American Samoa and the Commonwealth of the Northern Mariana Islands: Economic Indicators Since Minimum Wage Increases Began
Published: 2014-03-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2007, the United States enacted a law incrementally raising the minimum wages in American Samoa and the CNMI until they equal the U.S. minimum wage. American Samoa's minimum wage increased by $.50 per hour three times, and the CNMI's four times before legislation delayed the increases amid concerns that they would have a detrimental effect on the American Samoa and CNMI economies. The most recent increase in American Samoa occurred on May 25, 2009. The next is scheduled for September 30, 2015, with additional increases every 3 years thereafter. Under current law, the minimum wage in American Samoa's tuna canning industry will equal the current U.S. minimum wage of $7.25 in 2027. The CNMI's most recent increase occurred on September 30, 2012. The next increase is scheduled for September 30, 2014, with additional increases in 2016 and annually thereafter until it reaches the U.S. minimum wage.
GAO is mandated to report in 2014, and every 3 years thereafter, on the impact of the minimum wage increases. This report updates our previous reports and discusses for each territory (1) changes in employment and earnings and (2) changes in key industries since the most recent federal minimum wage increase and since the increases began. GAO reviewed local and federal earnings information; collected data from employers in key industries through a questionnaire and from employers and workers through discussion groups and interviews during visits to each area.
American Samoa's government said GAO captured the consensus to postpone a 2015 minimum wage increase. CNMI's government said GAO captured the general economic condition of the CNMI.
section_title: What GAO Found
paragraphs: American Samoa employment and earnings have decreased since 2007, but employment increased slightly from 2011 to 2012. Since 2005, the American Samoa economy has had a flat or declining real gross domestic product (GDP).
Average inflation-adjusted earnings of those employed fell by 5 percent overall from 2007 to 2012 and by 2 percent from 2011 to 2012.
One of American Samoa's two tuna canneries closed in 2009. However, a new company is renovating the closed cannery and plans to re-open it in 2015. Two employers in the tuna canning industry took cost-cutting actions from 2010 to 2013, including labor-saving strategies and reduced overtime. The employers attributed to a moderate or large extent all but one of their actions to minimum wage increases, but also to increased utility and material costs. Two of the three employers planned more cost-cutting actions and attributed those plans to a moderate or large extent to minimum wage increases, but also to other increased costs and business factors.
Commonwealth of the Northern Mariana Islands (CNMI) employment and earnings have decreased overall since 2006, but earnings increased slightly from 2011 to 2012. After falling rapidly from 2005 to 2009, CNMI real GDP remained relatively stagnant from 2009 to 2012.
Average inflation-adjusted earnings of those employed fell by about 2 percent overall from 2006 to 2012 but rose by 1 percent from 2011 to 2012.
CNMI hotel occupancy and room rates have risen in recent years, but industry representatives we spoke with characterized the recent growth as an opportunity to recover and reinvest in their properties. Hotels representing the majority of all workers employed by respondents to GAO's questionnaire attributed past cost-saving strategies and price increases to minimum wage increases. Hotels also attributed their actions to other increased costs and changes to U.S. immigration law, which reduce the number of available permits for foreign workers in the CNMI. Hotels representing 90 percent or more of all workers employed by questionnaire respondents attributed plans for further cost-cutting to minimum wage increases, but also to increasing utility, material, and transportation costs.

section_title: Letter
paragraphs: For decades, American Samoa and the Commonwealth of the Northern  Mariana Islands (CNMI) have had minimum wages below the statutory  minimum wage in the United States and in other U.S. territories. In 2007,  Congress enacted legislation to increase the minimum wages in  American Samoa and the CNMI in periodic increments until each reaches  the federal minimum wage, which is currently $7.25 per hour. In 2009,  Congress mandated that GAO report on the impact of these minimum  wage increases. Some incremental minimum wage increases included in  the 2007 law have occurred in each territory; however, subsequent  legislation delayed further increases amid concerns about their impact on  the American Samoa and CNMI economies. Both territories experienced  economic downturns between 2007 and 2009, including the complete  exodus of the CNMI’s garment industry and the closure of one of two tuna  canneries in American Samoa—a major source of private sector  employment. GAO has reported twice in response to this mandate, in  2010 and 2011.
This report updates our previous reports and discusses for each territory  (1) changes in employment and earnings and (2) changes in key  industries since the most recent federal minimum wage increase and  since the increases began.
To identify changes in employment and earnings in American Samoa and  the CNMI, we reviewed and analyzed prior GAO reporting covering 2006  through 2009 and information from the American Samoa and CNMI  governments for 2010 through 2012. We used CNMI tax data to  determine the number of employees and mean wages in the CNMI. We  used combined American Samoa tax data and GAO questionnaire data to  determine the number of employees and mean wages in American  Samoa and compared these data to Social Security Administration (SSA)  data on employment and wages. We primarily present the American  Samoa tax data in our analysis. While the SSA data cover all types of  workers in American Samoa, three large groups of people in the CNMI  were not required to report earnings to SSA and thus are excluded from  the SSA data—CNMI government workers and immigrant workers from  the Philippines and Korea. In 2012, these three groups represented  approximately 40 percent of all CNMI workers, according to CNMI  government tax data. We have chosen not to report the CNMI SSA data  due to these coverage gaps. Our study does not cover workers in the  underground economy or identify any workers who may have been  unlawfully paid below the minimum wage. We relied on consumer price  index (CPI) data from American Samoa and the CNMI to determine  inflation-adjusted wages. We reviewed technical documentation and  compared available data to other sources, among other steps, and  determined that these data sources were sufficiently reliable for our  purposes.
To identify changes in key industries, we reviewed prior GAO reporting  and analyzed data from the U.S. Department of Commerce, tuna industry  representatives, and tourism organizations in the CNMI. We analyzed the  results of a questionnaire we sent to employers in the key industries in  American Samoa (tuna canning) and the CNMI (hotels). Our  questionnaire requested 2011-2013 information on their number of  employees and wage rates, as well as past and planned actions in  response to the minimum wage. We received completed questionnaires  from all 3 employers in the tuna canning industry and from 11 out of the  13 hotels that we sent questionnaires to in the CNMI. Questionnaire  responses are limited to the American Samoa tuna canning industry and  the CNMI hotel industry and may not be representative of all workers and  employers in each area. We also met with or obtained data from  representatives of the territorial governments, businesses, business  groups, and workers. In the CNMI, we held discussion groups on the  impact of minimum wage increases with members of the Hotel  Association of the Northern Mariana Islands (HANMI) and the Chambers  of Commerce of Saipan and Tinian islands. We also held discussion  groups with hotel workers on Saipan and Tinian. In American Samoa, we  held a discussion group with members of the Chamber of Commerce and  with workers employed at the Star-Kist cannery. Views expressed in  discussion groups only represent the views of participants in those groups  and may not be representative of all workers’ and employers’ views in  each industry or area. We reviewed technical documentation and  compared available data with other sources, among other steps, and  determined that these data sources were sufficiently reliable for our  purposes.
Although our approach yielded information on trends in employment,  wages, and earnings in both areas, we were not able to distinguish  between the effects of minimum wage increases and the effects of other  factors, including the global economy, fluctuations in energy prices, global  trade liberalization, and the application of U.S. immigration law to the  CNMI.
We conducted this performance audit from July 2013 to February 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. See appendix I for further  details of our methodology.
subsections: section_title: American Samoa Earnings, Employment, and Status of Key Industries
paragraphs: The minimum wage in American Samoa has increased three times since  2007, most recently on May 25, 2009. Unlike the United States, American  Samoa has separate minimum wages for 18 separate industries, currently  ranging from $4.18 to $5.59 per hour. The tuna canning industry,  American Samoa’s largest source of private sector employment, has a  current minimum wage of $4.76 per hour and mostly employs foreign   There is currently one  labor from the neighboring islands of Samoa.operating cannery, Star-Kist, and its associated can manufacturer in  American Samoa. An additional fish company has begun limited  operations in American Samoa while renovating and planning to re-open  the former Chicken of the Sea cannery in 2015. Each minimum wage in  American Samoa will next be increased by $.50 per hour on September  30, 2015, with further increases every 3 years. Under current law, the  minimum wage in the tuna canning industry will reach the U.S. minimum  of $7.25 per hour in 2027.
subsections: section_title: American Samoa Employment and Earnings Declined from 2007 to 2012
paragraphs: Economy. American Samoa’s real gross domestic product (GDP) and  population have both declined in recent years. American Samoa’s  2012 real GDP of $504 million was 4.5 percent below the 2006 real  GDP, and also slightly lower than the 2009 real GDP. Real GDP per  capita increased 12.5 percent to $9,164 from 2006 to 2012. American  Samoa’s population declined from 57,291 in 2000 to 55,519 in 2010.
Employment. American Samoa tax combined with GAO questionnaire  data show that the total number of employees in American Samoa  increased 1.5 percent from 2011 to 2012 (from 15,552 to 15,790).
However, from 2007 to 2012, employment declined 11 percent (from  17,677 to 15,790, with a peak of 19,229 in 2008).responses from the tuna canning industry show that their employment  of hourly workers dropped by 13 percent from 2012 to 2013 and by 58  percent from 2007 to 2013.
Earnings. Earnings analysis based on American Samoa tax, GAO  questionnaire, and consumer price data show that, from 2011 to 2012,  average inflation-adjusted earnings of those employed in American  Samoa fell by 2 percent. The decrease resulted from average  earnings increasing by 2 percent while prices increased 4 percent. For  the overall period from 2007 to 2012, average inflation-adjusted  earnings fell by about 5 percent; average annual earnings rose about  27 percent but local prices rose by about 34 percent. Although  earnings data do not allow for a direct comparison of average and  minimum wage annual earnings or for tracking the earnings of  workers who lost their jobs, the hourly wage of minimum wage  workers who retained their jobs and work hours has not increased by  more than inflation since 2007. The inflation-adjusted earnings of  minimum wage cannery workers who retained their jobs and work  hours fell by about 4 percent from 2011 to 2012 and by about 5  percent from 2007 to 2012.
Employer, government, and worker views. The discussion group of  private sector employers we met with generally opposed additional  minimum wage increases, citing American Samoa’s reliance on the  tuna canning industry and fears about the effect of further increases  on the industry and the economy. The American Samoa  government, American Samoa’s largest employer, anticipated it would  have to cut six employees to offset the 2015 minimum wage increase,  with additional budget impacts resulting from any further increases.  The Governor of American Samoa has stated that he would pursue  changes in U.S. law to allow American Samoa to take control of its  minimum wage. Star-Kist workers who participated in our discussion  group generally opposed further minimum wage increases rather than  supported future increases. Workers expressed concerns that any  increase would result in lost jobs or a closure of the cannery. Some  workers we spoke with also expressed concerns that future increases  in the minimum wage would lead to an increase in prices in American  Samoa, as they said occurred as a result of previous minimum wage  increases.
section_title: American Samoa’s Tuna Canning Industry Faces Challenges from Minimum Wage Increases and Other Factors.
paragraphs: Tuna canning industry wages. Without a minimum wage increase in  American Samoa from 2011 through 2013, there was no increase in  the $4.76 median wage of tuna canning workers in that time. Since  2007, as a result of previous minimum wage increases, the median  wage among workers in the tuna canning industry employed by  questionnaire respondents has risen from $3.30 to $4.76 per hour (44  percent). Based on questionnaire responses about workers’ wages as  of June 2013, the future minimum wage increases would affect the  wages of 92 percent of the current workers in the canning industry by  2018, when the minimum wage reaches $5.76. Based on the wages  workers currently earn, minimum wage increases would increase the  average annual cost per worker in 2018 by an average annual cost of  $1,723 per worker. By 2027, when the tuna canning minimum wage  reaches $7.25, 98 percent of current workers in the tuna canning  industry would be affected, increasing the average annual cost per  worker by $4,710.
Tuna canning employer actions. Two of the three employers in the  tuna canning industry in American Samoa reported that they had  taken cost-cutting actions from June 2010 to June 2013 including  labor- and cost-saving strategies, and reduced overtime. The third  employer, which was just beginning operations in American Samoa at  that time, considered the questions not applicable. The two employers  attributed all but one of their actions to a moderate or large extent to  minimum wage increases. In addition to minimum wage increases,  these two employers also attributed their actions to a moderate or  large extent to increased utility and material costs. Two of three  employers stated that they planned in the next 18 months to introduce  labor- and cost-saving strategies, delay business expansion, relocate  business, and reduce overtime hours. The two employers attributed  all of these plans to a moderate or large extent to the minimum wage  increases, but also to increased utility and material costs and  business factors.
Tuna canning industry analysis. Cannery officials stated that wage  increases are one of many factors affecting the tuna canning industry  in American Samoa, but that its labor costs, including the minimum  wage increases, place American Samoa at a significant cost  disadvantage in comparison with other canned tuna exporting  countries. Both canneries cited congressional action to defer the next  minimum wage increase to 2015 as encouraging their ability to invest  in American Samoa. Cannery officials said that there is a spectrum of  possible actions in response to increasing costs. For example,  canneries could lower the staffing level or close certain production  lines.
See table 1 for key findings and appendix III for detailed findings and  tables on American Samoa.
section_title: CNMI Earnings, Employment, and Status of Key Industries
paragraphs: The minimum wage in the CNMI has increased five times since 2007,  with the most recent increase on September 30, 2012, bringing the  minimum wage to $5.55 per hour. Under current law, the next minimum  wage increase will occur on September 30, 2014, and the CNMI will  reach the current U.S. minimum wage on September 30, 2018. The  CNMI’s sizeable garment industry has left the territory, leaving tourism as  its key industry. Tourists are primarily from Japan, Korea, China, and  Russia. Chinese and Russian tourism has been supported by the  Secretary of Homeland Security’s decision to exercise parole authority,  allowing tourists from those countries to enter the CNMI. The CNMI  economy heavily relies on a foreign workforce to support its economy; as  of the 2010 decennial census, noncitizens comprised 43 percent of the  CNMI population. Since the 2009 assumption of U.S. control over CNMI  immigration, the Department of Homeland Security has annually reduced  the number of permits for the CNMI’s foreign workforce in keeping with  the requirement to bring the number of such permits down to zero by the  end of 2014.
subsections: section_title: CNMI Employment and Earnings Declined from 2006 to 2012
paragraphs: Economy. The CNMI’s population and real GDP have both declined in  recent years. In real terms, CNMI GDP decreased by approximately  36 percent overall from 2006 to 2012 though it has remained relatively  flat since 2009. The CNMI’s real GDP per capita decreased  approximately 24 percent from 2006 to 2012. The CNMI population  declined from 69,221 in 2000 to 53,883 in 2010.
Employment. The total number of people employed fell from 25,229 to  23,720 (about 6 percent) from 2011 to 2012 according to CNMI  government tax data. For the entire period from 2006 to 2012, the  number employed has fallen from 43,036 to 23,720 (45 percent), with  most of the overall decrease occurring from 2006 to 2009.  Decreases before 2009 reflect closure of the CNMI’s garment  factories, which employed many foreign workers.
Earnings. From 2011 to 2012, inflation-adjusted average earnings of  those employed rose by 1 percent, according to CNMI government tax  data and consumer price data. The increase in earnings resulted from  a 3 percent increase in average earnings offset by a 2 percent  increase in prices. Over the entire period from 2006 to 2012, average  inflation-adjusted earnings fell by about 2 percent, with an about 29  percent increase in average earnings offset by an about 31 percent  increase in prices. Although earnings data do not allow for a direct  comparison of average and minimum wage annual earnings or for  tracking the earnings of workers who lost their jobs, the hourly wage  of minimum wage workers who retained their jobs and work hours has  increased by more than inflation since 2006. The inflation-adjusted  earnings of minimum wage workers who retained their jobs and work  hours rose by about 7 percent from 2011 to 2012 and by about 39  percent from 2006 to 2012.
Employer, government, and worker views. CNMI employers we spoke  with supported the 2013 postponement of minimum wage increases.
Participants in our discussion groups stated that businesses,  particularly small businesses, could not absorb another minimum  wage increase. However, the minimum wage was not as important a  concern for discussion group participants as the potential loss of the  foreign labor force. For hotel representatives we spoke with, providing  easier access for Russian and Chinese tourists by having the  Department of Homeland Security continue to parole these individuals  into the CNMI was a greater concern than the minimum wage.  According to the CNMI Department of Commerce, the Governor of the  CNMI supported the 2013 postponement of the minimum wage  increase. Workers we spoke with on Tinian island saw future  minimum wage increases as an opportunity to increase the amount  they could remit to their families living elsewhere. Workers on both  Saipan and Tinian islands feared that prices would increase along  with the minimum wage, as they said had occurred at the time of  previous increases.
section_title: Hotel Industry Has Rebounded in Recent Years; Most Hotel Workers Will Be Affected by Minimum Wage Increases
paragraphs: Hotel industry wages. From June 2011 to 2013, the median wage  among workers employed by CNMI hotel industry questionnaire  respondents rose from $5.33 to $5.86 (10 percent). Based on  questionnaire responses about workers’ wages as of June 2013, the  future minimum wage increases would affect the wages of 94 percent  of current workers in the CNMI hotel industry by the time the minimum  wage reaches the U.S. minimum wage of $7.25 in 2018. Based on the  wages workers currently earn, minimum wage increases would  increase the average annual cost per worker in 2018 by $3,051 since  June 2013. For the hotels that responded to our questionnaire, if  observed trends continue, scheduled minimum wage increases will  increase the share of hotels’ total operating costs attributable to  payroll from approximately 26 percent of operating costs in 2012 (with  minimum wage increases representing about 1 percent of total  operating costs) to 31 percent in 2018 (with minimum wage increases  representing about 5 percentage points of the 31 percent increase).
Hotel employer actions. Hotels representing the majority of all workers  employed by questionnaire respondents took cost-cutting actions and  raised prices from 2010 to 2013. Although employers attributed a  number of actions to the minimum wage increases, they also  attributed them to other factors, such as increased costs and changes  to U.S. immigration law. Hotels representing 90 percent or more of all  workers employed by questionnaire respondents stated that they  planned to introduce labor or cost-saving strategies and raise prices in  the next 18 months, with hotels representing all or almost all workers  employed by questionnaire respondents attributing that plan to  minimum wage increases to a moderate or large extent. As with their  past actions, employers attributed their future plans to a moderate or  large extent to increasing utility, material, and transportation costs in  addition to minimum wage increases.
Hotel industry analysis. In 2012 and 2013 hotel occupancy rates  increased from previous years. After adjusting for inflation, yearly  average room rates increased by 11 percent between 2010 and 2013.  In addition, according to the Mariana Visitors Authority, two closed  hotels may re-open and there are current proposals for the  construction of two new hotels. While acknowledging the recent  upturn in tourism, industry representatives characterized the growth  as an opportunity to recover from several down years and reinvest in  their properties. They attributed the recent growth in tourism to the  Chinese and Russian markets and feared the loss of Russian and  Chinese market if the parole program for these tourists is not  maintained.
See table 2 for key findings and appendix IV for detailed findings and  tables on the CNMI.
section_title: Concluding Observations
paragraphs: Both American Samoa and the CNMI have experienced decreases in  employment and earnings since minimum wage increases began in 2007.  Although minimum wage increases play a role in each economy, factors  beyond minimum wage increases will also continue to play a role. Both  American Samoa and the CNMI have short-term potential to grow their  primary sectors–American Samoa through the opening of a new cannery  in 2015 and the CNMI through the opening of new hotels. However,  according to cannery officials we spoke with, changes in tariffs applicable  to other countries exporting tuna or competition from low-wage foreign  competitors could compel the tuna canning industry to leave American  Samoa. In the CNMI, the projected decrease in the permitted foreign  labor force remains a concern for CNMI employers. In addition, CNMI  tourism faces competition from other locations and is susceptible to  economic trends in its tourist markets and the continuing use of parole to  support Chinese and Russian tourism.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to officials at the Department of  Commerce, Department of the Interior, Department of Labor, the Social  Security Administration, and the governments of American Samoa and  the CNMI for review and comment. We received written comments from  the governments of American Samoa and the CNMI, which are reprinted  in appendixes VI and VII, respectively. We also received technical  comments from the Departments of the Interior, Commerce and Labor;  and SSA, which we incorporated as appropriate. We also shared excerpts  of the draft with several private sector entities and incorporated their  comments as appropriate.
Following are summaries of the written comments from American Samoa  and the CNMI, with our responses.
The government of American Samoa noted that our draft report captured  the consensus among American Samoan stakeholders to postpone the  2015 minimum wage increase, but expressed a number of concerns  about the information sources we used. The government stated that there  is significant evidence that the 2010 U.S. census grossly undercounted  the American Samoa population. We have edited the footnote in the  report to further describe American Samoa’s concerns and have reprinted  their assertions in the Appendix VI of the report, but the employment  counts we present are not based on Census data and would not be  affected by an underestimate in the 2010 decennial census.
The government next expressed concern that, given the challenges to  collecting validated data in American Samoa, the data presented in our  report did not include a wide enough scope of data from other sources  and, as a result, yielded misleading statements and findings. In Appendix  I of our report, we reported and evaluated alternative data sources. We  have worked with the American Samoa Office of Taxation to review and  verify their data and believe that the use of its data, in conjunction with  cannery employment data from our questionnaire, is appropriate for  determining the changes in employment and earnings in American  Samoa.
The government additionally stated that our report failed to capture the  multiplier effect of employment cutbacks in other industries in addition to  tuna canning and the significant number of business closures during this  period. However, each of the data series we present in Appendix I covers  employment in all sectors and so would capture employment and  earnings throughout the economy.
The government of American Samoa also restated its opposition to  further minimum wage increases and proposed that American Samoa set  its own minimum wage schedule. In expressing its opposition, the  government cited American Samoa’s vulnerability to elements of the  international and national market place and U.S. international trade and  national budget policies. The government additionally stated that tethering  the American Samoa minimum wage to that of the United States is  misguided; because of the differences between the U.S. and American  Samoa economies, American Samoa can never attain equality with the  U.S. minimum wage. The government proposed instead that American  Samoa be allowed to develop its own minimum wage schedule with  appropriate guidance and oversight provided by the U.S. Department of  Labor and U.S. Department of the Interior. See the full text of American  Samoa’s comment in Appendix VI.
The government of American Samoa also provided us with technical  comments that included updated CPI data correcting calculation errors  made by their staff. Correcting these errors slightly changed the reported  CPI. For example, the CPI for the 4th quarter of 2012 increased from  130.5 to 131.1. We have recalculated the inflation-adjusted wages  accordingly in this report. Additionally, during the comment period, data  reviews by American Samoa Office of Taxation and GAO resulted in  corrections to American Samoa employment and wage data for 2007- 2009. We have incorporated this corrected data.
Comments from the Department of Commerce of the CNMI stated that  the indicators provided an objective overview of CNMI economic  conditions and the report captured the general condition of what is  happening in the CNMI. The CNMI comment letter additionally reiterated  challenges faced by the CNMI from uncertainty regarding the phase-out  of foreign worker permits, the cost of fuel and utilities, and increases in  health care costs. The Secretary of Commerce additionally stated that he  hoped the report will elevate the CNMI’s discussion with federal agency  partners regarding baseline assessments and data, and how a wage  increase may affect enrollment and eligibility for public assistance  programs, such as Medicaid.
We are sending copies of this report to interested congressional  committees. We also will provide copies of this report to the U.S.  Secretaries of Commerce, the Interior, Labor, to the Commissioner of  Social Security, and to the Governors of American Samoa and the CNMI.  In addition, the report will be available at no charge on the GAO website  at http://www.gao.gov.
If you or your staffs have questions about this report, please contact  David Gootnick at (202) 512-3149 or gootnickd@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix VIII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report updates our previous reports on the impact of minimum wage  increases in American Samoa and the Commonwealth of the Northern  Mariana Islands (CNMI) and discusses for each territory (1) changes in  employment and earnings and (2) changes in key industries since the  most recent federal minimum wage increase and since the increases  began.
To describe employment and earnings, we analyzed tax data from the  American Samoa and CNMI governments and earnings data from the  U.S. Social Security Administration (SSA) through 2012. We adjusted the  earnings data using Consumer Price Index (CPI) data for each area. We  also analyzed responses from GAO’s questionnaire of large employers in  the American Samoa tuna canning and CNMI hotel industries. To  describe the status of key industries, we collected responses through the  industry questionnaire. For both objectives, we conducted discussion  groups with employers and workers and interviews with public officials.  We provide additional information on each data source below.
In preparing this report, we reviewed data and interviewed officials from  the U.S. Departments of the Interior, Commerce, and Labor, as well as  from SSA. During visits to American Samoa and the CNMI in November  2013, we conducted interviews and discussion groups with government  officials, employers, other private sector representatives, and workers to  obtain views and information on the minimum wage increases. We also  reviewed U.S. minimum wage laws and other relevant laws and  regulations. We did not review the extent to which laws were properly  enforced or implemented. The scope of our study also does not include  workers in the underground economy, which would include any  employers that may not comply with laws, including tax, minimum wage,  immigration, and other laws. We did not review compliance with laws as  part of this study.
The federal sources generally used to generate data on wages,  occupations, and employment status for the United States, including the  Current Population Survey and the Current Employment Statistics  program, do not cover American Samoa or the CNMI. Because these  data sources were unavailable, we collected our own data in each area.
subsections: section_title: Employer Questionnaire
paragraphs: In American Samoa and the CNMI in 2013, we collected updated data on  employment, wage structure, and past and planned employer actions  covering 2010 through 2013 from the CNMI’s hotels and the American  Samoa tuna canning industry.
For our 2013 questionnaire, we defined a large hotel as one that  employed 50 or more workers in recent years. We sent the questionnaire  only to hotels with 50 or more workers because we could contact only a  limited number of hotels in each area, given available resources. We  confirmed our list of hotels with the Saipan Chamber of Commerce and  the Hotel Association of the Northern Mariana Islands. We initially sent  the questionnaire to 15 hotels. Two who responded had less than 50  employees and were not included in our analysis, bringing the total  number of hotels in our survey to 13. All but 2 hotels responded.
In accordance with other federal employment surveys and with our 2009  and 2010 questionnaires, our 2013 employer questionnaire asked for  wage data for the pay period containing June 12 of 2011, 2012, and  2013. The questionnaire asked separately for data regarding workers  paid an hourly wage and workers paid an annual salary. The  questionnaire also included detailed questions about employers’ past and  possible future actions, and about the extent to which employers  attributed these actions to past and future minimum wage increases. (The  questionnaire is reproduced in app. V.)
Before sending the 2009 questionnaire to employers in 2009, we  pretested it over the phone with three employers in the CNMI and two in  American Samoa to make sure that the questions were clear and  comprehensive, the data were readily obtainable, and the questionnaire  did not place an undue burden on employers. While we eliminated some  questions in our 2010 and 2013 questionnaires, revisions to remaining  questions were minor and did not require additional pretesting.
We administered the questionnaire between September 2013 and  December 2013. Employers received the questionnaire by e-mail in an  attached form that they could return electronically after marking  checkboxes or entering responses in open-answer boxes. We conducted  nonresponse follow-up while in the CNMI. We also contacted  nonrespondents by e-mail and phone. In addition, we contacted  respondents to clarify responses and request any missing data.
Because of the lack of data on the entire workforce, it is difficult to  precisely state the percentage of the workforce that our questionnaire  represents. In 2013, all three of the American Samoa employers that  received our questionnaire provided responses, resulting in a response  rate of 100 percent. Based on American Samoa tax data, our  respondents represented, in 2012, about 14 percent of the total  workforce. Based on CNMI tax data, our respondents represented, in  2012, about 7 percent of the total workforce.
In reporting the percentages for questionnaire responses in the CNMI, we  weighted each percentage to reflect the proportion of workers employed  by the responding employers relative to all workers employed by all  questionnaire respondents. As a result, the responses of larger  employers affect our findings more than those of smaller employers. In  addition to asking a direct question about number of employees, the  questionnaire asked respondents to complete a separate table listing the  number of employees at each wage or salary level. Separate tables were  required for hourly wage and salaried workers. To apply the weights, we  multiplied the number of employees by the employer response, then  divided that number by the total number of employees in the sample. For  example, if three of five employers attributed an action to the minimum  wage to a moderate extent, the unweighted response would be 60  percent. However, if those three employers represented 300 of 400  employees, the weighted response that we report would be 75 percent.  Among CNMI employer responses, two hotels accounted for almost half  of workers employed by questionnaire respondents, so those hotels’  responses substantially affected our questionnaire results.
For our analyses of the effect of minimum wage increases, we obtained  information from our questionnaire on employment and earnings for both  hourly wage and salaried workers during the pay periods that included  June 12, 2011, 2012, and 2013. We analyzed these responses in  conjunction with data we collected from the same employers for previous  reports regarding the pay periods that included June 12, 2007, 2008,  2009, and 2010. For hourly wage workers, respondents were asked to  provide the number of employees paid at each wage rate. For salaried  workers, respondents were asked the number of full-time and part-time  workers paid at each salary level. Hourly wage workers represented  about 98 percent of American Samoan cannery workers and 90 percent  of CNMI hotel workers. To determine the number of workers affected by  each minimum wage increase, we assumed that all workers employed by  questionnaire respondents were legally required to receive the minimum  wage. If some are not covered or are exempt, the minimum wage  increases would affect fewer workers. We did not independently verify  that the wage and other information provided to us were correct. After  recording the questionnaire data, we verified all keypunched records by  comparing them with the corresponding questionnaires and corrected the  errors we found.
The questionnaire responses cannot be used to make inferences about  all employers and workers in the CNMI and American Samoa, or about all  employers and workers in the CNMI hotel industry. First, because the lists  of employers that received the questionnaire included only those in the  American Samoa tuna canning and CNMI hotel industries (with more than  50 employees), the lists were not representative of all employers or of all  employers in the CNMI hotel industry. Second, some nonresponse bias  may exist in some of the questionnaire responses, since characteristics of  questionnaire respondents may differ from those of nonrespondents and  nonrecipients in ways that affect the responses (e.g., if those that employ  a larger number of workers would have provided different responses than  those that employ a smaller number). Last, it is possible that some  employers’ views of the minimum wage increases may have influenced  their responses.
To study CNMI hotel minimum wage and payroll costs in relation to  operating costs, we analyzed data provided by CNMI hotel questionnaire  respondents on 2012 annual payroll before deductions for taxes and  benefits, Social Security and Medicare contributions under the Federal  Insurance Contributions Act (FICA), payments for employee benefits, and  other operating expenses. For this and other analyses in this report, we  excluded nonwage labor costs due to the minimum wage increases, such  as increases in employer payroll tax contributions under FICA. In 2011,  for example, employers contributed the equivalent of 6.2 percent of  employee wages to Social Security and 1.45 percent to Medicare, up to  $106,800 in employee wages.
section_title: Employment and Earnings Data
paragraphs: To report on overall employment and earnings, we relied on local  government data. The CNMI Department of Finance provided tax data for  2006 to 2012 with counts of the number of individuals in different ranges  of earnings for both public and private sector workers and for both  citizens and noncitizens. For the CNMI, this data source and use is the  same as in the two prior GAO reviews of minimum wage changes. To  calculate mean wages in the CNMI, we divided the total sum of earnings  by the number of workers with non-zero wages.
In the case of American Samoa, we used a combination of local  government data and business responses to GAO’s questionnaire to  report on employment and earnings. The American Samoa Office of  Taxation provided tax data with the number of workers employed by each  employer from 2007 to 2012, and the total sum of earnings over the year.  However, the American Samoa tax data excluded cannery employees in  some years. To address this gap, we added counts of cannery workers  from our questionnaire. The American Samoa tax data has a count of  persons employed during the tax year by the employer. The cannery  employment figure, from GAO’s questionnaire, is a count of employees at  the canneries as of a specific pay period in June of the given year. To  calculate mean wages for the American Samoa tax data, we divided the  total sum of earnings by the number of workers across all employers. To  calculate the mean wages for cannery workers, we assumed that all  cannery workers earned the minimum wage and worked full-time over the  year. To calculate the overall mean wage for American Samoa, we  averaged these estimates, weighting by the number of workers in each  category.
The initial data provided by the Office of Taxation had a number of gaps,  such as missing numbers of employees or wages for several employers.  At our request, the Office of Taxation researched and provided updated  data that was far more complete, but lacked employee counts for some  employers in 2007 and 2010. We used the reported number of employees  in the adjacent year or years to estimate these missing values. In 2007,  the American Samoa tax data were missing the number of employees for  39 of the 408 employers. We were able to estimate the number of  employees in 2007 for 34 of these 39 by using their reported number of  employees in other years. This estimation added 391 employees to the  2007 total. Similarly, in 2010, we added 499 employees to the total by  interpolating the 2010 number of employees for the American Samoa  Community College from the reported number of employees in 2009 and  2011. The data in 2008, 2009, 2011, and 2012 did not require estimation  of such missing values.
In addition to the tax data, we obtained SSA data (as of November 15,  2013) on the employment and earnings of individual taxpayers in  American Samoa to update our analysis of data for the previous report.  While the SSA data cover all types of workers in American Samoa, three  large groups of people in the CNMI were not required to report earnings  to SSA and thus were excluded from the SSA data—CNMI government  workers and immigrant workers from the Philippines and Korea. In 2012,  these three groups represented approximately 40 percent of all CNMI  workers, according to CNMI government tax data. We have chosen not to  report the CNMI SSA data due to these coverage gaps.
To perform the analysis of SSA data, we first identified American Samoa  workers by using the recorded territory or state code for the worker.  However, we determined that, in 2011 and 2012, this method resulted in  implausibly large counts. After consultation with SSA officials, we found  that data entry issues had resulted in a number of extra entries with the  American Samoa state code of “AS.” For example, some entries for  addresses in Texas had entered the last two letters of the state, “AS” in  the state field. Consequently, we additionally checked the American  Samoa data to exclude those entries that, though they had an American  Samoa state code, had a city or zip code that did not match American  Samoa. We performed an additional inspection of the records that had  blank city and zip code fields and concluded that the vast majority of  persons with an “AS” state code but missing city and zip code entries had  characteristically Samoan names. We therefore also included those  records that had an “AS” state code and a blank city and zip code field.  These additional checks reduced the count for 2011 and 2012 and also  slightly reduced the reported count based on SSA data in earlier years.  SSA officials attributed these data errors in 2011 and 2012 to intermittent  data entry errors by employers and data submitters.
We compared our counts of employees based on American Samoa tax  data and GAO questionnaire responses to employment counts based on  SSA data. In addition, we compared these series to employment counts  in the American Samoa Statistical Yearbook (based on a combination of  government sources for public sector employers and business license  applications for private sector employers). There are some differences  between the data. For example, a person (as counted in the Social  Security data) could have multiple positions (as counted in the other  sources). As table 3 shows, all three employment counts fell from 2007 to  2012 and also had roughly comparable changes from 2007 to 2009— years covered by our previous report on the minimum wage in American  Samoa. However, the trend in the Social Security data was much larger in  magnitude overall from 2007 to 2012. Specifically, the drop in  employment from 2007 to 2012 was approximately 41 percent based on  SSA data but about 11 percent based on combined American Samoa tax  and GAO questionnaire data and 13 percent in the Statistical Yearbook.
The smaller drop was more in keeping with the Bureau of Economic  Analysis’s calculation of a flat or slightly declining real GDP in those  years.
We could not determine an explanation for the divergence among the  data sources. Because the drop was larger when persons were counted,  some of the difference could reflect the loss of cannery workers, who may  have been less likely than other workers to hold multiple positions.  However, there were also cases where the year-to-year changes differed.  For example, from 2011-2012, both the Social Security and the Statistical  yearbook show decreases of about 16 percent and 18 percent,  respectively, but the figure based on American Samoa tax and GAO  questionnaire data remained largely unchanged. We determined that the  data from the American Samoa Office of Taxation were more reliable than  SSA data for our purpose of describing employment and earning trends in  more recent years.
Because the U.S. Bureau of Labor Statistics collects CPI data on the U.S.  50 states but not on American Samoa or the CNMI, we relied on other  sources of data to compare changes in earnings or wage rates to  changes in prices. We obtained historical data on the CPI from both areas  to estimate inflation-adjusted earnings.the CNMI, we used quarterly CPI data from the first quarter of 2006 to the  fourth quarter of 2012. To produce an annual CPI series, we averaged  the four quarters in each year. In addition, for American Samoa, because  the CPI was rebased in the fourth quarter of 2007, we recalculated the  quarterly index series from the fourth quarter of 2008 back to the fourth  quarter of 2007 by finding a rebasing factor such that the old and new  indexes in the fourth quarter of 2007 were identical. For both CNMI and  American Samoa, we interviewed agency officials responsible for  producing the quarterly CPI estimates.
section_title: Discussion Groups
paragraphs: We conducted structured discussion groups with Chamber of Commerce  members in American Samoa and the CNMI to collect information on the  impact of the minimum wage increases on employers. For each  discussion group, the Chamber of Commerce invited members to  participate. In the CNMI, we also held a discussion group with members  of the Hotel Association of the Northern Mariana Islands and interviewed  hotel human resource managers. The number of participants in each  group ranged from 4 to 20 business owners and representatives.
To collect information on workers’ views of the minimum wage increases,  we conducted structured discussion groups with worker groups in the  CNMI and American Samoa. In American Samoa, we arranged, in  cooperation with Star-Kist, a worker discussion group at the Star-Kist  cannery. In the CNMI, we conducted one discussion group with  employees of hotels in Saipan, arranged by Hotel Association of the  Northern Mariana Islands and another with employees of the Tinian  Dynasty, arranged through that hotel. The number of participants in each  group ranged from 3 to 10.
All discussion groups were moderated by a GAO employee following a  structured guide with open-ended questions about the minimum wage  increases and related topics. Discussion groups are generally designed to  obtain in-depth information about specific issues that cannot be easily  obtained from single interviews. Methodologically, they are not designed  to provide results generalizable to a larger population or provide  statistically representative samples or quantitative estimates. The views  represented are those only of the participants in our groups and may or  may not be representative of the population of employers and workers in  the CNMI and American Samoa. Therefore, the experiences of other  employers and workers may be different from those who participated in  our discussion groups. In addition, the groups and participants in the  groups were not random samples of employers and workers.
section_title: Other Local Data
paragraphs: We also analyzed industry data. For example, to determine hotel room  prices and hotel occupancy rates in the CNMI, we collected data from the  Hotel Association of the Northern Mariana Islands and conducted related  follow-up. In addition, the Marianas Visitors Authority provided data on  arrivals by country of residence. We found the data used to be reliable  and relevant for the purposes of our report.
section_title: Data Reliability and Limitations
paragraphs: In general, to establish the reliability of the data that we used for reporting  trends and statistics for both American Samoa and the CNMI, we  systematically obtained information about the way in which data were  collected and tabulated. When possible, we checked for consistency  across data sources. While the data had some limitations, we determined  that the available data were adequate and sufficiently reliable for the  purposes of our review.
Our review had certain limitations in addition to those already noted. In  particular, although our approach yielded information on trends in  employment, wages, and earnings in both areas, we were not able 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. In addition, our review of  minimum wage increases is limited to American Samoa and the CNMI,  and we did not study minimum wage increases in the U.S. economy more  broadly.
We conducted this performance audit from July 2013 to February 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Minimum Wage Increases in American Samoa and CNMI
paragraphs: The federal minimum wage was first enacted as part of the Fair Labor  Standards Act of 1938 (FLSA). It had repercussions in the U.S. Virgin  Islands and Puerto Rico that led the United States, in 1940, to revise the  application of the law in those territories; the overarching goal of the  FLSA continued to be pursued there, but at a slower pace than in the 50  U.S. states.
As of July 2009, the federal minimum wage was set at $7.25 per hour.  Federal minimum wage laws apply generally to any employee engaged in  commerce who meets certain conditions, with limited exemptions.  Certain employees who would otherwise be covered under certain  requirements of the FLSA may be exempt. For example, individuals  engaged in agriculture, if their employer is an immediate family member,  or those catching seafood at sea are exempt from FLSA minimum wage  and overtime requirements.
subsections: section_title: Application of Federal Minimum Wage Law to American Samoa and CNMI
paragraphs: In 2007, the United States enacted legislation that incrementally applies  the U.S. minimum wage to American Samoa and the CNMI. The  legislation raised the federal minimum wage in the 50 U.S. states from  $5.15 to $7.25 per hour over 3 years and, for the first time, also mandated  a series of $.50 per hour increases beginning in July 2007 to the  minimum wages in both American Samoa and CNMI that would  eventually bring them to parity with the federal minimum wage.
The 2007 legislation changed decades of federal law that had allowed  both American Samoa and the CNMI to apply minimum wage rates  significantly lower than the minimum wage for the 50 U.S. states. Prior to  the 2007 law, American Samoa’s minimum wages were set for each of 18  industries through biennial reviews by special industry committees  established by the U.S. Department of Labor. American Samoa’s  minimum wages in 2006 ranged from $2.68 to $4.09. Under the 2007 law,  American Samoa retained its separate minimum wages by industry, with  each to be increased by $.50 per hour until it reaches the U.S. minimum  wage. The CNMI had authority to set its own minimum wage under its  1976 Covenant with the United States; its minimum wage in 2006 was  $3.05.
subsections: section_title: Minimum Wage Law in American Samoa
paragraphs: Since 2007, the minimum wages in American Samoa have increased by  $.50 three times, with the minimum wage of the lowest paid workers now  set at $4.18 and the minimum wage of workers in the tuna canning  industry set at $4.76. The most recent minimum wage increase in  American Samoa was on May 25, 2009. In 2010, the U.S. enacted a law  delaying the scheduled American Samoa minimum wage increases for 2   Further changes to the  years, providing for no increase in 2010 or 2011. law in 2012 provided for no increases in 2012, 2013, and 2014 and  changed the interval of the increases from every year to every 3 years.Under current law, therefore, the next minimum wage increase will occur  on September 30, 2015, and the minimum wage in the American Samoa  tuna canning industry will reach the current U.S. minimum wage of $7.25  on September 30, 2027. Under current law, the minimum wage for  American Samoa’s lowest-paid workers will reach the U.S. minimum  wage on September 30, 2033 (see table 4). If the original 2007 law  increasing the minimum wage had not been subsequently amended, the  minimum wage in the tuna canning industry would have reached the U.S.  minimum wage in May 2014.
Congress raised the CNMI minimum wage from $3.05 to $3.55 per hour  in July 2007 and required a $.50 increase every year thereafter until the  CNMI minimum wage equals the full federal minimum wage. In 2010, the  U.S. enacted a law delaying the scheduled minimum wage increase for 1  year, providing for no increase in 2011. On September 30, 2012, the  scheduled annual increase raised the CNMI minimum wage to the current  $5.55 per hour. In September 2013, additional legislation cancelled the  scheduled 2013 and 2015 annual increases. Under current law,  therefore, the next minimum wage increase will occur on September 30,  2014, and the CNMI will reach the current U.S. minimum wage on  September 30, 2018 (see table 5). If the original 2007 law increasing the  minimum wage had not been subsequently amended, the minimum wage  in the CNMI would have reached the U.S. minimum wage in May 2015.
section_title: CBO Study of Options to Increase the Minimum Wage in the United States
paragraphs: In February 2014, the Congressional Budget Office (CBO) issued a study  of two options for raising the federal minimum wage. The first option  would raise the minimum wage to $10.10 per hour and the second would  raise it to $9.00 per hour. To perform its study, CBO identified the  number of workers who would be affected by these options from Census  data. CBO then reviewed existing research findings on the elasticity of  employment and minimum wage increases—that is, the percentage  change in employment induced by a percentage change in the minimum  wage—and estimated the effect of each option on employment, income,  and poverty. CBO chose the value of the elasticity for each option based  on estimates of this elasticity from previous research. However,  because there is considerable uncertainty about the effect of minimum  wage increases, CBO developed a range of estimates.
The two options of the CBO study each assumed increases in the  minimum wage that are smaller in size than those that occurred from  2007 to 2009 in American Samoa and the CNMI.  CBO also found that  the two options would affect a much smaller percentage of U.S. workers  than we found would be affected by future minimum wage increases for  workers in the key industries of American Samoa and the CNMI.
section_title: Appendix III: American Samoa
subsections: section_title: Background
paragraphs: American Samoa comprises five volcanic islands and two coral atolls with  a combined land area of 76 square miles—slightly larger than  Washington, D.C.—located about 2,600 miles southwest of Hawaii (see  fig. 1).
The 2010 decennial census found American Samoa’s population to be  55,519, a decrease of 2.5 percent from its 2000 population.  Approximately 98 percent of the population lives on the main island of  Tutuila, and most economic activity and government operations take  place in and around the harbor of the capital of Pago Pago. Most of  Tutuila, however, consists of rugged terrain, with relatively little level land  (see fig. 2).
From 1900 through 1904, the U.S. government negotiated control over  American Samoa,federal governance of the territory. In 1951, governance was transferred   and the U.S. Navy subsequently took responsibility for  to the Secretary of the Interior. In 1960, American Samoa residents  adopted their own constitution. Amendments to the constitution of  American Samoa can only be made by the U.S. Congress. Persons born  in American Samoa are U.S. nationals but may apply to become  naturalized U.S. citizens. U.S. noncitizen nationals from American  Samoa have the right to travel freely, live, and work throughout the United  States. American Samoa exercises authority over its immigration system  and customs through locally adopted laws.
Additionally, the U.S. government has supported American Samoa’s  economy through trade policies that have provided tariff-free access to  the United States for canned tuna and tax policies that have reduced  federal taxes on income earned by qualifying U.S. corporations investing  in American Samoa. Changes to various free trade agreements within the  last decade, however, have lowered U.S. tariffs on tuna exported from  several other countries, reducing the American Samoa canneries’  competitive advantage. In addition, the potential Trans-Pacific  Partnership includes one tuna producing country, Vietnam, which could  pose additional competition if granted tariff-free access to the U.S.  market. Under the Internal Revenue Code, qualifying American Samoa  tuna canneries have received a tax credit for U.S. corporate income  taxes. Canneries in American Samoa have also benefited from  exemptions from local taxes.
subsections: section_title: American Samoa Economy
paragraphs: The U.S. Department of Commerce’s Bureau of Economic Analysis  estimated American Samoa’s 2012 gross domestic product (GDP) at  $725 million. In 2005 dollars, the real 2012 GDP was $504 million, 4.5  percent below the real GDP of 2006, the last full year prior to minimum  wage increases and also slightly lower than the 2009 real GDP (see fig.  3). Real GDP per capita has increased, however, as the American Samoa  population has declined. American Samoa’s 2012 real GDP per capita of  $9,164 was a 12.5 percent increase over the 2006 real GDP per capita of  $8,148.
The 2010 decennial census reported that American Samoa’s median  household income remained well below that of the United States, and its  poverty rate well above. American Samoa’s 2009 median household  income of $23,892 was 47 percent of that of the United States, a decline  from 2004 when it was about 52 percent of that of the United States.  American Samoa’s 2009 poverty rate of 57.8 percent far exceeded the  U.S. rate of 15.1 percent. Based on the 2010 decennial census,  American Samoa’s unemployment rate was 9.2 percent in April 2010.
According to the Bureau of Labor Statistics’ Current Population Survey,  the U.S. unemployment rate was 9.9 percent at that time.
section_title: Key Industries
paragraphs: The tuna canning industry and the government sector have historically  employed the most workers in American Samoa. In 2012, about 36  percent of American Samoa’s workforce worked in the government sector  and about 12 percent worked for the canneries. Noncitizens, mostly  from the independent state of Samoa, comprised approximately 36  percent of American Samoa’s 2010 population (see fig. 4) and, according  to Star-Kist, approximately 85 percent of their labor force. Many citizens  of the independent state of Samoa reside in American Samoa on a long- term basis, including spouses and relatives of American Samoans.
Despite recent declines, in 2012 tuna exports represented more than 99  percent of American Samoa’s approximately $416 million in commodity  exports to the United States. However, the tuna canning industry faces  competition from other countries. From 1995 to 2003, the value of canned  tuna imported into the United States from American Samoa exceeded  that of tuna imported from all other countries combined. Since 2003,  however, foreign imports have exceeded those from American Samoa. In  addition, U.S. per capita consumption of canned tuna fell by 23 percent  from 2003 to 2011. From 2008 to 2011, tuna exports from American  Samoa to the United States declined, rebounding somewhat in 2012 (see  fig. 5).
Chicken of the Sea International, which operated one of the two  canneries in American Samoa, closed its cannery operations in the  territory at the end of September 2009, contributing to the decline of tuna  exports that began that year. 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. While the Star-Kist  cannery has been in American Samoa for more than 50 years, it also has  production facilities in place or in process in Ecuador, Senegal, Thailand,  and Papua New Guinea (see fig. 6).
In addition to the closure of Chicken of the Sea in 2009, American Samoa  suffered another blow on September 29 of that year when a tsunami  following a strong earthquake left 34 people dead. Although the two tuna  canneries were mostly spared, the tsunami caused severe damage. The  federal government issued a disaster declaration and assisted with  tsunami recovery efforts, including providing direct cash assistance to  those affected and temporary employment in support of recovery efforts.  In 2009 and 2010, other temporary jobs included Census Bureau  enumerators and managers assisting with collection of 2010 decennial  census data, and workers on infrastructure projects and in other fields  supported by funds made available in the American Recovery and  Reinvestment Act of 2009.
On October 5, 2010, Tri Marine International acquired the former Chicken  of the Sea facility in American Samoa, located adjacent to the Star-Kist  cannery (see fig. 7). As of November 2013, Tri Marine had completed  construction of a new cold-storage facility on the site and is actively  constructing other facilities for expanded operations. According to Tri  Marine officials, the company plans to begin processing sashimi-grade  tuna in early 2014 and to re-open the tuna cannery in 2015. When the  cannery becomes operational, Tri Marine expects to employ 1,200  people.
section_title: American Samoa Employment and Average Inflation- Adjusted Earnings in 2012 Were Lower Than in 2007
subsections: section_title: Employment Declined Overall from 2007 to 2012, but Increased in Some Years
paragraphs: Overall American Samoa employment declined from 2007 to 2012;  however, employment increased in some years. As shown in figure 8,  employment grew from 2007 to 2008 but by 2012 had fallen to a level  lower than in 2007. Specifically, the total number of employees in  American Samoa increased by 1.5 percent from 2011 to 2012 (from  15,552 to 15,790) but fell over the entire period from 2007 to 2012 by 11  percent (from 17,677 to 15,790, with a peak of 19,229 in 2008).  Because American Samoa tax data are not yet available for 2013, we are  unable to report on the overall level of employment for that year.  However, based on our survey of cannery employers, the number of  hourly workers at the canneries fell by about 13 percent from 2012 to  2013 (from 2,193 to 1,915) and 58 percent overall from 2007-2013.
Employment figures are based on our analysis of combined employee  data from the American Samoa Department of Treasury, Office of  Taxation, and responses from tuna canning industry employers to our  questionnaire. The American Samoa tax data are a count of persons  employed at any point during the tax year by the employer. The cannery  employment figure, from GAO’s questionnaire, is a count of hourly  employees at the canneries as of a specific pay period in June of the  given year. See appendix I for a full discussion our methodology.
section_title: Average Inflation-Adjusted Earnings of Those Employed Have Fallen Since 2007
paragraphs: Average earnings of workers who maintained employment rose from  2007 to 2012, but the increase was not sufficient to overcome the  increase in prices. As shown in figure 9, based on American Samoa tax  and GAO questionnaire data, and consumer price data, from 2011 to  2012, average inflation-adjusted earnings fell by 2 percent. This decline  resulted from an increase in average earnings of 2 percent and an  increase in prices of 4 percent. For the overall period from 2007 to 2012,  average inflation-adjusted earnings fell by about 5 percent due to an  increase in average annual earnings of about 27 percent and a 34  percent increase in prices.
Although earnings data do not allow for a direct comparison of average  and minimum wage annual earnings or for tracking the earnings of  workers who lost their jobs, the hourly wage of minimum wage workers  who retained their jobs and work hours has not increased by more than  inflation since 2007. The inflation-adjusted earnings of minimum wage  cannery workers who retained their jobs and work hours fell by about 4  percent from 2011 to 2012 (a period that did not include a minimum wage  increase) and also decreased by about 5 percent overall from 2007 to  2012.
section_title: Employers, the American Samoa Government, and Workers Generally Oppose Minimum Wage Increases
paragraphs: The discussion group of private sector employers we met with generally  opposed additional minimum wage increases and stated that previous  minimum wage increases had been harmful to the economy. These  employers called the minimum wage the most important issue impacting  businesses and cited American Samoa’s reliance on the tuna canning  industry and fears about the effect of further increases on the industry  and the American Samoa economy. In addition, these employers said  that federal tsunami recovery assistance had cushioned the impact of the  2009 closure of the Chicken of the Sea cannery, so its full impact had not  yet been felt. Finally, the business representatives we spoke with  expressed frustration with American Samoa’s lack of success in attracting  alternative businesses to the territory. Business representatives we spoke  with said that the American Samoan government had not fostered  economic development and that its tax policies had created a poor  business environment.
The American Samoan government, American Samoa’s largest employer,  continues to report that any increases in the minimum wage will result in  reduced government employment. The government anticipates that it will  reduce staff or hours as part of its response to any future increases. It  further stated that the scheduled 2015 increase would raise its wage bill  by approximately $140,000. The government anticipated it would have to  cut six employees to offset this increase. Future increases beyond 2015,  it stated, would have a drastic budget impact and contribute to the  government’s already critical cash flow problem. In his January 2014  State of the Territory address, the Governor of American Samoa stated  that he had instructed the American Samoa Department of Commerce to  prepare and justify a request to Congress to permanently remove  American Samoa from the application of the federal minimum wage.  According to the Governor, the justification will include a presentation of a  locally developed “living wage” to address what it described as  congressional fears that the American Samoa minimum wage does not  provide for basic living needs in American Samoa.
Star-Kist workers who participated in our discussion group generally  opposed further minimum wage increases rather than supported future  increases.in lost jobs or a complete closure of Star-Kist. Workers we spoke with  said that hours and opportunities for overtime have been reduced at the  cannery. In addition, workers we spoke with said that prices for essentials  such as rent, food, and utilities are high and difficult for them to afford.  Some workers we spoke with expressed concerns that future increases in  the minimum wage would lead to an increase in prices in American  Samoa, which they said had occurred as a result of previous minimum  wage increases.
section_title: Minimum Wage Increases through 2018 Would Affect Wages of Almost All Workers Employed in American Samoa’s Tuna Canning Industry in 2013
paragraphs: From 2011 to 2013, there was no increase in the median wage of workers  in the tuna canning industry—in all years, the median hourly wage for  tuna canning workers was $4.76. During this period, the minimum wage  for canning workers also remained unchanged at $4.76. Since 2007, as a  result of previous minimum wage increases, the median wage among  workers in the tuna canning industry employed by questionnaire  respondents has risen from $3.30 to $4.76 per hour (44 percent).
As the minimum wage increases continue, they will affect a growing  percentage of workers in American Samoa’s tuna canning industry.  Based on questionnaire responses about workers’ wages as of June  2013, 79 percent of canning industry hourly workers would be affected by  the scheduled increase of the minimum wage to $5.26 in September  2015. Future minimum wage increases would affect the wages of 92  percent of current cannery hourly workers when the minimum wage  reaches $5.76 in September 2018, and 98 percent of current canning  industry hourly workers when the minimum wage reaches $7.25 in 2027.  By 2027, the extra annual cost added by minimum wage increases after  June 2013 would be $4,710 per worker (see table 6). We identified the  additional cost by calculating the difference between the cost per worker  in June 2013 and the cost per hourly worker through 2027, based on the  scheduled minimum wage increases and averaged across all workers.
section_title: Tuna Canning Employers Cut Costs Due to Minimum Wage Increases and Other Factors
paragraphs: Two employers in the tuna canning industry in American Samoa reported  in our questionnaire that they had taken cost-cutting actions from June  2010 to June 2013 including labor- and cost-saving strategies and  reduced overtime. All but one of the employer actions were attributed to  a moderate or large extent to minimum wage increases by one or both  respondents (see table 7).
In addition to minimum wage increases, both respondents from the tuna  canning industry who took cost-cutting actions attributed their actions to a  moderate or large extent to increased utility and material costs (see   table 8).
When asked about future planned actions, two of the three tuna canning  industry respondents stated that they planned to take future actions to  introduce labor- and cost-saving strategies, delay business expansion,  and reduce overtime hours. One of the three respondents did not plan to  take any of these actions. Both respondents who planned to take these  actions attributed them to a moderate or large extent to the minimum  wage increases (see table 9).
In addition to the minimum wage increases, the two respondents to the  tuna canning industry questionnaire who planned to take future cost- cutting actions attributed their plans to a moderate or large extent to other  increased costs and business factors (see table 10).
section_title: Tuna Canning Industry Faces Challenges; Relocation Could Reduce Business Costs
paragraphs: Cannery officials stated that wage increases are one of many factors  affecting the tuna canning industry in American Samoa. Both Star-Kist  and Tri Marine cited American Samoa’s proximity to Pacific fisheries as a  key advantage for the American Samoa tuna canning industry, as well as  tariff-free access to the U.S. market. Star-Kist also cited Pago Pago’s  protected deep-water harbor. However, cannery company officials we  interviewed indicated that labor costs, including the minimum wage  increases, continued to place American Samoa at a significant cost  disadvantage compared with other canned tuna exporting countries. In  June 2011, we concluded that the three minimum wage increases to date  had further widened the gap between American Samoa and production   Star-Kist estimated the  sites with lower labor costs, such as Thailand.total differential in the annual wage bill between American Samoa and an  equivalent number of employees in Thailand at approximately $17.4  million. In addition, Star-Kist also cited disadvantages for American  Samoa from U.S. regulations, high fuel and re-provisioning (net repairs,  ship maintenance, crew provisions, and fishing bait) costs, an outdated  shipyard, and the lack of sufficient dock space.
Both canneries cited congressional action to defer the next minimum  wage increase to 2015 as encouraging their ability to invest in American  Samoa. According to Star-Kist officials, deferring the next minimum wage  increase helped the company to better plan for future activity at the  cannery (to better train its workforce, plan procurement, negotiate supply  contracts, and compete for business that requires pricing guarantees for  multiple years). Tri Marine stated that it carefully considered all of its  current and projected costs before deciding to invest in American Samoa  and that its decision to move forward came only after the deferral of  increases in the minimum wage.
In our June 2011 report on the minimum wage in American Samoa, we  modeled four alternative scenarios for the American Samoa tuna  industry.however, we discussed them with Star-Kist officials, and Star-Kist and Tri  Marine each provided additional written comments on the options  available to the tuna industry. Star-Kist officials said that the four options  are all still possible, but that there is a spectrum of possible actions in  response to increasing costs. For example, Star-Kist could lower the  staffing level or close certain production lines. Star-Kist reiterated its  position that the cost savings between a fully U.S. manufacturing process  and an outsourced manufacturing process is substantial and places  American Samoa at a disadvantage. Tri Marine stated that any increase  in direct costs, related to wages or not, will erode the competitiveness of  American Samoa with a number of low-cost sources, including Thailand,  Vietnam, Indonesia, and the Philippines, as a source of canned tuna for  the U.S. market.
section_title: Appendix IV: Commonwealth of the Northern Mariana Islands
subsections: section_title: Background
paragraphs: Part of the Mariana Islands Archipelago, the CNMI is a chain of 14 islands  in the western Pacific Ocean—just north of Guam and about 3,200 miles  west of Hawaii (see fig. 10). Most of the CNMI population resides on the  island of Saipan, with additional residents on the islands of Tinian and  Rota.
The United States took control of the Northern Mariana Islands from  Japan during the latter part of World War II and, after the war, the U.S.  Congress approved the Trusteeship Agreement making the United States  responsible to the United Nations for the administration of the islands. In  1976, the District of the Mariana Islands entered into a covenant with the  United States establishing the island territory’s status as a self-governing  commonwealth in political union with the United States. This covenant  grants the CNMI the right of self-governance over internal affairs and  grants the United States complete responsibility and authority for matters  relating to foreign affairs and defense affecting the CNMI. The covenant  initially made many federal laws applicable to the CNMI, including laws  that provide federal services and financial assistance programs. However,  the covenant preserved the CNMI’s exemption from certain federal laws  that had previously been inapplicable to the Trust Territory of the Pacific  Islands, including federal immigration laws, with certain limited  exceptions, and certain federal minimum wage provisions. However,  under the terms of the covenant, the federal government has the right to  apply federal law in these exempted areas without the consent of the  CNMI government.
subsections: section_title: CNMI Economy
paragraphs: The U.S. Department of Commerce’s Bureau of Economic Analysis  estimated CNMI’s GDP in 2012 at $701 million. However, in real terms,  GDP decreased by approximately 36 percent from 2006 to 2012. After 4  years of consistent decline, the CNMI real GDP has remained relatively  flat since 2009 (see fig. 11). The CNMI’s 2012 real GDP per capita of  $11,537 was an approximately 24 percent decrease from the 2006 real  GDP per capita of $15,157.
The 2010 decennial census reported that CNMI’s median household  income remained well below that of the United States, and its poverty rate  well above. CNMI’s 2009 median household income of $19,958 was 39  percent of that of the United States, approximately the same percentage  as in 2004. CNMI’s 2009 poverty rate of 52.3 percent far exceeded the  U.S. rate of 15.1 percent. Based on the 2010 decennial census, CNMI’s  unemployment rate was 11.2 percent in April 2010. According to the  Bureau of Labor Statistics’ Current Population Survey, the U.S.  unemployment rate was 9.9 percent at that time.
section_title: Key Industries
paragraphs: For years, the garment and tourism industries were the mainstay of the  CNMI’s economy. In 1999, these two industries accounted for about 85  percent of the CNMI’s total economic activity and 96 percent of its  exports. However, several developments in international trade caused  the CNMI’s garment industry to decline dramatically. In January 2005, in  accordance with a World Trade Organization 10-year phaseout  agreement, the United States eliminated quotas on textile and apparel  imports from other textile-producing countries, exposing the CNMI  apparel industry’s shipments to the United States to greater competition.  Subsequently, the value of CNMI textile exports to the United States  dropped from a peak of $1.1 billion in 1998 to $677 million in 2005 to  close to zero in 2010.
After years of decline, fiscal years 2012 and 2013 showed an increase in  visitor arrivals. However, total visitor arrivals to the CNMI have dropped  from a peak of 726,690 in fiscal year 1997 to 433,925 in fiscal year 2013,  a decline of 40 percent, as shown in figure 12.
Japan, Korea, China, and Russia are the CNMI’s primary visitor markets,  with Japan representing the largest share of any country and China and  Russia representing emerging markets. In fiscal year 2013, 34 percent of  visitors were from Japan, 31 percent from South Korea, 26 percent from  China, and 3 percent from Russia (see fig. 13). The Department of  Homeland Security has exercised parole authority to allow, on a case-by- case basis, eligible nationals of China and Russia to enter the CNMI   The  temporarily as tourists where there is significant public benefit.
Consolidated Natural Resources Act of 2008 required the establishment  of a joint visa waiver program for the CNMI and Guam by amending the  authority for an existing visa waiver program for Guam visitors. The  Guam-CNMI Visa Waiver Program exempts tourism and business visitors  from certain countries who are traveling to the CNMI and Guam for up to  45 days from the standard U.S. visa documentation requirements.
During the expansion of the CNMI garment and tourism industries prior to  1995, the CNMI economy became dependent on foreign labor, as the  CNMI government used its authority over its own immigration policy to  bring in large numbers of foreign workers and investors. The number and  percentage of noncitizens in the CNMI population have decreased since  2000, when they were 57 percent of the population, to approximately 43  percent as of the 2010 decennial census (see fig. 14).
In 2008, federal legislation amended the U.S.-CNMI Covenant to  establish federal control of CNMI immigration. The law includes several  provisions affecting access to the CNMI by foreign workers (using permits  referred to as conditional worker, or CW-1, permits), tourists, and foreign  investors that were implemented beginning in November 2009. The law  mandated an annual reduction in the number of CW-1 permits that results  in zero permits by the end of a transition period, but the law did not  mandate specific reductions. The current CW-1 transition period expires  December 31, 2014; however, the Secretary of Labor is authorized to  extend the program for up to 5 years. The Secretary’s decision to  extend the program beyond 2014 must be made no later than July 4,  2014.
The Department of Homeland Security annually determines the numerical  limitation, terms, and conditions of the CW-1 permits. The department set  the numerical limitation at 22,417 for fiscal year 2011; 22,416 for 2012;  15,000 for 2013, and 14,000 for fiscal year 2014.  As we concluded in  August 2008, although modest reductions in CNMI-only permits for  foreign workers would cause minimal impact, any substantial and rapid  decline in the availability of work permits for needed workers would have  a negative effect on the economy, given foreign workers’ prominence in  key CNMI industries. As of August 13, 2013, employers in the CNMI  had requested a total of 7,323 nonimmigrant transitional worker permits  during fiscal year 2013.
In addition, the CNMI’s economy may be affected in the future by the  planned build-up of the U.S. military in neighboring Guam; however,  those impacts will likely be smaller than originally anticipated. Under  original plans, the Department of Defense intended to relocate  approximately 8,000 Marines and their 9,000 dependents from Okinawa,  Japan, to Guam by 2014. Current plans are to relocate approximately  5,000 personnel and 1,300 dependents. DOD is in the process of  determining what military and public infrastructure facilities and live-fire  training ranges are necessary to support the proposed reduced  realignment plan on Guam, as well as Tinian Island in the CNMI.
section_title: CNMI Employment Fell from 2011 to 2012 and Has Decreased Substantially Since 2006; Average Inflation-Adjusted Earnings Have Declined
subsections: section_title: CNMI Employment Decreased Substantially from 2006-2012
paragraphs: Overall CNMI employment dropped every year from 2006 to 2012,  according to CNMI tax data. As shown in figure 15, from 2011 through  2012 the total number of employed fell by about 6 percent (from 25,229 to  23,720). For the entire period from 2006 through 2012, the number  employed fell 45 percent (from 43,036 to 23,720). A large part of this  decline, especially early in this period, is likely attributable to the closure  of the CNMI’s last remaining garment factories, which employed many  foreign workers. CNMI tax data show that U.S. citizen (combining those  that the CNMI tax office labels as “U.S.” or “CNMI”) employment fell by  less than 1 percent from 2011 to 2012 (10,006 to 9,934), and by almost 9  percent from 2006 to 2012 (10,882 to 9,934).
Because CNMI tax data are not available for 2013, we are unable to  report on the overall level of employment for the year. Data from the  respondents to our 2013 hotel questionnaire show that hourly  employment in the responding hotels rose by 3 percent from 2012 to  2013 (from 1,715 to 1,763). Overall hourly employment at hotels that  responded to both our first survey in 2009 and our most recent survey in  2013 fell by 21 percent over the period from 2007 to 2013 (from 1,590 to  1,252).recent survey but did not respond to our first survey.
section_title: CNMI Average Inflation- Adjusted Earnings of Those Employed Have Fallen Since 2006
paragraphs: Average earnings for those who maintained employment rose from 2006  to 2012, but prices increased by a similar amount. As shown in figure 16,  based on CNMI tax and consumer price data, average inflation-adjusted  earnings rose by 1 percent from 2011 to 2012. This increase resulted  from an increase in average earnings of 3 percent and an increase in  prices of 2 percent. For the period from 2006 to 2012, average inflation- adjusted earnings dropped about 2 percent due to a rise in average  annual earnings of about 29 percent and a 31 percent increase in  prices.
Although CNMI tax data do not allow for a direct comparison of average  and minimum-wage annual earnings or for tracking the earnings of  workers who lost their jobs, the hourly wage of minimum wage workers  increased by more than inflation. The inflation-adjusted earnings of  minimum wage workers who retained their jobs and work hours rose by  about 7 percent from 2011 to 2012 and by about 39 percent for the entire  period from 2006 to 2012.
section_title: Employers and the CNMI Government Supported the 2013 Postponement of the Minimum Wage Increase; Workers Had Mixed Views
paragraphs: CNMI employers we spoke with supported the 2013 deferral of minimum   While participants in our discussion groups stated that  wage increases.businesses in general could not absorb another minimum wage increase,  they in particular cited the effect of the increases on smaller businesses  rather than the effect on hotels. However, employer discussion group  participants also identified minimum wage increases as only one of  multiple factors affecting the CNMI economy. The minimum wage was not  as important a factor for discussion group participants as the potential  loss of the foreign labor force if the conditional worker permit program is  not extended. For hotel business representatives we spoke with, the U.S.  Department of Homeland Security’s continued use of parole to permit  access for Russian and Chinese tourists to the CNMI was a greater  concern than minimum wage increases. Participants asserted that the  CNMI economy is still weak and cited a general uncertainty about future  conditions in the CNMI that has caused some businesses to withhold  investment. Participants also cited the high costs of utilities, imported  goods, and shipping, as well as restrictions on foreign ownership of land,  among other factors in expressing their outlook on the CNMI economy.
According to CNMI government payroll data we reviewed, about 177  government workers in the three branches of government and the  Commonwealth HealthCare Corporation would have been affected by the  postponed 2013 minimum wage increase.not include other autonomous or semi-autonomous agencies of the  government. According to the CNMI Department of Commerce, the CNMI  Governor supported the 2013 postponement of the minimum wage   This figure, however, does  increase. However, the CNMI Commerce Secretary noted that there  could be additional challenges to the CNMI economy from increases in  health insurance costs, which could make absorbing future minimum  wage increases more difficult for the CNMI.
Workers participating in our CNMI discussion groups expressed mixed  views regarding the minimum wage increases. Workers we spoke with  said they were helped by previous minimum wage increases, but some  were concerned about losing jobs and work hours due to future  increases, as they had in the past. Workers we spoke with stated that  prices for staples in the CNMI were high, citing in particular high costs for  electricity and gasoline. Workers we spoke with reported regularly  turning off air conditioning in the CNMI’s tropical climate and foregoing  the use of electric stoves because of the high cost of electricity. There is  minimal public bus transportation in Saipan. In Tinian, some workers at  the Tinian Dynasty (see fig. 17) we spoke with lived in staff housing, and  one saw future minimum wage increases as an opportunity to increase  the amount remitted to family living elsewhere. Workers we spoke with in  both Saipan and Tinian expressed fear that prices would increase along  with the minimum wage, which they said had occurred at the time of  previous increases.
section_title: The 2012 Minimum Wage Increase Increased Median Wage for Hotel Workers; Further Increases Would Affect Wages of Almost All Hotel Workers
paragraphs: From June 2011 to June 2013, the median hourly wage in the CNMI hotel  industry rose from $5.33 to $5.86, a 10 percent increase, according to our  questionnaire responses. During this period, the minimum wage  increased from $5.05 to $5.55, also an increase of 10 percent.
As the minimum wage increases continue, they will affect a growing  percentage of hourly workers in the CNMI’s hotel industry. Based on  questionnaire responses about hotel workers’ wages as of June 2013, at  the current distribution of wages, the future minimum wage increases  would affect the wages of 84 percent of current hourly wage workers  when the minimum wage reaches $6.05 in September 2014, and 94  percent by the time it reaches $7.25 in 2018. By 2018, the extra annual  cost added by minimum wage increases after June 2013 would be  approximately $3,051 per worker (see table 11).
If other costs remain stable, payroll will represent an increasing share of  total operating costs for hotels in the CNMI, due to the minimum wage  increases. We estimate that, for the hotels that responded to our  questionnaire, the minimum wage increases from 2013 through 2018 will  raise average annual payroll costs by approximately $527,823 at the  average hotel of 173 employees. As a result, payroll costs as a  percentage of total operating costs will increase from approximately 26  percent in 2012 to 31 percent in 2018 (with minimum wage increases  representing about 5 percentage points of the 31 percent).
section_title: Hotels Cut Costs and Raised Prices Due to Minimum Wage Increases and Other Factors
paragraphs: Hotels representing the majority of all workers employed by questionnaire  respondents reported in our questionnaire that they had taken cost- cutting actions and raised prices from 2010 to 2013. Hotels representing  nearly all workers employed by questionnaire respondents stated that  they used cost-saving strategies (99 percent) or raised prices (95  percent) and attributed that action to a moderate or large extent to the  minimum wage increases. While hotels representing a smaller proportion  of workers employed by questionnaire respondents introduced labor- saving measures (76 percent), decreased regular hours for hourly  workers (36 percent), or decreased hourly employee benefits (18  percent), all or nearly all hotels attributed those actions to a moderate or  large extent to the minimum wage increases (see table 12).
Though hotels attributed a number of cost-cutting actions to the minimum  wage increases, they also attributed their actions to a number of other  factors. Hotels representing nearly all workers employed by questionnaire  respondents also attributed their cost-cutting actions to a moderate or  large extent to increased utility, material, and transportation costs.  Employers representing 60 percent or more of workers employed by  questionnaire respondents cited other factors, including changes to U.S.  immigration law, as contributing to their actions to a moderate or large  extent (see table 13).
Looking to the future, hotels representing 90 percent or more of workers  employed by questionnaire respondents stated that they planned to take  further actions to introduce labor- or cost-saving strategies and to raise  prices, with nearly all of these hotels attributing that plan to minimum  wage increases (see table 14). Hotels representing smaller than 90  percent of workers employed by questionnaire respondents planned to  reduce operations, delay expansion, lay off hourly employees, reduce  hours, or reduce overtime. However, 100 percent of hotels that planned to  take these actions attributed that plan to minimum wage increases to a  moderate or large extent.
As with past actions, employers attributed their future planned actions to  a moderate or large extent to factors other than minimum wage  increases. All respondent hotels attributed their plans to a moderate or  large extent to other increasing costs. Other factors also contributed to  the plans of hotels representing 75 percent or more of workers employed  by questionnaire respondents to a moderate or large extent (see table  15).
section_title: CNMI Hotel Occupancy and Room Rates Have Increased in Recent Years
paragraphs: Data from the Hotel Association of the Northern Mariana Islands  (HANMI), which, prior to November 2013, covered 12 CNMI hotels, show  that in 2012 and 2013 occupancy rates for its member hotels have  increased over average rates between 2006 and 2011. Occupancy rates  in the January to March peak season topped 90 percent in 2013 (see  table 16).
As occupancy has increased in recent years, room rates have also risen.  After adjusting for inflation, yearly average room rates increased by 11  percent between 2010 and 2013 (see table 17).
According to the Marianas Visitors Authority, CNMI tourism is dependent  on the availability of air service and hotel accommodations. According to  the Marianas Visitors Authority (citing 2013 data), there is at present a  good balance between the number of flight seats and the number of  resort hotel rooms in the CNMI. In 2011 Saipan began receiving twice- weekly direct flights from Beijing, China. According to tourism industry representatives, there is currently no international jet service to Tinian,  making Tinian visitors and residents dependent on “air taxis” that run  several daily flights from Saipan, as well as charter flights (see fig. 18).  There is no ferryboat service between the two islands. Similarly,  according to the Marianas Visitors Authority, the island of Rota receives  only charter flights from Japan at the end of the calendar year.
According to the Marianas Visitors Authority, there are approximately 667  daily hotel rooms in the CNMI that are currently off-line or closed, which  could support an additional 133,400 visitors.that the currently closed Palms (see fig. 19) and Riviera Resort Hotels will  soon re-open. In addition, there are requests for proposals for  development of two tracts of land on Saipan that could, according to the  Authority, add 800 to 1,000 daily rooms, accommodating an additional  160,000 to 200,000 annual visitors.
section_title: Appendix V: GAO Questionnaire
section_title: Appendix VI: Comments from the Government of American Samoa
subsections: section_title: GAO Comments
paragraphs: 1.  The government of American Samoa stated that there is significant  evidence that the 2010 U.S. Census grossly undercounted the  American Samoa population. We have edited the note in the report to  expand on the American Samoa government’s concern about a  population undercount in the census. However, an undercount of the  American Samoa population by the Census would not affect the  employment counts we include in our report. Our employment counts  are not based on Census data but on data from the American Samoa  Office of Taxation and from responses to the questionnaire we  submitted to tuna canning industry employers.  2.  The government of American Samoa stated that it is very concerned  that GAO’s findings are derived from a narrow spectrum of information  sources and, as a result, yield misleading statements and findings not  supported by available data. As noted in the report, U.S. territories are  not included in some federal data collection that is routinely done for  the 50 U.S. states. We have carefully reviewed the available data  from the American Samoa Office of Taxation and have worked with  the office to review and verify its data. As a result of our review, the  office has also reviewed its data for completeness and accuracy. We  believe that the use of these data is appropriate for determining the  changes in employment and earnings in American Samoa over time.  We recognize that different data series can provide different specific  numbers because of their varied methodologies or coverage;  therefore we have reported other data series to provide full disclosure,  and have included a discussion of potential reasons for the  differences. Because we reviewed and discussed the alternate data  sources, and included our analysis of the GAO questionnaire and  interviews with multiple stakeholders in American Samoa, we do not  believe that we are presenting a misleading picture of the impact of  minimum wage increases in American Samoa.
With the exception of the County Business Patterns data, each of the  data sources included in Attachment C of the American Samoa letter  was included in our report’s Appendix I as part of our discussion of the  different data sources and was included in the draft report. County  Business Patterns data have limitations in their coverage for American  Samoa. For example, County Business Patterns data do not include  most government employees. Government employees were  approximately 29 percent of total employment in American Samoa in  2012 according to the data from the American Samoa Office of  Taxation. In addition, the County Business Patterns data are currently  available for only 2008 to 2011 and are not available for 2007 or 2012.  The other series we report are available for 2007 through 2012. The  American Samoa government has used the 2007 Economic Census  to substitute for the missing County Business Patterns data for 2007,  but these data have a different basis. For example, according to  Census Bureau officials, the Economic Census includes FICA and  non-FICA workers, while County Business Patterns data include only  FICA workers. In addition, the 2012 data the American Samoa  government presents assume that there was no change in private  sector employment from 2011 to 2012.  3.  The American Samoa government stated that our report does not  capture the severity of employment decreases since 2007 and the  government presents an estimation of the 2012 unemployment rate by  the American Samoa Department of Commerce stating that the  unemployment rate in 2012 was 18 percent, up from 12 percent in  2011. We have added unemployment rates to the report that were  calculated based on the 2010 decennial census to the report, for  reference. The 2012 unemployment rates calculated by American  Samoa are based on an extrapolation of 2000 and 2010 census data,  and American Samoa Statistical Yearbook data, and therefore do not  include actual data from 2012. Therefore, the American Samoa  government’s 2012 unemployment calculation may not capture  changes in the actual labor force during this period, which would  affect the unemployment rate. For example, in their responses to our  questionnaire, cannery employers reported a 6 percent increase in  hourly employment from 2011 to 2012. Additionally, if some portion of  the unemployed individuals leaves American Samoa, the  unemployment rate would be less than that estimated by the  American Samoa government.  4.  The American Samoa government comments that more emphasis  should be placed on the multiplier effect of percentage changes in  GOP, however small, to employment. Each of the three data series  we present in Appendix I covers employment in all sectors, therefore  any change in employment and wages that occurred as a result of the  2009 cannery closure would also be captured in data we present. We  agree that it is likely that a major closure such as that of the cannery  in 2009 will have larger effects on the economy.   5.  The American Samoa government presents employment data labeled  as from the American Samoa Government Office of Taxation. The  Office of Taxation data presented by the American Samoa  government are from our draft report and are a combination of data  from that office and from our questionnaire of cannery employers. As  a result of data reviews by the American Samoa Office of Taxation  and GAO during the report comment period, we made corrections to  American Samoa employment and wage data for 2007-2009 that  revised these employment data slightly downward for those years in  the final report.  6.  The American Samoa government presents employment data from  the SSA. We prepared these data as part of an analysis of SSA data  undertaken specifically for this report. As Appendix I of our report  notes, the SSA data had data entry errors for 2011 and 2012 that  resulted in implausibly large counts. While we took steps to account  for these errors, we determined that the data from the American  Samoa Office of Taxation were more reliable than SSA data for our  purpose of describing employment and earning trends in those years.  7.  The American Samoa government presents employment data labeled  as being from the U.S. Department of Commerce County Business  Patterns. However, the County Business Patterns data from 2007 are  U.S. Economic Census data, which have a different basis for the  count than the County Business Patterns data. In addition, the 2012  data presented by the American Samoa government assume no  change in private sector employment between 2011 and 2012.  However, there is likely to have been a change in total employment  between those years. For example, in their responses to our  questionnaire, cannery employers reported a 6 percent increase in  hourly employment from 2011 to 2012.
section_title: Appendix VII: Comments from the Government of the CNMI
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: David Gootnick, (202) 512-3149 or gootnickd@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Emil Friberg, Assistant Director;  Ashley Alley; Benjamin Bolitzer; Karen Deans; Jon Fremont; Jill Lacey;  Michael Simon; Vanessa Taylor; and Eddie Uyekawa made key  contributions to this report. Technical assistance was provided by Lynn  Cothern and C. Etana Finkler.