technology:
Yes:
No:
Don't know:
b. Brand name:
Yes:
No:
Don't know:
c. Skilled workforce:
Yes:
No:
Don't know:
d. High-quality goods or services:
Yes:
No:
Don't know:
e. Low production costs (both labor and operating costs):
Yes:
No:
Don't know:
f. Location:
Yes:
No:
Don't know:
g. Access to U.S. markets:
Yes:
No:
Don't know:
h. Government tax incentives:
Yes:
No:
Don't know:
i. Others (please specify):
Yes:
No:
Don't know:
Part II. Expenses And Income:
These questions ask about this establishment's labor and capital
expenses in order to better understand this establishment's cost
structure and ability to absorb cost increases.
12. The questions in Part II will refer to the 12-month period that
includes June 12'h in a given year. How does your establishment prefer
to provide expense data ” for a calendar year (January through
December) or for a fiscal year as defined by your establishment?
Calendar year: Skip to Question 13;
Fiscal year:
12a. What is the first and last month of your establishment's fiscal
year that includes June 12th?
First month of fiscal year: (MM)
Last month of fiscal year: (MM)
The data reported in questions 13 to 15 will be used to determine this
establishment's total costs incurred for its employees. Each question
asks you to report a different type of employee cost that most
establishments incur”total payroll, FICA contributions, and costs of
employee benefits. Specific definitions of each of these three
categories are provided below.
13. What was the total U.S. dollar amount of this establishment's
payroll before employee deductions for taxes and benefits for the 12-
month period for 2006, 2007, and 2008 identified in question 12?
For each year only include the following as payroll expenses:
* Wages and salaries, including overtime pay, commissions, and
bonuses, paid only to employees of this establishment;
* Paid holidays, vacation, sick leave, and other paid leave for all
employees.
12-month period that includes June 12th:
If did not incur any expenses, please write in 0.
(Please round to the nearest whole dollar)
2006:
2007:
2008:
14. What was the total U.S. dollar amount of this establishment's FICA
contributions for the 12-month period for 2006, 2007, and 2008
identified in question 12?
FICA contributions are those made for:
* Social Security (OASDI) and;
* Medicare.
12-month period that includes June 12th:
If did not incur any expenses, please write in 0.
(Please round to the nearest whole dollar)
2006:
2007:
2008:
15. What was the total U.S. dollar amount of this establishment's
payments for employee benefits (other than FICA) for the 12-month
period for 2006, 2007, and 2008 identified in question 12?
* Insurance contributions (e.g., health, life);
* Payments for health expenses;
* Pension or 401(k) contributions;
* Housing or food allowances;
* Transportation payments for local or international travel;
* Payments for education expenses;
* Workers' compensation;
* Other benefits not listed above.
For each year, only include the following as benefits if offered to
any employee who earned an annual salary or an hourly wage:
12-month period that includes June 12th:
If did not incur any expenses, please write in 0.
(Please round to the nearest whole dollar)
2006:
2007:
2008:
16. Excluding payroll, FICA contributions, and employee benefits, what
was the total U.S. dollar amount of this establishment's other
operating expenses for the 12-month period for 2006, 2007, and 2008
identified in question 12?
For each year only include:
* Lease and rental payments;
* Costs of materials, such as raw materials, packaging, or food;
* Utilities and telecommunications costs;
* Advertising services, office supplies, and shipping costs;
* Services provided by contractors, such as legal, data processing,
janitorial, or other;
* Insurance, storage, repairs, theft, and damage losses;
* Merchandise purchased for resale;
* Equipment that was expensed (rather than capitalized);
* Depreciation and amortization charges;
* Business taxes and fees;
* Other expenses not listed above, except expenses reported in
questions 13 to 15.
12-month period that includes June 12th:
If did not incur any expenses, please write in 0.
(Please round to the nearest whole dollar)
2006:
2007:
2008:
17. What was the total U.S. dollar amount of this establishment's
capital expenditures for the 12-month period for 2006, 2007, and 2008
identified in question 12?
For each year only include the following as capital expenditures:
* Value of new construction completed;
* Value of physical improvements made to establishment's facilities
that were completed;
* Equipment that was capitalized (rather than expensed) travel.
12-month period that includes June 12th:
If did not incur any expenses, please write in 0.
(Please round to the nearest whole dollar)
2006:
2007:
2008:
18. What was the approximate total U.S. dollar amount of this
establishment's income (before taxes, if applicable) for the 12-month
period for 2006, 2007, and 2008 identified in question 12?
Please do not include the value of sales or other taxes collected
directly from customers and paid directly to a federal or local tax
agency.
(Please check One box per year)
2006:
2007:
2008:
a. Less than $500,000;
2006:
2007:
2008:
b. $500,000 to $749,999;
2006:
2007:
2008:
c. $750,000 to $999,999;
2006:
2007:
2008:
d. $1 million to $2,999,999;
2006:
2007:
2008:
e. $3 million to $4,999,999;
2006:
2007:
2008:
f. $5 million to $6,999,999;
2006:
2007:
2008:
g. $7 million to $8,999,999;
2006:
2007:
2008:
h. $9 million or higher (please specify to nearest million dollar
below);
2006:
2007:
2008:
i. Don't know;
2006:
2007:
2008:
j. Not applicable;
2006:
2007:
2008:
19. What percentage increase in operating costs would cause this
establishment to close its operation in American Samoa?
(Please check only One box)
Less than 10 percent:
10 to 19 percent:
20 to 29 percent:
30 to 39 percent:
40 to 49 percent:
More than 50 percent:
Don't know:
Not applicable:
Part III. Employment, Wages, And Benefits Data:
These questions ask for detailed data about employment, wages, and
benefits for employees at this establishment for 2007, 2008, and 2009.
These data are necessary to establish a historical time series of
comparable employment and wage data for large employers in American
Samoa.
Note: The questions in Part III ask about employees on this
establishment's payroll. When answering, please refer to the following
definition of employee:
Include the following in your count of employees:
*Full- and part-time employees, including executives, who earn an
hourly wage or annual salary;
* Employees on paid leave during any part of the stated pay period
Exclude the following in your count of employees:
* Employees on the payroll of establishments with a different EIN from
this establishment;
* Proprietors, owners, or partners of unincorporated establishments;
* Employees on unpaid leave for the entire stated pay period;
* Unpaid family members;
* Pensioners.
Several questions in Part 111 also ask about employees covered by the
Fair Labor Standards Act (FLSA). The FLSA establishes minimum wage,
overtime pay, recordkeeping, and youth employment standards affecting
employees in the private sector and in federal, state, and local
governments.
20. Approximately what percentage of the employees at this
establishment is female? (Please check only One box)
Less than 20 percent:
20 to 39 percent:
40 to 59 percent:
60 to 79 percent:
More than 80 percent:
Don't know:
21. Are any of the employees on this establishment's payroll covered
by the FLSA? (Please check only One box)
Yes:
No:
Don't know:
22. Are any of the employees on this establishment's payroll paid an
hourly wage instead of an annual salary? (Please check only One box)
Yes: Continue with Question 23;
No: Skip to Question 32;
Don't know: Skip to Question 32.
23. The reporting period for questions in Part 11 was either a
calendar or fiscal year. The reporting period for the questions in
Part HI will now be a pay period. A pay period is a recurring length
of time over which employee work time is recorded and paid. What
length of time defines a pay period for employees paid an hourly wage
at this establishment?
(Please check only One box)
1 week:
2 weeks:
1 month:
Other: Please specify:
24. For employees paid an hourly wage, what were the start and end
dates of the pay period including June 12th for 2007, 2008, and 2009?
If this establishment was not in operation during the pay period that
included June 12th in any year, please check the appropriate box in
the last column of the table.
(Please enter two numerals per answer box)
a. 2007:
Start date of pay period that includes June 12 2007:
End date of pay period that includes June 12 2007:
Establishment was not in operation on June 12 2007:
b. 2008:
Start date of pay period that includes June 12 2007:
End date of pay period that includes June 12 2007:
Establishment was not in operation on June 12 2007:
c. 2009:
Start date of pay period that includes June 12 2007:
End date of pay period that includes June 12 2007:
Establishment was not in operation on June 12 2007:
25. What was the total number of employees paid an hourly wage on this
establishment's payroll during the pay periods that included June 12th
for 2007, 2008, and 2009 who were (a) U.S. citizens, nationals, or
permanent residents; (b) American Samoa permanent residents and
citizens of the FAS; (c) citizens or permanent residents of nations
other than the U.S., American Samoa, or the FAS?
If this establishment was not in operation during the pay period that
included June 12th in any year, please enter a "0" in the
corresponding box.
(Please enter numerals in each box below)
Employee category: (a) U.S. citizens, nationals, or permanent
residents;
Pay period that includes June 12, 2007:
Pay period that includes June 12, 2008:
Pay period that includes June 12, 2009:
Employee category: (b) American Samoa permanent residents and citizens
of the FAS;
Pay period that includes June 12, 2007:
Pay period that includes June 12, 2008:
Pay period that includes June 12, 2009:
Employee category: (c) citizens or permanent residents of nations
other than the U.S., American Samoa, or the FAS;
Pay period that includes June 12, 2007:
Pay period that includes June 12, 2008:
Pay period that includes June 12, 2009:
26. If the number of employees paid an hourly wage at this
establishment increased or decreased between 2007 and 2009, can you
please describe below some of the factors that contributed to the
increase or decrease?
27. The next three tables ask for detailed information about employees
who were paid different base hourly wages (before deductions) during
the pay period that included June 12th in 2007, 2008, and 2009.
Question text and instructions are provided at the top of each column.
Please do not include employees paid an annual salary in these tables.
Data for employees paid an annual salary will be reported separately
in question 34.
You may also submit the requested data in an Excel spreadsheet or as a
computer printout instead of reentering the data into the tables below.
a. For each of the questions below, please answer for the pay period
that included June 12, 2007:
(A)Base hourly wage rate before deductions (in U.S. dollars) (Please
enter in $XXXX format for each hourly wage earned by employees at your
establishment):
(B) How many employees earned the base hourly wage listed in (A)?
(Please enter only numerals):
(C) How many of the employees listed in (B) are covered by the FLSA?
(Please enter only numerals):
(D) How many of the employees listed in (B) are U.S. citizens or
nationals, U.S. or American Samoan permanent residents, or citizens of
the FAS? (Please enter only numerals):
(E) How many total hours not including overtime hours) did employees
who earned this base hourly wage work during this pay period? (Please
report hours rounded to the quarter hour and to two decimal places):
(F) How many total overtime hours did employees who earned this base
hourly wage work during this pay period? (Please report hours rounded
to the quarter hour and to two decimal places):
(G) What were the total earnings (before taxes and deductions) of
employees who earned this wage during this pay period, including
overtime, bonuses, and commissions? Please do not include the value of
employee benefits. (Please round to the nearest whole dollar):
Example:
(A): $4.63;
(B): 10;
(C): 9;
(D): 2;
(E): 819.25;
(F): 30.50;
(G): $1,763.00.
b. For each of the questions below, please answer for the pay period
that included June 12, 2008:
(A)Base hourly wage rate before deductions (in U.S. dollars) (Please
enter in $XXXX format for each hourly wage earned by employees at your
establishment):
(B) How many employees earned the base hourly wage listed in (A)?
(Please enter only numerals):
(C) How many of the employees listed in (B) are covered by the FLSA?
(Please enter only numerals):
(D) How many of the employees listed in (B) are U.S. citizens or
nationals, U.S. or American Samoan permanent residents, or citizens of
the FAS? (Please enter only numerals):
(E) How many total hours not including overtime hours) did employees
who earned this base hourly wage work during this pay period? (Please
report hours rounded to the quarter hour and to two decimal places):
(F) How many total overtime hours did employees who earned this base
hourly wage work during this pay period? (Please report hours rounded
to the quarter hour and to two decimal places):
(G) What were the total earnings (before taxes and deductions) of
employees who earned this wage during this pay period, including
overtime, bonuses, and commissions? Please do not include the value of
employee benefits. (Please round to the nearest whole dollar):
Example:
(A): $4.63;
(B): 10;
(C): 9;
(D): 2;
(E): 819.25;
(F): 30.50;
(G): $1,763.00.
c. For each of the questions below, please answer for the pay period
that included June 12, 2009:
(A)Base hourly wage rate before deductions (in U.S. dollars) (Please
enter in $XXXX format for each hourly wage earned by employees at your
establishment):
(B) How many employees earned the base hourly wage listed in (A)?
(Please enter only numerals):
(C) How many of the employees listed in (B) are covered by the FLSA?
(Please enter only numerals):
(D) How many of the employees listed in (B) are U.S. citizens or
nationals, U.S. or American Samoan permanent residents, or citizens of
the FAS? (Please enter only numerals):
(E) How many total hours not including overtime hours) did employees
who earned this base hourly wage work during this pay period? (Please
report hours rounded to the quarter hour and to two decimal places):
(F) How many total overtime hours did employees who earned this base
hourly wage work during this pay period? (Please report hours rounded
to the quarter hour and to two decimal places):
(G) What were the total earnings (before taxes and deductions) of
employees who earned this wage during this pay period, including
overtime, bonuses, and commissions? Please do not include the value of
employee benefits. (Please round to the nearest whole dollar):
Example:
(A): $4.63;
(B): 10;
(C): 9;
(D): 2;
(E): 819.25;
(F): 30.50;
(G): $1,763.00.
28. Did this establishment change any benefits offered to a typical
U.S. citizen, national, or permanent resident paid an hourly wage
between the pay periods for 2007 and 2009 that included June 12th?
Please do not include American Samoa permanent residents or citizens
of the FAS.
Changes in benefits include:
* Introduction of a new benefit;
* Change in the level of a benefit offered;
* Elimination of a benefit.
(Please check One box per benefit)
a. Paid vacation or personal leave (not including sick leave):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
b. Paid sick leave:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
c. Paid holidays:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
d. Health insurance or reimbursement for expenses:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
e. Disability:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
f. Retirement benefits, such as 401(k)s or pensions:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
g. Housing allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
h. Food allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
i. Local transportation allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
j. Transportation to employees' home countries:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
k. Others (Please specify):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
29. If any benefit was added, eliminated, or was increased or
decreased, can you please describe the changes below?
30. Did this establishment change any benefits offered to a typical
non-U.S. citizen, national, or permanent resident paid an hourly wage
between the pay periods for 2007 and 2009 that included June 12th?
Changes in benefits include:
* Introduction of a new benefit;
* Change in the level of a benefit offered;
* Elimination of a benefit.
(Please check One box per benefit)
a. Paid vacation or personal leave (not including sick leave):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
b. Paid sick leave:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
c. Paid holidays:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
d. Health insurance or reimbursement for expenses:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
e. Disability:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
f. Retirement benefits, such as 401(k)s or pensions:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
g. Housing allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
h. Food allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
i. Local transportation allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
j. Transportation to employees' home countries:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
k. Others (Please specify):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
31. If any benefit was added, eliminated, or was increased or
decreased, can you please describe the changes below?
32. Are any of the employees on this establishment's payroll paid an
annual salary instead of an hourly wage? (Please check only One box)
Yes: Continue with Question 33;
No: Skip to Question 39;
Don't know: Skip to Question 39.
33. What was the total number of employees paid an annual salary on
this establishment's payroll during the pay periods that included June
12th for 2007,2008, and 2009 who were (a) U.S. citizens, nationals, or
permanent residents; (b) American Samoa permanent residents and
citizens of the FAS; (c) citizens or permanent residents of nations
other than the U.S., American Samoa, or the FAS?
If this establishment was not in operation during the pay period that
included June 12th in any year, please enter a "0" in the
corresponding box.
(Please enter numerals in each box below)
Employee category: (a) U.S. citizens, nationals, or permanent
residents;
Pay period that includes June 12, 2007:
Pay period that includes June 12, 2008:
Pay period that includes June 12, 2009:
Employee category: (b) American Samoa permanent residents and citizens
of the FAS;
Pay period that includes June 12, 2007:
Pay period that includes June 12, 2008:
Pay period that includes June 12, 2009:
Employee category: (c) citizens or permanent residents of nations
other than the U.S., American Samoa, or the FAS;
Pay period that includes June 12, 2007:
Pay period that includes June 12, 2008:
Pay period that includes June 12, 2009:
34. During the pay period for 2007, 2008, and 2009 that includes June
12th, how many full- and part-time employees on this establishment's
payroll were paid an annual salary in the following ranges, and how
many of these employees were covered under the FLSA?
Please do not include employees paid an hourly wage. Data for
employees paid an hourly wage were reported separately in question 27.
Full-time employees are those who typically worked 35 or more hours
per week; part-time employees are those who typically worked less than
35 hours per week. If this establishment was not in operation during
the pay period, please enter a 0 for that year in each box.
(Please enter numerals only in each box below)
Annual salary range before deductions for taxes and benefits (in U.S.
dollars):
Less than 10,000:
10,000 to 19,999:
20,000 to 29,999:
30,000 to 39,999:
40,000 to 49,999:
50,000 to 59,999:
60,000 to 69,999:
70,000 to 79,999:
80,000 to 89,999:
90,000 to 99,999:
100,000 or more:
Pay period including June 12, 2007; Number of full-time employees:
Pay period including June 12, 2007; Number of part-time employees:
Pay period including June 12, 2007; Number of employees covered by
FLSA:
Pay period including June 12, 2008; Number of full-time employees:
Pay period including June 12, 2008; Number of part-time employees:
Pay period including June 12, 2008; Number of employees covered by
FLSA:
Pay period including June 12, 2009; Number of full-time employees:
Pay period including June 12, 2009; Number of part-time employees:
Pay period including June 12, 2009; Number of employees covered by
FLSA:
Example:
Annual salary range before deductions for taxes and benefits (in U.S.
dollars):
Less than 10,000:
10,000 to 19,999:
20,000 to 29,999:
30,000 to 39,999:
40,000 to 49,999:
50,000 to 59,999:
60,000 to 69,999:
70,000 to 79,999:
80,000 to 89,999:
90,000 to 99,999:
100,000 or more:
Pay period including June 12, 2007; Number of full-time employees: 31;
Pay period including June 12, 2007; Number of part-time employees: 2;
Pay period including June 12, 2007; Number of employees covered by
FLSA: 33;
Pay period including June 12, 2008; Number of full-time employees: 28;
Pay period including June 12, 2008; Number of part-time employees: 0;
Pay period including June 12, 2008; Number of employees covered by
FLSA: 28;
Pay period including June 12, 2009; Number of full-time employees: 32;
Pay period including June 12, 2009; Number of part-time employees: 2;
Pay period including June 12, 2009; Number of employees covered by
FLSA: 34.
35. Did this establishment change any benefits offered to a typical
U.S. citizen, national, or permanent resident paid an annual salary
between the pay periods for 2007 and 2009 that included June 12th?
Please do not include American Samoa permanent residents or citizens
of the FAS.
Changes in benefits include:
* Introduction of a new benefit;
* Change in the level of a benefit offered;
* Elimination of a benefit.
(Please check One box per benefit)
a. Paid vacation or personal leave (not including sick leave):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
b. Paid sick leave:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
c. Paid holidays:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
d. Health insurance or reimbursement for expenses:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
e. Disability:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
f. Retirement benefits, such as 401(k)s or pensions:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
g. Housing allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
h. Food allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
i. Local transportation allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
j. Transportation to employees' home countries:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
k. Others (Please specify):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
36. If any benefit was added, eliminated, or was increased or
decreased, can you please describe the changes below?
37. Did this establishment change any benefits offered to a typical
non-U.S. citizen, national, or permanent resident paid an annual
salary between the pay periods for 2007 and 2009 that included June
12th?
Changes in benefits include:
* Introduction of a new benefit;
* Change in the level of a benefit offered;
* Elimination of a benefit.
(Please check One box per benefit)
a. Paid vacation or personal leave (not including sick leave):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
b. Paid sick leave:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
c. Paid holidays:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
d. Health insurance or reimbursement for expenses:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
e. Disability:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
f. Retirement benefits, such as 401(k)s or pensions:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
g. Housing allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
h. Food allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
i. Local transportation allowances:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
j. Transportation to employees' home countries:
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
k. Others (Please specify):
Did not offer in any year:
Benefit was reduced:
Level of benefit increased:
Level of benefit remained about the same:
Level of benefit decreased:
Benefit was eliminated:
38. If any benefit was added, eliminated, or was increased or
decreased, can you please describe the changes below?
Part II: Questions About The Minimum Wage Increases:
The questions in this section ask about past and future actions this
establishment has taken and what factors contributed to the decisions
to implement the each action.
39. Between June 2007 and June 2009, did this establishment implement
any of the following actions? (Please check One box per action)
a. Introduced labor-saving strategies or technology:
Yes:
No:
Don't know:
Not applicable:
b. Introduced other cost-saving strategies (e.g., energy-saving
technologies):
Yes:
No:
Don't know:
Not applicable:
c. Reduced operating capacity or services offered:
Yes:
No:
Don't know:
Not applicable:
d. Delayed expansion of business:
Yes:
No:
Don't know:
Not applicable:
e. Relocated business outside of American Samoa:
Yes:
No:
Don't know:
Not applicable:
f. Closed establishment temporarily:
Yes:
No:
Don't know:
Not applicable:
g. Laid off salaried employees:
Yes:
No:
Don't know:
Not applicable:
h. Laid off employees who are paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
i. Reduced regular work hours for employees paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
j. Reduced overtime work hours for employees paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
k. Decreased level of benefits for salaried employees:
Yes:
No:
Don't know:
Not applicable:
l. Decreased level of benefits for employees paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
m. Implemented a hiring freeze:
Yes:
No:
Don't know:
Not applicable:
n. Raised prices of goods or services:
Yes:
No:
Don't know:
Not applicable:
o. Others (Please specify):
Yes:
No:
Don't know:
Not applicable:
If You Checked Yes For Any Of These Actions, Continue To Questions 40.
If you did not check Yes for any of these actions, skip to question 43.
40. To what extent did the past minimum wage increases in 2007, 2008,
and 2009 contribute to this establishment's decision to implement each
action listed in question 39 for which you checked Yes?
(Please check One box per action)
a. Introduced labor-saving strategies or technology:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
b. Introduced other cost-saving strategies (e.g., energy-saving
technologies):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
c. Reduced operating capacity or services offered:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
d. Delayed expansion of business:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
e. Relocated business outside of American Samoa:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
f. Closed establishment temporarily:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
g. Laid off salaried employees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
h. Laid off employees who are paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
i. Reduced regular work hours for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
j. Reduced overtime work hours for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
k. Decreased level of benefits for salaried employees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
l. Decreased level of benefits for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
m. Implemented a hiring freeze:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
n. Raised prices of goods or services:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
o. Others (Please specify):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
41. To what extent did expectations of future minimum wage increases
in 2010 and beyond contribute to this establishment's decision to
implement each action listed in question 39 for which you checked Yes?
(Please check One box per action)
a. Introduced labor-saving strategies or technology:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
b. Introduced other cost-saving strategies (e.g., energy-saving
technologies):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
c. Reduced operating capacity or services offered:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
d. Delayed expansion of business:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
e. Relocated business outside of American Samoa:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
f. Closed establishment temporarily:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
g. Laid off salaried employees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
h. Laid off employees who are paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
i. Reduced regular work hours for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
j. Reduced overtime work hours for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
k. Decreased level of benefits for salaried employees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
l. Decreased level of benefits for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
m. Implemented a hiring freeze:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
n. Raised prices of goods or services:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
o. Others (Please specify):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
42. To what extent did each of the following factors contribute to
this establishment's decision to implement actions listed in question
39?
(Please check One box per cost)
a. Increased utility costs:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
b. Increased costs of materials:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
c. Increased transportation/shipping costs:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
d. Increased maintenance costs:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
e. Decreased number of customers:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
f. Changes to U.S. immigration laws:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
g. Changes in business taxes or fees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
f. Others (please specify):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
43. Do you think this establishment will implement any of the
following actions in the neat 18 months? (Please check One box per
action)
a. Introduced labor-saving strategies or technology:
Yes:
No:
Don't know:
Not applicable:
b. Introduced other cost-saving strategies (e.g., energy-saving
technologies):
Yes:
No:
Don't know:
Not applicable:
c. Reduced operating capacity or services offered:
Yes:
No:
Don't know:
Not applicable:
d. Delayed expansion of business:
Yes:
No:
Don't know:
Not applicable:
e. Relocated business outside of American Samoa:
Yes:
No:
Don't know:
Not applicable:
f. Closed establishment temporarily:
Yes:
No:
Don't know:
Not applicable:
g. Laid off salaried employees:
Yes:
No:
Don't know:
Not applicable:
h. Laid off employees who are paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
i. Reduced regular work hours for employees paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
j. Reduced overtime work hours for employees paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
k. Decreased level of benefits for salaried employees:
Yes:
No:
Don't know:
Not applicable:
l. Decreased level of benefits for employees paid an hourly wage:
Yes:
No:
Don't know:
Not applicable:
m. Implemented a hiring freeze:
Yes:
No:
Don't know:
Not applicable:
n. Raised prices of goods or services:
Yes:
No:
Don't know:
Not applicable:
o. Others (Please specify):
Yes:
No:
Don't know:
Not applicable:
If you checked Yes for Any of these actions, continue to question 44.
If you did not check Yes for any of these actions, skip to question 46.
44. To what extent do you think the minimum wage increases will
contribute to this establishment's decision to implement each action
listed in question 43 for which you checked Yes?
(Please check One box per action)
a. Introduced labor-saving strategies or technology:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
b. Introduced other cost-saving strategies (e.g., energy-saving
technologies):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
c. Reduced operating capacity or services offered:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
d. Delayed expansion of business:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
e. Relocated business outside of American Samoa:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
f. Closed establishment temporarily:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
g. Laid off salaried employees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
h. Laid off employees who are paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
i. Reduced regular work hours for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
j. Reduced overtime work hours for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
k. Decreased level of benefits for salaried employees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
l. Decreased level of benefits for employees paid an hourly wage:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
m. Implemented a hiring freeze:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
n. Raised prices of goods or services:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
o. Others (Please specify):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
45. To what extent do you think each of the following factors will
contribute to this establishment's decision to implement the actions
listed in question 43?
(Please check One box per cost)
a. Increased utility costs:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
b. Increased costs of materials:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
c. Increased transportation/shipping costs:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
d. Increased maintenance costs:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
e. Decreased number of customers:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
f. Changes to U.S. immigration laws:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
g. Changes in business taxes or fees:
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
f. Others (please specify):
Not at all:
To a small extent:
To a moderate extent:
To a large extent:
Don't know:
46. Would you like to provide any other comments regarding the impact
the increases in the minimum wage or other factors had or will have on
this establishment or its employees?
47. What is the name, title, and contact information of the primary
person who completed this questionnaire in case GAO needs to follow up
on information provided in this questionnaire?
a. Name of person completing the questionnaire:
b. Title of person completing the questionnaire:
c. E-mail address of person completing the questionnaire:
d. Phone number of person completing the questionnaire:
e. Fax number of person completing the questionnaire:
48. What is this establishment's mailing address?
This concludes the questionnaire. Thank you very much for your
assistance!
[End of section]
Appendix VIII: Comments from the Department of the Interior:
United States Department of the Interior:
Office Of The Secretary:
Washington, DC 20240:
March 10, 2010:
Mr. David Gootnick:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Mr. Gootnick:
The Department of the Interior, through its Office of Insular Affairs,
has reviewed the U.S. Government Accountability Office's Report Draft
No. GAO-10-333 entitled: American Samoa And Commonwealth Of The
Northern Mariana-Islands: Wages, Employment, Employer Actions,
Inflation-Adjusted Earnings, And Worker Views Since Minimum Wage
Increases Began.
The Congressional request for the Report is contained in the American
Recovery and Reinvestment Act of 2009 that the GAO shall conduct a
study to:
(1) Assess the impact of the minimum wage increases...in 2007 and
2008...on the rates of employment and the living standards of workers,
with full consideration of the other factors that impact rates of
employment and the living standards of workers such as inflation in
the cost of food, energy, and other commodities; and;
(2) Estimate the impact of any further wage increases on rates of
employment and the living standards of workers...with full
consideration of the other factors that may impact the rates of
employment and the living standards of workers, including assessing
how the profitability of major private sector firms may be impacted by
wage increases in comparison to other actors such as energy costs and
the value of tax benefits.
The Department values the fact that the Report contains a great deal
of useful and diverse information on both American Samoa and the
Commonwealth of the Northern Mariana Islands (CNMI), and agrees with
the GAO's findings. The Department, however, notes that there is a
lack of sufficient commentary on the future impact of minimum wage
increases in American Samoa and the CNMI. With regard to the impact of
further wage increases contained in item (2) above, the relatively
minor amount of material is interspersed throughout the Report among
the findings on the minimum wage impact from 2007 to date. Currently,
there is little research or data on the implementation and impact of
Federal minimum wage rules in American Samoa and the CNMI, and the
Report, along with the subsequent reviews, could be instrumental in
identifying trends.
The downward spiraling economic situations in the U.S. territories of
American Samoa and the CNMI present an austere future for the areas,
and information in the Report helps to identify the immediate need for
actions to assist the territories. In American Samoa there is only one
major industry, i.e., canning tuna, and one of the only two canneries
has already closed its operations, as is identified in the Report,
"cannery officials cited that minimum wage increases were a
significant contributing factor". The closure of the cannery resulted
in the layoff of over 2,100 employees, and closure of the one
remaining cannery will result in the layoff of 2,000, plus more
employees. The number of displaced workers is quite significant as the
canneries have employed over one-third of the work force and provided
approximately 35% of total revenues of the American Samoa Government.
Additionally, the ripple effect of the closures on other businesses
will reduce further the revenues to the local government. The Report
also identified that:
"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."
Regarding public support in American Samoa, the Report identified that
"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 Report identified that factors other than minimum wage
issues, such as immigration changes and living standards, have a
greater impact on the economy.
Developing solutions to assist the U.S. territories of American Samoa
and the CNMI and the other insular areas for which OIA has
responsibilities continues to prove challenging, OIA is meeting with
other Federal agencies, leaders of the respective insular areas,
nongovernmental organizations and members of the public to help find
solutions to challenges that are sometimes inadvertently exacerbated
by the application of U.S. domestic policies and trade agreements on
these remote, resource-poor insular areas.
If you have any questions, please feel free to communicate with me
directly at (202) 2084709, or with Nikolao Pula, Director of the
Office of Insular Affairs, at (202) 208-4736.
Sincerely,
Signed by:
Anthony M. Babauta:
Assistant Secretary for Insular Areas:
[End of section]
Appendix IX: Comments from the American Samoa Government:
Note: A GAO comment supplementing those in the report text appears at
the end of this appendix.
Office Of The Governor:
American Samoa:
Togiola T.A. Tulafono, Governor:
Faoa A. Sunia, Lieutenant Governor:
A.P. Lutali Executive Office Building:
Pago Pago, American Samoa 96799:
www.americansamoa.gov:
Telephone: (684) 633-4116:
Fax: (684) 633-2269:
go@americansamna.gov:
Serial: 223:
March 10, 2010:
David Gootnick:
Director, International Affairs and Trade:
U.S Government Accountability Office:
441 G Street NW:
Washington, DC 20548:
Subject: Official Response to GAO Draft Report on Minimum Wage
Increases (GAO-10-333):
Dear Mr. Gootnick:
Thank you for the opportunity to review your draft report on the
impact of the 2007 federal minimum wage increases in American Samoa
and the CNMI. Its description of wages, employment, employer actions,
inflation adjusted earnings and worker views as required by the
American Recovery and Reinvestment Act of 2009, seems to be a fairly
accurate depiction of the impacts that have resulted from the minimum
wage increases in American Samoa. My comments regarding each of those
issues are outlined below:
1. Wages - The GAO's wage impact estimates seem reasonable. However,
the report does not address critical conclusions implicit in these
wage impacts. One of the primary conclusions 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 will be lost (and that have
been lost thus far), cannot be overstated. Especially when considering
of the magnitude of the effects described in the GAO report for the
first three minimum wage increases.
2. Employment ” The employment impact estimates are also quite
reasonable. Likewise however, the report does not address critical
conclusions implicit in these employment impacts. After just the first
three minimum wage increases, total employment fell 4287 (including
the cannery closure) or 22 percent. 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. The GAO job loss estimates suggest that the minimum
wage may be causing serious job losses in industries other than the
canneries. The GAO estimated job losses of 2287 even before the COS
cannery closure. If this holds true and this trend continues as
expected, American Samoa could lose of half of its total jobs by 2016.
The GAO report anticipates economic decline far more devastating than
previously projected. [See comment 1]
3. Employer Actions ” 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. 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. Large employers (representing 84
percent of private sector workers) have indicated that they plan to
close or relocate. These large employers and other smaller companies
attribute the necessity of these cost cutting measures largely to
increases in the minimum wage. Both canneries stated that the rise in
the minimum wage was a significant contributing factor to the closure
of the COS cannery.
4. Inflation Adjusted Earnings ” It would seem to follow from the
above that those who are able to remain employed will have greater
real incomes. However, 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. 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 closure of
the COS cannery, the number of shipping vessels coming to American
Samoa has declined. 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. 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.
5. Worker Views ” With the shutdown of COS and the attendant layoffs,
workers began questioning the wisdom of raising the minimum wage.
Temporary jobs that have been provided through the U.S. Department of
Labor's National Emergency Grant related to the recovery and cleanup
efforts, made necessary by the earthquake and tsunami of September 29,
2009, have helped those laid off by the COS closure or who lost their
job due to other business cutbacks maintain employment. However as
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. With the
closure of COS and with continuing, significant job losses in the
private sector, the revenue streams that fund local government
services and programs will likewise continue to see considerable
decreases. If losses to private sector jobs continue as projected,
decreases to government revenue will necessitate cutbacks to
government services and in government employment.
I thank the GAO for this work and will be pleased to provide any
further support to this important report.
Sincerely,
Signed by:
Togiola T. A. Tulafono:
Governor:
cc: Hon. Faoa A. Sunia, Lt. Governor:
The following is GAO's comment on the American Samoa government's
letter, dated March 10, 2010.
GAO Comment:
1. The American Samoa government developed and cited its own estimates
of employment loss based on the information included in our 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. 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. In
addition, our questionnaire measured employment by respondents in June
of each year, while the SSA data measured the entire year's employment.
[End of section]
Appendix X: Comments from the Commonwealth of the Northern Mariana
Islands Government:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Department of Commerce:
Commonwealth Of The Northern Mariana Islands:
Caller Box 10007 CK, Saipan, MP 96950:
Tel. (670) 664-3000:
Fax: (670) 664-3067:
email: commereedept@pticom.com:
March 11, 2010:
Mssrs. David Gootnick and Torn McCool:
Directors, International Affairs and Trade:
Government Accountability Office:
Subject: Response to CNMI Wages, Employment, Employer Actions, Adjusted
Earnings, and Worker Views since Minimum Wage Increases Began Report:
Dear Mssrs. Gootnick and McCool:
The CNMI Department of Commerce is pleased with the opportunity to
comment on the GAO report #10-333 on the minimum wage increases in the
CNMI. Please find our responses as attached.
If we can be of further assistance in the issuance of the final
report, please let us know.
Thank you,
Signed by:
Michael J. Ada:
Secretary of Commerce:
cc: Governor, CNMI:
The draft GAO-10-333 intends to describe the CNMI since 2007 with
respect to the increase of minimum wage, by evaluating the following;
(1) wages, (2) employment, (3) employer action, (4) inflation-adjusted
earnings, and (5) worker's view. [pg.15 ” Objective, Scope, and
Methodology]
We are referencing GAO draft report finding and providing our
responses below:
Report finding #1. Wages(p.9):
GAO draft report states, "About a third of private sector workers
employed by CNMI questionnaire respondents were directly affected by
the first minimum wage increase, in July 2007, according to large-
employer questionnaire responses. From 2007 through 2009, as a result
of the first three wage increase, the median wage rose by about 19
percent in the tourism industry compared with about 18 percent for the
rest of the private sector, for workers employed by questionnaire
respondents. The gap between the lowest and highest paid workers
narrowed by 9 percent. Based on questionnaire responses about workers'
wages as of June 2009, the future minimum wage increases would affect
the wages of more than 80 percent of those private sector workers by
2015."
This finding is insufficient and not representative of the overall
CNMI work force because of the way the survey was conducted and for
several other reasons as listed below: [See comment 1]
1) GAO draft report states, "The questionnaire responses cannot be
used to make inferences about all employers and workers, in each
insular area, particularly in the CNMI. First, because the lists of
employers that received the questionnaire were intended to include
only those with more than 50 employees, the lists were not
representative of all employers.[Footnote 1] Second, we were unable to
survey employers that had closed between 2007 and our questionnaire
date, including those in the CNMI garment industry. Third, some
nonresponse bias may exist in some of the questionnaire responses,
since characteristics of questionnaire respondents may differ from
those of nonrespondents in ways that affect the responses (e.g. if
those that employ a larger number of workers would have provided
different responses than those that employ a smaller number). Last, it
is possible that some employers' views of the minimum wage increases
may have influenced their responses [pg. 21]." [See comment 1]
2) The report finding failed to indicate that responses from the
questionnaires received "...greater coverage among public sector
workers" than private sector workers. We question why the report
finding did not include employees in the public sector. [See comment 2]
3) The report is both not quantitative and qualitative. This is
because the methodology of surveying only large companies employing 50
or more employees is not a representation of the entire CNMI
workforce. Furthermore, we question the inference that 33 companies
who responded out of the 61 companies surveyed is a valid
representation to base an accurate description of wages and employer
actions in the CNMI since 2007. [See comment 1]
4) The questionnaire failed to obtain views of smaller businesses or
those employing less than 50 employees who may not have the financial
resources to cope with the yearly minimum wage increases, or other
reported factors, as opposed to the larger companies. [See comment 1]
Report finding #2. Employment (p. 9):
GAO draft report states, "From 2006 through 2008, the total number of
people employed fell by about 27 percent, according to CNMI government
tax data, largely reflecting garment factories' closure. Small
employers and other private sector officials expressed mixed views
about the future minimum wage increases, including concern that thy
would make it more difficult to attract new industries to the CNMI;
however, many expressed concerns about changes to immigration law.
Public sector officials said CNMI government employees will be more
directly affected by future increases, increasing budget pressures."
This report finding above is accurate, and therefore the minimum wage
increases every year and the immigration changes will only expedite
the plight of small business employers and private sector officials.
The report mentioned that several businesses have dosed shop, cut back
on employee benefits, and have plans to either lay off more employees
or shut their doors if the increases continue.
Sometime during the Clinton administration, the minimum wage for the
United States was around the $5.15 mark. Then President Clinton
proposed to Congress that the minimum wage be increased to $6.15
($1.00 above the minimum wage) to add value to the workers' purchasing
power. The proposal was to take place over a two-year period. His
administration cited economic studies done by the National Economic
Council that the minimum wage increase:
* Has no negative impact on employment and can even increase
employment;
* Will ensure that all workers can participate in the growing economy;
* Past increases have helped reduce welfare caseloads;
* Will help ensure that parents can raise their children out of
welfare.
We mentioned the Clinton administration to point out that the yearly
increases in minimum wage in the CNMI might actually have a reverse
effect of what the Clinton administration proposed. The Clinton
proposal was a dollar increase within a two-year span only. Whereas,
the CNMI minimum wage increases span over a nine-year period, or a
total increase of $4.20. This yearly increases will have negative
impacts on the large and small businesses in the CNMI as evident from
the concerns of small business employers and private sector officials
as stated in the GAO draft report.
We propose capping the minimum wage at the current rate of $4.55 to
allow an in-depth assessment to be conducted on the effects of the
earlier and current minimum wage increases on private and public
sectors. We also propose that we let the economy adjust to the $4.55
mark given the closure of the garment industry and the new immigration
law.
Report finding #3. Employer actions (pp.9-10):
GAO draft report states, "CNMI employers responding to our
questionnaire reported having taken cost-cutting actions, such as
freezing hiring, since the minimum wage increases began. Employers
also reported planning to take such actions by the end of 2010, and
some attributed their planned actions largely to the minimum wage
increases. Employers also noted other factors, such as changes to
immigration law and increased shipping and maintenance costs, that
contributed to their actions. Based on an analysis of responses from
the 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." [See comment 3]
This report finding reflects only those larger companies employing 50
or more workers but not the smaller companies employing less than
that. Considering smaller companies are more susceptible to minimum
wage increases, the negative impact should be greater than what is
stated above. Again, we propose capping the increased minimum wage at
the current rate of $4.55 to allow in-depth studies to include the
smaller business community and the effects of the earlier and current
increases.
Report finding #4. Inflation-adjusted earnings (p. 10):
GAO draft report states, "CNMI government tax data and consumer price
data show that, from 2006 to 2008, inflation-adjusted earnings dropped
by about 6 percent, resulting from a rise in median annual earnings of
about 12 percent while local prices rose by about 19 percent 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, we estimate that inflation-adjusted earnings for
CNMI minimum wage workers who retained their jobs and full hours rose
by about 12 percent from 2006 to 2008." [See comment 4]
Even though the draft report estimates that inflation-adjusted
earnings for CNMI minimum wage workers who retained their jobs and
full hours rose by about 12 percent from 2006 to 2008, it can be
construed as more purchasing power for said minimum wage workers
without weighing other important factors. The statement is misleading
because your draft report also mentioned that local prices of goods
and services rose by 19 percent. This one factor will have an impact
on the 12 percent increase in inflation-adjusted wages. Furthermore,
the report did not include inter-island inflationary conditions.
At the end of the day, the minimum wage earner may have taken home
more disposable income, but said income is with little value given the
increase in prices of goods and services, among other things.
It would he helpful to the decision makers in the CNMI to include in
your draft report the real value in dollar amounts of the minimum wage
increases before and after inflation has been factored in.
Report finding #5. Worker views (p.10):
GAO draft report states, "Workers participating in our discussion
groups generally expressed support for the minimum wage increases and
cited other factors affecting living standards. Participants observed
that although the wage increases had led some employers to reduce
benefits for foreign workers, the wage increases had benefited local
workers. In addition, participants expressed concern about the
implementation of U.S. immigration law." [See comment 5]
We question the sufficiency and the integrity of all the report's
statements with respect to views of the discussion groups. The reason
is, as stated in your report, "...they [discussion groups] are not
designed to provide results generalizable to a larger population or
provide statistically representative samples or quantitative
estimates. They represent the views only of the participants in our 18
groups, and may or may not be representative of the population of
employers and workers may be different from those who participated in
our discussion groups. In addition, while we attempted to hold
discussion groups with as many groups as our resources allowed, the
groups and participants in the groups were not random samples of
employers and workers in these insular areas (p.24]."
Conclusion:
If this report (GA0-10-333) is stating that such a minimum wage
increase would greatly affect our economy, based on a survey of the
larger employers, then one should deduced that a greater exponential
impact will fall upon the smaller employers. An evaluation on the
number of smaller employers is not even stated. If the number of
smaller employers is vast throughout the CNMI, then such a reference
should at least be hinted at to show that an impact is eminent and
that serious considerations from the federal government should be a
top priority; direct federal support on statistics, increase federal
financial funding, and other support to help the CNMI brace and
cushion itself from the minimum wage increase and also reduction in
revenue as a result of both direct and indirect impacts of the U.S.
Federalization on CNMI Immigration. We question the methodology of
this report. The following statements below by GAO seem to agree that
the minimum wage issue coupled with other factors will have a great
impact of the CNMI's economy:
1. "Our review had certain limitations in addition to those already
noted. In particular, although our approach yielded information on
trends in employment, wages, and earnings in both areas, it is
difficult to distinguish between the effects of minimum wage increase
and other factors, including the global recession in 2009,
fluctuations in energy prices, global trade liberalization, and the
application of U.S. immigration law to the CNMI. However, we
determined that the available data were, apart from these limitations,
adequate and sufficiently reliable for the purpose of our review."
[pg.5]
2. "Based on questionnaire responses about workers' wages as of June
2009, the future minimum wage increases would affect the wages of more
than 80 percent of those private sector workers by 2015." [pg.9]
3. "Based on an analysis of responses from CNMI Employers in the hotel
industry, we found that raising room rates to cover higher wage cost
may cause a 2.6 to 13.7 percent decline in visits to the CNMI." [pg.
10]
The GAO should ask for more time, considering they acknowledged the
time and resources limitation allowable for them to complete this
study. The CNMI has a unique and sensitive economy that is slowly
realigning its foundation for a stronger economy. Any premature
conclusions or insinuations will be detrimental as supported in the
GAO report: [See comment 6]
1. "...it seemed likely that the CNMI's existing economic decline
would be made worst and that the CNMI population would continue to
decline." [pg. 44] (Reporting on January 2008 U.S. DOL 'Impact of
Increased MM. Wages...")
2. "Small business owners and managers told us ...difficult for the
economy to sustain wage increases while it was experiencing other
difficulties ...increased shipping costs, decreased government tax
revenues, and decreased demand for goods and services..." [pg.86]
3. Similarly, many larger private sector employers...expressed greater
concern about economic effects of U.S. immigration law on the CNMI
economy ...more difficult to attract new businesses, such as call
centers and new tourism businesses, to the CNMI." [pg.87]
Comment letter Footnote:
[1] Because our final list of CNMI larger employers was based in part
on judgments by government and private sector representatives, the
list may have included employers with fewer than 50 workers or
mistakenly excluded some large companies.
The following are GAO's comments on the CNMI government's letter,
dated March 11, 2010.
GAO Comments:
1. The CNMI government stated that our summary-level finding regarding
CNMI wages is insufficient and not representative of the overall CNMI
workforce because of our large-employer questionnaire's coverage.
First, it noted that the questionnaire covers employers with 50 or
more employees but excludes smaller employers. Because key federal
sources of data on the U.S. labor market do not cover these insular
areas, we collected our own data on employers through the
questionnaire, discussion groups, and other methods such as
interviews. Our report appropriately states the limitations of the
questionnaire data and repeatedly notes that the data may not be
representative of all CNMI workers and employers. In addition, we
determined that the most effective and least burdensome method of
collecting information from small employers would be to conduct
discussion groups targeting these employers. Both the Saipan and
Tinian Chambers of Commerce assisted us in inviting small employers to
discussion groups in the CNMI, and our report summarizes their views
(see appendix IV, employment section). Small employers also were
invited, among others, to share their views at a public forum we held
in the CNMI and to send comments to an e-mail account we established
for this purpose. Furthermore, while we use the terms "large
employers" and "small employers" in our report for clarity, the U.S.
Small Business Administration generally defines small employers as
having, depending on the industry and other factors,[Footnote 140]
employees numbering from 500 to 1,500 or fewer. By these definitions,
our questionnaire covers many small employers. Second, the CNMI
government expressed concern about the questionnaire's response rate,
given that 33 out of 61 employers responded to our questionnaire.
While we spent considerable effort to obtain as high a response rate
as possible, employers were not required to respond, and the response
rate reflects the individual decisions of CNMI employers who received
the questionnaire about whether to provide information regarding the
extent to which minimum wage increases had affected their operations.
2. The CNMI government incorrectly stated that the report does not
include findings related to employees in the public sector. Our
findings related to public sector employees are included in multiple
sections of appendix IV. In addition, the CNMI government stated that
our summary-level finding related to wages should note that the
questionnaire included greater coverage of public than private sector
employees. We disagree. Our report findings on public and private
sector employees combined note that the CNMI government accounted for
a higher percentage of workers employed by questionnaire respondents
than in the actual CNMI workforce, so the government's responses
disproportionately influence our questionnaire results on the public
and private sectors combined. However, this limitation is not relevant
to findings on public sector workers alone or on private sector
workers alone.
3. The CNMI government stated that GAO's findings related to employer
actions understate the negative impact of minimum wage increases on
small employers. We note that the employer actions section does not
address the actions of small employers because they were not covered
by the questionnaire; however, findings related to small employers are
included in the preceding report section on employment.
4. The CNMI government comments on the inflation-adjusted earnings
findings reflect misunderstanding of the analysis presented. The CNMI
government commented that the analysis of changes in earnings should,
but does not, account for changes in local prices. In fact, the
inflation-adjusted earnings data we present account for changes in
local prices, using local Consumer Price Index data from the CNMI
Department of Commerce. Accordingly, the findings based on the
earnings analyses for both average wage earners and minimum wage
earners fully account for CNMI price increases.
5. The CNMI government stated that it questions the findings related
to worker views based on our discussion groups. As we note in the
report's objectives, scope, and methodology section, discussion groups
are not designed to provide results generalizable to a larger
population or to provide quantitative estimates. However, discussion
groups are a qualitative research method capable of adding valuable
information that may be difficult or impossible to collect through
quantitative methods. Given the relevance of the minimum wage
increases to workers, we considered it critical to include their
views; however, no existing federal data source provided this
information. We believe the discussion groups were an appropriate and
worthwhile approach for collecting and including the views of workers.
6. The CNMI government stated that we should ask for more time to
study the effects of minimum wage increases; however, the law does not
permit additional time for this report. 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.
[End of section]
Appendix XI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
David Gootnick, (202) 512-3149 or gootnickd@gao.gov.
Tom McCool, (202) 512-2642 or mccoolt@gao.gov.
Staff Acknowledgments:
In addition to the contacts named above, Emil Friberg, Assistant
Director, Mark Speight, Assistant General Counsel, Marissa Jones,
analyst-in-charge, Ashley Alley, Benjamin Bolitzer, Joe Carney, Ming
Chen, Gergana Danailova-Trainor, Jill Lacey, Reid Lowe, Luann Moy,
Ramzi Nemo, and Vanessa Taylor made key contributions to this report.
Technical assistance was provided by Kate Brentzel, Muriel Brown,
Giulia Cangiano, Holly Dye, Lawrance Evans, Etana Finkler, Kay
Halpern, Dave Hancock, and Michael Kendix.
[End of section]
Footnotes:
[1] U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007, Pub.L. No. 110-28, §8103, 121
Stat. 188 (May 25, 2007). Under the law, any future changes to the
minimum wage enacted under U.S. law for the 50 states, District of
Columbia, U.S. Virgin Islands, Guam, and Puerto Rico also will apply
to American Samoa and the CNMI. For changes enacted before American
Samoa and the CNMI would have reached the current U.S. minimum wage,
the minimum wages in the two areas would continue to increase in $.50
increments until they reach the federal minimum wage, extending beyond
the current time frames of 2016 and 2015. After each area reaches the
U.S. minimum wage, any additional increase in the U.S. minimum wage
would apply to American Samoa and the CNMI on the same schedule as for
the 50 U.S. states.
[2] The 2007 law required minimum wage increases in May of 2008 and in
May each year thereafter, until the American Samoa and CNMI minimum
wages converged with the U.S. minimum wage. However, on December 16,
2009, the President signed H.R. 3288, providing fiscal year 2010
appropriations for several federal agencies, which includes a
provision delaying the month of the minimum wage increases
implementation in each scheduled year. House Conference Report 111-366
includes a general provision that delays the American Samoa and CNMI
minimum wage increases until September 30, 2010, and until September
30 of each year thereafter until the minimum wages converge.
[3] Consolidated Natural Resources Act of 2008, Pub. L. No. 110-229,
Title VII, 122 Stat. 754, 853 (May 8, 2008).
[4] The Secretary of Homeland Security elected to delay the transition
period start date from June 1, 2009, to November 28, 2009, as
permitted by the law. U.S. immigration law was applied to the CNMI
November 28, 2009, as scheduled; however, implementation of the CNMI
worker permit program was delayed following a federal court injunction
just before the transition period start date that requires the
Department of Homeland Security to allow more time for public comment
on the proposed program regulations.
[5] In 2008, we issued a report on the factors that would affect the
impact of the law's implementation on the CNMI economy, in particular
the CNMI's (1) labor market, including foreign workers; (2) tourism
sector; and (3) foreign investment. See GAO, Commonwealth of the
Northern Mariana Islands: Managing Potential Economic Impact of
Applying U.S. Immigration Law Requires Coordinated Federal Decisions
and Additional Data, [hyperlink,
http://www.gao.gov/products/GAO-08-791] (Washington, D.C.: Aug. 4,
2008). Also see GAO, Commonwealth of the Northern Mariana Islands:
Pending Legislation Would Apply U.S. Immigration Law to the CNMI with
a Transition Period, [hyperlink,
http://www.gao.gov/products/GAO-08-466] (Washington, D.C.: Mar. 28,
2008) and GAO, Commonwealth of the Northern Mariana Islands:
Coordinated Federal Decisions and Additional Data Are Needed to Manage
Potential Economic Impact of Applying U.S. Immigration Law,
[hyperlink, http://www.gao.gov/products/GAO-09-426T] (Washington,
D.C.: May 19, 2009).
[6] Pub. L. No. 111-5, §802 (February 17, 2009). GAO is required to
report on the minimum wage increases between March 15 and April 15 of
2010 and each year thereafter until the minimum wages reach the U.S.
minimum wage.
[7] In addition, the scope of our study does not include workers in
the underground economy.
[8] The SSA data do not cover CNMI government employees and foreign
workers from the Philippines and South Korea.
[9] The federal sources generally used to generate data on wages,
occupations, and employment status for the United States, including
the Current Population Survey and the Current Employment Statistics
program, do not cover these insular areas. The Office of Insular
Affairs of DOI has provided technical assistance to American Samoa and
the CNMI to help with data collection, including funding for the 2005
Household, Income, and Expenditures Surveys (HIES) and past surveys.
However, this assistance has not generated the scope of data collected
by federal sources for the United States more generally.
[10] The American Samoa large-employer questionnaire responses covered
57 percent of the private sector workforce and about 99 percent of the
public sector workforce in 2008. The CNMI large-employer questionnaire
responses covered 20 percent of the private sector workforce,
excluding garment factories, which had all closed by the time of our
questionnaire, and about 87 percent of the total public workforce in
2008.
[11] The federal sources generally used to generate data on wages,
occupations, and employment status for the United States, including
the Current Population Survey and the Current Employment Statistics
program, do not cover these insular areas. The Office of Insular
Affairs of DOI has provided technical assistance to American Samoa and
the CNMI to help with data collection, including funding for the 2005
Household, Income, and Expenditures Surveys (HIES) and past surveys.
However, this assistance has not generated the scope of data collected
by federal sources for the United States more generally. In addition,
the 2005 HIES for American Samoa was not completed and is available
only in draft form.
[12] Because our final list of CNMI large employers was based in part
on judgments by government and private sector representatives, the
list may have included employers with fewer than 50 workers or
mistakenly excluded some large employers.
[13] In Tinian, we held a brief discussion and distributed
questionnaires to all WIC recipients who came in the office that day
for a period of about 2 hours. In Saipan, we distributed
questionnaires to all recipients who came in during 1 hour and with
whom we could talk.
[14] We received CPI data from the CNMI and American Samoa Departments
of Commerce. The series were updated by a subcontractor funded through
a grant from the Office of Insular Affairs.
[15] CNMI CPI data used is consistent with that posted in the CNMI
Department of Commerce's second quarter 2009 CPI tables. (These data
differ from other CNMI CPI data.)
[16] American Samoa Government, Department of Commerce, Statistics
Division, Report of the 2005 American Samoa Household Survey. Data is
based on the 2005 HIES for American Samoa. The 2005 HIES for American
Samoa was not completed and is available only in draft form.
[17] Joseph Kennedy, The Tropical Frontier: America's South Sea Colony
(Mangilao, Guam: University of Guam Micronesian Area Research Center,
2009) and J. Robert Shaffer, American Samoa: 100 Years Under the
United States Flag (Honolulu, Hawaii: Island Heritage Publishing,
2000).
[18] Two deeds of cession were initially completed between Samoan
chiefs, or matai, and the United States in 1900 and 1904 and ratified
by the federal government in 1929. In these deeds, the United States
pledged to promote peace and welfare, to establish a good and sound
government, and to preserve the rights and property of the people. 45
Stat. 1253, c. 281 (Feb. 20, 1929), codified at 48 U.S.C. §1661.
[19] The Secretary exercised broad powers with regard to American
Samoa, including "all civil, judicial, and military powers" of
government in American Samoa. 48 U.S.C. § 1661(c); Exec. Order No.
10,264, 16 Fed. Reg. 6419 (1951).
[20] 48 U.S.C. § 1662a. In addition, persons born in American Samoa
are U.S. nationals but may apply to become naturalized U.S. citizens.
American Samoa residents have many of the rights of citizens of the 50
states but cannot vote in U.S. national elections and often do not
have voting representation in the final approval of legislation by the
full Congress. The Delegate from American Samoa has many of the same
congressional privileges as other representatives, including a vote in
committee and when the House convenes as the Committee of the Whole,
but cannot vote when the House convenes as the House of
Representatives. U.S. noncitizen nationals from American Samoa have
the right to travel freely, live, and work throughout the United
States (22 C.F.R. §53.2, §41.0). However, noncitizen nationals do not
have the same preferences as U.S. citizens for sponsoring immediate
family members for family-based immigration visas. In order to qualify
for the same preference categories as citizens, noncitizen nationals
must become naturalized citizens of the United States, which includes
a requirement to reside in the United States for three months (8
C.F.R. §325.2).
[21] American Samoa Government Single Audit Report (fiscal year 2008).
Additional federal funds may go to component units of the American
Samoa government not covered by the Single Audit, including the Lyndon
B. Johnson Tropical Medical Center, the American Samoa Power
Authority, and American Samoa Community College.
[22] American Samoa Government Single Audit Report.
[23] In an effort to improve accountability for federal funds, DOI's
Office of Insular Affairs (OIA) has designated American Samoa as a
"high-risk" grantee as provided in 43 CFR §12.52, and as recommended
by the department's Inspector General and GAO. This designation allows
OIA to require American Samoa grantees to comply with special
conditions for future or existing grants. OIA will remove this high-
risk designation once the American Samoa Government demonstrates its
compliance with certain fiscal and internal accounting requirements.
See U.S. Department of the Interior, Office of Insular Affairs, Budget
Justifications and Performance Information: Fiscal Year 2010.
[24] In February 2009, Congress enacted, and President Obama signed,
the American Recovery and Reinvestment Act (Recovery Act). Among other
provisions--including the mandate for this and subsequent GAO reports--
the Act appropriates roughly $787 billion in federal spending on
infrastructure, research, and other purposes, providing fiscal
stimulus to the U.S. economy. By January 19, 2010, federal agencies
had reported the availability of Recovery Act funds for American Samoa
totaling $65.9 million and the disbursement of $8.3 million.
[25] Under the Internal Revenue Code, qualifying American Samoa tuna
canneries have received a tax credit for U.S. corporate income taxes.
See 26 U.S.C. §936, 26 U.S.C. §30A note.
[26] From 1997 through 2007, U.S. trade laws and agreements helped
American Samoa's tuna canning industry remain viable in spite of
competition. As tuna exports from other countries into the U.S. market
increased, exports from American Samoa remained constant. In August
2002, tariffs decreased on pouched tuna exported from countries
covered by the Andean Trade Preference Act. In January 2008,
provisions of the North American Free Trade Agreement lifted tariffs
imposed on canned tuna and other tuna products exported from Canada
and Mexico. Nevertheless, some of American Samoa's foreign competitors
still did not qualify for tariff-free access to the U.S. market.
[27] The tax credits under section 936 of the Internal Revenue Code
expired for taxable years beginning after December 31, 2005. Section
30A of the Internal Revenue Code extends the Section 936 credits for
American Samoa until January 2010, subject to certain limitations.
Corporations that were actively conducting business in American Samoa
by 1995 who elected Section 936 status in the last taxable year before
January 1, 2006, could claim a section 30A tax credit until January
2010. See Pub. L. No. 109-432 §119 (Dec. 20, 2006). Section 30A has
been continuously in effect since the expiration of Section 936, and
legislation introduced in the House of Representatives (H.R. 4213,
§144) would extend it for 1 year.
[28] According to the Economic Census 2007, American Samoa's private
sector economy included 812 establishments; 11,247 workers; total
annual payroll of $132.25 million; and transactions (sales, receipts,
revenue, shipments) totaling $1.278 billion. In particular, 44 percent
of employees worked in manufacturing, the largest share of employment
for any single industry. Establishments that are not covered by the
Economic Census include agricultural establishments, schools, and
government-owned establishments, such as utilities, among others.
[29] U.S. Department of Labor, Employment Standards Administration,
Wage and Hour Division, Economic Report: The Minimum Wage in American
Samoa, 2007 (Washington, D.C. May 2007).
[30] In November 2006, Chicken of the Sea's Samoa Packing operation
employed 40 percent (1,906 workers) of the island's fish canning and
processing workers.
[31] Legislation introduced in the 111TH Congress would authorize a
federal subsidy of $200 per metric ton to firms in American Samoa
canning whole tuna delivered directly to the territory. Under the
American Samoa Protection of Industry, Resources, and Employment Act,
the federal government would adjust this amount each year based on
minimum wage increases during the preceding year (H.R. 3583, 111TH
Cong., 2010). The legislation would grant fishing-boat operators a
subsidy of $200 per metric ton of tuna delivered to American Samoa by
eligible vessels with a fishery endorsement from the U.S. Maritime
Administration. The House Committee on Natural Resources, Subcommittee
on Insular Affairs, Oceans and Wildlife, held a hearing on the act on
November 4, 2009.
[32] Canneries in American Samoa have benefited from an exemption from
local taxes, renewable annually, for employers maintaining payrolls at
certain levels. Public and private sector officials said in interviews
that StarKist sought to negotiate a 3-month extension to a tax
exemption provided by the American Samoa government, expiring on
December 31, 2009.
[33] To expand disaster assistance available to American Samoa, on
January 16, 2010, the President increased federal funding to American
Samoa to cover 90 percent of costs resulting from public assistance,
hazard mitigation, and other specified needs. The order also increased
the federal share for debris removal and emergency protective
measures, including increasing direct federal assistance under the
public assistance program to 100 percent of total eligible costs for
30 consecutive days. Under the President's major disaster declaration
of September 29, 2009, the federal government had assumed 75 percent
of these costs.
[34] American Samoa Government, Department of Commerce, Statistics
Division, Report of the 2005 American Samoa Household Survey (draft).
[35] U.S. Department of Commerce, Bureau of the Census, Housing and
Household Economic Statistics Division, The Effects of Government
Taxes and Transfers on Income and Poverty: 2004 (Feb. 14, 2006).
[36] American Samoa Government, Department of Commerce, Statistics
Division, Report of the 2005 American Samoa Household Survey (draft).
[37] U.S. Department of Labor, Bureau of Labor Statistics, and U.S.
Department of Commerce, Bureau of the Census, Current Population
Survey--2005 Annual Social and Economic Supplement.
[38] This population estimate includes 60,608 residents of Saipan;
2,829 residents of Tinian; and 2,490 residents of Rota. See
Commonwealth of the Northern Mariana Islands, Department of Commerce,
Central Statistics Division, Report on the 2005 Household, Income, and
Expenditures Survey (April 1, 2008).
[39] In 1947, the United Nations gave the United States authority to
administer the Trust Territory of the Pacific Islands, which included
the Northern Mariana Islands. The trusteeship over the Northern
Mariana Islands was formally dissolved in 1986.
[40] Covenant to Establish a Commonwealth of the Northern Mariana
Islands in Political Union with the United States of America (Pub. L.
No. 94-241, § 1, 90 Stat. 263 (Mar. 24, 1976), 48 U.S.C. § 1801 note).
Howard P. Willens and Deanne C. Siemer, An Honorable Accord: The
Covenant between the Northern Mariana Islands and the United States
(Honolulu, Hawaii: University of Hawaii Press, 2002).
[41] Under the covenant, the U.S. government may enact legislation in
accordance with its constitutional processes that will be applicable
to the CNMI. To respect the CNMI's right of self-government under the
covenant, certain provisions of the covenant may be modified only with
the consent of both the federal government and the CNMI government.
These provisions include those relating to the political relationship
between the United States and the CNMI; the CNMI constitution,
citizenship, and nationality; the application of the U.S. constitution
to the CNMI; and the land ownership rights of CNMI citizens. Most
other provisions of the CNMI covenant may be modified by the federal
government without the consent of the CNMI government, and local CNMI
laws that were not inconsistent with federal laws or treaties of the
United States when the covenant was enacted remain in effect. In
addition, international treaty obligations between the United States
and other countries apply to the CNMI through the covenant.
[42] The covenant also made certain provisions of the Social Security
Act, the Public Health Service Act, and the Micronesian Claims Act
applicable to the CNMI.
[43] Section 506 of the covenant applied certain provisions of the
Immigration and Nationality Act of 1952 (INA) A relating to
citizenship and family-based permanent immigration to the CNMI.
Certain other nonimmigrant provisions of the INA (T and U) also
applied to the CNMI. See 8 U.S.C. § 1101(a)(15)(T)-(U). In addition,
the covenant provided U.S. citizenship to legally qualified CNMI
residents.
[44] Public Law 110-229 created a nonvoting delegate seat in the U.S.
House of Representatives for the CNMI. In January 2009, the CNMI
elected its first representative to the United States Congress. The
Delegate from the CNMI has many of the same congressional privileges
as other representatives, including a vote in committee and when the
House convenes as the Committee of the Whole, but cannot vote when the
House convenes as the House of Representatives.
[45] Consolidated Natural Resources Act of 2008, Pub.L. No. 110-229,
Title VII, 122 Stat. 754, 853 (May 8, 2008). Certain provisions may be
extended past 2014. The legislation's stated intent is to ensure
effective border control procedures and protect national and homeland
security, while minimizing the potential adverse economic and fiscal
effects of phasing out the CNMI's own foreign worker permit program
and while maximizing the CNMI's potential for economic and business
growth. CNMI immigration law was in effect until the start of the
transition period under the federal legislation; however, federal
restrictions on the total number of foreign workers in the CNMI
applied immediately.
[46] [hyperlink, http://www.gao.gov/products/GAO-08-791].
[47] Independent Auditors' Report on CNMI Government Financial
Statements for the Year Ended September 30, 2008. Additional federal
funds may go to component units of the CNMI government not fully
covered by the single audit, including the Commonwealth Utilities
Corporation, the Commonwealth Development Authority, the Public School
System, and the Marianas Visitors Authority.
[48] On November 10, 2009, the CNMI Governor certified the
commonwealth's intent to request and use federal funds under the act.
By January 19, 2010, federal agencies had reported the availability of
Recovery Act funds for CNMI totaling $53.1 million, and the
disbursement of $11.4 million. Among other initiatives, these federal
funds supported infrastructure projects under the Commonwealth Ports
Authority, as well as augmenting resources available for nutrition
assistance in the Department of Community and Cultural Affairs.
[49] According to the Economic Census 2007, the CNMI's private sector
economy included 1,191 establishments; 22,622 workers; total annual
payroll of $246.1 million; and transactions (sales, receipts, revenue,
shipments) totaling $1.284 billion. Manufacturing employed the largest
share of the total workforce, with 31 percent. Twenty-one percent of
employees worked in accommodation and food services, the second-
largest share of employment for any single industry. Establishments
that are not covered by the Economic Census include agricultural
establishments, schools, and government-owned establishments, such as
utilities, among others.
[50] Northern Marianas College, Business Development Center, An
Economic Study for the Commonwealth of the Northern Mariana Islands,
with funding provided by the U.S. Department of the Interior, Office
of Insular Affairs (Saipan, Commonwealth of the Northern Mariana
Islands, October 1999). See [hyperlink,
http://www.gao.gov/products/GAO-08-791] for more detailed information
regarding the CNMI's economy.
[51] The apparel industry in the CNMI grew and expanded during a time
when international rules governing apparel and textile trade were
being rewritten. Beginning in the 1960s, exporting and importing
nations established the Multifiber Arrangement as a multilateral trade
agreement to govern trade restrictions in textiles. Under the
Multifiber Arrangement, importing countries could negotiate and
implement quota restrictions. The Uruguay Round of Multinational Trade
Negotiations, initiated in September 1986, agreed to a negotiating
objective of integrating the textile sector into the General Agreement
on Tariffs and Trade thereby also contributing to further trade
liberalization. Negotiations on textiles began in 1987, and by
December 1991, the proposed final agreement brought the sector into
conformity with the General Agreement on Tariffs and Trade over a 10-
year period through several stages by which imports could increase
until all quota restrictions are ended after 10 years. In 1994, the
United States agreed to the World Trade Organization Agreement on
Textiles and Clothing to remove quota restrictions in a series of
stages beginning on January 1, 1995, and ending with the removal of
all remaining quotas on January 1, 2005. See Agreement on Textiles and
Clothing, Apr. 15, 1994, Marrakesh Agreement Establishing the World
Trade Organization, Annex 1A, Multilateral Agreement on Trade in
Goods - Results of the Uruguay Round, 33 I.L.M. 28. The end of U.S.
quotas on apparel imports in 2005 negated the value of quota-free
status for Guam and the CNMI. CNMI shipments to the United States
began to fall in advance of the final quota removal.
[52] Government of the Commonwealth of the Northern Mariana Islands,
Department of Commerce, Economic Indicator: A Quarterly Report
(Saipan, Commonwealth of the Northern Mariana Islands, October-
December 2008).
[53] The number of visitors to the CNMI from Japan decreased by 44
percent from 2005 to 2009 and by 28 percent from 2006 to 2008.
[54] The legislation establishes a joint visa waiver program for the
CNMI and Guam, by amending an existing visa waiver program for Guam
visitors. The joint visa waiver program exempts tourism and business
visitors from certain countries who are traveling to the CNMI and Guam
for up to 45 days from the standard U.S. visa documentation
requirements
[55] Northern Marianas College, Business Development Center, An
Economic Study for the Commonwealth of the Northern Mariana Islands,
with funding provided by the U.S. Department of the Interior, Office
of Insular Affairs (Saipan, Commonwealth of the Northern Mariana
Islands, October 1999). The study did not distinguish between U.S.
citizens and U.S. lawful permanent residents, referring to the
combined group as permanent residents.
[56] We reported in May 2008 that the Department of Defense was in the
process of conducting a training study covering both Guam and the CNMI
to identify options for training in the region. GAO, Defense
Infrastructure: Planning Efforts for the Proposed Military Buildup on
Guam Are in Their Initial Stages, with Many Challenges Yet to Be
Addressed, GAO-08-722T (Washington, D.C.: May 1, 2008).
[57] Commonwealth of the Northern Mariana Islands, Department of
Commerce, Central Statistics Division, Report on the 2005 CNMI
Household, Income, and Expenditures Survey (April 1, 2008).
[58] U.S. Department of Commerce, Bureau of the Census, Housing and
Household Economic Statistics Division, The Effects of Government
Taxes and Transfers on Income and Poverty: 2004 (February 14, 2006).
[59] Commonwealth of the Northern Mariana Islands, Department of
Commerce, Central Statistics Division, Report on the 2005 CNMI
Household, Income, and Expenditures Survey.
[60] U.S. Department of Labor, Bureau of Labor Statistics, and U.S.
Department of Commerce, Bureau of the Census, Current Population Survey
--2005 Annual Social and Economic Supplement.
[61] 29 U.S.C. § 206(a)(1)(C).
[62] The federal minimum wage laws apply to employees engaged in
commerce or the production of goods for commerce and to employees who
work for enterprises engaged in commerce or the production of
commerce. An enterprise is deemed to be engaged in commerce or the
production of goods for commerce only if it is an activity of a public
agency, if its annual gross volume of business is at least $500,000,
or if it is engaged in the operation of a hospital, health facility,
or school. 29 U.S.C. § 203(s). Businesses in which the only regular
employees are immediate family members of the owner are not considered
to be enterprises engaged in commerce.
[63] 29 U.S.C. § 213(a)(5). The exemption only applies to these
activities when performed at sea, so employees engaged in these
activities on shore would not qualify for the exemption. See 29 C.F.R.
§ 784.130.
[64] The original FLSA allowed special industry committees to
recommend wages for certain industries to DOL, within specified
minimum and maximum limits, to move lower-wage industries gradually
toward statutory minimums. In 1986, Special Industry Committee 17
mandated raising the minimum wage across several industries in
American Samoa to the nationwide rate of $3.35 per hour. This change
was nullified by Congress in a subsequent law (Pub. L. No. 99-396, §
11 (Aug. 27, 1986)), which required that the minimum wage in American
Samoa be reset to the rates that existed for each industry prior to
the Special Industry Committee 17 rates; this returned the rate for
cannery workers to $2.82 per hour, until it was raised to $2.87 in
March 1991.
[65] Pub. L. No. 110-28, § 8103(b)(2) (May 25, 2007).
[66] Covenant to Establish a Commonwealth of the Northern Mariana
Islands in Political Union with the United States of America, §503(b).
See 48 U.S.C. §1801 note.
[67] Pub. L. No. 110-28, § 8103(b)(1) (May 25, 2007). For delay in
increases until September 2010, see H.R. Rep. No. 111-366 (Dec. 8,
2009) (Conf Rep.).
[68] U.S. Department of Labor, Employment Standards Administration,
Wage and Hour Division, Economic Report: The Minimum Wage in American
Samoa, 2007 (May 2007). DOL issued similar reports for previous
industry committees. DOL did not issue a similar report for the CNMI
because the CNMI set its own minimum wage until July 2007.
[69] Office of the Assistant Secretary for Policy, U.S. Department of
Labor, Impact of Increased Minimum Wages on the Economies of American
Samoa and the Commonwealth of the Northern Mariana Islands (January
2008). The report noted that data and time limitations constrained the
study.
[70] U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007, Pub. L. No. 110-28 (May 25,
2007).
[71] We did not assess the methodologies or assumptions used in these
studies.
[72] Malcolm D. McPhee & Associates with Dick Conway and Lewis Wolman,
American Samoa's Economic Future and the Cannery Industry, prepared
for the American Samoa Department of Commerce under a grant award from
the U.S. Department of the Interior, Office of Insular Affairs
(February 2008).
[73] Malcolm D. McPhee & Associates and Dick Conway, Economic Impact
of Federal Laws on the Commonwealth of the Northern Mariana Islands,
prepared for the CNMI Office of the Governor under a grant from the
U.S. Department of the Interior, Office of Insular Affairs (October
2008). For previous report, see Northern Marianas College, Business
Development Center, An Economic Study for the Commonwealth of the
Northern Mariana Islands, with funding provided by the U.S. Department
of the Interior, Office of Insular Affairs (Saipan, Commonwealth of
the Northern Mariana Islands, October 1999).
[74] We assumed that all workers employed by questionnaire respondents
were legally required to receive the minimum wage; if some were not
covered or were exempt, the minimum wage increase affected fewer
workers than our analysis shows. Before the first increase in July
2007, 37 percent of all American Samoa workers employed by
questionnaire respondents earned wages close enough to the minimum
wage to be directly affected by the first increase. In contrast,
according to Bureau of Labor Statistics estimates, in 2006
approximately 2.2 percent of all hourly workers in the U.S. states
earned the federal minimum wage of $5.15 or less.
[75] According to a 2007 DOL report, an October 2006 survey showed
that 17 percent of American Samoa government employees were paid less
than $4.50 per hour, slightly more than $1.50 above the minimum of
$4.41 per hour. See U.S. Department of Labor, Employment Standards
Administration, Wage and Hour Division, Economic Report: The Minimum
Wage in American Samoa (May 2007).
[76] DOL has previously identified cases of noncompliance with minimum
wage law among U.S. employers. If this occurred in American Samoa,
some workers who are covered by FLSA and are entitled to earn a
minimum wage may not be paid the minimum wage. In questionnaire
responses, no employer reported paying wages below the minimum wage;
however, we did not independently verify the wage and other
information provided to us.
[77] Our analysis reflects the wages of those employed but does not
reflect loss of wages by workers who lost their jobs.
[78] The median government salary might have changed within the
$10,000 to $20,000 range, but our data do not allow us to measure such
variation.
[79] In contrast, recent minimum wage increases in the 50 states did
not cause larger wage increases at the lower end of the wage
distribution. From 2006 to 2008, the U.S. minimum wage increased from
$5.15 in 2006, to $5.85 in July 2007, to $6.55 in July 2008. According
to data from the Bureau of Labor Statistics Current Population Survey,
usual weekly earnings at the 25th percentile increased by 9 percent
and at the 75th percentile by 10 percent (unadjusted for inflation)
during this period.
[80] A 2007 DOL report found that 83 percent of all surveyed employers
and 61 percent of American Samoa government employees were paid less
than $7.00 per hour, based on an October 2006 survey. U.S. Department
of Labor, Employment Standards Administration, Wage and Hour Division,
Economic Report: The Minimum Wage in American Samoa (May 2007).
[81] This count does not correct for the following factors: (a) the
questionnaire was given only to large employers, (b) some employers
did not complete the questionnaire, and (c) we were unable to survey
employers that had closed. As a result, questionnaire responses are
not necessarily representative of all American Samoa workers and
employers. In addition, one cannery told us that, owing to
fluctuations in its numbers of employees throughout the year, the June-
to-June comparison might mask larger decreases in employment.
[82] Particularly since the early 1990s, economists have debated the
overall effects of a minimum wage increase on low-wage employment.
According to a recent review of this literature, although there may be
consensus that the overall effect is negative, there is no consensus
on the size of the effect. For discussion of the economic literature
on the effect of the minimum wage, see David Neumark and William
Wascher, "Minimum Wages and Employment," Foundations and Trends in
Microeconomics, vol. 3, no. 1-2 (2007): 1-182.
[83] American Samoa immigration officials told us that, under current
American Samoa immigration law, workers with guest worker status must
leave the territory if they lose their jobs, while workers with
individual sponsors may remain. About 22 percent of foreign workers
from independent Samoa who were formerly employed by the closed tuna
cannery have guest worker status.
[84] We conducted structured discussion groups with American Samoa
Chamber of Commerce members to collect information on the impact of
the minimum wage increases on employers not covered by our large-
employer questionnaire. Although many small employers not covered by
the questionnaire attended, several participants did receive the
questionnaire.
[85] American Samoa Legislative Staff, A Report Assessing the
Consequences of Tri Union Samoa Packing's Departure, prepared for the
legislative leadership (Pago Pago, American Samoa, May 12, 2009).
[86] According to American Samoa officials, another challenge in
attracting investment and new businesses in American Samoa is
cabotage. With its South Pacific location, American Samoan government
and business officials view Australia and New Zealand as possible
sources of business investment and tourists. However, according to
these officials, restrictions on the ability of Australian and New
Zealand air carriers to land in American Samoa and then continue to
other U.S. destinations, such as Hawaii and Los Angeles, hamper
investment and tourism. The United States restricts foreign airlines
from carrying passengers or cargo between U.S. locations (cabotage)
unless authorized by the U.S Department of Transportation based on
specific criteria. 49 U.S.C. section 40109(g).
[87] The petition also supported re-establishing the previous system
by which special industry committees determined the minimum wages in
the territory. A local non-government group Common Cause has
questioned the validity of the petition signatures and it has stated
support for the $.50 minimum wage increase scheduled for 2010.
[88] Percentages of responses regarding actions are weighted by each
employer's total number of workers in 2009. The percentages of
respondents that attributed the action largely to the minimum wage
increases are weighted to reflect the number of workers employed by
those respondents relative to the total number of workers employed by
respondents that reported the action. The percentages of respondents
that reported other factors contributing to their actions are weighted
by each employer's number of workers in 2009 relative to the total
number of workers employed by all respondents. The weighting approach
gives more weight to responses from employers with larger number of
workers. Data shown cover large employers--generally, those with at
least 50 employees. Questionnaire responses do not include smaller
employers, employers that had closed, or employers that did not
respond to our questionnaire. Although questionnaire responses
represented about 72 percent of the American Samoa workforce, they are
not necessarily representative of all American Samoa workers and
employers. In addition, the tuna canneries and local government
employed a large percentage of workers employed by all questionnaire
respondents, as in the actual American Samoa workforce; as a result,
these employers' responses significantly affected our reported
questionnaire data.
[89] Because only private sector employers can choose to close or
relocate, we limited our analysis for these actions to private sector
respondents.
[90] In addition, of those that reported relocating, employers
representing 79 percent of workers employed by those respondents
attributed the decision largely to expectations of future minimum wage
increases.
[91] In addition, data provided by respondents to our large-employer
questionnaire show that the average hours of hourly workers stayed
about the same over the period from 2007 to 2009, while overtime hours
decreased during the same period. Specifically, average regular hours
worked per day decreased from 7.41 in June 2007 to 6.34 in June 2008,
before rising to 7.46, close to the 2007 level, in June 2009. Data
that employers reported on overtime hours showed a net decrease of 17
percent over the same period; average overtime hours worked per day
changed from 0.82 to 0.55 to 0.68.
[92] Some of the examples of labor-saving strategies include
automating certain tasks and cross-training staff in different
departments so they can perform multiple tasks.
[93] Because only private sector employers can choose to close or
relocate, we limited our analysis for these actions to private sector
respondents.
[94] Employers representing more workers employed by respondents said
that other factors contributed to a moderate extent. In particular,
nearly 100 percent cited rising utility costs as contributing to a
moderate or large extent, and 28 percent cited increased
transportation and shipping costs as contributing to a moderate or
large extent.
[95] Local governments have provided various forms of incentives to
attract manufacturing, such as tuna canning. American Samoa has
provided various tax exemptions and benefits to the tuna canning
industry, such as a graduated tax exemption on corporate income taxes,
employee tax benefits, and tax exemptions for owners and operators of
vessels that supply the canneries. The cannery that moved its canning
operations to the U.S. state of Georgia has received local and state
incentives, including county and city tax exemptions and contributions
from the state to cover part of the build-up cost. According to tuna
cannery officials, the Thai government also provides incentives to
attract businesses, such as a tax rebate on investment in new
manufacturing facilities.
[96] Global trade liberalization has reduced trade barriers on some
tuna products from certain countries, which leads to the erosion of
the tariff-free benefits for American Samoa exports. For example,
tariffs on pouched tuna from Andean Trade Preference Act countries
have declined.
[97] The tax credits under section 936 of the Internal Revenue Code
expired for taxable years beginning after December 31, 2005. Section
30A of the Internal Revenue Code extends the Section 936 credits for
American Samoa until January 2010, subject to certain limitations.
Corporations that were actively conducting business in American Samoa
by 1995 who elected Section 936 status in the last taxable year before
January 1, 2006, could claim a section 30A tax credit until January
2010. See Pub. L. No. 109-432 §119 (Dec. 20, 2006). Section 30A has
been continuously in effect since the expiration of Section 936, and
legislation introduced in the House of Representatives (H.R. 4213,
§144) would extend it for one year.
[98] The remaining cannery has significant vested interests in
Ecuador, a low-cost site of production, and was a major advocate for
duty-free treatment of canned tuna from Ecuador. Liam Campling,
Elizabeth Havice, and Vina Ram-Bidesi, Pacific Islands Countries, the
Global Tuna Industry and the International Trade Regime-A Guidebook
(Pacific Islands Forum Fisheries Agency, 2007).
[99] Testimony of Donald J. Binotto, President and CEO, Starkist Co.,
before the U.S. House of Representatives Committee on Natural
Resources, Subcommittee on Insular Affairs, Oceans, and Wildlife
(November 4, 2009).
[100] We analyzed SSA data on reported earnings covered by Social
Security withholding taxes. For American Samoa, these data covered
workers from all sectors and nationalities. While wages reflect each
worker's hourly rate of pay, earnings are determined by wages, as well
as hours worked. The results of our SSA data analysis are also
consistent with the results from our questionnaire of large employers,
which show that median earnings of workers employed by the covered
employers increased by 12.4 percent from 2007 to 2008.
[101] SSA data do not provide information on hours worked for
individual workers, including minimum wage workers. Without data on
hours worked per worker, it is not possible to distinguish minimum
wage workers from other workers, because total earnings are a product
of hours worked and wage per hour. Therefore, while SSA data allow for
ordering of earnings and thus a computation of median earnings, they
do not allow us to determine minimum wage workers' earnings. SSA data
also do not provide information on hours worked for any individual
worker during the year and do not cover workers who have lost their
jobs and earned zero income.
[102] We made the simplifying assumption that the minimum wage
increases occurred in the beginning of the calendar year. We also
based our calculations on the minimum wage rate of workers in the tuna
canning industry.
[103] American Samoa Department of Commerce, Statistics Division,
American Samoa Statistical Yearbook 2007.
[104] Utilities such as electricity are an import, but housing is not;
however, the consumer price index tracks housing and utilities as one
category.
[105] Minimum wage increases may cause employed workers' income to
rise, eliminating their need for assistance. However, minimum wage
increases may also lead to loss of income for workers who are laid off
or have experienced a reduction in hours worked, making them eligible
for need-based assistance.
[106] However, need-based program enrollment rates may not accurately
reflect the numbers of people living in poverty, because not all
people in need seek need-based assistance. In addition, the lack of
any indication of the change in the poverty rate may be due to many
factors. For example, changes in population growth rates would affect
changes in the poverty rate. Effects of population growth on this
analysis depend on (1) the magnitude of the population growth rate and
(2) the source of growth. Regarding the source of growth, if the
growth rate is partially due to increased immigration into American
Samoa, and many new immigrants may qualify for but are not aware of,
or do not apply for, WIC benefits, the enrollment rate would decline
but the poverty rate would stay the same. If the source of growth is a
high domestic birth rate (among the general population, poor and
nonpoor alike), that would likely not change the enrollment rate but
would imply a lower poverty rate.
[107] To collect information on workers' views of the minimum wage
increases, we conducted six structured discussion groups with various
worker and community groups with different organizational
affiliations. We asked the organization's leadership to invite 6 to 12
members to the discussion groups. In American Samoa, we conducted four
discussion groups with cannery workers, one group with WIC recipients,
and one group that was recruited by the American Samoa government's
Office of Samoan Affairs.
[108] Before the first increase in July 2007, 18 percent of all CNMI
workers employed by questionnaire respondents earned wages close
enough to the minimum wage to be directly affected by the first
increase. DOL has previously identified cases of noncompliance with
minimum wage law among U.S. employers; if this occurred in the CNMI,
some workers who are covered by FLSA and are entitled to earn a
minimum wage may not be paid the minimum wage. In questionnaire
responses, no employer reported paying wages below the minimum wage.
However, we did not independently verify that the wage and other
information provided to us were correct.
[109] Our 2008 report showed that in the garment industry, almost all
workers in the factories operating in the CNMI at the end of 2007
earned no more than the minimum wage (see GAO-08-791, p. 43); however,
because our August 2009 large-employer questionnaire was sent only to
employers currently in operation, we are unable to present updated
information from the garment firms operating in 2007 that subsequently
closed. Our 2008 report noted that more than 95 percent of foreign
garment workers earned the minimum wage at the end of 2007. We
projected that, based on the 2007 wages, by 2015 almost all foreign
workers would be affected by the minimum wage increases. In addition,
according to tax data we obtained from the CNMI government, almost all
garment workers were foreign.
[110] Our analysis covers wages of those employed but does not reflect
loss of wages by workers who lost their jobs.
[111] The median government salary might have changed within the
$20,000 and $30,000 range, but our data do not allow us to measure
such variation. Available data show that for the 17 percent of workers
earning less than $15,000, the median annual salary remained at about
$13,000.
[112] In addition, in prior work, GAO-08-791, we found that almost 95
percent of foreign workers in the CNMI earned less than the $7.25
minimum wage in December 2007. We also estimated that almost 95
percent of foreign workers would be covered by the minimum wage by
2015, based on their 2007 wages.
[113] In addition to the questionnaire data, we received more precise
data on the numbers of workers in each salary range from one component
of the public sector, the CNMI central government. According to this
information, about 17 percent of CNMI government workers would be
affected by the $7.25 minimum wage in 2015.
[114] U.S. immigration law was applied to the CNMI beginning on
November 28, 2009, as scheduled; however, implementation of the CNMI
transitional worker permit program was delayed following a federal
court ruling just before the transition period start date.
[115] In addition to the direct loss of garment jobs, the departure of
the garment industry may result in losses in other sectors. The impact
that reductions in employment in one CNMI sector can have on another
is supported by a recent analysis that used a CNMI-specific input-
output model. Specifically, the authors estimated that in 1995 every
garment worker supported .5 other jobs, while every tourism worker
supported .8 other jobs. Recently, this multiplier was used to gauge
the effect of the decline of garment workers on the CNMI economy.
Malcolm D. McPhee & Associates and Dick Conway, Economic Impact of
Federal Laws on the Commonwealth of the Northern Mariana Islands,
prepared for the CNMI Office of the Governor under a grant from the
U.S. Department of the Interior, Office of Insular Affairs (October
2008).
[116] Above numbers reflect the number of taxpayers and not the number
of W-2 tax records filed. W-2s with the same taxpayer ID were combined
to provide annual taxpayer totals by the CNMI Department of Finance.
[117] According to our questionnaire of large CNMI employers,
employment remained virtually unchanged from 2007 to 2008 (changing
from 8,037 to 8,027) and fell 6 percent to 7,535 in 2009. Data cover
large employers--generally, those with at least 50 employees.
Questionnaire wage data do not include smaller employers, employers
that did not respond, and employers that have closed, including
garment factories. Questionnaire responses cover about 29 percent of
the CNMI public and private sector workforce. As a result, the data
may not be representative of all CNMI workers and employers. In
addition, the CNMI government accounted for a higher percentage of
workers employed by questionnaire respondents than in the actual CNMI
workforce, so the government's responses disproportionately influence
our questionnaire results on the public and private sectors combined.
[118] In this analysis, we used W-2 tax records of employees to
analyze the decline in the number garment workers; however, there are
more W-2s than people in each year because some workers may have
multiple employers. Specifically, we found there were from 11 percent
to 14 percent more W-2s than individual workers in the years 2005 to
2008. In addition, we found that, based on the CNMI tax data, the
percentage of the workforce that were non-U.S. citizens changed from
76 to 66 percent from 2006 to 2008.
[119] Malcolm D. McPhee & Associates and Dick Conway, Economic Impact
of Federal Laws on the Commonwealth of the Northern Mariana Islands,
prepared for the CNMI Office of the Governor under a grant from the
U.S. Department of the Interior, Office of Insular Affairs (October
2008). In 2001, garment industry representatives told us that the CNMI
industry was already declining due to a range of factors, including
elimination of quotas under WTO agreements, increased costs of inputs,
and declining global garment prices. In 2007, garment industry
representatives said the minimum wage increases were hastening the
closure of the remaining garment factories that were closing due to
multiple factors, including high transportation and power costs and
increased competition under the WTO changes.
[120] Government accounting standards define "unfunded liability" as
the excess, if any, of government liabilities over government assets.
Unfunded liabilities indicate formal commitments by a government to
expend funds for which the government has set aside no assets. In
addition, these standards define "net deficit" as the difference
between a government's assets and its liabilities.
[121] Percentages of responses regarding employer actions are weighted
by each employer's total number of workers in 2009. The percentages of
respondents that attributed the action largely to the minimum wage
increases are weighted to reflect the proportion of workers employed
by those respondents relative to all workers employed by respondents
that reported the action. The percentages of respondents that reported
other factors contributing to their actions are weighted to reflect
the number of workers employed by each respondent relative to the
total number of workers employed by all questionnaire respondents.
Data shown cover large employers--generally, those with at least 50
employees. Data do not include smaller employers and employers that
have closed, including garment factories, none of whom are covered by
our questionnaire. Data also omit employers that did not respond to
our questionnaire. Questionnaire responses cover about 29 percent of
the CNMI public and private sector workforce. As a result, the data
may not be representative of all CNMI workers and employers. In
addition, the CNMI government accounted for a higher percentage of
workers employed by questionnaire respondents than in the actual CNMI
workforce, so the government's responses disproportionately influence
our questionnaire results on the public and private sectors combined.
[122] Because only private sector employers can choose to close or
relocate, we limited our analysis for these actions to private sector
respondents.
[123] In addition, employers representing 68 percent of workers
employed by questionnaire respondents reported that they had reduced
hourly workers' overtime hours; of these, employers representing 14
percent of workers employed by respondents attributed the action
largely to the minimum wage increases. Our questionnaire wage data
from employers show that hourly workers' average overtime hours worked
per day rose from 0.43 in 2007 to 0.51 in 2008, before dropping to
0.27 in 2009--a net decrease of 37 percent.
[124] One CNMI hotel we interviewed reported replacing separate
waitstaff for different dining facilities with a single shift covering
all of the facilities.
[125] Because only private sector employers can choose to close or
relocate, we limited our analysis for these actions to private sector
respondents.
[126] We analyzed data on reported earnings by the CNMI Division of
Revenue and Tax. These data covered workers from all sectors and
nationalities. The data do not allow us to analyze median earnings, as
we did for American Samoa, because they do not include earnings by
individual taxpayers that can be rank ordered. However, we analyzed
average earnings using data on total earnings and total number of
taxpayers. While wages reflect each worker's hourly rate of pay,
earnings are determined by wages as well as hours worked. The results
of our data analysis are also consistent with the results from our
large-employer questionnaire, which show that average earnings of
workers employed by the covered employers increased by 1.68 percent
from 2007 to 2008.
[127] CNMI Division of Revenue and Tax data do not provide information
on hours worked for individual workers, including minimum wage
workers. Without data on hours worked per worker, it is not possible
to distinguish minimum wage workers from other workers, because total
earnings are a product of hours worked and wage per hour. Therefore,
while the data allow for ordering of earnings and thus a computation
of median earnings, they do not allow us to determine minimum wage
workers' earnings. The data also do not provide information on hours
worked for any individual worker during the year and do not cover
workers who lost their jobs and earned zero income.
[128] We made the simplifying assumption that the minimum wage
increases occurred in the beginning of the calendar year.
[129] In addition, according to our large-employer questionnaire,
employers representing 37 percent of CNMI workers employed by private
sector questionnaire respondents said they had reduced or eliminated
at least one type of benefit for foreign workers paid an hourly wage.
For housing benefits in particular, CNMI employers representing 37
percent of workers employed by private sector respondents said they
decreased or eliminated housing benefits for foreign workers paid an
hourly wage from 2007 to 2009; employers representing 40 percent of
workers employed by private sector respondents did not offer the
housing benefit to foreign workers paid an hourly wage at any time
during this period.
[130] Since foreign-born workers may be charged up to $200 a month for
living expenses, the lower bound of our estimate assumes that workers
are charged the full amount in 2008.
[131] One group of foreign workers experienced a larger increase in
their inflation-adjusted earnings. Under the CNMI established minimum
wage, household workers' minimum pay was set at $300 per month for up
to 72 hours of work per week, or about $1 per hour if all 72 hours
were worked. The application of the federal minimum wage established
an hourly rate of pay of $3.55 per hour in 2007 and applied to
household workers. By 2008, household workers working 40-hour weeks
could earn from $5,700 to $8,100 per year depending on deductions for
food and lodging. As a result, household workers experienced a range
of increases in their inflation-adjusted earnings from 2006 to 2008,
from a 33 percent increase with maximum allowed deductions to 89
percent increase without deductions.
[132] CNMI government, Energy Division.
[133] Utilities such as electricity are imports, but housing is not;
however, the consumer price index tracks housing and utilities as one
category.
[134] Minimum wage increases may cause employed workers' income to
rise, eliminating their need for assistance. However, minimum wage
increases may also lead to loss of income for workers who are laid off
or have experienced a reduction in hours worked, making them eligible
for need-based assistance.
[135] The U.S. Department of Agriculture's Supplemental Nutrition
Assistance Program, formerly known as the Food Stamp Program, helps
low-income people and families buy the food they need for good health.
The Nutrition Assistance Block Grant in the CNMI provides food
assistance to such low-income households in the CNMI. In addition, a
newly established WIC program has increased its intake of
beneficiaries, who are both local residents and foreign nationals.
However, because the program has been in operation for only the last 3
years, the increased enrollment count may be due to successful
outreach efforts and may not imply that more people have become
eligible for assistance.
[136] However, as noted earlier, need-based program enrollment rates
may not accurately reflect the numbers of people living in poverty,
because not all people in need seek need-based assistance. In
addition, the lack of any indication of the change in the poverty rate
may be due to many factors. If the total population in the CNMI has
dropped due to U.S.-born residents leaving the area and the coverage
rate has not changed, then it is possible that despite the constant
enrollment rate, the percentage of those living in poverty might have
increased.
[137] To collect information on workers' views of the minimum wage
increases, we conducted six structured discussion groups with various
worker and community groups with different organizational
affiliations. We conducted discussion groups with hotel workers at two
different hotels, one group with Nutrition Assistance Program
recipients, one group with Filipino workers, one group with former
garment factory workers, and one group recruited by the CNMI Labor
Ombudsman Office.
[138] While the earnings of foreign-born workers who remained in the
CNMI have not changed significantly, according to CNMI tax data, their
number dropped by 43 percent from 2005 to 2008. In particular, the
number of foreign-born earners in the CNMI dropped from 37,711 in 2005
and 32,116 in 2006, to 25,732 in 2007, to 21,316 in 2008.
[139] Children born in the CNMI are U.S. citizens by birth.
[140] For some industries, the Small Business Administration uses
average annual receipts to determine whether a firm is considered
small.
[End of section]
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