Wages. Responses to our American Samoa large-employer questionnaire indicate that the hourly wages of about three-quarters of private sector workers employed by respondents were low enough to be affected by the first $.50 minimum wage increase, in July 2007. From 2007 to 2009, as a result of the first three wage increases, median hourly wages rose by almost $1.50 (44 percent) among tuna canning workers employed by questionnaire respondents, compared with $1.00 (25 percent) among other private sector respondents’ employees. In addition, the 2007 through 2009 wage increases narrowed the wage gap between the lowest and highest paid employees of questionnaire respondents by 37 percent. Based on American Samoa large-employer questionnaire responses about workers’ wages as of June 2009, the minimum wage increases scheduled for 2010 through 2016 would affect the wages of close to 95 percent of those private sector workers by 2016. Employment. Available data show that from 2006 to 2007, the total number of people employed in American Samoa grew by 5.5 percent (from 17,551 to 18,518) and that from 2007 to 2008, employment growth slowed to 3 percent (from 18,518 to 19,060). Questionnaire responses show that employment of workers employed by respondents dropped about 12 percent from 2008 to 2009. Although data for all of 2009 are not yet available, employment in American Samoa dropped further with the loss of 2,000 jobs when the cannery closed in September 2009. Public and private sector officials expressed concern about the significant impact on employment if future minimum wage increases led the remaining cannery to close or made it more difficult to attract new industries to the territory. Employer actions. American Samoa employers responding to our questionnaire reported having taken cost-cutting actions, including freezing hiring and reducing workers’ benefits, since the minimum wage increases began. Employers also reported plans to reduce costs by the end of 2010, including laying off workers. Employers representing 84 percent of private sector workers employed by respondents, including the cannery that has now closed, said they planned to close or relocate. More employers attributed their actions largely to the minimum wage increases than attributed their actions to other factors, such as transportation and shipping costs. Tuna cannery officials said that minimum wage increases were a significant contributing factor in the closure of one cannery, in addition to other factors. Our analysis shows that outsourcing cleaning operations from low labor-cost areas, such as Thailand, provides opportunities to significantly reduce cannery operating costs. Inflation-adjusted earnings. Earnings data from SSA and consumer price data show that from 2006 to 2008, median inflation-adjusted earnings dropped by about 6 percent, resulting from a rise in median annual earnings of about 8 percent while local prices rose by about 15 percent. Although earnings data do not allow for a direct comparison of median and minimum-wage annual earnings or for tracking the earnings of workers who lost their jobs, we estimate that inflation-adjusted earnings of full-time minimum wage workers who retained their jobs and full benefits rose by about 14 percent from 2006 to 2008. Worker views. Workers participating in discussion groups said that their support for the minimum wage increases had dwindled because of the closure of one cannery and uncertainty about the future of the remaining cannery, as well as concern about job security and reductions in benefits related to the wage increases. Workers also expressed an obligation to support extended families and the broader community negatively affected by the minimum wage increases. In addition, workers expressed a belief that wages had increased less than the cost of living. Cannery workers we spoke with generally opposed future minimum wage increases, but the attitudes of other community members varied. See table 1 for key findings and appendixes III and V for detailed findings and tables on American Samoa. Wages. About a third of private sector workers employed by CNMI questionnaire respondents were directly affected by the first minimum wage increase, in July 2007, according to large-employer questionnaire responses. From 2007 through 2009, as a result of the first three wage increases, the median wage rose by about 19 percent in the tourism industry compared with about 18 percent for the rest of the private sector, for workers employed by questionnaire respondents. The gap between the lowest and highest paid workers narrowed by 9 percent. Based on questionnaire responses about workers’ wages as of June 2009, the future minimum wage increases would affect the wages of 82 percent of those private sector workers by 2015. Employment. From 2006 through 2008, the total number of people employed fell by about 27 percent, according to CNMI government tax data, largely reflecting the garment factories’ closure. Small employers and other private sector officials expressed mixed views about the future minimum wage increases, including concern that they would make it more difficult to attract new industries to the CNMI; however, many expressed greater concerns about changes to immigration law. Public sector officials said CNMI government employees will be more directly affected by future increases, increasing budget pressures. Employer actions. CNMI employers responding to our questionnaire reported having taken cost-cutting actions, such as freezing hiring, since the minimum wage increases began. Employers also reported planning to take such actions by the end of 2010, and some attributed their planned actions largely to the minimum wage increases. Employers also noted other factors, such as changes to immigration law and increased shipping and maintenance costs, that contributed to their actions. Based on an analysis of responses from CNMI employers in the hotel industry, we found that raising room rates to cover higher wage costs may cause a 2.6 to 13.7 percent decline in visits to the CNMI. Inflation-adjusted earnings. CNMI government tax data and consumer price data show that, from 2006 to 2008, average inflation-adjusted earnings dropped by about 6 percent, resulting from a rise in average annual earnings of about 12 percent while local prices rose by about 19 percent. Although earnings data do not allow for a direct comparison of average and minimum wage annual earnings or for tracking the earnings of workers who lost their jobs, we estimate that inflation-adjusted earnings for CNMI minimum wage workers who retained their jobs and full hours rose by about 12 percent from 2006 to 2008. Worker views. Workers participating in our discussion groups generally expressed support for the minimum wage increases and cited other factors affecting living standards. Participants observed that although the wage increases had led some employers to reduce benefits for foreign workers, the wage increases had benefited local workers. In addition, participants expressed concern about the implementation of U.S. immigration law. See table 2 for key findings and appendixes IV and VI for detailed findings and tables on the CNMI. We provided a draft of this report to officials in DOC, DOI, DOL, SSA, and in the governments of American Samoa and the CNMI for review and comment. We received written comments from DOI, the American Samoa government, and the CNMI government, which are reprinted in appendixes VIII, IX, and X, respectively. We also received technical comments from DOL and DOC, which we incorporated as appropriate. SSA had no comments. We shared excerpts of the draft with several private sector entities and experts and incorporated their comments as appropriate. Following are summaries of the written comments from DOI, the American Samoa government, and the CNMI government, with our responses. Department of the Interior. In its written comments, DOI agreed with our findings and noted that the report contained useful information on American Samoa and the CNMI. However, DOI commented that the report included insufficient commentary on the future impact of minimum wage increases in American Samoa and the CNMI. We note that information on the potential impact of future minimum wage increases appears in the report’s discussions of employment, employer actions, and worker views for both American Samoa and the CNMI. American Samoa. In its written comments, the American Samoa government generally agreed with our findings. In addition, the comments stated that the report findings lead to the conclusion that without a change to the existing incremental minimum wage increases, American Samoa will face very serious economic difficulties. The comments further stated that the economy was losing jobs more quickly than expected and that with the closure of one cannery and continuing significant job losses in the private sector, government revenues and funding available for government services and employment will decrease. American Samoa’s comments also noted that increases in shipping costs due to decreased tuna exports will likely further increase the cost of imported goods and the overall cost of living. Appendix IX provides our more detailed evaluation of the American Samoa government’s letter. CNMI. In its written comments, the CNMI government agreed with some of our findings but raised concerns about several aspects of our report methodology and analysis. Specifically, the CNMI government expressed concerns about our large-employer questionnaire’s coverage, noting that the questionnaire covers employers with 50 or more employees but excludes smaller employers. In response, we note that because key federal sources of data on the U.S. labor market do not cover the insular areas, we collected our own data on employers through the questionnaire, discussion groups, and other methods such as interviews. Our report appropriately states the limitations of the questionnaire data and repeatedly observes that the data may not be representative of all CNMI workers and employers. Moreover, our report summarizes the views of small employers based on the method that we determined would be most effective and efficient in collecting information from them—through discussion groups targeting small employers (see app. IV, employment section). The CNMI government also expressed concern about the questionnaire’s response rate, given that 33 of 61 employers responded to our questionnaire. While we spent considerable effort to obtain as high a response rate as possible, employers were not required to respond, and the response rate reflects the individual decisions of CNMI employers who received the questionnaire about whether to provide information regarding the extent to which minimum wage increases had affected their operations.