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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 

Committee address: http://naturalresources.house.gov 

(II) 

COMMITTEE ON NATURAL RESOURCES 

DOC HASTINGS, WA, Chairman 

EDWARD J. MARKEY, MA, Ranking Democrat Member 

Don Young, AK 

John J. Duncan, Jr., TN 

Louie Gohmert, TX 

Rob Bishop, UT 

Doug Lamborn, CO 

Robert J. Wittman, VA 

Paul C. Broun, GA 

John Fleming, LA 

Mike Coffman, CO 

Tom McClintock, CA 

Glenn Thompson, PA 

Jeff Denham, CA 

Dan Benishek, MI 

David Rivera, FL 

Jeff Duncan, SC 

Scott R. Tipton, CO 

Paul A. Gosar, AZ 

Rau ́l R. Labrador, ID 

Kristi L. Noem, SD 

Steve Southerland II, FL 

Bill Flores, TX 

Andy Harris, MD 

Jeffrey M. Landry, LA 

Jon Runyan, NJ 

Bill Johnson, OH 

Mark Amodei, NV 

Dale E. Kildee, MI 

Peter A. DeFazio, OR 

Eni F.H. Faleomavaega, AS 

Frank Pallone, Jr., NJ 

Grace F. Napolitano, CA 

Rush D. Holt, NJ 

Rau ́l M. Grijalva, AZ 

Madeleine Z. Bordallo, GU 

Jim Costa, CA 

Dan Boren, OK 

Gregorio Kilili Camacho Sablan, CNMI 

Martin Heinrich, NM 

Ben Ray Luja ́n, NM 

John P. Sarbanes, MD 

Betty Sutton, OH 

Niki Tsongas, MA 

Pedro R. Pierluisi, PR 

John Garamendi, CA 

Colleen W. Hanabusa, HI 

Vacancy 

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 

Robert J. Wittman, VA 

Jeff Duncan, SC 

Steve Southerland, II, FL 

Bill Flores, TX 

Andy Harris, MD 

Jeffrey M. Landry, LA 

Jon Runyan, NJ 

Doc Hastings, WA, ex officio 

Eni F.H. Faleomavaega, AS 

Frank Pallone, Jr., NJ 

Madeleine Z. Bordallo, GU 

Pedro R. Pierluisi, PR 

Colleen W. Hanabusa, HI 

Vacancy 

Edward J. Markey, MA, ex officio 

(III) 

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 

(1) 

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. 

2 

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. 

3 

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. 

4 

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, 

5 

• 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. 

6 

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 

7 

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; 

8 

• 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: 


70507.001.eps
9 

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. 


70507.002.eps
10 

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 

11 

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:] 

12 

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. 


70507.003.eps
13 

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. 


70507.004.eps
14 

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. 

For 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 


70507.005.eps 70507.006.eps
15 

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. 

16 

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, deVerDate Nov 24 2008 16:12 Oct 02, 2012 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 L:\DOCS\70507.TXT Hresour1 PsN: KATHY
17 

1GAO, 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). 2 U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, Pub. L. No. 110–28, § 8103, 121 Stat. 188 (May 25, 2007), as amended by Pub. 

L. No. 111–244, 124 Stat. 2618 (Sep. 30, 2010), codified at 29 U.S.C. § 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 

Continued 

creased 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 buyAmerica 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). 

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 minVerDate Nov 24 2008 16:12 Oct 02, 2012 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 L:\DOCS\70507.TXT Hresour1 PsN: KATHY
18 

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. 3Pub. L. No. 110–28, § 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, § 520, 123 Stat. 3034, 3283 (Dec. 16. 2009). 4Pub. 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. 5Previously, 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. 6The 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. 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. 8Malcolm 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). 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. 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. 

imum 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

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

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. 

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. 

19 

11The 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, § 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). 12The 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. 

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. 

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. 

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. 

20 

13Temporary 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. 15From 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. 

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

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: 

• Model A: All loining and canning located in American Samoa 

21 

16The frozen fish carries a tariff of $11 per metric ton. 17The 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. 

• Model B: Relocating loining to Thailand or another country with lower labor 

costs, and canning frozen loins in the U.S. 50 states 16

• 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. 

See appendix III of our June 2011 report for detailed findings and tables on American Samoa. 


70507.007.eps
22 

18 If many foreign workers left the CNMI, the impact on the unemployment rate would be 

smaller than if those workers remained. 19Temporary federal jobs included those funded by the Recovery Act and by the U.S. Census 

Bureau for the Decennial Census. 

Commonwealth of the Northern Mariana Islands 

CNMI Employment Fell Substantially from 2006–2009, and Average InflationAdjusted 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. 

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. 

23 

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. 


70507.008.eps
24 

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 gootnickd@gao.gov Tom McCool, (202) 512– 

2642 or mccoolt@gao.gov 

Staff Acknowledgments 

In addition to the contacts named above, Emil Friberg, Assistant Director; Mark 

Speight, Assistant General Counsel; Marissa Jones, analyst-in-charge; Ashley Alley; 

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 

The Government Accountability Office, the audit, evaluation, and investigative 

arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates 

federal programs and policies; and provides analyses, recommendations, and other 

assistance to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. 

Contact: 

Website: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov 

Automated answering system: (800) 424–5454 or (202) 512–7470 

Public Affairs 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512–4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149 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 

25 

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 

26 

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 

27 

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, 

28 

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 oneyear 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 LouVerDate Nov 24 2008 16:12 Oct 02, 2012 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6602 L:\DOCS\70507.TXT Hresour1 PsN: KATHY
29 

isiana, 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-migraVerDate Nov 24 2008 16:12 Oct 02, 2012 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 L:\DOCS\70507.TXT Hresour1 PsN: KATHY
30 

tion 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. 

31 

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 MarVerDate Nov 24 2008 16:12 Oct 02, 2012 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6602 L:\DOCS\70507.TXT Hresour1 PsN: KATHY
32 

iana Islands. And I guess we should say we do have multigenerational 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. 

33 

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: 

34 

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 IndusVerDate Nov 24 2008 16:12 Oct 02, 2012 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 L:\DOCS\70507.TXT Hresour1 PsN: KATHY
35 

try 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 lowwage 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 be- cause 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 SaVerDate Nov 24 2008 16:12 Oct 02, 2012 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6621 L:\DOCS\70507.TXT Hresour1 PsN: KATHY
36 

moa’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 ‘highrisk’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. 

37 

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. 

38 

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 

39 

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. 

40 

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 

41 

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 

42 

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 hotlined 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. 

43 

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 

44 

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 lowwage 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 

45 

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 

46 

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. 

47 

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. 

48 

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. 

49 

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. 

50 

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 longterm 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. 

51 

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? 

52 

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. 

53 

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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