[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                      THE IMPACT OF MINIMUM WAGE
                      INCREASES IN AMERICAN SAMOA
                      AND THE COMMONWEALTH OF THE
                       NORTHERN MARIANA ISLANDS

=======================================================================

                           OVERSIGHT HEARING

                               before the

                  SUBCOMMITTEE ON FISHERIES, WILDLIFE,
                       OCEANS AND INSULAR AFFAIRS

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                       Friday, September 23, 2011

                               __________

                           Serial No. 112-65

                               __________

       Printed for the use of the Committee on Natural Resources









         Available via the World Wide Web: http://www.fdsys.gov
                                   or
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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Jon Runyan, NJ
Bill Johnson, OH
Mark Amodei, NV

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 David Watkins, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON FISHERIES, WILDLIFE, OCEANS
                          AND INSULAR AFFAIRS

                       JOHN FLEMING, LA, Chairman
     GREGORIO KILILI CAMACHO SABLAN, CNMI, Ranking Democrat Member

Don Young, AK                        Eni F.H. Faleomavaega, AS
Robert J. Wittman, VA                Frank Pallone, Jr., NJ
Jeff Duncan, SC                      Madeleine Z. Bordallo, GU
Steve Southerland, II, FL            Pedro R. Pierluisi, PR
Bill Flores, TX                      Colleen W. Hanabusa, HI
Andy Harris, MD                      Vacancy
Jeffrey M. Landry, LA                Edward J. Markey, MA, ex officio
Jon Runyan, NJ
Doc Hastings, WA, ex officio















                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Friday, September 23, 2011.......................     1

Statement of Members:
    Faleomavaega, Hon. Eni F.H., a Delegate in Congress from 
      American Samoa, Prepared statement of......................    33
        Timeline submitted for the record........................    37
    Fleming, Hon. John, a Representative in Congress from the 
      State of Louisiana.........................................     1
        Prepared statement of....................................     2
    Sablan, Hon. Gregorio, a Delegate in Congress from the 
      Commonwealth of the Northern Mariana Islands...............     3
        Prepared statement of....................................     4

Statement of Witnesses:
    Arenovski, James T., President, Delta Management 
      Corporation--Saipan........................................    24
        Prepared statement of....................................    26
    Babauta, Hon. Anthony M., Assistant Secretary of the Interior 
      for Insular Areas, U.S. Department of the Interior.........     6
        Prepared statement of....................................     7
    Gootnick, David, Director, International Affairs and Trade, 
      U.S. Government Accountability Office......................    16
        Prepared statement of....................................    17
    Tulafono, Hon. Togiola T.A., Governor of American Samoa......    10
        Prepared statement of....................................    12

Additional materials supplied:
    Cho, In-Soo, President and CEO, StarKist Co., Statement 
      submitted for the record by The Honorable Eni F.H. 
      Faleomavaega...............................................    43
                                     


 
OVERSIGHT HEARING ON ``THE IMPACT OF MINIMUM WAGE INCREASES IN AMERICAN 
     SAMOA AND THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS.''

                              ----------                              


                       Friday, September 23, 2011

                     U.S. House of Representatives

    Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 9:00 a.m., in 
Room 1334, Longworth House Office Building, Hon. John Fleming 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Fleming, Sablan, Faleomavaega, 
Duncan, Bordallo, and Harris.

    STATEMENT OF THE HON. JOHN FLEMING, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Dr. Fleming. The Subcommittee will come to order. The 
Chairman notes the presence of a quorum.
    Good morning. The Subcommittee on Fisheries, Wildlife, 
Oceans and Insular Affairs will conduct an oversight hearing on 
``The Impact of Minimum Wage Increases in the Territories of 
American Samoa and the Northern Mariana Islands.''
    Under Committee Rule 4(f), opening statements are limited 
to the Chairman and Ranking Member of the Subcommittee so that 
we can hear from our witnesses more quickly. However, I ask 
unanimous consent to include any other Members' opening 
statements in the hearing record if submitted to the Clerk by 
close of business today.
    Hearing no objection, so ordered.
    The Fair Labor Standards Act was enacted in 1938. The law 
applied to all States and U.S. Territories. However, during the 
history of the law, Congress amended it to allow certain 
Territories to use special industry committees to determine 
local wage rates or pass separate legislation to allow a 
territory to retain authority over setting wages for local 
industries.
    The practice of allowing wage rate flexibility in American 
Samoa and the Northern Mariana Islands ended in 2007. The 110th 
Democrat-led Congress required the application of the Federal 
minimum wage in American Samoa and the Northern Mariana Islands 
through annual 50-cent-per-hour increases until the Federal 
wage was met of $7.25. To date, three minimum wage increases 
have occurred in American Samoa and four minimum wage increases 
have occurred in the Northern Marianas.
    Congress required the Department of Labor and the 
Government Accountability Office to report on how minimum wage 
increases were affecting living standards and employment in the 
Territories. The reports detailed the vulnerability of the two 
Territories to outside factors influencing their economies, 
including the global recession, foreign competition and Federal 
actions which have led to declines in their economies over the 
last decade. The requirement to increase local minimum wages to 
Federal levels further exacerbated economic conditions in the 
Territories, leading to the loss of a cannery in American Samoa 
and the loss of the garment industry in the Northern Mariana 
Islands.
    In 2009, to alleviate the effects of the minimum wage 
increases in the two Territories, Congress passed legislation 
to delay the annual 50-cent-per-hour increase in American Samoa 
for 2 years and allowed an increase in 2010, but no increase in 
2011 for the Northern Mariana Islands. We will hear testimony 
today regarding the on-the-ground effects of minimum wage 
increases in the two Territories. I am interested to hear from 
today's witnesses on how mandatory minimum wage increases 
affected the economies in the Territories and hurt revenue 
sources on the islands.
    I now recognize our Ranking Member, Mr. Sablan, for any 
statement he would like to make.
    [The prepared statement of Dr. Fleming follows:]

          Statement of The Honorable John Fleming, Chairman, 
    Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs

    Good morning, the Subcommittee on Fisheries, Wildlife, Oceans and 
Insular Affairs will conduct on oversight hearing on the impact of 
minimum wage increases in the territories of American Samoa and the 
Commonwealth of the Northern Mariana Islands.
    Under Committee Rule 4(f), opening statements are limited to the 
Chairman and Ranking Member of the Subcommittee so that we can hear 
from our witnesses more quickly. However, I ask unanimous consent to 
include any other Members' opening statements in the hearing record if 
submitted to the Clerk by close of business today. Hearing no 
objection, so ordered.
    The Fair Labor Standards Act was enacted in 1938. The law applied 
to all states and U.S. territories. However during the history of the 
law, Congress amended it to allow certain territories to use special 
industry committees to determine local wage rates or passed separate 
legislation to allow a territory to retain authority over setting wages 
for local industries.
    The decades-long practice of allowing wage rate flexibility in 
American Samoa and the Northern Mariana Islands ended in 2007. The 
110th Democratic-led Congress required the application of the federal 
minimum wage in American Samoa and the Northern Mariana Islands, 
through annual 50-cent-per-hour increases until the federal wage of 
$7.25 is met. To date, three minimum wage increases have occurred in 
American Samoa, and four minimum wage increases have occurred in the 
Northern Mariana Islands.
    Congress required the Department of Labor and the Government 
Accountability Office to report on how minimum wage increases were 
affecting living standards and employment in the territories. The 
reports detailed the vulnerability of the two territories to outside 
factors influencing their economies including the global recession, 
foreign competition and federal actions which have led to declines in 
their economies over the last decade. The requirement to increase local 
minimum wages to federal levels further exacerbated economic conditions 
in the territories leading to the loss of a cannery in American Samoa 
and the loss of the garment industry in the Northern Mariana Islands.
    In 2009, to alleviate the effects of the minimum wage increases in 
the two territories, Congress passed legislation to delay the annual 
50-cent-per-hour increase in American Samoa for two years and allowed 
an increase in 2010, but no increase in 2011 for the Northern Mariana 
Islands.
    We will hear testimony today regarding the on-the-ground effects of 
minimum wage increases in the two territories. I am interested to hear 
from today's witnesses on how mandatory minimum wage increases affected 
the economies in the territories and hurt revenue sources on the 
islands.
                                 ______
                                 

    STATEMENT OF THE HON. GREGORIO KILILI CAMACHO SABLAN, A 
  DELEGATE IN CONGRESS FROM THE COMMONWEALTH OF THE NORTHERN 
                        MARIANA ISLANDS

    Mr. Sablan. Well, thank you very much, Mr. Chairman, and 
thank you for agreeing to this morning's hearing on the impact 
of raising the minimum wage in American Samoa and the Northern 
Mariana Islands, and thank you once again for permitting 
testimony from the Northern Mariana Islands by video 
conference. This is a smart use of technology to lower the cost 
of government and let Congress hear directly from our 
constituents.
    One of the most quoted passages in the covenant between the 
United States and the Northern Mariana Islands is the promise 
to help the people of the Northern Mariana Islands achieve a 
progressively higher standard of living as part of the American 
economic community. Raising the minimum wage is one way to 
accomplish that goal. Working men and women in the Marianas pay 
more for gas, more for utilities, more for food than their 
brothers and sisters almost anywhere else in the United States. 
It only makes sense that they get a minimum wage at least as 
high as the rest of our country.
    In 2006, family breadwinners were working for $3.05 in the 
Northern Mariana Islands. Can you just imagine that? $6,344 in 
a year before taxes. Today, because of the minimum wage law 
that Congress passed, some of those same people earn at least 
$5.05. It is still not enough, it is not what I call a 
dignified wage, but it has already made a difference, bringing 
people into the workforce, people who had not bothered to work 
for $3.05.
    We are struggling in this country with the problem of 
unemployment. Let me tell you, one way to solve unemployment is 
to pay people a decent wage. I have seen this in my community. 
The more the wage goes up, the more people will go to work.
    I want the minimum wage in the Marianas to rise to the U.S. 
level. I will say that again. I want the minimum wage in the 
Marianas to rise to the U.S. level. But I am also not blind to 
the economic reality. The Bureau of Economic Analysis reported 
in July that GDP in the Marianas advanced almost 20 percent in 
2009. The Recovery Act has provided jobs and kept some people 
working temporarily, and Recovery Act funds improve fuel 
efficiency in the local utilities and paid for new appliances 
in people's homes, which helped with power bills.
    But the fact is that the economy is spiraling downward. 
Business is holding on by its teeth, and when businesses close, 
workers earn nothing. GAO says we are looking at a perfect 
storm of negative factors in the Marianas right now--
uncertainty over labor supply because of immigration, increases 
in crime and poverty, lack of air service, very high shipping 
costs and utilities that are through the roof. But the 
businesses GAO interviewed said this, that minimum wage is not 
their biggest concern. It is the shrinking economy that is the 
real problem.
    Minimum wage policies need to be addressed here in 
Congress, however. We need to be sure that in our effort to 
give workers a better wage, we do no harm. And, Dr. Fleming, I 
understand that principle, do no harm.
    So it is extremely important that we keep our finger on the 
pules of the economy. We have to keep monitoring the situation, 
adjust if necessary, as we did this year, by skipping the wage 
increase. That is why we are requiring GAO to report to us 
every 2 years on the impact of the minimum wage increases. That 
is why we are holding this oversight hearing today.
    We are going to hear from Governor Tulafono, we are going 
to hear from Assistant Secretary Babauta, who is responsible 
for Federal policies in the islands, and from Mr. David 
Gootnick from GAO. We are going to hear from Mr. Arenovski, who 
is a small business owner and past President of the Saipan 
Chamber of Commerce.
    Welcome, gentlemen.
    We are going to keep listening and watching as time goes by 
so we achieve the goal of keeping people working while making 
sure they earn a decent, fair and dignified wage to support 
themselves and their families.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Sablan follows:]

  Statement of The Honorable Gregorio Kilili Camacho Sablan, Ranking 
Member, Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs

    Thank you, Mr. Chairman:
    Thank you for agreeing to this morning's hearing on the impact of 
raising the minimum wage in American Samoa and the Northern Mariana 
Islands.
    And thank you for once again permitting testimony from the Northern 
Mariana Islands by video conference. This is a smart use of technology 
to lower the cost of government and let Congress hear directly from our 
constituents.
    One of the most quoted passages in the Covenant between the United 
States and the Northern Mariana Islands is the promise to help the 
people of the Marianas ``achieve a progressively higher standard of 
living. . .as part of the American economic community.''
    Raising the minimum wage is one way to accomplish that goal.
    Working men and women in the Marianas pay more for gas, more for 
utilities, more for food than their brothers and sisters almost 
anywhere else in the U.S.
    It only makes sense that they get a minimum wage at least as high 
as the rest of our country.
    In 2006 family breadwinners were working for three dollars and five 
cents an hour in the Marianas. Can you imagine? $6,344 in a year--
before taxes!
    Today, because of the minimum wage law Congress passed, those same 
people earn at least five dollars and five cents.
    It is still not enough. It is not what I call a dignified wage.
    But it has already made a difference bringing people into the 
workforce, people who would not bother to work for three-o-five.
    We are struggling in this country with the problem of unemployment.
    Let me tell you: one way to solve unemployment is to pay people a 
decent wage.
    I've seen this in my community. The more the wage goes up, the more 
people will go to work.
    I want the minimum wage in the Marianas to rise to the U.S. level.
    But I am not blind to economic reality.
    The Bureau of Economic Analysis reported in July that GDP in the 
Marianas plunged 20% in 2009.
    The Recovery Act has provided jobs and kept some people working--
temporarily. And Recovery Act funds improved fuel efficiency at the 
local utility and paid for new appliances in people's home, which 
helped with power bills.
    But the fact is the economy is spirally downward. Business is 
holding on by its teeth. And when businesses close, workers earn 
nothing.
    GAO says we're looking at a ``perfect storm'' of negative factors 
in the Marianas right now:
          uncertainty over labor supply because of immigration,
          increases in crime and poverty,
          lack of air service,
          high shipping costs, and
          utilities that are through the roof.
    But the businesses GAO interviewed said that minimum wage is not 
their biggest concern. It's the shrinking economy that is the real 
problem.
    Minimum wage policy needs to be our concern here in Congress, 
however. We need to be sure that in our zeal to give workers a better 
wage we ``do no harm.''
    I know Dr. Fleming understands that principle. ``Do no harm.''
    So, it is extremely important that we keep our finger on the pulse 
of the economy. We have to keep monitoring the situation. Adjust if 
necessary, as we did this year, by skipping the wage increase.
    That's why we are requiring GAO to report to us every two years on 
the impact of the minimum wage increases.
    That's why we are holding this oversight hearing today.
    We are going to hear from Governor Tulafono. We are going to hear 
from Assistant Secretary Babauta, who is responsible for federal policy 
in the islands, and from Mr. Gootnick from GAO. We are going to hear 
from Mr. Arenovski, who is a small business owner and past president of 
the Saipan Chamber of Commerce. Welcome, gentlemen.
    And we are going to keep listening and watching, as time goes by, 
so we achieve our goal of keeping people working--while making sure 
they earn a decent, fair, and dignified wage to support themselves and 
their families.
    Thank you, Mr. Chairman.
                                 ______
                                 
    Dr. Fleming. I thank the gentleman, the Ranking Member, for 
his statement.
    Now we will hear from our witnesses. Like all witnesses, 
your written testimony will appear in full in the hearing 
record, so I ask that you keep your oral statements to five 
minutes, as outlined in our invitation letter to you and under 
Committee Rule 4(a).
    Our microphones are not automatic, so please press the 
button when you are ready to begin.
    Mr. Faleomavaega. Mr. Chairman, might I make a statement?
    Dr. Fleming. Yes, sir. I will recognize you in just a 
moment. A word about the microphones. You kind of have to lean 
into them or bring them closer. So just a word of caution on 
that. Oftentimes we don't key into the sensitivity or lack of 
on these microphones.
    Also I will explain the timing lights. You have five 
minutes. As I said, you will be under green light for 4 
minutes. Then it will turn yellow for a minute. Then when it 
turns red, we ask that you go ahead and wrap up your testimony 
as soon as possible.
    With that, I would like to recognize the gentleman from 
American Samoa, Mr. Faleomavaega, with an introduction.
    Mr. Faleomavaega. Mr. Chairman, thank you very much. 
Certainly it is always a welcome sight to see Secretary Babauta 
and also Dr. Gootnick here from GAO. But more especially, Mr. 
Chairman, I am very honored to introduce also the presence of 
our Governor of American Samoa, Governor Tulafono, and his dear 
wife, Mary, who is with us this morning.
    I might also note that the gentleman accompanying our 
Governor is a retired Command Sergeant Major in the Marine 
Corps. We are very, very proud of our men and women who serve 
honorably in the military services of our country, Mr. Filipo 
Ilaoa, who is here with us.
    Again, traveling such a long distance, I really, really 
appreciate the Governor accepting your invitation to come and 
testify before this Committee and offer us some insights of 
what we need to do to resolve this very important issue now 
confronted by the Northern Mariana Islands as well as American 
Samoa.
    Again, Mr. Chairman, thank you.
    Dr. Fleming. I thank the gentleman.
    I would like to welcome today's guests. I will go through 
the panel here. First let me say that it is a joy to be 
Chairman of this Committee. I love everything about it except 
for one thing, and that is pronouncing names. So I will 
struggle through that as best I can. So bear with me.
    First, we have The Honorable Anthony Babauta, Assistant 
Secretary of the Interior for Insular Affairs; The Honorable 
Togiola Tulafono, Governor of American Samoa; Mr. David 
Gootnick, Director, International Affairs and Trade, U.S. 
Government Accountability Office; and Mr. James Arenovski, 
President, Delta Management Corporation, Saipan.
    So, Assistant Secretary Babauta, you are recognized for 
your five-minute testimony, sir.

 STATEMENT OF THE HON. ANTHONY BABAUTA, ASSISTANT SECRETARY OF 
THE INTERIOR FOR INSULAR AREAS, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Babauta. Thank you very much, and good morning, Mr. 
Chairman and members of the Subcommittee. Thank you for the 
opportunity to discuss the minimum wage issues relating to 
American Samoa and the Commonwealth of the Northern Mariana 
Islands.
    In 2007, Public Law 110-28 raised the Federal minimum wage 
to $7.25. It also included a provision raising minimum wage 
rates in American Samoa and the CNMI in 50-cent annual 
increments until the minimum wage rates in the two Territories 
equaled that of the Federal minimum wage rate. Later, the 
Congress postponed the 50-cent increases for American Samoa in 
2010 and 2011 and for the CNMI in 2011.
    Additionally, the GAO's latest report on the effect of the 
minimum wage in American Samoa and the CNMI was released this 
past June. Salient points from that report regarding American 
Samoa include that employment fell 19 percent from 2008 to 
2009, due largely to the closure of the Chicken of the Sea tuna 
cannery, which caused a 55 percent decrease in tuna canning 
employment. Private sector employers reported cost cuttings or 
layoffs and hiring freezes, and private sector employers were 
also concerned that American Samoa was becoming less 
competitive in the increasingly competitive world tuna market.
    Regarding the CNMI, the report noted that employment fell 
13 percent from 2008 to 2009 and 35 percent from 2006 through 
2009, and that tourism employers reported that future planned 
actions included laying off workers.
    The GAO noted declines in both economies and confirmed in 
GDP statistics developed by the Bureau of Economic Analysis in 
the Department of Commerce.
    To summarize, economic prospects for American Samoa and the 
CNMI have fallen precipitously over recent years and remain 
bleak for the foreseeable future. The postponement of the 50-
cent minimum wage increases enacted by Congress last year will 
certainly help on the minimum wage front. Congress may find it 
desirable to take additional action to postpone increases or 
reestablish the industry committee process.
    Postponements over a long period of time may not be 
sufficiently nuanced to meet current national minimum wage 
goals, which envision moving toward the Federal minimum wage 
without substantially curtailing employment. Employees would 
receive no increase, even though economic conditions may have 
improved.
    On the other hand, if the scheduled 50-cent increases 
continue and these territorial economies do not improve, the 
50-cent increases may translate into new company closures and 
employee layoffs.
    In addition, we will be hearing from the Governor of 
American Samoa, who recommends that Congress reinstitute the 
industry committee process. Reinstituting the industry 
committee process would free the Congress from having to hold 
hearings and take action every time a postponement appears 
desirable.
    In addition, the industry committee process was designed to 
move a Territory's minimum wage rate to the Federal minimum 
wage rate as quickly as possible without substantially 
curtailing employment. Each Committee member is provided 
background research on economic conditions in the Territory, 
and this, along with testimony from labor, business, government 
and the public in a local setting, allows for subtle and 
nuanced minimum wage decisions.
    At such time as the economies of American Samoa and the 
CNMI recover their footings, the Congress can return to the 
issue and reestablish the periodic increases until the Federal 
minimum wage is achieved in the respective Territory. The 
Administration would not be opposed to reinstituting the 
industry committee process in American Samoa and also extending 
it to the CNMI.
    Mr. Chairman, we appreciate the interest of the 
Subcommittee in an issue affecting the quality of so many lives 
in American Samoa and the Northern Mariana Islands.
    Thank you very much.
    [The prepared statement of Mr. Babauta follows:]

 Statement of Anthony M. Babauta, Assistant Secretary of the Interior 
           for Insular Areas, U.S. Department of the Interior

    Mr. Chairman and members of the Subcommittee on Fisheries, 
Wildlife, Oceans and Insular Affairs, thank you for the opportunity to 
discuss minimum wage issues relating to American Samoa and the 
Commonwealth of the Northern Mariana Islands (CNMI).
    In 2007, legislation that ultimately was enacted as Public Law 110-
28 raised the Federal minimum wage to $7.25 per hour also included a 
provision raising minimum wage rates in American Samoa and the CNMI in 
50-cent annual increments until the minimum wage rates in the two 
territories equal that of the Federal minimum wage rate. Since 
enactment of that law, Congress has postponed the 50-cent increases for 
American Samoa in 2010 and 2011 and for the CNMI in 2011.
THE GAO REPORT
    Subsequent law requires that the United States Government 
Accountability Office (GAO) produce a report on the affect of the 
minimum wage in American Samoa and the CNMI. The GAO's latest report, 
GAO-11-427, was released in June 2011. Salient points from that report 
regarding American Samoa include--
          employment fell 19 percent from 2008 to 2009, due 
        largely to the closure of one tuna cannery, which caused a 55 
        percent decrease in tuna canning employment, and a 14 percent 
        employment decline from 2006 to 2009;
          average inflation-adjusted earnings fell by 5 percent 
        from 2008 to 2009, but for those minimum wage cannery workers 
        who remained employed their wages increased more than 
        inflation;
          current law will increase future minimum wages for 99 
        percent of the employees in the tuna canning industry;
          some workers were disappointed in the 2010 minimum 
        wage increase delay while more workers expressed concern over 
        job security;
          private sector employers reported cost-cutting 
        through lay-offs and hiring freezes; and
          private sector employers were also concerned that 
        American Samoa was becoming less competitive in the 
        increasingly competitive world tuna market.
    Regarding the CNMI, the report noted that--
          employment fell 13 percent from 2008 to 2009, and 35 
        percent from 2006 to 2009;
          average inflation-adjusted earnings rose by 3 percent 
        from 2008 to 2009;
          current law will increase future minimum wages for 95 
        percent of the employees in the tourism industry;
          tourism workers expressed mixed views: they would 
        like minimum wage pay increases but were concerned about losing 
        jobs and work hours;
          tourism employers reported that future planned 
        actions included laying off workers; and
          some tourism employers expressed concern about 
        minimum wage increases, but others said the primary difficulty 
        was the decline of the CNMI's tourism industry.
THE ECONOMIES
    It is instructive to further examine the economies of American 
Samoa and the CNMI. Beginning in fiscal year 2009, the Office of 
Insular Affairs has provided funding for the Bureau of Economic 
Analysis (BEA) in the Department of Commerce to develop the gross 
domestic product (GDP) statistics for the United States territories. 
The territories now receive these annual GDP statistics, which are of a 
quality comparable to those developed for the 50 states and the 
District of Columbia. The first set of these statistics became 
available in May 2010 and covered the period of 2002 to 2007; estimates 
for 2008 and 2009 were released this past summer.
American Samoa
    The current set of GDP statistics on American Samoa by BEA are for 
2002 through 2009, and are as follows:






    Adjusted for inflation, American Samoa's GDP declined in both 
2009 and 2008 from 2007 levels and remained below the average for the 
2002-2009 period. Stagnant and declining real GDP is caused by stagnant 
commodity prices for processed fish and stagnant public sector receipts 
in the form of Federal grants and other revenue flowing to the American 
Samoa Government.
    One of the two canneries that had operated in American Samoa since 
the 1950s, Chicken of the Sea, closed in September 2009. The economic 
and financial impact of the closure is evident in the 2009 GDP data and 
will also add to GDP losses for 2010.
    Long a part of the American Samoa landscape, the cannery closure 
has caused both economic and financial dislocation. In October 2010 the 
global fish processing and marketing firm, Tri Marine, indicated that 
it would purchase and rebuild the physical assets of the closed cannery 
and reopen as a new enterprise focused on high quality fish products 
for which it claims it is known. According to local media reports, 
however, Tri Marine's plans have been delayed, with no tangible 
progress evident at this time.
CNMI
    As with American Samoa, the CNMI's most recent GDP data cover the 
years 2002 through 2009, and include:






    The dramatic decline in the economy of the CNMI is due to 
extraordinary circumstances. New global trade rules embraced by the 
United States took effect in 2005 and set in motion forces that would 
wipe out the CNMI's biggest industry, making brand name garments for 
American retailers. For reasons unrelated to global trade, CNMI tourism 
began its decline in 2006 when Japan Air Lines withdrew from the market 
altogether for financial reasons. With significant losses in both of 
the CNMI's major industries, a devastating economic contraction was set 
in motion. The CNMI's real GDP dropped 39.1 percent from 2005 to 2009, 
when the last three garment factories closed. Just as with American 
Samoa, the impact of these events--in this case the garment shutdown--
may show up in the 2010 GDP data, which will likely reflect the trend 
of the last several years.
    The CNMI's tourism showed slight improvement in 2010 as arrivals in 
each of the first three quarters of the year exceeded levels from the 
same period in 2009. There were similar improvements in business 
receipts in the first half of 2010 as compared to 2009. However, 
following the earthquake and tsunami in Japan earlier this year, a new 
slowdown has occurred.
    To summarize, economic prospects for American Samoa and the CNMI 
have fallen precipitously over recent years and remain bleak.
WHAT TO DO
    The postponement of the 50-cent minimum wage increases enacted by 
Congress last year will certainly help on the minimum wage front. Once 
the postponements lapse, three policy positions are available: (1) do 
nothing and the 50-cent increases will continue, beginning in 2012, (2) 
continue the postponements of the 50-cent increases, or (3) reinstitute 
the industry committee process for American Samoa and extend it to the 
CNMI.
    With the economic prospects for American Samoa and the CNMI bleak 
for the foreseeable future, Congress may find it desirable to take 
additional action to postpone increases or re-establish the industry 
committee process. Postponements over a long period of time may not be 
sufficiently nuanced to meet current goals, which envision moving 
toward the Federal minimum wage without substantially curtailing 
employment. Employees would receive no increase, even though economic 
conditions may have improved. If, on the other hand, these territorial 
economies do not improve in the near future, the scheduled 50-cent 
increases may translate into new company closures and employee lay-
offs.
    In addition, we have heard from the Governor of American Samoa, who 
recommends that the Congress re-institute the industry committee 
process. Re-instituting the industry committee process would free the 
Congress from having to hold hearings and take action every time a 
postponement appears desirable. In addition, the industry committee 
process was designed to move a territory's minimum wage rate to the 
Federal minimum wage rate as quickly as possible without substantially 
curtailing employment. Each committee member is provided background 
research on economic conditions in the territory, and this, with 
testimony from labor, business, government and the public in a local 
setting allow for subtle and nuanced minimum wage decisions. At such 
time as the economies of American Samoa and the CNMI recover their 
footings, the Congress can return to the issue and re-establish the 
periodic increases until the Federal minimum wage is achieved in the 
respective territory. The Administration would not be opposed to re-
instituting the industry committee process in American Samoa and 
extending it to the CNMI.
    Mr. Chairman, we appreciate the interest of the subcommittee in an 
issue affecting the quality of so many lives in American Samoa and the 
Commonwealth of the Northern Mariana Islands.
                                 ______
                                 
    Dr. Fleming. OK, thank you, Mr. Secretary.
    Next we have Governor Tulafono. You are recognized, sir, 
for five minutes.

         STATEMENT OF THE HON. TOGIOLA T.A. TULAFONO, 
                   GOVERNOR OF AMERICAN SAMOA

    Governor Tulafono. Mr. Chairman and honorable members of 
your Subcommittee, thank you for your invitation to testify in 
this hearing today. I am honored to be here and pleased to 
testify on a matter of grave importance to American Samoa.
    As you might all appreciate, it is very difficult for us in 
American Samoa to pick up and come all the way to Washington, 
D.C. to present a five-minute testimony, but the opportunity to 
demonstrate to the U.S. Congress how serious this issue is for 
us cannot be dismissed because of the cost and distance. It is 
an opportunity that we cannot afford to ignore. I have 
submitted detailed written testimony in support of my five-
minute presentation here with the understanding and expectation 
that this opportunity to address this very important issue 
before this Subcommittee cannot end with just this detailed 
report.
    This Territory of the United States, American Samoa, needs 
some advice from this Subcommittee and from this Congress. We 
are watching our economy burn down. We know what to do to stop 
it. We need to bring the aggressive wage costs decreed by the 
Federal Government under control, but we are ordered not to 
interfere. Our job market is being torched. Our businesses are 
being depressed. Our hope for growth has been driven away. We 
are still ordered not to interfere. Our people live in the 
middle of the South Pacific Ocean with no place to seek refuge 
in any economy other than our own.
    Our question is this: How much does our government expect 
us to suffer until we have to stand up for our survival? At 
what point does it expect us to strike out to preserve our 
well-being, because we need to live. We are in a far off place. 
We need to know. And if silence follows now, we have our 
answer.
    Having said that, let me quickly summarize where we are 
today. After three increments of 50-cent increases to minimum 
wages in American Samoa, a cannery that once employed over 
2,000 people closed, thousands of jobs have been lost at all 
levels of employment in American Samoa, and the economic 
conditions in the Territory continue to decline. That is 
basically why to me a five-minute opportunity is priceless to 
demonstrate to you how critical this situation is and how 
important it is for American Samoa to have permanent and 
enduring solutions to these issues.
    So while I respect very much the professional work of GAO 
and the limitations upon their authority to investigate these 
matters, I would be remiss if I did not continue to emphasize 
the concerns I have had conveyed to them regarding what I felt 
should have been addressed in the report before you, and as 
long as they have not been addressed, I feel the report is 
incomplete and requires more work.
    In my communication of May 25, 2011, to GAO with respect to 
the draft report 11-427 on the effects of the first three of 10 
minimum wage increases in American Samoa, I expressed general 
agreement with the GAO's findings. However, I also cited some 
fundamental concerns where I felt the report fell short. GAO 
did note these concerns in its final report, but for the most 
part they were not addressed in the final GAO report for 
reasons having mainly to do with limitations of its 
congressional mandate in requesting the report. I would say the 
mandate should have been expanded and have a fuller report and 
more complete presentation.
    I remain concerned, however, that this GAO report does not 
adequately, succinctly or clearly convey the magnitude of the 
worst economic disaster in American Samoa that has resulted 
primarily from the imposition of the 2007 United States minimum 
wage mandate. Please allow me to restate briefly some of those 
things.
    One, it continues to understate American Samoa's employment 
losses due substantially to the initial increases in the 
minimum wage. The omission of the loss of 2,000 jobs from the 
cannery after the closure makes that report incomplete. It 
needs to be taken into consideration in this analysis.
    Two, it continues to downplay the minimum wage as only one 
of the several factors influencing the growing economic 
depression in American Samoa. This is despite the fact that its 
own data demonstrates that workers and major employers fault 
the minimum wage for adverse economic effects to date and 
expect economic conditions to worsen primarily as a result of 
continuing increases in the minimum wage.
    I have listed the rest of those seven reasons, Mr. Chairman 
and the honorable members of your Committee.
    We have been put into this situation where it may end up 
with American Samoa being totally reliant only on Federal 
grants if we lose all our industry. This is clearly not the 
economic future American Samoa wants or seeks. We want to have 
a strong economic base supported by industry and manufacturing 
jobs. We want wages in American Samoa to grow with sustainable 
economic growth that continues to support existing as well as 
new jobs created by such economic growth. We need to design a 
system that will permit us to do that, and that is why we 
recommend the reinstitution of the special Committee, and we 
need your wise advice to do it.
    Even with this temporary suspension of the increases, the 
uncertainty of what will happen and the likelihood of further 
increases under the present law is damaging enough because we 
are losing opportunities that could have been cultivated or 
harnessed if we were certain that there is an appropriate 
solution in the making.
    No one is willing to invest in this kind of business 
climate. That is why I am asking for immediate positive action 
to stop any further escalation of the minimum wage in American 
Samoa, with proposed provisions for a proper study of how to 
accomplish our desired goals toward rebuilding a sustainable 
economy for American Samoa that will make it less dependent 
only on Federal grants.
    I truly hope that my next appearance before this honorable 
Committee or another congressional Committee will be to testify 
in support of such legislation that will install for us a 
system for determining appropriate minimum wages that will 
support our economy and create jobs for our people.
    Thank you again for my priceless five minutes.
    [The prepared statement of Governor Tulafono follows:]

           Statement of The Honorable Togiola T.A. Tulafono, 
         Governor of American Samoa, American Samoa Government

Continued Minimum Wage Increases Would Destroy American Samoa's Economy
    Summary--In 2007, the United States enacted legislation that 
mandated annual $.50 per hour increases to the minimum wages in 
American Samoa beginning in July 2007 until it reached parity with the 
federal minimum wage. To date since 2007, the minimum wages in American 
Samoa have increased by $.50 three times. Under current law, the 
minimum wage for American Samoa's lowest paid workers will reach the 
federal minimum wage of $7.25 in 2018. In 2010, the United States 
enacted a law delaying the scheduled minimum wage increases providing 
for no increase in 2010 or 2011.
    On May 25, 2011, I responded to GAO's draft report (GAO-11-427) on 
the effects of recent minimum wage increases in American Samoa. I 
expressed general agreement with the GAO's findings; however, I also 
expressed fundamental concerns about the draft. These concerns were 
noted but not seriously addressed in the final GAO report for reasons 
provided in that report having mainly to do with the limitations of its 
Congressional mandate.
    I remain concerned that this GAO report does not adequately, 
succinctly or clearly convey the magnitude of the worsening economic 
disaster in American Samoa. My specific concerns about the GAO report 
are as follows:
        1.  It continues to understate American Samoa's employment 
        losses due substantially to the initial increases in the 
        minimum wage.
        2.  It continues to downplay the minimum wage as only one of 
        several factors influencing the growing economic depression in 
        American Samoa despite the fact that its own data demonstrates 
        that workers and major employers expect economic conditions to 
        worsen primarily as a result of continuing increases in the 
        minimum wage.
        3.  It ignores the fact that the minimum wage increases have 
        adversely affected the entire economy and not just the 
        canneries.
        4.  It ignores the fact that the indirect effects of the 
        cannery employment losses have not yet run their course as they 
        often require several years to fully materialize.
        5.  It downplays the fact that the damage to date is from only 
        three of ten scheduled minimum wage increases.
        6.  It ignores the evidence that continued increases in the 
        minimum wage make any meaningful economic recovery increasingly 
        unlikely.
        7.  It is silent on the real possibility that American Samoa 
        could be left substantially without a private sector economic 
        base except for some limited visitor industry and fisheries 
        activities. American Samoa's economic base would then 
        essentially be based solely on federal government expenditures 
        in the territory.
    American Samoa is in dire need of relief from the U.S. Congress. At 
a minimum, the present suspension of the minimum wage increases should 
be continued indefinitely or until some more satisfactory minimum wage 
procedures are designed and implemented.
    Recent Employment Losses--The employment analysis by GAO in Table 1 
underestimates the economic impact of the rising minimum wage in 
American Samoa. There was no reason to exclude cannery closure 
employment losses total employment in 2009. The September 30, 2009 
cannery closure reduced employment in American Samoa by another 2000 in 
addition to the decline of 3737. That would bring the percent 
employment decline to 30 percent rather than 19 percent between 2008 
and 2009 as described in Table 1.







    The importance of combining these numbers for some sense of 
magnitude outweighs any possible definitional discrepancies. Those 2000 
cannery jobs existed before September 30 2009. After that date they no 
longer existed. They should have been included in some manner in the 
job loss calculation for 2009. GAO did not compute this total 
themselves because it thought the data could not be combined since it 
came from multiple sources (GAO-11-427, Page 129). Our combining the 
2009 SSA 3737 employment loss estimate with the 2000 employees who lost 
their jobs at the canneries in 2009 did not come from multiple sources; 
they came only from SSA and the closed cannery and did not likely 
involve any serious distortion in the combination. However, it must be 
acknowledged that we, out of necessity, often treat employment and jobs 
as synonymous when they are not. The number of jobs exceeds the number 
of persons employed because of multiple job holders and the fact that 
employment is measured differently by different agencies.
    This higher level of employment loss represented 30 percent of 
American Samoa's total employment in 2008. Economies do not recover 
from losses of that magnitude in the short term. The people who lost 
those jobs and their families were and are in serious trouble. They 
have to begin weighing their options for making a living. Obviously, 
seeking employment outside American Samoa must be considered a real 
option.
    Later in Table 4 it will be observed that the gravity of the 
employment decline between 2008 and 2009 wiped out the entire 
employment gain from years 2000-2008. Table 4 will show that employment 
in 2009 was lower than it was in 2000! If we deduct the cannery 
employment loss from the 15,434, the 2009 employment estimate falls 
below even our 1990 employment level.
    Future Employment Losses---The worst is yet to come. The above 
serious employment losses were the result of just the first three of 
ten $.50 annual increases in the minimum wage in American Samoa. Unless 
the minimum wage law for American Samoa is changed, these $.50 annual 
increases in American Samoa's minimum wage will resume in 2012 and 
continue for the following seven years. Based upon the minimum wage 
experience of the first three years, another seven years of similar 
increases will be devastating.
    It is difficult to contemplate a scenario for 2018 when American 
Samoa's minimum wage reaches the U.S. level of $7.25 per hour or even 
higher if the U.S. minimum wage is increased over that period. That 
scenario would likely describe a U.S. territorial economy substantially 
without a private sector economic base except for some limited visitor 
industry and fisheries activities. American Samoa's economic base would 
then essentially be the U.S. federal government expenditures in the 
territory.
    In Table 2, further employment losses are estimated for 2012-13. 
These are conservative estimates. By then total job losses are 
anticipated to reach 7993. This estimate assumes no further cannery 
employment losses from the 2010 estimate of 2256 in the GAO report. It 
assumes only a further loss of 1000 in non-cannery jobs. It assumes a 
1000 job loss due to the 1.5 employment multiplier effects of the 
cannery closure. Employment losses could be ameliorated slightly with 
temporary jobs funded by the U.S. Census Bureau, the Recovery Act, and 
recovery efforts after the 2009 Tsunami. However, these are temporary 
jobs and will likely end when federal funding ends prior to 2013. Given 
the magnitude of the 5737 employment losses between 2008 and 2009, it 
is easy to imagine total job losses of 7993 by 2013. This is especially 
the case if annual minimum wage increases are resumed in 2012.







    Unemployment--In Table 3, the above employment loss estimates 
are considered in a labor force and employment context in order to 
estimate unemployment trends. The numbers in Table 3 are primarily 
illustrative because our most recent labor force data is from the 2000 
U.S. Census. In reality, the labor force in 2013 will almost certainly 
have declined substantially from what is shown in Table 3 due to people 
no longer seeking work or people leaving American Samoa in pursuit of 
employment.







    aFor example, if 4,000 of the unemployed workers left the 
territory by 2013, the rate of unemployment would fall from 39.5 
percent to 24.6 percent. However, we are still talking about very high 
rates of unemployment at 25 percent.
    Outmigration may not be a convenient option in American Samoa under 
the best of circumstances because of distance and cost of relocation 
and, in the case of the US, considerable cultural adjustment. In 
addition, independent Samoa offers limited employment opportunities. In 
that regard, the GAO frequently notes in its report that a large 
percentage of cannery workers are citizens of Samoa. What it fails to 
point out is that many of these Samoa citizens have resided in American 
Samoa for decades and have grown children who are U.S. nationals and 
citizens. Hence, it is not as though these are short term temporary 
workers who can pick up and return to Samoa on short notice.







    We are currently reviewing our 2010 U.S. Census population 
count. There are some indications of a possible undercount. At the same 
time there is some evidence of possible heavy outmigration. Table 4 
demonstrates that the relationship between population and employment is 
reasonably stable and has remained so for 30 years. The 2010 GAO 
employment number fits closely with the long term population/employment 
relationship with employment at about 28 percent of population in 2010. 
We are still looking at this. However, the important point is that our 
population was estimated at over 65,500 in 2005. It is apparent that 
American Samoa, in the latter part of the decade, suffered serious 
employment and population declines attributable primarily, although not 
exclusively, to increases in the minimum wage. The U.S. Census of 
population count for 2010, 3 percent below the 2000 level, suggests 
very heavy outmigration late in the decade especially in light of the 
large natural population increase during the period.
    In conclusion, the use of the best available data with reasonable 
assumptions about 2010 employment suggests that the 2010 U.S. Census 
population count for American Samoa may not be seriously out of line.
    Even if there was some undercount, the data for 2010 in Table 4 
strongly suggest that employment trends will eventually force net 
outmigration levels until the relationship between employment and 
population is eventually reestablished at a lower population level.
    Unfortunately, it gets worse. Not only did GAO's treatment of the 
data result in a serious underestimation of the economic decline, it 
ignored an even more serious implication of the SSA employment data. 
Since the SSA 2009 data did not reflect the cannery closure in 2009, 
the SSA's 3737 employment decline in 2009 was substantially in 
industries other than fish canning. This means that the minimum wage 
increases had serious adverse effects on industries other than the 
canneries.
    In addition, the SSA total of 3737 could not have included much of 
the cannery closure employment multiplier effect since they require 
several years to materialize fully. This indicates that the non-cannery 
sectors of the economy were being seriously affected by the minimum 
wage increases as well.
    Finally, the GAO business and worker survey results suggested 
clearly the overwhelming cause of American Samoa's declining economy 
was the rapidly rising minimum wage. It only served to discount the 
impact of the minimum wage on American Samoa's economy by repeated 
admonitions that there were other influences at work. Certainly there 
were, but employer surveys in the draft report (excluded from the final 
report) showed large employers attributed past employment reductions to 
the minimum wage increases, and they viewed future impacts of minimum 
wage increases even more pessimistically.
    In other words, American Samoa's economy is in dire straits, and 
the forces that caused the decline remain intact to prevent an economic 
recovery. Indeed they remain intact to drive American Samoa deeper into 
economic depression over the next seven years.
    The McPhee Study--The Government of American Samoa had separately 
commissioned a study on the economic impact if fish canning operations 
in the territory were to close--the McPhee Study. This study was shared 
with the U.S. Bureau of Labor Statistics. Although the study was 
limited to the canning industry, it noted that the serious economic 
problems in the territory would be worsened by mandated future 
increases in the minimum wage. The study also stated that for the 
canners these increases will compound the problems of declining 
consumer demand and of cheaper foreign imports which benefit from 
recent trade negotiations. The mandated minimum wage increases will 
also hamper the territory in dealing with the loss of the canneries. 
The study found that the dramatic increase in the minimum wage is a 
serious threat to the Samoan economy. This underscores the need for a 
congressional policy, the study says, for economic development in 
American Samoa. American Samoa has the lowest per capita income 
compared to all U.S. states and to the other territories. Its per 
capita income is one-fifth that of the United States. This study also 
stated that American Samoa has a poor, undeveloped economy with the 
added drawbacks of a small size, physical isolation, high 
transportation costs, and lack of resources. Recognizing the 
territory's undeveloped economy, prior law had directed that the 
minimum wage in American Samoa should reach parity with the states ``as 
rapidly as is economically feasible without curtailing employment.'' 
Emphasis added. Congress had applied to American Samoa the same 
statutory procedure that had gradually raised the minimum wage in the 
Virgin Islands and Puerto Rico to match the regular Federal rate. 
Pursuant to that prior law, the Secretary of Labor every two years had 
adjusted the minimum wage rate in American Samoa based on industrial 
sectors.
    The McPhee study remains a story foretold regarding the minimum 
wage increases. Unfortunately, these warnings went unheeded as the 
territory's decline continues.
    Conclusion and Recommendations--American Samoa is in dire need of 
relief from the U.S. Congress. At a minimum, the present suspension of 
the minimum wage increases should be continued indefinitely or until 
some more satisfactory minimum wage procedures are designed and 
implemented. Increases in the minimum wage should be terminated 
immediately in American Samoa.
    We recommended to GAO that in its September 2011 report to Congress 
it address how the minimum wage can be determined without substantially 
curtailing employment or earning power in American Samoa. This requires 
a thorough analysis of what caused the minimum wage increases to lead 
to such adverse economic effects in American Samoa and not in the US.
    Accordingly, we recommended that the Federal government explore 
alternative procedures for setting minimum wage levels in American 
Samoa. Alternatives include but are not limited to:
        1.  Considering previous U.S. DOL Special Industry Committee 
        processes or some modification thereof for determining minimum 
        wages in American Samoa.
        2.  Considering processes used to raise the minimum wage in 
        Puerto Rico and the Virgin Islands which permit some variation 
        in minimum wage rates by industry and gross receipts levels.
        3.  Considering some form of negotiated minimum wage involving 
        the public and private sectors.
        4.  Considering amending statutes to specify the conditions to 
        be taken into account in determining the minimum wage in 
        American Samoa.
        5.  Considering other methods used in state minimum wage 
        programs or those of other countries.
    These recommendations should be the subject of follow on studies by 
the GAO, the U.S. Department of Labor or some other appropriate Federal 
agency.
                                 ______
                                 
    Dr. Fleming. Thank you. I thank you, Governor.
    Next, Mr. Gootnick. You have five minutes, sir.

 STATEMENT OF DAVID GOOTNICK, DIRECTOR, INTERNATIONAL AFFAIRS 
        AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Gootnick. Thank you, Mr. Chairman.
    Mr. Chairman and members of the Subcommittee, thank you for 
asking GAO to participate in this hearing. GAO has reported 
twice on the impact of the rising minimum wage in American 
Samoa and the CNMI. A key reason that we were directed to do 
this work is that unemployment and other important monthly data 
collected by Labor and Census do not exist for these two 
locations. Lacking this data, we did four key things.
    First, we ran a detailed survey which covered more than 50 
employers.
    Second, we analyzed Social Security and local tax data to 
report trends in employment and earnings.
    Third, we conducted structured discussion groups with 
employers and workers in both locations.
    Fourth, we modeled the impact of minimum wage increases on 
the tuna and tourism industries.
    In brief, five key findings. First, between 2006 and 2009, 
unemployment dropped in both locations--down 14 percent in 
American Samoa and 35 percent in the CNMI. In 2009 alone, 
employment in American Samoa dropped by 19 percent; and we 
acknowledge that these numbers do not fully capture job loss 
from the cannery closure in September of that year, as 2010 
Social Security data were not available for our report. We did 
make an effort, however, to portray the narrative of job losses 
in the cannery industry.
    In the CNMI, the numbers reflect the end of the garment 
factories and stagnation in the tourism industry. Many foreign 
workers in the CNMI have simply left and both the population 
and the economy have shrunk significantly as the BEA GDP data 
shows.
    Second, from 2006 to 2009, average inflation adjusted 
earnings dropped by 11 percent in American Samoa and remained 
unchanged in the CNMI, reflecting rising food, fuel and other 
costs.
    Third, in addition to laying off workers, employers in both 
locations cut costs through measures such as reduced worker 
hours, decreased benefits and rising prices. In American Samoa, 
employers attributed most of these actions directly to the 
minimum wage hikes. In the CNMI, employers generally cited 
other factors, including immigration reform and a shrinking 
customer base as the cause of their actions.
    Fourth, on key industries. As wages rise in American Samoa, 
the tuna industry loses its ability to compete with lower wage 
locations in Asia and elsewhere. Its only remaining advantage 
may be in U.S. Government contracts for tuna, many of which 
have buy-America provisions. In the CNMI, hotels thus far 
appear to have absorbed the minimum wage hikes without raising 
room rates, and many hotels have postponed capital investments 
needed to attract tourists.
    Finally, worker views. In American Samoa, workers were most 
concerned about losing jobs. They were acutely aware of the 
connection between a rising minimum wage and the closure of the 
first cannery. In the CNMI, workers were most concerned about 
uncertainty over immigration and rising prices for basic goods. 
They believe that the rising minimum wage was simply offset by 
their cost of living increases.
    In closing, a year ago Congress used the GAO report in part 
to support its decision to suspend minimum wage increases. 
Looking ahead, future minimum wage hikes are scheduled to occur 
under very difficult economic circumstances. Quite aside from 
global economic uncertainty, both areas face the inherent 
challenges associated with small island economies.
    In American Samoa, wage hikes are directly tied to the 
closure of the first cannery, and the second cannery reports 
that its current operations there are not competitive with 
business models in other locations. In the CNMI, wage hikes are 
just one factor in an economy where the workforce is in flux, 
its immigration reform moves forward, and tourism struggles to 
turn around after a number of very lean years.
    Mr. Chairman, this completes my prepared remarks. I look 
forward to your questions.
    [The prepared statement of Mr. Gootnick follows:]

Statement of David Gootnick, Director, International Affairs and Trade, 
          United States Government Accountability Office (GAO)

    Chairman Fleming, Ranking Member Sablan, and Members of the 
Subcommittee:
    Thank you for the opportunity to discuss our recent report \1\ on 
the impact of minimum wage increases in American Samoa and the 
Commonwealth of the Northern Mariana Islands (CNMI).
---------------------------------------------------------------------------
    \1\ GAO, American Samoa and the Commonwealth of the Northern 
Mariana Islands: Employment, Earnings, and Status of Key Industries 
Since Minimum Wage Increases Began, GAO-11-427 (Washington, D.C.: June 
23, 2011).
---------------------------------------------------------------------------
    In 2007, the United States enacted legislation that incrementally 
applies the U.S. minimum wage to the U.S. insular areas of American 
Samoa and the Commonwealth of the Northern Mariana Islands (CNMI).\2\ 
This legislation raised the minimum wage in both territories in a 
series of $.50 per hour annual increases, which were to continue until 
these wages equal the federal minimum wage.\3\ Enactment of subsequent 
legislation delayed the scheduled minimum wage increases in both areas, 
providing for no increase in American Samoa in 2010 or 2011, and no 
increase in the CNMI in 2011.\4\ Currently, the minimum wage of the 
lowest paid workers in American Samoa is $4.18,\5\ and in the CNMI the 
minimum wage is $5.05.\6\
---------------------------------------------------------------------------
    \2\ U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and 
Iraq Accountability Appropriations Act, 2007, Pub. L. No. 110-28, 
Sec. 8103, 121 Stat. 188 (May 25, 2007), as amended by Pub. L. No. 111-
244, 124 Stat. 2618 (Sep. 30, 2010), codified at 29 U.S.C. Sec. 206 
note. 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. 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.
    \3\ Pub. L. No. 110-28, Sec. 8103, 121 Stat. 188 (May 25, 2007). 
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 in 2016 and 2015, respectively. 
However, the Consolidated Appropriations Act, 2010, included a 
provision delaying the minimum wage increases until September 30th of 
each year, beginning in 2010. Pub. L. No. 111-117, Div. D, Title V, 
Sec. 520, 123 Stat. 3034, 3283 (Dec. 16. 2009).
    \4\ Pub. L. No. 111-244, 124 Stat. 2618 (September 30, 2010). 
American Samoa's minimum wage increased by $.50 three times and the 
CNMI's four times before this legislation delayed the increases.
    \5\ Previously, American Samoa's minimum wage was set for each of 
18 industries by the U.S. Department of Labor under biennial reviews, 
and its minimum wages in 2006 ranged from $2.68 to $4.09.
    \6\ The CNMI had authority to set its own minimum wage under its 
1976 Covenant with the United States, and its minimum wage in 2006 was 
$3.05.
---------------------------------------------------------------------------
    Public and private sector officials and workers in both areas have 
expressed concern about the impact of the federal minimum wage 
increases on the local economies. Economic indicators in both areas 
show decline. Both governments have faced budget gaps in most recent 
years, and they have reduced the work hours of government employees and 
taken other steps to reduce the shortfalls. In January 2008, the U.S. 
Department of Labor issued a report on the economic impact of minimum 
wage increases in both American Samoa and the CNMI; the report noted 
concern that the scheduled minimum wage increases would lead to the 
closing of tuna canneries in American Samoa and concluded that it 
seemed likely the increases would worsen CNMI's existing economic 
decline.\7\ Also in 2008, studies funded by the U.S. Department of the 
Interior projected major additional contraction of the two 
economies.\8\
---------------------------------------------------------------------------
    \7\ U.S. Department of Labor, Office of the Assistant Secretary for 
Policy, 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.
    \8\ 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); and 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).
---------------------------------------------------------------------------
    American Samoa's private sector is largely based on the tuna 
canning industry, and the closure of one of its two tuna canneries in 
September 2009 significantly affected the labor market and economy.\9\ 
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.
---------------------------------------------------------------------------
    \9\ 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. Chicken of the Sea relocated 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.
---------------------------------------------------------------------------
    Until recently the CNMI private sector relied on the garment 
industry which had employed close to a third of all workers; however, 
by early 2009, the last garment factory had closed. Tourism, the major 
remaining private sector industry, has seen visitor arrivals drop from 
nearly 727,000 in 1997 to roughly 368,000 in 2010, a decline of almost 
50 percent. 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.\10\ In 2005, foreign workers 
represented a majority of the CNMI labor force and outnumbered U.S. 
citizens in most industries.
---------------------------------------------------------------------------
    \10\ Consolidated Natural Resources Act of 2008, Pub. L. No. 110-
229, Title VII, 122 Stat. 754, 853 (May 8, 2008). U.S. law established 
federal control of CNMI immigration on November 28, 2009, with 
provisions affecting employers' access to foreign workers.
---------------------------------------------------------------------------
    GAO is required to report every two years on the impact of minimum 
wage increases in American Samoa and the CNMI.\11\ My statement today 
describes, since the minimum wage increases began, (1) employment and 
earnings, and (2) the status of key industries.
---------------------------------------------------------------------------
    \11\ The American Recovery and Reinvestment Act of 2009 required 
that GAO report annually on the impact of minimum wage increases in 
American Samoa and the CNMI. Under the Act, GAO was 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. Pub. L. No. 111-5, Sec. 802, 123 Stat. 115, 186 (Feb. 17, 2009). 
A subsequent law changed the GAO reporting requirement to not later 
than September 1, 2011; April 1, 2013; and every 2 years thereafter 
until the minimum wage in the respective territory meets the federal 
minimum wage. Pub. L. No. 111-244, 124 Stat. 2618 (Sep. 30, 2010).
---------------------------------------------------------------------------
    In preparing our June 2011 report, we reviewed and analyzed 
existing information from federal sources and from the American Samoa 
and CNMI governments. To describe employment and earnings, we analyzed 
earnings data from the Social Security Administration (SSA) for 
American Samoa and tax data from the CNMI government, and we adjusted 
the earnings data using Consumer Price Index (CPI) data for each area. 
For both objectives, we analyzed responses from GAO's questionnaire of 
large employers in the American Samoa tuna canning and CNMI tourism 
industries, and we conducted discussion groups with employers and 
workers and interviews with public officials during site visits to 
American Samoa and the CNMI.\12\ A limitation of our study is that 
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 the effects of other 
factors, including the global recession beginning in 2009, fluctuations 
in energy prices, global trade liberalization, and the application of 
U.S. immigration law to the CNMI.
---------------------------------------------------------------------------
    \12\ The scope of our study did not include workers in the 
underground economy in each area, and we did not focus on the extent to 
which relevant laws were properly enforced or implemented. See appendix 
I of our report for a detailed explanation of the methods we used and 
the scope and limitations of our work. See appendix V of the report for 
the industry questionnaire.
---------------------------------------------------------------------------
    We conducted work on our June 2011 report from September 2010 to 
June 2011 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.
Summary
    In American Samoa, employment declined 14 percent--from 17,852 to 
15,434--between 2006 and 2009, and average inflation-adjusted earnings 
of those employed fell by 11 percent over the same period. In addition, 
roughly 2,000 to 3,000 temporary federal jobs will end when funding is 
no longer available. Employers in the tuna canning industry attributed 
most of their past and planned actions, including worker layoffs and 
hiring freezes, to the minimum wage. Cannery officials also expressed 
concern about American Samoa's loss of competitive advantage in the 
global tuna canning industry. Workers principally expressed concern 
over job security. Analysis of alternate models suggests that moving 
tuna cannery operations from American Samoa to another tariff-free 
country with lower labor costs would significantly reduce cannery 
operating costs.
    In the CNMI, employment fell 35 percent--from 43,036 to 27,897--
between 2006 and 2009, and average inflation-adjusted earnings of those 
employed remained largely unchanged. Also, fewer than 1,000 temporary 
federal jobs will end when funding is no longer available. Employers in 
the tourism industry generally attributed their employment actions to 
multiple factors, such as immigration law and a decrease in the number 
of customers, more than to the rising minimum wage. Workers said they 
would like pay increases to help meet rising prices, but they were 
concerned about losing jobs and work hours. CNMI hotels have generally 
absorbed minimum wage costs rather than raise room rates. If this trend 
continues, scheduled minimum wage increases would increase hotels' 
operating costs due to payroll from approximately 29 to roughly 34 
percent of total operating costs between 2010 and 2016.
American Samoa
Employment and Average Inflation-Adjusted Earnings Declined Between 
        2006 and 2009
    Employment. Social Security Administration (SSA) data show that 
from 2006 to 2009, employment declined 14 percent from 17,852 to 15,434 
with employment having peaked in 2008 at 19,171. From 2008 to 2009, the 
total number of people employed in American Samoa declined 19 percent. 
In addition, we estimated that from 2,000 to 3,000 temporary federal 
jobs funded beginning in June 2009 will end when federal funding is no 
longer available.\13\ Data on total employment from the 2010 Decennial 
Census are not yet available. Questionnaire responses from the tuna 
canning industry show that employment of their workers--most of whom 
are foreign workers from independent Samoa--dropped by 55 percent from 
2009 to 2010, reflecting the September 2009 closure of one cannery and 
layoffs in the remaining cannery.\14\
---------------------------------------------------------------------------
    \13\ Temporary federal jobs included those funded by the Recovery 
Act, by the U.S. Census Bureau for the Decennial Census, and by 
recovery efforts after the 2009 tsunami.
    \14\ If many foreign workers left American Samoa, the impact on the 
unemployment rate would be smaller than if those workers remained.
---------------------------------------------------------------------------
    Inflation-adjusted earnings of those employed. Earnings data from 
SSA and consumer price data show that from 2006 to 2009, average 
inflation-adjusted earnings of those employed fell by 11 percent. This 
resulted from a rise in average annual earnings of about 5 percent 
while local prices rose by about 18 percent. From 2008 to 2009, average 
inflation-adjusted earnings fell by 5 percent, resulting from a 
decrease in average earnings of 2 percent and an increase in prices of 
3 percent. The inflation-adjusted earnings of minimum wage cannery 
workers who retained their jobs and work hours rose by about 23 percent 
for the entire period from 2006 to 2009 and about 8 percent from 2008 
to 2009.
    Worker views. Some workers said they had looked forward to the 2010 
minimum wage increase and were disappointed to see the increase 
delayed. However, more tuna canning workers expressed concern over job 
security than favored a minimum wage increase with the potential for 
subsequent layoffs.
The American Samoa Tuna Canning Industry Has Continued to Lay Off 
        Workers and Has Considered Alternate Locations
    Employers in the tuna canning industry reported that they had taken 
cost-cutting actions, including laying off workers, reducing overtime 
hours, freezing hiring, decreasing benefits, temporarily closing, 
reducing operating capacity or services, and raising prices, among 
other actions. They reported plans to take the same types of cost-
cutting actions by early 2012, including laying off additional 
employees.
    Employers attributed most of their past and planned actions largely 
to the minimum wage increases and did so more often than attributing 
their actions to other factors, which included the high cost of goods 
and utilities, transportation and shipping costs, and changes in 
business taxes and fees.
    In addition to the minimum wage increases, cannery officials also 
expressed concern about American Samoa's dwindling competitive 
advantage in the global tuna canning industry and said that current 
operations in American Samoa were not competitive with other 
models.\15\ Analysis of alternate models available to the industry 
suggests that moving tuna cannery operations--including unloading, 
loining (cleaning, cooking, and cutting), and canning fish--from 
American Samoa to another tariff-free country with lower labor costs 
would significantly reduce cannery operating costs. However, given that 
tuna facilities in American Samoa are among the few in the United 
States that can meet the requirements of U.S. government contracts, 
many of which require U.S.-sourced and processed fish, maintaining some 
operations in American Samoa would allow the facility to continue to 
compete for these contracts. Figure 1 compares estimated wage and 
tariff costs for tuna canneries using four alternative business models:
---------------------------------------------------------------------------
    \15\ 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. The authority to extend duty-free 
treatment to Andean Trade Preference Act beneficiary countries expired 
on February 12, 2011, and has not been renewed. 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.
---------------------------------------------------------------------------
      Model A: All loining and canning located in American 
Samoa
      Model B: Relocating loining to Thailand or another 
country with lower labor costs, and canning frozen loins in the U.S. 50 
states \16\
---------------------------------------------------------------------------
    \16\ The frozen fish carries a tariff of $11 per metric ton.
---------------------------------------------------------------------------
      Model C: Relocating all loining and canning to a tariff-
free country
      Model D: Hybrid, with loining and canning for U.S. 
government contracts located in American Samoa and with other 
production relocated to a tariff-free country







    Despite the advantages of moving some operations to other 
countries, the remaining cannery's lease obligation through 2013 and 
the cost of building new facilities elsewhere may pose obstacles to 
near-term relocation. In addition, since October 2010 a new tuna 
facility operator \17\ has hired a small number of workers formerly 
employed by the cannery that closed, but it is unclear how many 
additional workers they will hire.
---------------------------------------------------------------------------
    \17\ The new operator is Samoa Tuna Processors, Inc., part of Tri 
Marine International, which acquired the former Chicken of the Sea tuna 
cannery in American Samoa. The firm's local tax exemption 
certificate requires that the company invest a minimum of $5 million 
and employ 600 people within 5 years in order to retain local tax 
benefits.
---------------------------------------------------------------------------
    See appendix III of our June 2011 report for detailed findings and 
tables on American Samoa.
Commonwealth of the Northern Mariana Islands
CNMI Employment Fell Substantially from 2006-2009, and Average 
        Inflation-Adjusted Earnings Have Remained Largely Unchanged
    Employment. For the period from 2006 to 2009, the number employed 
fell 35 percent from 43,036 to 27,897 according to CNMI government tax 
data. The decrease largely reflected the closure of the CNMI's last 
remaining garment factories, ending in 2009, which employed many 
foreign workers.\18\ From 2008 to 2009, the total number of people 
employed fell by about 13 percent. In addition, we estimated that fewer 
than 1,000 temporary federal jobs funded beginning in June 2009 will 
end when federal funding is no longer available.\19\ Because CNMI tax 
data are not available for 2010, we are unable to report on the overall 
level of employment for the year. In the tourism industry, employment 
among GAO questionnaire respondents fell by 14 percent from 2007 to 
2010 and fell 8 percent from 2009 to 2010.
---------------------------------------------------------------------------
    \18\ If many foreign workers left the CNMI, the impact on the 
unemployment rate would be smaller than if those workers remained.
    \19\ Temporary federal jobs included those funded by the Recovery 
Act and by the U.S. Census Bureau for the Decennial Census.
---------------------------------------------------------------------------
    Inflation-adjusted earnings of those employed. Over the entire 
period from 2006 to 2009, based on CNMI government tax data and 
consumer price data, average inflation-adjusted earnings of those 
employed remained largely unchanged. This resulted from a 19 percent 
increase in average earnings and a 19.5 percent increase in prices. 
From 2008 to 2009, average inflation-adjusted earnings rose by 3 
percent. This resulted from a 7 percent increase in average earnings, 
with a 3.5 percent increase in prices. The inflation-adjusted earnings 
of minimum wage workers who retained their jobs and work hours rose by 
about 25 percent for the entire period from 2006 to 2009, and by about 
9 percent from 2008 to 2009.
    Worker views. Workers in our discussion groups expressed mixed 
views regarding the minimum wage increases and said they would like pay 
increases but were concerned about losing jobs and work hours. 
Participants said they wanted to receive the pay increases to help meet 
rising prices, including for utilities and consumer goods. However, 
they said they had observed that while some workers received pay 
increases, others lost jobs or work hours.
As Visitor Arrivals Decline, Hotels Have Taken Cost-Cutting Actions and 
        Have Absorbed Minimum Wage Increases Rather than Raising Room 
        Rates
    In response to the decline in visitor arrivals, hotel and other 
employers in the CNMI tourism industry reported having taken cost-
cutting actions including reducing hours, freezing hiring, decreasing 
benefits, and raising prices of goods or services, and these employers 
reported plans to lay off workers. Employers generally stated that 
other factors, including changes in immigration law and a decrease in 
the number of customers, contributed to their actions more than the 
rising minimum wage. In discussion groups, some hotel and other tourism 
employers and managers expressed concern about the minimum wage 
increases, but others said the minimum wage increases were needed and 
manageable and that the primary difficulty was the CNMI tourism 
industry's general decline.
    CNMI hotels have generally absorbed minimum wage costs rather than 
raise room rates. Industry data show that since 2006 the hotel 
occupancy rate had not changed significantly, remaining between 58 and 
64 percent, while inflation-adjusted room rates declined by about 12 
percent from 2006 to 2009. If observed trends continue, scheduled 
minimum wage increases will increase the share of hotels' total 
operating costs attributable to payroll from approximately 29 percent 
of operating costs in 2010 (with minimum wage increases representing 
about 1 percent of total operating costs) to 34 percent in 2016 (with 
minimum wage increases representing about 8 percent of the total). See 
figure 2.
    See appendix IV of our June 2011 report for detailed findings and 
tables on the CNMI.







    Agency Comments and Our Evaluation
    We shared our June 2011 report with relevant federal agencies and 
the governments of American Samoa and the CNMI. Agencies agreed with 
our report or chose not to provide comments. In its written comments, 
the American Samoa government generally agreed with our findings but 
stated that employment losses and other aspects of economic decline in 
American Samoa are greater than the report suggests. In its written 
comments, the CNMI government said the draft report fairly 
characterized current conditions in the CNMI. Appendix VII of our 
report provides our detailed evaluation of the American Samoa 
government's letter and our response, and appendix VIII of the report 
provides our detailed evaluation of the CNMI government's letter and 
our response.
    Chairman Fleming, Ranking Member Sablan, and Members of the 
Subcommittee, this completes my prepared statement. I would be happy to 
respond to any questions you may have at this time.
GAO Contacts and Staff Acknowledgments
GAO Contacts
    David Gootnick, (202) 512-3149 or [email protected] Tom McCool, 
(202) 512-2642 or [email protected]
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; Pedro Almoguera; Benjamin Bolitzer; 
David Dayton; Etana Finkler; Jill Lacey; Luann Moy; Nalylee Padilla; 
Suneeti Shah Vakharia; and Vanessa Taylor made key contributions to 
this report. Technical assistance was provided by Holly Dye.
GAO's Mission
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investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
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Washington, DC 20548
                                 ______
                                 
    Dr. Fleming. Thank you, Mr. Gootnick.
    Mr. Arenovski, I will now recognize you, sir, for five 
minutes.

          STATEMENT OF JAMES T. ARENOVSKI, PRESIDENT, 
              DELTA MANAGEMENT CORPORATION--SAIPAN

    Mr. Arenovski. Thank you, Mr. Chairman, for inviting me to 
testify today.
    In 2007, the United States enacted Public Law 110-28, which 
included a provision to incrementally bring the minimum wage in 
the Northern Mariana Islands into line with Federal minimum 
wage over the course of a 9-year period, with 50-cent-per-hour 
increases each year until it matches the Federal minimum wage. 
It is important to note this yearly increase is not rooted in 
any methodology nor did it take into account any of what the 
increases would do to the cost of doing business or cost of 
goods in the NMI.
    I believe that Congress had the best interests of the 
people of the NMI when it required us to conform to the U.S. 
Federal minimum wage, but Congress also failed to appreciate 
some of the harm that this would cause businesses, economic 
growth and ultimately employment, with no empirical data to 
support the annual 50-cent increases. It is appropriate for 
Congress to now revisit the issue and help workers and 
businesses in the NMI so they can remain viable and have 
sustainable employment for the foreseeable future.
    Public Law 111-244, which delayed by 1 year the annual 
increase scheduled for 2011, saved businesses and jobs. In 
light of the current economic conditions in the Commonwealth, 
which is likely to continue for the foreseeable future, I urge 
Congress to adopt a similar delay for the increase scheduled in 
2012, and, if not possible, then for 2013.
    Even with its economic expansion in the late eighties and 
1990s, increasing the minimum wage in the United States from 
$3.10 to $7.25 took a full 29 years. But Congress charted a 
path in the NMI with its well-documented challenges to complete 
the same task in only 9 years.
    Even if our local economy was booming this schedule would 
be a hard one to keep without adverse economic effects.
    In 2010 and 2011, GAO reports on employment and earnings in 
the Northern Marianas and Samoa accurately point out that the 
increased minimum wage is just one of many financial pressures 
being brought to bear upon our businesses, but it represents a 
financial pressure that Congress has the means to control.
    With the shrinking economy in the NMI, we are at a time 
where businesses simply do not have enough revenue to increase 
salaries and maintain our current operations. In simple terms, 
the intent of increased wages for employees is laudable, but if 
these yearly increases as they stand now mean the loss of 
overall employment, we have to find middle ground.
    It is difficult for me to tell my 45 employees that I am 
not supportive of these annual increases according to the 
current schedule, but I know that more increases will leave 
these dedicated employees with fewer hours and others out of 
work.
    Prices and goods that come in by ship and by air are high 
to begin with, but beyond shipping, the cost of running a 
business in the NMI is uniquely high. Our utility rates are the 
highest in the Nation. Many businesses in our community do not 
turn on their lights or air conditioning during operations. 
These are actions that in the mainland would run you out of 
business, but in our island such actions are becoming more of a 
necessity to remain in business.
    If you consider that many companies cannot afford to 
adequately air condition or light their business, it is not a 
stretch to imagine that further wage increases are going to be 
the end for some and reduced operations for the others.
    Our economy is also severely strained due to global 
economic crises, the earthquake in Japan, as well as local 
government issues. Tourism, our main economic driver, is in a 
downward spiral. Fewer visitors mean less revenues for hotels 
and for those businesses who supply and support the hotels. 
These effects ripple through our business community and 
ultimately affect the workforce needs of our private sector.
    Often when a business struggles or fails, it is due to bad 
decisions, poor management or the inability to adapt to markets 
or competition. But in the case of the Northern Mariana 
Islands, almost all businesses are affected significantly and 
negatively by somewhat unique forces beyond our control. 
Similarly, these minimum wage increases are out of our control, 
but they are not out of Congress' control.
    Helping the Northern Mariana Islands to survive its current 
economic depression and bring us into line with the Federal 
minimum wage in a rational manner is in the hands of Congress. 
The goal of increasing worker pay is commendable, but please do 
not allow this to come about at the ultimate expense of 
workers, businesses and our economy.
    I respectfully request that this Subcommittee advocate 
delay and you continue to monitor the situation in the Northern 
Mariana Islands. This is an issue of critical importance to the 
employees and employers alike. What is of utmost importance is 
not simply that the minimum wage is implemented, but rather 
that it is implemented in the right way, with long-term 
sustainable economic growth in mind.
    Thank you for your consideration.
    [The prepared statement of Mr. Arenovski follows:]

              Statement of James T. Arenovski, President, 
                  Delta Management Corporation--Saipan

    My name is James T. Arenovski and I am a businessman who has been 
running a number of businesses in the Northern Mariana Islands since 
1999. I have lived in Micronesia since 1987. My companies in the 
Northern Marianas employ approximately 45 individuals ranging in age 
from high school students to those nearing retirement age. I have a 
company that operates gasoline service stations, a company that 
provides workplace training to employers and employees, and a company 
that operates a small restaurant. I have been an active member of the 
Saipan Chamber of Commerce since 2000, and have served in a variety of 
capacities at the Chamber including as president in 2008 and 2009. 
Thank you for inviting me to testify today via teleconference on the 
status of minimum wage increases in the NMI.
    In 2007 the United States enacted Public Law 110-28, which included 
a provision to incrementally bring the minimum wage in the Northern 
Marianas into line with the federal minimum wage over the course of a 
nine-year period. The plan was to increase the minimum wage by fifty 
cents per hour each year until it matches the federal minimum wage. 
This yearly increase was not rooted in any methodology nor did it take 
into account what the increases would do to the costs of doing business 
and the costs of goods in the NMI. No study was undertaken prior to the 
implementation of this law, something that I warned about in my 
previous written testimony as President of the Saipan Chamber of 
Commerce. And now the concerns we had about this annual minimum wage 
increase have become reality.
    I believe that Congress had the best interests of the people of the 
NMI in mind when it required us to conform to the U.S. federal minimum 
wage, but Congress also failed to appreciate some of the harm that this 
would cause to businesses, economic growth, and ultimately, employment. 
With no empirical data to support the annual fifty-cent increases, it 
is appropriate for Congress to now revisit the issue and help the 
workers and businesses of the NMI so they can remain viable and have 
sustained employment for the foreseeable future. Public Law 111-244, 
which delayed by one year the annual increase scheduled for 2011 saved 
businesses and saved jobs. In light of the current economic condition 
of the Commonwealth, which is likely to continue for the foreseeable 
future, I urge Congress to adopt a similar delay for the increase 
scheduled for 2012, or if that is not possible, then for 2013.
    Even with the U.S. economic expansion of the late 1980's and 
1990's, increasing the minimum wage in the United States from $3.10 to 
$7.25 took a full 29 years. But Congress charted a path for the NMI, 
with its well documented challenges, including the loss of the apparel 
industry, the desertion of Japan Airlines and Continental Airlines, and 
the federal takeover of immigration, to complete the same task in only 
nine years. Even if our local economy was booming, this schedule would 
be a hard one to keep without adverse economic effects. If there was an 
action that Congress could take that would cost no money to implement 
and would do much good for the NMI economy, it would be to implement 
another delay as soon as possible.
    The 2010 and 2011 GAO reports on employment and earnings in the 
Northern Mariana Islands and Samoa highlighted the financial challenges 
that these increases represent for employers during troubled economic 
times. In fact, the 2011 report reflected a growing concern among 
workers that increased wages not come at the expense of jobs or work 
hours. And as bleak a picture as those reports painted, the underlying 
studies focused mostly on larger businesses in the NMI. I feel if more 
time was spent on examining the effects on small businesses, the GAO 
would have found the impact was much greater. The reports accurately 
point out that the increasing minimum wage is just one of many 
financial pressures being brought to bear on businesses. But it 
represents a financial pressure that Congress has the means to control, 
unlike, for example, rising fuel prices, or rising shipping costs.
    This testimony will not be popular with most employees in the NMI 
and I, as well as most of my colleagues, want the very best for our 
staff, to ensure they are motivated and dedicated to our companies' 
missions. However, with a shrinking economy and shrinking population 
base in the NMI, we are at a time where businesses simply do not have 
enough revenue to increase salaries and maintain our operations, let 
alone consider any sort of expansions or upgrades. We are at a point 
where hard decisions have to be made and most of the options include 
the loss of jobs. Whether through business closure or reduction of 
services, it means less available employment. In simple terms, the 
intent of increased wages for employees is laudable, but if lockstep 
increases mean the loss of overall employment and eventual loss of tax 
base for our already struggling government, we have to find middle 
ground.
    It is difficult for me to tell my 45 employees on Saipan that I am 
not supportive of these annual increases according to the current 
schedule. But I know that more increases will force me to reduce hours 
and staffing, leaving some employees out of work, or with fewer hours. 
It simply makes no sense to have an increase in minimum wage that 
contributes to such a negative effect on overall employment. There is a 
saying that 50 percent of something is better than 100 percent of 
nothing. My staff understand that some wage is better than no wage. 
They also know that I have been in business on Saipan for 13 years and 
that I want to be in business on Saipan for least another 13 years.
    Many businesses are reluctantly preparing for the wage increase in 
2012. But the fact remains that population, sales, revenues, and 
profits have all decreased and continue to fall. Business have battled 
the local government to not raise costs such as license fees and taxes, 
but those costs pale in comparison to the cost of doing business that 
another wage increase will bring. For example, a small restaurant 
business with four kitchen staff and four waitresses would see an 
immediate cost increase to the company of $700 per month or $8,300 per 
year. For a small restaurant to earn an additional $700 each month to 
pay for the wage increases, it would need to increase monthly sales by 
approximately $3000. Consider a hotel with 100 employees and the 
numbers become staggering.
    Extrinsic economic forces weigh greatly on our small island 
community. With thousands of miles of ocean in all directions, the 
prices of goods that come in by ship or air are high to begin with, but 
beyond shipping, the costs of running a business in the NMI are 
uniquely high. Our utility rates are the highest in the nation. Many 
businesses in our community do not turn on their lights or air 
conditioning. Some even unplug their chillers at night. These are 
actions that in the mainland would run you out of business, but in our 
islands such actions are becoming more of a necessity to remain in 
business. If you consider that many companies cannot afford to 
adequately air condition or light their business, it is not a stretch 
to imagine that further wage increases are going to be the death knell 
for some and result in reduced operations for others. Some of you may 
think it is time for businesses in the NMI to cut expenses and hunker 
down. Businesses in the NMI have made those cuts over the last five 
years and there is frankly no further cutting that can be done to 
eliminate the downward economic effects of another wage increase.
    Our economy is also severely strained due the global economic 
crisis, the earthquake and tsunami in Japan, as well as local 
governmental issues. Tourism, our main economic driver, is in a 
downward spiral. Fewer visitors means less revenues for the hotels, and 
all those businesses that supply or support the hotels. These effects 
ripple throughout the business community and ultimately affect the 
workforce needs of the private sector. In fiscal year 2010, visitor 
arrivals to the NMI totaled only 386,186, just a little more than half 
of total visitor arrivals during the industry's peak in 1996. From FY 
2006 to 2010, hotel revenues each year dropped at an average of $2.9 
million and the NMI lost approximately $10.5 million annually in direct 
on-island expenditures. With a multiplier of 1.5, our business 
community lost $33.4 million in economic activity and $2-million in 
taxes annually. Additionally, it is estimated that 171 public and 191 
private sector jobs were displaced annually.
    Often, when a business struggles or fails, it is due to bad 
decisions or poor management or an inability to adapt to markets and 
competition, but in the case of the Northern Marianas, most all 
businesses are affected significantly and negatively by somewhat unique 
forces beyond our control: our geographical isolation, our declining 
population, our unique immigration history, and the like. These minimum 
wage increases are also out of our control, but they are not out of 
Congress's control.
    I recently saw a MSNBC interview with Chairman Fleming recently 
regarding the taxes and the costs of doing business and the need to 
have money left at the end of the day to reinvest in your business in 
order to continue to continue to provide, and to create, jobs. So I 
know this subcommittee is led by someone who fully appreciates the 
real-world impact that increased costs have on businesses. And I am 
sure the Chairman is not the only one on this committee who understands 
the financial challenges of running a business facing an increase in 
costs when revenues are flat. When the NMI was granted a one year delay 
of the fifty cent increase in 2011, it was desperately needed by 
businesses and I believe it worked to the benefit of retail consumers. 
And perhaps most importantly for your consideration, it benefitted the 
overall workforce in the Northern Marianas--the employees who otherwise 
would have faced reduced work hours or job loss.
    Conditions reflected in the 2010 and 2011 GAO reports amply 
justified the delay in the 2011 wage increase. Current conditions are 
at least as poor, and probably worse, than when GAO undertook the 
previous two studies. When the 2012 minimum wage increase is 
implemented, some people will see their wages go up. Likely, however, 
even more people will see their work hours decline or they will lose 
their jobs. There is plenty of justification and time, however, to 
implement another one-year delay as soon as possible. Of course, if 
there was a sudden and dramatic economic upturn in the next year, I 
would happily revisit my analysis. I want to be able to pay my 
employees more--but I cannot afford to do so when it means that I would 
jeopardize the overall financial health of the company. I assure you, 
however, that there is no best-case scenario that would be substantial 
enough for companies to recover in any meaningful way before the next 
scheduled increase. A delay of the upcoming increase would mitigate the 
negative effects of wage increases originally scheduled to be 
implemented at a historic pace, without consideration of our failing 
economy, and without consideration of the negative collateral impact on 
many workers.
    More jobs should be the immediate goal in the Northern Marianas. 
Not only is the NMI wrestling with impact of minimum wage legislation, 
but also immigration reform which is directly related to labor and 
costs. The Consolidated Natural Resources Act of 2008 mandates a 
decreasing dependence of foreign labor. A delay in the ongoing 
increases would allow businesses to invest money in the hiring and 
training of United States workers in order to comply with that law.
    Helping the Northern Mariana Islands to survive its current 
economic depression, replace our foreign workforce with United States 
workers, and to bring our minimum wage into line with the federal 
minimum wage in a rational manner is the hands of Congress. The goal of 
increasing worker pay is laudable, but please do not allow it to come 
about at the ultimate expense of workers, businesses and our economy. I 
respectfully request that this subcommittee advocate a delay as I have 
outlined above and that you continue to monitor the situation in the 
Northern Marianas. This is an issue of critical importance to employees 
and employers alike. What is of utmost importance is not simply that 
minimum wage are implemented but rather that they are implemented in 
the right way.
    Thank you for your consideration.
                                 ______
                                 
    Dr. Fleming. Thank you, Mr. Arenovski. That completes the 
testimony of our witnesses.
    At this point we will begin Member questions of the 
witnesses. To allow all Members to participate and to ensure we 
can hear from all our witnesses today, Members are limited to 
five minutes for their questions. However, if Members have 
additional questions, we can have more than one round of 
questioning. I now recognize myself for five minutes.
    Specifically Governor Tulafono and Mr. Arenovski, 
statistical data is fairly clear with respect to minimum wage 
increases also effectively raising unemployment rates. We have 
seen this every time we study this. It seems when we get a bump 
in the minimum wage, we get also a bump in unemployment among 
young people, which then comes down over time as the economy 
expands, inflation and so forth. So there seems to be a very 
direct correlation in general when we look at statistics 
between raising the minimum wage and employment levels.
    These two Territories are showing the accuracy of the 
statistical data. Many rural areas of the country, including 
areas in Louisiana, are also feeling the effects of minimum 
wage laws. As the Department of Labor noted in its report, the 
general experience in the U.S. has shown that potential adverse 
employment effects due to minimum wage increases can be masked 
or offset to some degree by an expanding economy that is 
generating net employment growth. For areas that are in 
economic decline, no such offsets can be expected.
    Now, it is interesting. Particularly American Samoa appears 
to me to be a microcosm of this debate about minimum wage which 
has gone on in Congress for many years. In a complex economy, a 
large economy like the United States, so many factors play into 
the consideration of employment that it sometimes becomes very 
difficult to tease that out. In American Samoa, it is a much 
more straightforward situation. It is obvious that raising the 
minimum wage rates has a direct impact on employment there and 
on commerce in general.
    Here is the point I would make: It is true that there are 
those who would say, well, you can't raise a family on minimum 
wage, and that is probably true in most cases. However, we know 
that minimum wage is an entry level for employees and that over 
time, as people who are in management positions move on, as 
other opportunities come along, they get promotions, they 
become a supervisor, they move up to management or whatever. So 
it certainly is the beginning of moving up that commercial 
ladder toward higher and higher wages which one can then feed a 
family. And in most cases people who get a minimum wage job, 
often it is their first job and they are young people, probably 
still living at home.
    Now, on the other hand, if minimum wage is raised so high 
as to close down a business or an entire industry, as we are 
seeing possibly here, those growth opportunities go away. You 
might say, well, we should force that anyway. Well, we need to 
recognize that today we have a worldwide economy. It is steady 
state. Whatever happens in one country affects the other in 
terms of competition and commerce. So it seems to me that we 
can't just artificially force in a specific economy a certain 
pay rate without it really having in many cases devastating 
effects, as what we are seeing here.
    We will always begin to see types of industries, companies, 
moving to areas in the world where they can keep their labor 
costs low, where they have a strong workforce, where they can 
use mechanization, transport, distribution, and all those other 
things. So these are things to consider going forward.
    I may be able to squeeze in one question here in my time 
allotted. Does the panel agree that minimum wage increases do 
not work in declining economies and that it doesn't just apply 
to the Territories?
    I will open that question up to everyone on the panel.
    Governor Tulafono. Mr. Chairman, I believe you have 
described exactly what has happened in American Samoa. It is 
ironic that even if you look at our Nation, most of the 
companies that moved to other countries do not move there 
because of the high cost of doing business. It is basically 
because they can capitalize on lower wage rates. The United 
States is among those of the lowest cost of doing business, 
except for wages, and I believe we are seeing that in our 
country. If you look at our recent census and the out-migration 
we have detected because of the losses of jobs, it is very 
substantial and it is very concerning to us, and most of those 
are young people.
    I have just returned from New Caledonia, where the minimum 
wage there is the equivalent of about $11 United States. I can 
tell you that within 500 yards of each other, you see $1 
million mansions and then you see shacks right next door to 
them, because that part of the population just could not get 
jobs because there are no jobs. This is why we are so very 
concerned with this issue.
    Dr. Fleming. Yes. Thank you. Anyone else that would like to 
comment on this issue?
    Mr. Babauta. I think I just would like to say that I agree 
with the Governor that you aptly and correctly described the 
situation in both American Samoa and the CNMI with respect to 
their economies. I don't know that they are the only factor, 
the minimum wage increase is the only factor in the troubled 
economy. There are other factors that affect these areas where 
policy needs to change, transportation, cost of fuel, the 
resulting cost of goods. All of these are higher in all the 
Territories, which have a very constraining effect on your 
purchasing power as a consumer or on families and also just the 
development of the economy itself. Their location as well is a 
factor, where it is difficult to bring in new capital.
    As you pointed out, Mr. Chairman, this is an issue between 
a rising minimum wage and increasing high employment or 
decreasing unemployment, and it is something that has been 
debated by Congress for years. But there are other factors to 
be considered within the scope of this issue.
    Dr. Fleming. Mr. Gootnick?
    Mr. Gootnick. Well, I think the 2008 Department of Labor 
report on this subject made your very point as well, agreeing 
with you that in a shrinking economy, a rising minimum wage 
will tend to result in job loss; that in a growing economy 
there may be other options, including reducing profits, passing 
on costs, increasing productivity and the like.
    It may be germane in this discussion that in American Samoa 
there is a considerable wage compression, in both jurisdictions 
there is a wage compression, more pronounced in American Samoa, 
such that the next minimum wage increase will affect 
approximately 70 percent of the cannery workers, and by the 
time the minimum wage hike merges with the Federal minimum 
wage, 99 percent of the cannery workers will receive a minimum 
wage increase. So considerable wage compression. Similarly, in 
the CNMI 95 percent will be affected by the minimum wage by the 
time it reaches $7.25.
    Dr. Fleming. Well, I am over my time. Again, I think that 
this is instructive to what our situation is here. You are 
quite right, there are many other factors. But as we isolate 
and understand factors, I think we can, going forward, make 
better decisions about an economy which as you know today we 
are in a worldwide recession, and I think these are important 
lessons for us in policy that comes out of Washington.
    I now recognize the Ranking Member for questions. You have 
five minutes, sir.
    Mr. Sablan. Thank you very much, Mr. Chairman, and good 
morning everyone. Actually, good evening, Jim.
    Let me start with Mr. Arenovski. I thank you again for 
agreeing to serve as a witness, especially since you have to 
stay up so late. But you described in your statement, 
accurately I might say, our conditions facing our economy and 
businesses in the CNMI. And I appreciate your continued support 
for your employees. I am also very pleased with the service 
they provide to me when I stop by in one of your places, as 
well as your willingness to continue to do what you can to 
remain and conduct business in the Commonwealth. We would like 
for you to stay for another 13 years, like you said.
    But that being said, what is your opinion of GAO's 
conclusion that it is difficult to distinguish between the 
effects of the Federal minimum wage increases in the Northern 
Marianas and the effects of other factors, including the global 
recession that began in 2009, the high energy prices, 
globalization, and obviously the one that is hitting us today, 
the Federalization of immigration?
    Mr. Arenovski. Thank you, Congressman. I think the simple 
answer is what can we control. We cannot control many of the 
factors that you mentioned, but we can control the minimum 
wage. We can study more, we can delay, we can adjust. There is 
no methodology that says that in 9 years that 50 cents a year 
is the answer.
    Mr. Sablan. I don't disagree with you, Jim, which is why we 
have the adjustment that we are doing in 2010 and 2011. 
Congress is cognizant of the situation in the Marianas. But let 
me get one thing very clear here. What we are saying here then 
is that because we can't control the shipping costs, we can't 
control utilities, we can't control global recession, we can't 
control that our government in the Northern Mariana Islands 
refuses to deal with the tourism slump so the only thing we can 
control is wages for our employees.
    Again, I am very happy with the services you have. You have 
excellent employees, Jim. So we will tag them with the problem, 
because it is the only thing we have to control. That is not 
what you are saying, are you?
    Mr. Arenovski. Certainly not. Would you like me to 
elaborate?
    Mr. Sablan. Yes, sir, please.
    Mr. Arenovski. I think it is important to understand that 
right now if we had employees, say household employees that had 
four wage earners in the house, and we continue on at this pace 
of increase, what happens is that over time, maybe those four 
people make the first cut of 50 cents. But the next time they 
have a 50-cent increase, what happens is one of those household 
earners loses their job completely. Let's say it is $5.05 an 
hour. Four people at $5.05 an hour is going to be roughly 
$40,000. When we lose that one job, that household maybe by 
increasing the minimum wage will get up to $43,000, $45,000. 
But when that person loses their job, they lose $7,000 worth of 
income to that family. Even though we have a minimum wage 
increase, what happens, the net effect to that family is a loss 
of $7,000.
    So the fact we are talking about increasing the minimum 
wage may in turn hurt the actual family unit here in the 
Northern Mariana Islands. And I guess we should say we do have 
multi-generational families living in one household.
    Mr. Sablan. Jim, because I am limited in my time, but I 
will talk to you about this some more.
    Mr. Secretary, thank you for taking the time, sir, also. We 
know that the full Federal minimum wage applies in Guam and the 
U.S. Virgin Islands and has for many years, whereas it did not 
apply in the Northern Mariana Islands and American Samoa before 
2007. But what is it about the economies of Guam as compared to 
the economy of the Northern Mariana Islands that in your 
opinion permitted the full application of the U.S. minimum 
wage?
    Mr. Babauta. Well, the application of the minimum wage for 
Guam was always there when the first minimum wage was applied 
in the United States. Guam has never had an exemption. It is a 
different scenario for the U.S. Virgin Islands and Puerto Rico, 
which the full minimum wage was extended in the 1990s.
    For Guam's economy, as you know, it is more complex, I 
guess, than the CNMI. They have more legs to stand on; two very 
strong legs as a matter of fact, tourism and probably a multi-
billion dollar defense infrastructure that brings jobs and 
other Federal funding to the Territory.
    For the Virgin Islands, we know from statistics that have 
been collected from the past years from BEA, they have a very 
strong export industry with rum, which helps to support jobs 
and keeps wages high. And it could have been for some of those 
reasons that the Congress in the 1990s decided to just fully 
extend the minimum wage at that time to the Virgin Islands and 
to Puerto Rico.
    Mr. Sablan. Thank you.
    Mr. Chairman, I agree with the Governor. Five minutes is 
very precious. So I yield my time and hope for a second round.
    Dr. Fleming. Thank you, Mr. Sablan.
    I now recognize Dr. Harris, the gentleman from Maryland, 
for five minutes.
    Dr. Harris. Thank you very much, Mr. Chairman, and thank 
you for holding the hearing, because it is troubling that in an 
attempt to fix things, once again the American government kind 
of got it wrong, and in an attempt to do well what we ended up 
doing is it seems to be destroying jobs.
    Mr. Assistant Secretary, let me ask you a question, and I 
am sorry I did not hear your verbal testimony. But your written 
testimony says that ``The Administration would not be opposed 
to reinstituting the industry committee process in American 
Samoa and extending it to the CNMI.''
    Is that the same thing as saying it supports it? It is an 
important question, because if we choose it go that route, it 
would be nice to know that the Administration was a partner in 
going back to a formula that seemed to work and abandoning the 
formula that seemed to be destroying jobs. It just seems 
carefully worded. It says the Administration would not oppose. 
Is that the same as support, or is there a subtle difference 
there?
    Mr. Babauta. There was no intended subtle difference.
    Dr. Harris. So you believe the Administration would, in 
fact, support if we decided to go back to the industry 
committee process?
    Mr. Babauta. Correct.
    Dr. Harris. Do you know if the Chairman of the Council of 
Economic Advisers agrees? Because he was written works that 
insists that the minimum wage does not destroy jobs. Now I come 
from the State of Maryland. We have inner cities where I am 
convinced that minimum wage does destroy jobs in fragile 
economic situations. But the new Chairman of the Council of 
Economic Advisers apparently disagrees with that.
    So are you certain that given the feelings of the new 
Chairman of the Council of Economic Advisers the President 
appointed that you would support abandoning the minimum wage?
    Mr. Babauta. I think when we are speaking about the 
economies of American Samoa and the CNMI and trying to be 
mindful and prudent of where they are in their development and 
the wages that they currently have and their prospects for 
future expanding their economy, I think that we would agree 
that it is a prudent thing to institute a special industry 
committee.
    Dr. Harris. Great, thank you. I am glad to hear that.
    Governor, thank you for being here today. In your written 
testimony it does state as part of the response to the increase 
in unemployment, you actually had to increase the payroll tax, 
is that right, on the workers who still had jobs? Is that one 
of the means you had for funding the shortfall?
    Governor Tulafono. Yes. It is a short-term increase to make 
up some of the deficiency that was lost because of the loss of 
wage taxes from the closure of the cannery and the loss of the 
other sectors.
    Dr. Harris. One of the results was that in fact the people 
that got those minimum wage increases actually had to turn 
around and pay some of it back in increased taxes because they 
were fortunate to still have a job.
    Governor Tulafono. True.
    Dr. Harris. So in essence what you end up with, your belief 
I guess is that what we did was we put some people out of work 
and really didn't have the intended effect on the people who 
remained in work because we ended up having to tax them more to 
pay for the needs of the citizens who now don't have jobs.
    Governor Tulafono. Essentially that is what it was.
    Dr. Harris. That is what I thought.
    Thank you again very much for everyone here. I apologize I 
have to leave, because I am going to chair a Committee meeting 
in about 6 minutes. But I thank you very much for bringing this 
to our attention and coming to testify.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Dr. Fleming. I thank the gentleman for his questions.
    I now recognize Mr. Faleomavaega.
    Mr. Faleomavaega. Thank you, Mr. Chairman. For the sake of 
time, I would like to ask unanimous consent that the full text 
of my statement be made part of the record.
    Dr. Fleming. Without objection, so ordered.
    [The prepared statement of Mr. Faleomavaega follows:]

           Statement of The Honorable Eni F.H. Faleomavaega, 
               a Delegate in Congress from American Samoa

    Mr. Chairman, Ranking Member:
    The history of minimum wage in American Samoa is not pretty. It is 
a complex matter that is deserving of this hearing, and I thank you for 
honoring my request to hold a hearing on the GAO's 2011 report entitled 
`Employment, Earnings, and Status of Key Industries Since Minimum Wage 
Increases Began in American Samoa and the Commonwealth of the Northern 
Mariana Islands'' and for inviting the Governors of both territories to 
testify.
    For more than 50-years, American Samoa's private sector economy had 
been nearly 80% dependent, either directly or indirectly, on two of the 
three major brands--StarKist and Chicken of the Sea--which until 
recently employed more than 74 percent of our private sector workforce.
    On September 30, 2009, one day after American Samoa was struck by a 
powerful earthquake which set off a tsunami that left untold damage and 
loss from which the Territory has not recovered, Chicken of the Sea 
closed down its operations in American Samoa, leaving more than 2,000 
workers without jobs.
    Chicken of the Sea left without the courtesy of discussing its 
departure either with myself or the Governor of American Samoa, 
although Samoan workers made Chicken of the Sea one of the most 
profitable brands of canned tuna in the U.S. Chicken of the Sea left 
for Lyons, Georgia where it now employs a skeletal crew of about 200 
workers. Chicken of the Sea pays its workers in Lyons, Georgia some 
$7.25 per hour, almost twice as much per hour as it ever paid Samoan 
workers.
    Why does this matter? It matters because from 1954 forward, when 
Chicken of the Sea's then parent company, Van Camp, first arrived on 
American Samoa's shores, the company set about to suppress the wages of 
Samoan workers by demeaning their worth and work. In 1956, the company 
testified before the U.S. Senate Committee on Labor and Public Welfare, 
urging consideration of legislation for the exemption of American Samoa 
from the wage and hour provisions of the Fair Labor Standards Act of 
1938.
    Commenting on his company's desire to pay Samoan workers 27 cents 
per hour as opposed to the prevailing minimum wage rate of the time at 
$1 per hour, Chicken of the Sea's then parent company said:

        ``The Samoans are Polynesians. They are not American 
        citizens.''

        About the women of American Samoa, the company said:

        ``[We] now employ 300 Samoans, mostly women. . .. [W]ages range 
        from 27 cents per hour for the women who clean the fish to $1 
        per hour for 1 employee, who is a technician. . .. The 
        difference in labor costs is attributed to the lower production 
        output in Pago Pago, where we have found that it takes from 3 
        to 5 Samoans to produce what 1 stateside employee can 
        produce.''

        Mr. Collins, legal counsel for Van Camp, put it this way:

        ``The company has found that it takes from 3 to 5 Samoan 
        workers to perform what 1 continental worker in the United 
        States will do. It is therefore felt that this justifies a 
        lower rate for Samoans.''

    Forgive me for pausing here but what company, in good conscience, 
would suppress wages in a U.S. Territory on the claim that the more 
than 300 Samoan women cleaning fish in American Samoa for 27 cents an 
hour were somehow inferior to the stateside employees being paid $1 per 
hour?
    While some in American Samoa may not think this history matters, it 
does, especially when 55 years later, Chicken of the Sea shut its doors 
in American Samoa and immediately paid stateside workers in Lyons, 
Georgia twice as much as they were currently paying our women and men 
in American Samoa. Different year, same Chicken of the Sea.
    This is the kind of prejudice and racism and gender inequality that 
workers in American Samoa have been dealing with for 55 years. And over 
the years, local government leaders were always being pressured not to 
increase the wages of cannery workers, or else the companies would 
leave the territory. This is why when there were occasional wage 
increases they were as small as 2 cents or 3 cents per hour, even 
though since 1938 the Fair Labor Standards Act (FLSA) has applied to 
American Samoa.
    After enactment of the FSLA, Industry Committees were established 
for American Samoa and other U.S. Territories for purposes of phasing 
low-wage industries in to the minimum statutory wage because the U.S. 
Congress believed that application of mainland minimum wage rates to 
territorial island industries would ``cause serious dislocation in some 
insular industries and curtail employment opportunities.''
    While Industry Committees were phased out in other U.S. Territories 
which eventually paid their workers in accordance with mainland wages, 
from 1956-2006 minimum wage rates in American Samoa continued to be 
determined by Special Industry Committees, and ASG is on record voting 
to accept whatever the management and lawyers for these canneries felt 
wages for our cannery workers and other low-wage earners should be.
    I am on record as voting to increase the wages of our lowest-paid 
workers because I believe that a Samoan is entitled to the same pay 
from the same corporation if he/she does the same work as any other man 
or woman born in any other part of America. Senator Borah of Idaho said 
it best in the heat of the 1937 Fair Labor Standards debate. He said it 
was his view that ``whether North or South, East or West, there [is] a 
standard of American living, and we ought to recognize that and fix a 
minimum wage upon that basis.''
    Regrettably, ASG is on record, at least with the United Nations, in 
suggesting that the U.S. federal government over-stepped by increasing 
minimum wage in American Samoa. This is not the case. American Samoa 
was exempted from mainstream increases for a period of about 50 years. 
But when minimum wage was raised all across America in 2006, Congress 
determined that it was time to raise minimum wage in American Samoa and 
CNMI which were the only two remaining U.S. Territories which were not 
up to federal minimum wage standards.
    For American Samoa, I supported a one-time increase of $0.50 cents 
per hour because our lowest paid workers were barely making above $3.00 
per hour at the time. But because our cost of living is as high or 
higher than the mainland, minimum wage was increased by $0.50 cents per 
hour for a period of three years until the U.S. Congress, at my 
request, stopped further increases until additional study could be 
undertaken, given that there were never any comprehensive reports 
issued regarding the overall economy of the territory. I ask that a 
summary of my work on this issue be included for the record (see 
attachments).
    Regarding minimum wage's impact on the tuna industry in American 
Samoa, I would refer the Subcommittee to a 2010 report issued by the 
U.S. Government Accountability Office (GAO) which clearly showed that 
before minimum wage ever went into effect, tuna canneries operating in 
American Samoa were already operating at about a $7.5 million loss per 
year when compared to canneries, like Bumble Bee.
    This is because Bumble Bee adopted a business model of outsourcing 
tuna preparation to cheap foreign labor and then bringing the almost 
finished product into small U.S. operations for final packaging. 
Chicken of the Sea followed suit by outsourcing Samoan jobs to Thailand 
where workers are paid about $0.75 cents per hour. StarKist, which is 
the only remaining cannery that cleans whole fish in America, can no 
longer effectively compete against canneries like Bumble Bee and 
Chicken of the Sea which outsource American jobs.
    On another point, when the South Pacific Tuna Treaty was first 
negotiated in 1987 it was negotiated for purposes of providing U.S. 
foreign assistance to the Pacific Island Parties while also providing a 
tangible benefit to the U.S. By the time the Treaty was renewed in 2002 
until now, the U.S. provided the Pacific Island Parties about $18 
million annually in exchange for our U.S. tuna boats to fish in the 
Treaty area. The U.S. tuna boats also paid a collective, not 
individual, fixed rate of about $3 million per year, and above that 
amount depending on the amount of fish caught and the value of it.
    When the Treaty first went into effect, all three major brands of 
canned tuna in the U.S., including StarKist, Chicken of the Sea and 
Bumble Bee, purchased their tuna from U.S. tuna boats authorized to 
fish in the Treaty Area. These boats were 100% U.S. owned and the 
majority of U.S. boats also off-loaded their fish in American Samoa, 
i.e. a U.S. port. The fish was then cleaned in the U.S., including 
American Samoa which was home to the largest cannery in the world 
because of our close proximity to the fishing grounds.
    Today, however, the majority of tuna boats (which are now 51% U.S.-
49% Taiwan owned, like those of the South Pacific Tuna Corporation that 
includes investors from Bumble Bee and Chicken of the Sea) trans-ship 
the fish they catch in the Treaty Area to Thailand. Thailand then buys 
the tuna that comes out of the South Pacific Tuna Treaty Area and puts 
our workers out of jobs because Thailand's fish cleaners directly 
compete against workers in the U.S. who are paid in accordance with 
federal minimum wage laws.
    So contrary to critics' assertions, the primary factor for the 
collapse of American Samoa's economy is not our wage rates but the wage 
rates of foreign countries as well as the shift in the way Bumble Bee 
and Chicken of the Sea and new tuna boats are doing business. Other 
factors that also impacted our tuna industry include higher fish costs, 
higher shipping costs, higher fuel costs, better local tax incentives 
offered by Lyons, Georgia and Thailand, and the global economic 
recession.
    It should also be noted that a new cannery, Tri-Marine, one of the 
world's largest fish trading companies, chose to invest in our 
Territory knowing that American Samoa's wage rates have been increased 
by $1.50 per hour which undercuts ASG's argument that minimum wage 
increases have collapsed our tuna industry or led to ASG's fiscal 
failure.
    In its 2011 report, the GAO openly admits that `it is difficult to 
distinguish between the effects of minimum wage increases and the 
effects of other factors, including the global recession beginning in 
2009, fluctuations in energy prices, global trade liberalization.' The 
GAO also reiterated that `American Samoa had lower income and higher 
poverty rates than the mainland US'' and found that the ``average 
earnings of workers who maintained employment rose from 2006 to 2009, 
but available data show that the increase was not sufficient to 
overcome the increases in prices.'
    ASG remained largely unaffected by minimum wage increases because 
most of its employees earned more than $1.50 above the local minimum 
wage set for government workers in 2007, as the GAO stated.
American Samoa's Current Economic Status
    As for the current economic status of the American Samoa Government 
(ASG), the GAO reported that `local government spending exceeded 
revenues each year from 2005 to 2009.' The GAO also showed that more 
than $240.8 million has been made available for ASG by the U.S. 
Congress through the American Recovery and Reinvestment Act and that 
only $61.6 million had been disbursed at the time of the report.
    The GAO also noted that American Samoa has been designated as a 
`high-risk'grantee by the U.S. Department of the Interior as 
recommended by the Department's Inspector General and GAO. The GAO 
further noted that `the office will remove this high-risk designation 
once the American Samoa Government demonstrates its compliance with 
certain fiscal and internal accounting requirements.'
    In private discussion groups, the GAO said `private sector 
employees said they were concerned about the fiscal status of the local 
government and the possibility of harmful tax increases.' Private 
sector employees also `generally opposed additional minimum wage 
increases but said that a number of other factors made it difficult to 
do business in American Samoa. For example, they said increased in 
prices of utilities, shipping, and raw materials; an outdated tax 
structure; low levels of investment; and business licensing problems 
also make it difficult to establish and do business in American Samoa.'
    Clearly, the issues facing American Samoa's economy are complex and 
neither minimum wage nor the U.S. federal government is the driving 
cause of ASG's trouble. More importantly, the U.S. is doing its part to 
help American Samoa, and the amount of federal funding and technical 
assistance to the Territory from the U.S. underscores this point. In 
fact, American Samoa continues to be the only State government that 
continues to receive funding from the U.S. Treasury for the operations 
of its local government.
Conclusion
    Nevertheless, I have pledged to do everything I can to halt further 
minimum wage increases in order to provide ASG with the time it needs 
to put an action plan in place. I remain hopeful that ASG will base its 
plans on the recommendations of the American Samoa Economic Advisory 
Commission which released its report since 2002, well before the tuna 
industry was under the threat it is today and long before minimum wage 
hikes took place in the Territory.
    To be clear, in 1999, former U.S. Secretary of the Interior Bruce 
Babbitt approved my request for $600,000 to establish the American 
Samoa Economic Development Study Commission. This was the first time 
during our Territory's 106-year relationship with the U.S. that a 
Commission of this nature was established. John Waihee, former Governor 
of Hawaii, served as the Commission's Chair and the U.S. Department of 
the Interior was the federal agency responsible for the Commission's 
oversight.
    What made this Commission unique is that its findings were not 
based on the views of outsiders but rather the research emanated from 
local input. ASG and community leaders participated in this undertaking 
and the American Samoa Community College surveyed the public to 
identify the attitudes, aspirations and long-range goals of our 
community. Lieutenant Governor Togiola, at the time, served as a 
Commission member and I served as an ex-officio member.
    This historic study took two years to complete and, in FY 2000, the 
Commission submitted its report to the Secretary of the Interior and to 
the responsible Committees in Congress including the House Resources 
Committee and the Senate Committee on Energy and Natural Resources. 
Congress still awaits ASG's recommendations.
    No doubt it has been difficult for ASG to diversify its economy due 
to American Samoa's remote location, limited land, and infrequent air 
and shipping services. Coupled with Chicken of the Sea's closure and 
StarKist layoffs, American Samoa also has not been able to absorb the 
rapid minimum wage increases mandated by federal law.
    As noted earlier, we are aware that American Samoa cannot 
indefinitely compete against companies like Bumble Bee and Chicken of 
the Sea which outsource American jobs and exploit cheap labor in 
foreign countries to clean and cook their fish. In fact, the GAO notes 
that American Samoa's competitive advantage is `dwindling' because 
`current operations in American Samoa were not competitive with other 
models. Analysis of alternate models available to the industry suggests 
that moving tuna canning operations--including unloading, loining 
(cleaning, cooking, and cutting), and canning fish--from American Samoa 
to another tariff-free country with lower labor costs would 
significantly reduce cannery operating costs.'
    However, American Samoa does have an advantage when it comes to 
U.S. government contracts which require tuna to be processed in the 
U.S. Because StarKist cooks and cleans the bulks of its fish in the 
U.S. Territory of American Samoa, it qualifies for U.S. government 
contracting. Bumble Bee and Chicken of the Sea do not qualify because 
their canned tuna is not American made. However, at some point, this 
advantage in U.S. government contracting will not be enough.
    This is why I am pleased that the U.S. Department of Labor provided 
a disaster National Emergency Grant (NEG) of $24 million that could 
have been expanded to include job re-training for our tuna cannery 
workers. I continue to be supportive of our tuna cannery workers being 
re-trained to become nurses, teachers, or whatever else they might want 
to be because I believe in their future and the future of American 
Samoa.
    On behalf of the people of American Samoa, I thank Chairman Doc 
Hastings of the Natural Resources Committee and also Chairman John 
Kline and Ranking Member George Miller of the Education and Workforce 
Committee as well as Senate Majority Leader Harry Reid, Senator Jim 
DeMint, Senator John McCain, Senator Daniel Inouye, Senator Tom Coburn, 
Congressman Jeff Flake, Speaker John Boehner, former Majority Leader 
Steny Hoyer and others for working so closely with my office during the 
last Congress to halt minimum wage increases for 2010 and 2011.
    I am appreciative of what the U.S. Congress has done, and continues 
to do, for us and, once more, I ask for your support to halt further 
increases for 2012. To determine further increases, I recommend that we 
establish a modified version of Special Industry Committees unlike the 
previous Committees administered by the U.S. Department of Labor that 
predetermined wage rates before the hearings began. It is also my 
recommendation that we establish one minimum wage rate for American 
Samoa, rather than the 18 different industry rates to which we are 
needlessly subjected.
                                 ______
                                 
In 2006, after taking control of both chambers of Congress, the 
Democrats promised to increase the federal minimum wage to $7.25 per 
hour in the ``first 100 hours'' on the Floor. Following is a history of 
how American Samoa came to be included in the national debate, and the 
Honorable Eni F.H. Faleomavaega's record on minimum wage.

1.10.07    On January 10, 2007, the House passes H.R. 2, the Fair 
Minimum Wage Act of 2007, by a vote of 315-116. CNMI is included in the 
bill and subject to annual wage increases until the Territory reaches a 
rate of $7.25 per hour. American Samoa is excluded from the bill 
because, unlike CNMI, minimum wage increases for American Samoa are 
determined by Special Industry Committees administered by the U.S. 
Department of Labor. In response to American Samoa's exclusion, reports 
suggest that Speaker of the House Nancy Pelosi excluded American Samoa 
from H.R. 2 because Del Monte, then StarKist's parent company operating 
in American Samoa, is a major contributor to Speaker Pelosi's campaign. 
Reports are proved to be false. False reports also imply that the Fair 
Labor Standards Act (FLSA) does not apply to American Samoa.

1.16.07    Faleomavaega responds by informing the press and Members of 
Congress that the FLSA has applied to American Samoa since 1938 and 
that since 1956, under Section 5 and 8 of the FLSA, Special Industry 
Committees administered by the Wage and Hour Division of the U.S. 
Department of Labor have determined wage rates in American Samoa. 
Faleomavaega asks for Special Industry Committees to continue and for 
CNMI to be brought under the Special Industry umbrella.

1.16.07    EF writes to U.S. Senator Daniel Inouye

1.16.07    EF writes to U.S. Senator Daniel Akaka

1.16.07    EF writes to U.S. Senator Lamar Alexander, Senate Committee 
on Health, Education, Labor & Pensions (HELP)

1.16.07    EF writes to U.S. Senator Wayne Allard, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Jeff Bingaman, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Sherrod Brown, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Richard Burr, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Hillary Clinton, Senate Committee 
on HELP

1.16.07    EF writes to U.S. Senator Tom Coburn, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Chris Dodd, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Michael B. Enzi, Ranking Member, 
Senate Committee on HELP

1.16.07    EF writes to U.S. Senator Judd Gregg, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Tom Harkin, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Orrin Hatch, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Johnny Isakson, Senate Committee 
on HELP

1.16.07    EF writes to U.S. Senator Edward M. Kennedy, Chairman, 
Senate Committee on HELP

1.16.07    EF writes to U.S. Senator Barbara Mikulski, Senate Committee 
on HELP

1.16.07    EF writes to U.S. Senator Lisa Murkowski, Senate Committee 
on HELP

1.16.07    EF writes to U.S. Senator Patty Murray, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Barack Obama, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Jack Reed, Senate Committee on 
HELP

1.16.07    EF writes to Senate Majority Leader Harry Reid

1.16.07    EF writes to U.S. Senator Pat Roberts, Senate Committee on 
HELP

1.16.07    EF writes to U.S. Senator Bernie Sanders, Senate Committee 
on HELP

1.16.07    EF writes to Congressman George Miller, Chairman, House 
Committee on Education and the Workforce

1.16.07    EF writes to Congressman Howard Buck McKeon, Ranking Member, 
House Committee on Education and the Workforce

1.16.07    EF writes to Speaker of the House Nancy Pelosi

1.18.07    EF speaks out on the House floor

1.19.07    EF speaks out on the House floor

1.22.07    EF & U.S. Senator Daniel K. Inouye write to U.S. Senator 
Edward Kennedy, Chairman, Senate Committee on HELP, in support of using 
Special Industry Committees to determine wage rates for American Samoa 
and CNMI

1.24.07    In an attempt to make a stink about Democrats' minimum-wage 
and territorial voting proposals, House Republicans take to the Floor 
wearing white stickers on their suit jackets of StarKist's Charlie the 
Tuna with a caption stating ``Something's Fishy!''--implying that 
Speaker Pelosi is showing favoritism by excluding American Samoa from 
the Fair Minimum Wage Act of 2007.

1.24.07    EF writes to U.S. Secretary of the Interior Dirk Kempthorne

1.24.07    StarKist & COS write to EF

1.30.07    Senate passes wage bill

2.05.07    EF writes to conferees, including U.S. Senator Edward 
``Ted'' Kennedy, Chairman of Senate HELP Committee, in support of 
strengthening Special Industry Committees

2.05.07    EF writes to U.S. Senator Michael B. Enzi, Ranking Member of 
Senate HELP Committee and conferee

2.05.07    EF writes to Congressman Howard ``Buck'' McKeon, Ranking 
Member of the House Committee on Education and the Workforce and 
conferee

2.05.07    EF writes to Congressman George Miller, Chairman of the 
House Committee on Education and the Workforce and conferee

3.12.07    EF writes to Congressman George Miller, Chairman of the 
House Committee on Education and the Workforce

3.15.07    Minimum wage bill is attached to Emergency Iraq War 
Supplemental bill and Republican Mark Kirk offers an amendment to 
extend federal minimum wage rates to American Samoa by $0.50 cents per 
hour every year until the Territory reaches the mainland rate of $7.25 
per hour. Amendment is accepted by House Appropriations Committee.

3.15.07    EF writes to Congressman David Obey, Chairman of the House 
Committee on Appropriations in opposition to the Kirk amendment. Obey 
promises that the issue will be resolved during conference.

5.11.07    EF writes to Chairman George Miller of the House Committee 
on Education and the Workforce offering compromise amendment to the 
Kirk proposal in which workers would be provided a one-time increase of 
$0.50 cents per hour and the U.S. Department of Labor would be 
empowered to determine future increases, though Special Industry 
Committees would be abolished

5.11.07    EF writes to Speaker of the House Nancy Pelosi

5.11.07    EF writes to Senate Majority Leader Harry Reid

5.11.07    EF writes to U.S. Senator Daniel Inouye

5.11.07    EF writes to U.S. Senator Daniel Akaka

5.11.07    EF writes to U.S. Senator Jeff Bingaman, Chairman of the 
Senate Committee on Energy and Natural Resources

5.11.07    EF writes to Del Monte CEO Richard Wolford, forwarding copy 
of letter and amendment to House and Senate

5.11.07    EF writes to Chicken of the Sea CEO John Signorino

5.11.07    EF writes to Del Monte CEO Richard Wolford to set the record 
straight about comments made by Del Monte's Executive Vice President 
regarding EF's position on minimum wage

5.18.07    EF, U.S. Senator Daniel Inouye, U.S. Senator Jeff Bingaman, 
U.S. Senator Daniel Akaka & Congresswoman Donna Christensen write to 
Chairman David Obey and Ranking Member Jerry Lewis of the House 
Committee on Appropriations and Chairman Robert Byrd and Ranking Member 
Thad Cochran of the Senate Committee on Appropriations urging support 
of EF's amendment but with an initial increase of $0.35 cents per hour.

5.21.07    Del Monte CEO Richard Wolford writes to EF in support of his 
efforts in Congress to resolve the challenges regarding the impact of 
increased wages on tuna cannery operations in American Samoa

5.25.07    Conferees do not accept the proposal but do agree to include 
EF language calling upon the U.S. Department of Labor to conduct a 
study to determine impact of future increases. Wage hike with automatic 
escalator clauses is included in the Iraq War supplemental spending 
bill and President George W. bush signs it into law on May 25, 2007. 
The first wage increase occurs on June 24, 2007.

6.06.07    EF writes to Congresswoman Donna Christensen, Chair of the 
House Natural Resources Subcommittee on Insular Affairs requesting an 
oversight hearing on the impact of the federal minimum wage 
legislation. EF copies his letter to Governor and Legislature.

6.11.07    COS President John Signorino writes to EF, enclosing copy of 
letter COS Senior Vice President Jim Davet wrote to Del Monte and 
copied to Governor Togiola.

6.21.07    EF writes to Thai Union President Thiraphong Chansiri and 
copies his letter to U.S. Senator Daniel Inouye, Governor Togiola, 
Lieutenant Governor Sunia, ASG Legislature, COS President John 
Signorino, and COS Vice President of Operations Jim Davet. EF responds 
to Davet's comments and requests meeting with Thai Union President 
Chansiri. Mr. Chansiri agrees to meet.

6.21.07    EF writes to COS President John Signorino and sets the 
record straight about Mr. Davet's comments. EF encloses a copy of his 
letter to Chairwoman Donna Christensen as well as his letter to Thai 
Union President Thiraphong Chansiri

6.21.07    EF writes to Del Monte CEO Richard Wolford and encloses a 
copy of his letter to Congresswoman Christensen requesting a hearing as 
soon as possible.

6.21.07    EF writes to Governor Togiola informing him that he will 
meet be meeting with StarKist, Chicken of the Sea, Del Monte, Thai 
Union and boat owners in San Diego, California regarding the impact of 
federal minimum wage law. EF also informs Governor that he will be 
meeting with Thai Union President Thiraphong Chansiri on July 1, 2007. 
EF copies his letter to U.S. Senator Daniel Inouye, Lieutenant 
Governor, American Samoa Legislature.

7.1.07     EF meets with Thai Union President Thiraphong Chansiri in 
Bangkok, Thailand.

7.24.07    EF meets with U.S. Department of Labor officials, including 
Dr. Ronald Baird, Chief Economist from the Office of the Assistant 
Secretary for Policy, who is tasked to undertake the study mandated by 
Congress to determine impact of minimum wage increases.

7.25.07    EF writes to U.S. Secretary of the Interior Dirk Kempthorne 
regarding his meeting with the U.S. Department of Labor and requesting 
support in assisting ASG and CNMI officials in how to collect the 
necessary data needed to make determinations about both economies.

1.25.08    U.S. Department of Labor (DOL) releases it report

1.29.08    EF introduces H.R. 5154 to condition further increases in 
minimum wage on a determination by the Secretary of Labor

1.29.08    EF writes to Governor Togiola and provides him with a copy 
of the DOL report and informs him that he has introduced H.R. 5154. EF 
copies U.S. Senator Daniel Inouye, U.S. Secretary of the Interior, 
Lieutenant Governor, ASG Legislature

2.12.08    EF writes to Paramount Chief Mauga regarding field hearing 
to be held in American Samoa regarding impact of minimum wage increases

2.14.08    EF writes to Congressman George Miller regarding H.R. 5154 
and thanking Chairman Miller for sending 2 professional staff members 
to field hearing scheduled to be held in American Samoa on February 22, 
2008

2.22.08    Congresswoman Donna Christensen, Chair of the House Natural 
Resources Subcommittee on Insular Affairs, holds field hearing in 
American Samoa at EF's request regarding impact of federal minimum wage 
increases on American Samoa's economy.

2.22.08    EF testifies before the House Resources Subcommittee on 
Insular Affairs

2.28.08    EF testifies before the Senate Committee on Energy and 
Natural Resources regarding the Impact of the Recently Increased 
Minimum Wage in American Samoa

3.14.08    Chairman George Miller writes to EF and raises concerns 
about DOL study

3.14.08    EF, U.S. Senator Daniel Inouye, U.S. Senator Daniel Akaka, 
U.S. Senator Jeff Bingaman write to Chairman Robert C. Byrd & Ranking 
Member Thad Cochran of the Senate Committee on Appropriations 
requesting delays in minimum wage

3.31.08    U.S. Secretary of the Interior to Dirk Kempthorne writes to 
EF offering support

4.03.08    EF writes to U.S. Senator Daniel K. Inouye thanking him for 
agreeing to offer an amendment based on H.R. 5154 to delay minimum wage 
increases and to review further increases

4.03.08    EF writes to U.S. Senator Jeff Bingaman

4.03.08    EF writes to U.S. Senator Daniel Akaka

4.18.08    EF writes to Senate Majority Leader Harry Reid

4.20.08    EF writes to U.S. Senator Orrin Hatch

4.22.08    EF & Governor Fitial write to U.S. Senator Edward Kennedy, 
U.S. Daniel Inouye, U.S. Senator Jeff Bingaman, & U.S. Senator Daniel 
Akaka

4.22.08    EF & Governor Fitial write to Chairman George Miller

4.24.08    EF & Governor Fitial write to House Majority Leader Steny 
Hoyer

5.13.08    EF and CAPAC members Congressman Mike Honda, Congressman 
Joseph Crowley, Congresswoman Donna Christensen, Congressman Albio 
Sires, Congressman Solomon Ortiz, Congresswoman Nydia Velazquez, 
Congressman Bennie Thompson, Congressman Neil Abercrombie, Congressman 
Al Green, Congressman Luis Gutierrez, Congresswoman Joe Baca, 
Congresswoman Mazie Hirono, Congressman Hank Johnson write to Senate 
Majority Leader Harry Reid, Speaker of the House Nancy Pelosi, House 
Majority Leader Steny Hoyer, Chairman David Obey of the House 
Appropriations Committee, Chairman Norm Dicks of the Interior 
Appropriations Committee, Chairman George Miller of the Education and 
Workforce Committee, Chairman Edward Kennedy of the Senate HELP 
Committee, U.S. Senator Daniel Inouye, U.S. Senator Daniel Akaka, and 
Chairman Jeff Bingaman of the Senate Committee on Energy and Natural 
Resources requesting support for delays

5.21.08    Senate passes language in the Emergency Supplemental to 
conduct new GAO study

5.30.08    2nd minimum wage increase goes into effect

7.31.08    EF & Chairman Rahall of the House Committee on Natural 
Resources & Congresswoman Donna Christensen write to U.S. Secretary of 
the Interior Dirk Kempthorne requesting technical assistance funds to 
conduct comprehensive economic study of American Samoa

11.25.08   EF writes to StarKist regarding announcement to lay off 
workers and copies letter to Senator Daniel Inouye, Governor Togiola 
and Chairman Kim Jae-Chul of the Dongwon Group

1.28.09    EF writes to Chairman George Miller requesting delays in 
further increases

1.30.09    EF meets with U.S. Senator Daniel Inouye and thanks him for 
agreeing to include language in H.R. 1, the American Reinvestment and 
Recovery Act (ARRA) that would require the GAO to conduct a new study 
by April 15, 2010

2.17.09    H.R. 1 is signed into law with 3rd wage increase to go 
forward and a mandate for a new GAO report to be released by April 2010

2.19.09    EF writes to Governor Togiola, President of the Senate 
Gaoteote, Speaker Savali and asks them to join him in sending a letter 
to Chairman Miller requesting a deferment of the 3rd increase until GAO 
has time to complete its study

2.23.09    EF holds meeting in his DC office with Governor Togiola and 
Governor Fitial for purposes of drafting a letter and sending a unified 
message to Congress and the Administration regarding the need to delay 
minimum wage

2.24.09    EF, Governor Togiola and Governor Fitial deliver their 
letter to U.S. Secretary of the Interior Ken Salazar during meeting of 
Interagency Group on Insular Affairs (IGIA)

5.07.09    EF writes to Governor Togiola re COS closure and copies 
letter to American Samoa Legislature

5.30.09    3rd minimum wage increase goes into effect

7.24.09    EF responds to ASG petition to President Obama

12.14.09   House and Senate agree to EF's request to postpone 4th 
minimum wage increase from May 2010 to September 2010 to give Congress 
time to act on the GAO study

4.08.10    GAO releases new study on the impact of minimum wage hikes 
in American Samoa and CNMI

4.30.10    EF thanks Chairman Miller for agreeing to his request to 
modify minimum wage law based on findings of GAO and copies U.S. 
Senator Daniel Inouye, Chairman Nick Rahall of the House Committee on 
Natural Resources, U.S. Secretary of the Interior Ken Salazar, Governor 
Togiola, & American Samoa Legislature

5.05.10    EF forwards U.S. Senator Daniel Inouye copy of letter to 
Chairman Miller

5.12.10    U.S. Senator Daniel Inouye thanks EF for copy and assures 
him of support in Senate

6.12.10    EF and Congressman Sablan of CNMI write to U.S. Senator 
Daniel Inouye, Chairman of the Senate Appropriations Committee, and 
include language approved by Chairman Miller that would halt minimum 
wage increases in American Samoa for 2010 and 2011 and for CNMI for 
2011 based on GAO report, and asking for inclusion in any legislative 
vehicle that might be moving

6.12.10    EF and Congressman Sablan write to U.S. Senator Tom Harkin, 
Chairman of the Senate HELP Committee

6.12.10    EF and Congressman Sablan write to U.S. Senator Bingaman, 
Chairman of Senate Committee on Energy and Natural Resources

6.12.10    EF and Congressman Sablan write to Chairman David Obey of 
the House Committee on Appropriations

7.27.10    U.S. Senator Jeff Bingaman & U.S. Senator Lisa Murkowski 
agree to include EF and Sablan language in H.R. 934, a CNMI bill 
already passed by the House, which is hotlined for Unanimous Consent 
(UC) in the Senate. Bill clears Democratic hotline. Republican hold 
placed on CNMI provision relating to submerged lands. Congressman 
Sablan would not agree to take out his submerged lands provision. In 
response, U.S. Senator Jeff Bingaman and U.S. Senator Lisa Murkowski 
agree to include EF and Sablan minimum wage language in H.R. 3940, a 
Guam bill already passed by the House, which is hotlined for Unanimous 
Consent in the Senate.

8.03.10    EF writes to U.S. Senator Bingaman thanking him for agreeing 
to include minimum wage language in H.R. 3940

8.03.10    EF writes to U.S. Senator Lisa Murkowski thanking her for 
support

8.06.10    EF provides updates informing public that H.R. 3940 has 
cleared Democratic holds but Republicans did not have time enough to 
review before August recess

9.14.10    House returns from District work period. UC process begins 
again. Senator Bingaman and Senator Murkowski's committee staff inform 
EF and Sablan that Democrats have cleared H.R. 3940 for UC.

9.16.10    At 4 pm, Republican cloakroom informs Democrats that 2 holds 
have been placed including one by one by Senator DeMint (R-SC). Senate 
ends business for the day and does not go in Session on Friday.

9.18.10    Saturday night Senator Bingaman and Senator Murkowski's 
staff inform EF and Sablan that there is nothing they can do to 
overcome Senator DeMint's hold.

9.20.10    EF's office contacts Senator DeMint's Chief of Staff at 
10:29 am. At 11:52 am, Senator DeMint's Chief of Staff responds stating 
he has forwarded EF information and comments to policy staff for 
review.

9.21.10    11:28 am, Senator DeMint's staff informs EF office that 
Senator DeMint will agree to let minimum wage section pass, but 
expresses concerns about Guam provision. EF office informs 
Congresswoman Bordallo's office of concerns raised about Guam. 
Congresswoman Bordallo's office begins process of working out 
compromise regarding Guam provisions.

9.27.10    At 4:36 pm, Congresswoman Bordallo's office and Sen DeMint's 
office reach agreement on new language regarding Guam provision.

9.28.10    At 9:45 am, Senator DeMint's office informs Republican 
cloakroom that he has released his hold on H.R. 3940 pending the change 
in language regarding the Guam provision. Change is made and H.R. 3940 
is hot-lined again. At 1:36 pm, Democrats begin hotline process. At 
3:48 pm, Democratic staff informs EF and Sablan that Senator Coburn is 
raising questions but Senator Murkowski's staff is trying to resolve 
his concerns. At 4:13 pm, EF speaks with U.S. Senator Majority Leader 
Harry Reid asking that bill be placed on floor for UC once it clears 
the Democratic and Republican cloakrooms. However, Senator Murkowski's 
staff is unable to clear Senator Coburn's hold. At 4:42 pm, EF office 
contacts Senator McCain's office asking for help to release Senator 
Coburn's hold. Senator McCain's office agrees. At 5:17 pm, EF office 
phones Senator Coburn's office. At 6:03 pm, Senator Coburn's office 
informs EF's office that Senator Coburn has agreed to release his hold. 
At 6:09 pm, Senator McCain's office also informs EF office that Senator 
Coburn has agreed to release his hold. Senate passes H.R. 3940 by UC. 
At 10:28 pm, EF sends letter to Speaker of the House Nancy Pelosi, 
House Majority Leader Steny Hoyer, Chairman George Miller of the House 
Committee on Education and Labor, & Chairman Nick Rahall of the House 
Committee on Natural Resources requesting that H.R. 3940 be brought to 
the House floor for immediate passage.

9.29.10    At 8:05 am, EF office phones House Majority Leader Steny 
Hoyer's Chief of Staff again requesting that H.R. 3940 be brought to 
Floor for passage. ML Hoyer's office states that Republican Leadership 
must be on board. At 10:33 am, EF office contacts Republican Leader 
John Boehner's Chief of Staff, Republican Whip Eric Cantor's Chief of 
Staff, Republican Staff Director for Ranking Member John Kline of the 
House Committee on Education and Labor, and Republican Staff Director 
for Ranking Member Doc Hastings of the House Committee on Natural 
Resources. At 10:38 am, EF office contacts Congressman Jeff Flake (R-
AZ), member of the Resources Committee and member of LDS Church, 
requesting help in getting support from Republicans, including Ranking 
Member Doc Hastings of the Natural Resources Committee. At 10:39 am, 
Congressman Flake's office informs EF office that message will be 
forwarded to Congressman Flake. At 12:08 pm, Congressman Flake sends 
message saying he will speak to Ranking Member Doc Hastings of Natural 
Resources Committee. At 12:31 pm, Republican Leader John Boehner's 
Chief of Staff responds thanking EF office for bringing this to his 
attention and stating that they will respond appropriately based on 
conversations with their two Ranking Members. At 12:30 pm, EF speaks to 
Ranking Member Doc Hastings on House floor, and also Congressman Jeff 
Flake who has also spoken to Ranking Member Hastings. Ranking Member 
Hastings and Ranking Member John Kline of the Education and Labor 
Committee agree to let bill go to the Floor by suspension. At 12:38 pm, 
EF office informs Majority Leader Hoyer's office that Republicans will 
agree to let the bill go to the House floor by suspension instead of 
UC, meaning a voice vote will be requested and that the measure must 
win by a vote of 290. At 5:18 pm, ML Hoyer's office agrees to put bill 
on House floor. ML Hoyer calls EF. At 8:52 pm, EF office begins 
providing Samoa News with regular updates.

9.30.10    At 12:19 am, EF office informs Samoa News that vote is 
taking place. At 12:27 am, EF issues press release stating bill passes 
House by a vote of 386 to 5. At 12:31 am, EF office emails White House 
requesting assistance to get bill on President's desk for signature. At 
8:00 am, White House emails EF office thanking EF for flagging the bill 
for signature. At 8:36 am, EF office contacts Majority Leader Hoyer's 
Chief of Staff requesting assistance to get the bill from the House to 
the White House. At 8:40 am, ML Hoyer's COS states he is working it. At 
10:58 am, Majority Leader Hoyer's Chief of Staff informs EF office that 
he has taken the bill to the Clerk's office and that it is at the 
Parliamentarian's office awaiting clearance, then it goes to Speaker 
Pelosi, then to the Senate, then to the President of the United States 
for signature. At 5:06 pm, White House informs EF that President has 
signed H.R. 3940. At 5:09 pm, EF office informs Samoa News bill has 
been signed. Samoa News issues breaking news flash. At 5:38 pm, EF 
issues press release announcing that bill has been signed into law.
                                 ______
                                 
    Mr. Faleomavaega. Also for the record, the statement 
submitted by Mr. In-Soo Cho, the President and CEO of StarKist 
Cannery.
    Dr. Fleming. Without objection, so ordered.
    [The prepared statement of Mr. In-Soo Cho follows:]

      Statement of Mr. In-Soo Cho, President and CEO, StarKist Co.

    On behalf of the StarKist Company and its employees, I wish to 
express our wholehearted gratitude to Chairman Fleming, Ranking Member 
Sablan, and Delegate Faleomavaega for your interest in the American 
Samoan economy and the impact of minimum wage increases on the 
territory's economy and its global competitiveness. As you know, 
StarKist is the largest private sector employer in American Samoa and 
we have worked closely with the Congress for the last several years to 
do everything we can to protect this fragile economy. So, we thank you 
for your interest in this subject today and look forward to working 
with you and the Congress to continue to protect the economy of this 
important U.S. Territory.
    With a private economy that is almost completely dependent on the 
tuna fishing and processing industry, American Samoa's economy is at 
constant risk of failure due to global cost pressures within this 
highly competitive industry. Indeed, American Samoa has suffered 
dramatic reductions in private sector employment since the 
implementation of automatic wage increases starting in 2007. Current 
wages in American Samoa are many multiples of the wages in competing 
nations such as Thailand, where wages have been as low as 60 cents an 
hour.
    According to the U.S. Department of Labor in January 2007, the tuna 
processing industry and ancillary businesses supported nearly 80% of 
all private sector employment in American Samoa. Unfortunately, today a 
substantial portion of that employment has already been lost with the 
closure of the Chicken of the Sea, Inc. (COSI) processing plant on 
September 30, 2009 and significant employment loss at our own facility. 
We have done our best to maintain employment while remaining globally 
competitive and have even from time to time been able to increase 
employment on a seasonal or temporary basis, however, our regular 
employment levels continue to remain significantly lower than our 
historic levels.
    With the departure of COSI, StarKist is the sole remaining full 
production tuna processor in American Samoa, so we have a unique 
perspective on the factors contributing to the Territory's loss of 
global competitiveness. Canned tuna is priced as a global food 
commodity and has very little elasticity in price. Therefore, a rapidly 
increasing cost structure in American Samoa makes it increasingly 
difficult for American Samoa to compete with other southeast Asian 
countries that can pay workers pennies per hour.
    Currently, there are two business models for the manufacture of 
canned tuna intended for the U.S. market. One is our model which 
manufactures canned tuna starting with the whole--or round--fish 
purchased directly from boats and results in the finished product ready 
for market. This model requires a significant investment in a U.S. 
workforce to prepare, cut, clean, cook, and can the product. The other 
model, used by many of our main competitors, instead outsources the 
bulk of the manufacturing and the most labor intensive parts of the 
process to extremely low-wage countries. These companies take advantage 
of nearly duty-free importation of cleaned and frozen tuna ``loin'' 
into the mainland United States for final packaging using the least 
amount of U.S. labor possible. The cost savings between a fully U.S. 
manufacturing process and an outsourced manufacturing process is 
substantial and places American Samoa at a distinct disadvantage vis-a-
vis competing economies.
    The General Accounting Office as well as the U.S. Department of 
Labor have both investigated the impact of recent wage increases and 
have unanimously agreed that these wage increases have had a direct and 
substantial negative impact on employment in American Samoa and a 
direct and substantial negative impact on the territory's ability to 
remain globally competitive in the tuna industry. In 2010 Congress 
prudently delayed an automatic increase in the minimum wage scheduled 
to occur on October 1, 2010. That increase was delayed for two years. 
Because of the greater certainty provided by this two year delay, the 
StarKist Company has been better equipped to make longer-term business 
plans for 2011 and 2012 because we had greater confidence in the 
underlying cost structure of manufacturing in the territory. This 
greater certainty allows us to better plan procurement, negotiate 
supply contracts, more aggressively compete for business, and to 
stabilize our employment base.
    However, as we come closer to the next automatic wage increase, the 
global cost structure remains the same but our ability to make business 
plans and to keep our cost structure as lean as possible is comprised. 
For these reasons we strongly urge the Congress to again delay the next 
scheduled increase in wages. American Samoa is already at a substantial 
disadvantage and at risk of the elimination of its economic base. 
Further, we would urge the Congress to consider the establishment of a 
more reliable system by which the economics of the territory may be 
evaluated on a systematic and automatic basis. There have been previous 
proposals, which we would support, to grant authority to an appropriate 
Cabinet agency for review of the economic condition of the territory 
and subsequent decision on any scheduled wage increase to move forward 
or not. We believe a system such as this would put American Samoa, its 
businesses, and the government in a more stable position to plan for 
the future knowing that the review would be automatic and a decision 
maker would be known and empowered to make a timely decision on any 
potential wage increase.
    Once again, we thank you for your interest and hard work on this 
subject.
                                 ______
                                 
    Mr. Faleomavaega. Thank you, Mr. Chairman.
    Mr. Chairman, probably many of our fellow Americans do not 
know that for the past 111 years American Samoa has had a very 
unique political relationship with the United States. American 
Samoa has long been the backbone of the U.S. tuna industry, 
tuna and processing industries. For more than 50 years, our 
economy has been more than 80 percent dependent either directly 
or indirectly to the major brands of canned tuna, that is 
primarily StarKist and Chicken of the Sea. Regrettably though, 
the tuna canneries in my humble opinion have had a history of 
suppressing wages for American Samoa.
    Mr. Chairman, I think within the context of the history, 
the minimum wage issue is not something that just popped up the 
past couple of years. I think if we read our history carefully, 
after the Great Depression of 1929, or even previous to that, 
there was an outrage in our country where many of our workers 
in the South were paid 15, 10 cents an hour; no compensation, 
no benefits whatsoever. In other words, slave labor, in my 
humble opinion. And Congress was so outraged, and that is why 
we passed the Labor Standards Act in 1938. And American Samoa 
was included with other Territories along this national concern 
that working people in America were paid cheap labor at the 
expense of corporations and companies that were making a lot of 
money. And don't get me wrong. I want companies to be 
successful. I want them to make good profits.
    Let me just add also as a matter of history, in 1956, 
Chicken of the Sea, the predecessor of Van Camp, testified 
before the U.S. Senate Committee on Labor and Public Welfare 
urging the Congress to take American Samoa out of the fair 
labor minimum wage requirements of the Act of 1938, commenting 
on the company's desire to pay Samoan workers 27 cents an hour 
as opposed to the prevailing minimum wage rate at the time of 
$1 per hour. Let me quote what was stated by these executives.
    ``The company has found that it takes three to five Samoan 
workers to perform what one continental worker in the United 
States will do. It is therefore felt that this justifies 
lowering the wages of Samoan workers.''
    Forgive me for pausing here, Mr. Chairman, but what company 
in good conscience in my opinion would suppress wages in a U.S. 
Territory on the finding that more than 300 Samoan women 
cleaning fish in the Territory for 27 cents an hour somehow is 
inferior, inferior in its quality of its work performance to 
stateside employees being paid $1 an hour?
    While some may think that history does not matter, in my 
humble opinion, Mr. Chairman, cannery workers in American Samoa 
are only now paid $4.76 per hour as a result of three increases 
of 50 cents per hour as mainland workers provided in the public 
law that was passed in 2007.
    Given that American Samoa has since suffered dramatic 
reductions in employment in the tuna industry, other than 
increased wages, what other factors contributed to the job 
losses? I think the 2010 report of the GAO stated that even 
before the minimum wage increase ever took place, our canneries 
were already operating at a $7.5 million loss per year simply 
because the whole tuna industry has evolved in a very different 
economic situation.
    So when this came about, American Samoa and the CNMI were 
caught in these two huge forces between the labor unions and 
all that we have been debating for all these years. Where is 
really the proper balance, that we should provide decent wages 
for American workers, but at the same time making sure that our 
businesses make regional profits so that they can continue 
doing their business. Because I think this is really where the 
issue stands, Mr. Chairman.
    I have so many questions I wanted to ask, and unfortunately 
we don't have the time.
    I want to thank our Governor for his testimony. I want to 
work with him and the Interior Department. Setting up an 
industry committee is another thing. I have very serious 
concerns with the history of how the industry committees have 
developed for all these years.
    When these industry committees make recommendations of 
increasing wages at 2 cents an hour, 3 cents an hour, what can 
these workers possibly do for 24 cents an hour increase in 
wages? It is impossible. But I will say, I am willing to work 
with the Administration, with our Governor, to see if the 
industry committee is another possible option so we can find a 
solution, so that we don't have to come to the Congress every 
time. Because every time we bring it, as you well know, Mr. 
Chairman, Congress isn't exactly the best place to give us 
answers to our problems.
    I would like to ask Secretary Babauta if the Administration 
is committed that we work together with the Governor as well as 
with our office to see what we can do about establishing an 
industry committee that has teeth, an industry committee that 
is going to give better and more comprehensive reports about 
the economic status of American Samoa.
    With due respect, my good friend from CNMI, he knows enough 
about CNMI that I am not going to address the issue.
    But I want to say to Mr. Gootnick, the biggest 
disappointment that I have with the GAO report that I have 
suggested at the times we were meeting, we have 18 minimum 
wages in American Samoa. The only jurisdiction in the whole 
United States of America, not one minimum wage, 18 minimum 
wages. As complicated as the issue is already, it is even more 
complicated by the fact that GAO never addressed this issue.
    But I will say that I appreciate your concerns. There is 
absolutely no question. I think the challenge on this very 
issue is how do we strike a balance on giving decent wages for 
working people at the same time, at the same time that our 
businesses will continue to grow and prosper and have a decent 
margin of profit that they can operate under. And the very 
question, why do companies in America leave to do their 
business in foreign countries? Bottom line, cheap labor.
    I think this is where the rubber meets the road in terms of 
our national debate about the issue, working people, decent 
wages, cost of living, standard of living. How does all this 
play within the context of how we can get our businesses to 
grow, but at the same time be fair to the working people, to 
the working Americans who are also trying to make a decent 
living. I think that is basically where I am coming from.
    Mr. Chairman, again I want to thank our Governor and 
Secretary Babauta and Mr. Gootnick. With all due respect, I 
agree with the Governor, some of the findings and some of the 
things that were brought to the attention of the Committee by 
the GAO report, it was not enough.
    Again, I know my time is up, but I do want to thank you, 
Mr. Chairman, for extending me this time, too. I expressed my 
feelings. I will have some follow-up questions.
    Because of the essence of time, again, thank you, Mr. 
Chairman.
    Dr. Fleming. I thank the gentleman from American Samoa. I 
will say certainly we can have another round of questions if 
you like. With that, I will go ahead and recognize myself for 
another five minutes. Maybe just some random comments here 
about statements made.
    First of all, the gentleman from American Samoa said that 
perhaps Congress doesn't have all the answers to this. I would 
say I am shocked to hear that, with tongue firmly in cheek. I 
think way too often Congress thinks it has all the answers, and 
really doesn't.
    You know, I had a conversation I recall many years ago when 
I was just high school age, and as a typical high schooler I 
believed I was twice as smart as my dad, a man who had grown up 
during the Great Depression and had been in World War II. He 
made a statement about the fact that the economy after the 
Great Depression picked up after the war began, and I corrected 
him on his misunderstanding about history and said no, that it 
was the New Deal and all of the legislation that occurred 
during that period from approximately 1933 and on that really 
saved our economy. I know this to be true because I read it in 
my textbooks.
    He came back and corrected me. He said, ``Son, we lived on 
a farm, and sometimes we were lucky to eat one meal a day, and 
the economy was bad despite all these regulations.'' It wasn't 
until there was a robust effort in industry that this country 
got back on its feet, and I think again that is instructive to 
us today.
    We can come up with all the artificial laws that we want. 
We can set limits and set points that say we have to pay this 
much and that much and so forth and guarantee this and 
guarantee that. That is all well and good and I am certainly 
not against having labor laws and things to make sure that we 
take care of our citizens.
    But the point I will make is that you can only go so far 
with that; that the power of government to control economies is 
much more limited than we often think, and the more we do to 
encourage industry and to allow industry to be competitive and 
robust, the better off I think we are in the long term in terms 
of getting living wages, more productivity and a better 
standard of living for our citizens, both in the continental 
U.S. and elsewhere.
    So, those are just some thoughts about our discussion today 
that I think is important. I really think this discussion, 
while it is so important for CNMI and American Samoa, as Dr. 
Harris pointed out, it has a much wider scope of consideration 
about where we are today in our world and our economy and how 
we are going to get out of the lassitude of commerce that we 
have today.
    Returning to questions, I want to ask this: New industries 
have been proposed, call centers for both Territories, tourism 
in American Samoa and agriculture and aquaculture in the 
Northern Mariana Islands. So I like that. I am glad that there 
is some consideration for some new areas, that we don't just 
stay with an industrial or factory base, but maybe look at 
other things.
    I also want to just kind of comment on the statement made, 
why is it that Guam can do OK with minimum wage but some of the 
other islands cannot. I lived on Guam. I visited Saipan. Guam 
has a tremendous military footprint. Lots of money flows to 
Guam. Then it has some of the other benefits like tourism that 
these other places do not have.
    So it is obvious that it is more difficult to meet those 
minimum wage targets for other island groups. And I do like the 
idea, although I haven't studied it and am not ready to endorse 
it, of again returning to some sort of a local commission or 
board that kind of looks at this and applies these laws and 
rules, for one thing in a very consistent way rather than 18 
different minimum wages, which is ridiculous, but also takes 
into account what the local economic situations are.
    Anyway, are these viable options for the Territories, as I 
say, call centers, et cetera? Anyone.
    Governor Tulafono. Call centers specifically were 
introduced to American Samoa, and we have taken a few years to 
investigate it. As it turned out, the technology is available. 
It is viable, but not in a very major, major way that it was 
initially introduced. A 1,000-seat call center has not been 
ruled to be totally impossible and unfeasible. The 
recommendation is for us to go with smaller centers like 50 to 
100 seats. It is what we can support with employment. Turnover 
is very, very high in that industry. We need a lot of people 
and we do not have the employment base to support a major 
industry like that. But it is possible.
    One of the factors that we continue to struggle with is 
bringing our educational system to a standard where we can 
actually elevate the kinds of industries and jobs that we can 
have. So we have to deal with that issue as well, because it is 
going to take a few years for us to catch up to that, and that 
is part of the reason why some of these industries may be 
difficult, although it is possible to some degree, but on a 
large scale it is not possible to replace the kind of 2,000 
employment that the manufacturing jobs provide.
    To us, there is no better way of controlling wages than the 
competition in industry. When industry is successful and they 
are vibrant, wages do naturally increase with good competition 
and a vibrant private sector. When that doesn't exist, you 
cannot depend on the government to pick up that difference and 
the government should never be the standard for setting wages 
for that work.
    Dr. Fleming. Let me ask Mr. Arenovski, did you have 
something you were going to add to that discussion?
    Mr. Arenovski. Yes, sir. This past March we actually had an 
economic summit here in the CNMI and we talked about 
aquaculture, ecotourism and call centers. We right now have one 
of the largest shrimp producers in our region. Our limitation 
is export out of Saipan. We can't get the shrimp or our 
agricultural, our produce, between Rota and Tinian and Saipan. 
We have wonderful produce. It is cost prohibitive to get it to 
Guam, which has a large population, we have been told they 
would buy it from us if we can get it there at a reasonable 
price. But, unfortunately, that is difficult to do. Right now 
we have some industry that could grow, but, unfortunately, some 
of these forces, air freight and shipping out of the NMI, is 
prohibitive.
    Call centers we don't think will be viable here in the 
future for the NMI, but we believe we have a very bright future 
for ecotourism. The point being though that these industries 
combined, plus anything else you could think of, including 
casinos, will never make up the economic benefit that we had in 
the garment factory. So what we have to understand is we will 
have a tapered economy into the future.
    But these industries, agriculture, aquaculture and 
certainly ecotourism, are certainly something that can flourish 
in the future.
    Dr. Fleming. Thank you. My time is up. I yield to the 
Ranking Member, Mr. Sablan.
    Mr. Sablan. Thank you again, Mr. Chairman.
    I don't know if anyone has ever done this and I don't know 
if it is my place to do it, but Governor and my good friend Eni 
and the people from American Samoa, I am very sorry and I 
apologize that our officials in the Northern Mariana Islands 
who went to bed with people like Jack Abramoff and brought this 
whole thing, actually dragged American Samoa into the 
situation, because our government paid Mr. Abramoff millions of 
dollars of taxpayers' money and then actually it became an 
issue that Congress noted, and unfortunately for the people of 
American Samoa, you got trapped. So if no one has apologized to 
the people of Samoa, I am making that apology today.
    Let me ask another question, and I don't have too much 
time, but I want to know, Mr. Secretary, and then I will go to 
Mr. Gootnick, why exactly didn't the industry committee work in 
American Samoa? The Governor alluded to seeing this thing in 
New Caledonia, in Noumea, where he saw this mansion next to a 
shanty house. Now, that is maybe the problem, right, in the 
mansion is the people who are using the people living in the 
shanty house. And that is what we are trying to avoid here. But 
why didn't the special industry committee work in Samoa?
    Mr. Babauta. I think I would agree with Congressman 
Faleomavaega that it maybe didn't work to the extent that it 
lifted wages higher when it should have when the canning 
industry and the canneries were there and it was a strong, 
vibrant industry. Wages should have gone up probably higher 
than they did, certainly more increments than 2 cents every 
year.
    Mr. Faleomavaega. Will the gentleman yield?
    Mr. Sablan. Real quick.
    Mr. Faleomavaega. With all due respect, here again I have a 
love-hate relationship with our canneries. I love them because 
they provide jobs for our people, but I have very serious 
problems with the way they went about making business. I think 
our Territories, the gross sales of these canneries were well 
over $100 billion in gross sales, and for that period of time, 
the people were being paid $2 an hour, $3 hour an hour for this 
50-year period.
    What happened is that every time the industry committee 
comes, the attorneys, the lawyers for the canneries made sure 
that pressure is being put upon our government officials and 
the community, if you raise the wages we are going to leave. 
That has been the way it has happened in my opinion. That is 
how why the industry committees have not been very effective.
    Mr. Sablan. So reclaiming my time, so it is the people in 
the mansion was influencing the government so that the people 
in the shanty house remain in that shanty house, which is why 
we need this law.
    Mr. Gootnick, hold on, I guess this is for Secretary 
Babauta again. You reported--or Mr. Gootnick. Right, this is 
for Mr. Gootnick.
    You reported, sir, that employers in the Northern Mariana 
Islands face a perfect storm of factors dragging down the 
economy. One of them is poverty, or people needing power and 
water. Of course, increasing the minimum wage is supposed to 
lift these people out of poverty.
    Can you tell me something about poverty in and of itself, 
how it has a negative effect on the economy?
    Mr. Gootnick. That is a challenging question, Congressman. 
The language ``perfect storm,'' I am not sure that is our 
characterization. That is perhaps a more colorful term than we 
would employ. But I think the factors associated with that 
storm we don't disagree with.
    Poverty in and of itself, as I understand it, does have 
some long-term relationship with minimum wage in that the 
health and education of the population, as the health and 
education of the population improves, poverty can be reduced. 
So a poor health status certainly entails costs. Poor 
educational status is kind of a vicious cycle, discouraging the 
opportunity for workers to move into higher skilled professions 
and higher skilled jobs.
    Mr. Sablan. Thank you. We will talk about this some more.
    Mr. Secretary, again, I will go back to you, because you 
say going forward in your testimony, we have three options, and 
I am sure you don't mean that that is exclusive. But we either 
do nothing and let the 50-cent increase continue, we stop the 
increases entirely, or go back to the wage boards that used to 
be used in American Samoa.
    But there are other options. I will associate myself with 
Congressman Faleomavaega that we need to work together and 
address this issue for the Northern Mariana Islands and 
American Samoa. I support whatever they agree to. But, of 
course, there are other things I am thinking of, maybe a 25-
cent increase. Because you have heard my opening statement. I 
have no objection to people having an extra, some loose change 
in their pocket. Because where I come from, once you pay COC, 
you don't have money for food, period. No and's, if's and 
but's. It is reported in the media. People tell me they have a 
choice, paying for utilities or putting food on the table, 
because there is nothing there. And these are people who are 
working.
    So we need the other options available. We really would 
like to continue to work with you, Mr. Secretary. I am very 
grateful to your Department and to you for putting some money 
out for the Census Bureau to do this analysis that we have. I 
am sorry that is all they did, because that was a very 
important report where they reported that the GDP in the 
Northern Mariana Islands decreased by that much, the gross 
domestic product.
    My time is up, so, Mr. Chairman, I yield. Thank you very 
much for being here, Mr. Secretary.
    Mr. Babauta. Mr. Chairman, if I could just respond, we 
agree that wages need to go up and there needs to be a very 
strong minimum wage that helps create a middle class for both 
the CNMI and American Samoa and puts money into people's 
pockets and into families. At the same time, we also agree with 
Mr. Faleomavaega and want to work to be able to strengthen 
those special industry committees if the decision is to 
reinstitute them so they are not making decisions with respect 
to wages increasing at very small levels.
    Dr. Fleming. Before I recognize the gentleman from American 
Samoa, I think that is very accurate. The only thing I would 
add is we can pass all the laws in the world, but unless there 
is a robust industry to make that happen, it just won't happen.
    Governor Tulafono. Mr. Chairman, may I inject a perspective 
to the special industry committee? It would be a fallacy to 
think that minimum wages never went up in American Samoa. It 
went from 25 cents to $3.25 by 2006. The difference in my 
opinion was in the early beginnings of the special industry 
committee, they had the power to insist on receiving how 
canneries calculated their profit margins and where they passed 
those two, how they passed those numbers around. Instead of 
using the American Samoa cannery only as a cost center and 
shift all their profits to another location, they were able to 
detect that before the law changed in 1972, when Congress 
changed the law where the canneries were not obligated to 
disclose that any more. That was the argument I made, that if 
we put that back in the hands of the special industry committee 
and give them the ability to see those numbers, then they will 
be able to not just say that there is no increase this year, 
because they were totally reliant on whatever the canneries and 
the industry provided.
    We need a special industry committee with the power to see 
those numbers, how do they calculate their profits, how do they 
work those numbers, especially now with multinationals and all 
that. That was the argument we wanted to make and we did make 
before the installation of the first escalation of the minimum 
wage.
    Dr. Fleming. Thank you. I now yield to Mr. Faleomavaega for 
his questions.
    Mr. Faleomavaega. Mr. Chairman, I couldn't agree with the 
Governor more and I appreciate his comments on this issue.
    Mr. Chairman, I thank you. I think it is an interesting 
observation that maybe American Samoa is a good micro example 
in terms of bringing this to the national forum as far as the 
minimum wage issue is concerned.
    One of the ironies of this issue, Mr. Chairman, it was my 
good friend, a Republican Member who is now a U.S. Senator in 
the Congress, he was the one who proposed to add American Samoa 
for increased wages in the minimum wage when the deliberations 
were made. The reason for this is because my Republican friend 
would come up to me and say Eni, why should you be exempted 
from the national requirements that the minimum wage should be 
the same throughout America? This is America. Why should CNMI 
and American Samoa be made exceptions to the rule? My district 
has 20 percent unemployment. Why should you be exempted because 
of your economic situation?
    So I think in terms of philosophical terms, Mr. Chairman, 
you are correct. And I think the pendulum swings. I think too 
much government is just as bad as no government, and I think we 
found out what happened recently, what Wall Street did, which I 
think primarily was the big cause of our big economic 
recession. I am not going to pass judgment any further because 
I am not an economist. But I really would like to pursue this 
issue about how we can better establish an industry committee 
for the simple fact again because Congress sometimes in its own 
clumsy way provides cures or remedies that are not necessarily 
helpful in that regard.
    What I mean is that for 10 years, no consideration of how 
American workers should be given increases in their wages, and 
that is when the whole debate flared up in 2006 when we had 
this problem. So maybe the industry committee might be a way 
that we could really put substance, make it comprehensive. 
Because the reluctance that I have always had in putting 
increases in wages in our economy, Mr. Chairman, is the fact 
that we never were able to get in our hands a good report that 
really tells us the bottom line, other than the fact that there 
are symptoms. We know there are indicators that our economy is 
going down the tube. But at the same time we just were not able 
to come up with a bottom line to tell the Congress, to tell the 
Administration we need help in this.
    Again, I do want to thank our Governor for his statement, 
because they are right to the point. And I sincerely hope that 
in the coming weeks we are going to be able to get together 
with Secretary Babauta and the Governor's office, if we can 
look at the industry committee as an option, how we can get 
better review the process so that wages can be in some way 
commensurate with the realities of how our economy is 
functioning.
    I agree with you. I think there is a very critical role 
that the free market system should operate in such a way so 
economic growth occurs in the same way. But at the same time I 
think the government also has a responsibility in providing 
services to facilitate opportunities for companies to do well, 
but at the same time make sure that our workers are also 
mutually getting the benefits as well as part of our overall 
economic situation, whether it be here in our country, as well 
as in this little Territory called American Samoa.
    So I do want to say that we need this. I don't know if 
asking the GAO for another study is going to be helpful, 
because it seems that we are going to have to find a better 
way. Since the Interior Department is the lead agency 
representing American Samoa, I am going to lean very heavily on 
Secretary Babauta and the Secretary of the Interior for 
assistance in giving us the proper resources so that we can 
make this thing a go and make it really functioning so if this 
industry committee can be done administratively or by law.
    Whatever that we can do between now and when the deadline 
comes, I sincerely hope, Mr. Chairman, that we will be able to 
do this.
    Again, I want to thank our Governor for traveling all this 
way to come here and testify before our Committee. And to you 
especially, Mr. Chairman, thank you for your leadership and for 
your sensitivity in calling this hearing that is so critical 
and important for American Samoa.
    I yield back.
    Dr. Fleming. I thank the gentleman from American Samoa, and 
quite agree that too much government can be as bad as no 
government at all, and gladly welcome you to the Republican 
Conference should you choose to do that.
    OK. I would like to thank all of our witnesses for their 
valuable testimony and contributions. Members of the 
Subcommittee may have additional questions for the witnesses. 
We ask you to respond to these in writing. The hearing record 
will be open for 10 days to receive these responses.
    So, with that, again I want to thank our witnesses and our 
witness direct from Saipan today, tonight I guess for you, sir. 
But I want to thank you all. It is very interesting testimony.
    As I say, while the focus has been on CNMI and American 
Samoa, I think that there is a lot that is instructive here 
around the world to these issues as we move forward, and I 
certainly pledge to work with the gentlemen, Mr. Sablan and Mr. 
Faleomavaega, to work on these issues and to try to resolve 
them so we can have a robust economy and middle-class lifestyle 
available for all of the citizens concerned.
    Thank you, and we are adjourned.
    [Whereupon, at 10:30 a.m., the Subcommittee was adjourned.]

                                 
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