– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —
As President Obama considers whether to fulfill his campaign promise to raise the minimum wage from $7.25 to $9.50 per hour by 2011, there’s no better illustration of the consequences of well-intentioned policy-making than recent events in American Samoa, a United States territory in the South Pacific that falls within the purview of Congress.
Chicken of the Sea, the tuna company, announced this month that it will close its canning plant in American Samoa in September. The culprit is 2007 legislation in Washington that gradually increased the islands’ minimum wage until it reaches $7.25 an hour in July 2009, almost double the 2007 levels.
In 2007, the hourly minimum wage in American Samoa for fish canning and processing was $3.76 and the minimum wage for government employees was $3.41. Shipping had the highest minimum wage, at $4.59. Garment manufacturers got the lowest, at $3.18 an hour. A $7.25 wage is a substantial increase for most residents.
Chicken of the Sea will lay off 2,041 employees—12 percent of total employment, almost half of all cannery workers. And the 2,700 workers at StarKist, the other American Samoa tuna canning company and Chicken of the Sea’s rival, are probably concerned that their jobs are the next to go.
American Samoa’s loss is Georgia’s gain. Chicken of the Sea will move to Lyons, Georgia, (2007 population 4,480) employing 200 people in a new $20 million plant on a more capital-intensive production line.
In January 2007 the legislation originally did not include American Samoa, perhaps because Del Monte, at the time the parent company of StarKist, was headquartered in Speaker Nancy Pelosi’s district.
Until then, the Labor Department had set wage rates in American Samoa every two years, following an extensive study on economic conditions on the island. But before final passage, Congress included American Samoa.
Back in 2007 American Samoa Governor Togiola Tulafono worried that increasing the minimum wage “would kill the economy” and Congressional Samoan Delegate Eni F.H. Faleomavaega forecast that it would devastate the local tuna industry.
They knew that industries would go elsewhere if they have to pay $7.25 an hour.
They were right. American Samoa will lose not only the 2,041 jobs at the Chicken of the Sea canning plant, but also secondary jobs from the ripple effect of loss of income—stores and eateries that cater to cannery workers, shops that mend fishing nets, shipyards, and buses that transport workers.
In a telephone conversation this week, Representative Vaito’a Hans A. Langkilde of the Ma’oputasi District #10, representing the villages of Leloaloa, Satala and Atu’u, described the prospective devastation of the community. His district is home to both StarKist and Chicken of the Sea.
Mr. Lankilde told me, “Over the past 50 years the industry provided massive job opportunities for unskilled labor. The 2007 law that increased the minimum wage was the beginning of the end for the tuna industry and the cause of massive job losses for our already fragile economy. The only way to resolve the trend towards total economic disaster is for Congress at its soonest opportunity to reverse its position.”
With the recent laying of fiber-optic cable linking American Samoa to the United States, Samoans could get jobs in call centers. Yet the higher minimum wage could discourage firms.
Raising the minimum wage to $9.50 an hour would drive even more jobs away from American Samoa. In the United States it would have the effect of shifting jobs from low-skill to high-skill workers, raising unemployment among those who are least equipped to handle it.
Rather than having to accept direction from a government thousands of miles away where they have no voting representation, residents of American Samoa should be given the power to decide on their own minimum wage. Congress should leave further minimum wage increases to individual states to choose as they see fit, because wage levels and the cost of living vary substantially between states such as Mississippi and New York.
The closure of the Chicken of the Sea cannery in American Samoa shows us that higher minimum wages cause low-skill workers to lose jobs. What’s true for American Samoa holds equally true for the United States.
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In reply to May 15th, 2009 4:49 pm GMT - Posted by Russ
“I think both side of this argument are correct. Businesses have to compete, and people have to live. There are two sides to every story and the truth lies somewhere in-between.
The pains of globalization are great. Business can’t continue to use third world and developing nations labor rates as leverage, nor can labor demand high wages or they will drive away business. Labor unions in their current incarnations would destroy business. The pain will continue until the playing field becomes level.”
http://www.dol.gov/esa/minwage/americanS amoa/ASminwagePoster.pdf
What high wages? Labor unions were never allowed to set foot in American Samoa.
A job held doesn’t necessarily reflect real skills since necessity will always take precedence over choice in the real world.
I see the author and the replies of some as a symptom of a disease that has nothing to do with minimum wage arguments: Generalization based on Prejudice. I mean, what holds true for Samoa holds true for the United States, right?
I don’t get it why is it such a game to bash a whole people online. Who is Mrs. Roth trying to get a reaction from?
As a reply to dale, post dated May 16th, 2009,
“I bet sometime in her life she has worked for minimum wage. So now we should fault her for moving up and bettering herself? I remember when people in American used to want to improve themselves, now they just wait for the government to “improve” their lives. And yes, i have worked for minimium wage, when I had minimum wage type skills. I guess I am evil to because I paid my way through college by working three jobs and put myself in a situation where I can make a lot better salary. Oh how evil I am. If your plan is for the government to take care of every aspect of your life, you have no plan.”
Not wishing to put you down but here is my take on what you said:
The people in American Samoa DON’T have the opportunity and luxury to hold 3 jobs because the job market there is highly limited. You had the chance to hold 3 minimum wage jobs because you were in an area where you could, there were that many jobs available to you.
What you say is to those people on an archipelago in the middle of the Pacific is to get a job, get skills, earn more - when the social reality is that you can’t get one job because THERE AREN’T ANY, let alone three. DOH!
To give you an idea, we’re talking about a bunch of islands many nautical miles away from the mainland USA, inhabited by about 60,000 people and only one community college. To commute many people take a boat. If the hurricane season allows.
Again, I’m not trying to put you down but how you are saying what you are saying is highly unrealistic. The fact that the author may or may have not taken a minimum wage job sometime in the distant past is irrelevant since it’s obvious she hasn’t gone through the same situation people in American Samoa are going through today. What gets me is the absolutely distasteful way in which she has twisted the words and the facts to outright lies.
It doesn’t take a genius to do a little search online and come across with the real facts, derived from the same people she used as sources for her “calumn”.
There is no English teacher that wouldn’t flunk her due to her poor skills in quoting her sources and lying to her readers.
It seems so simple to me. Birth control. Planned families. Supply and demand, applied to labor. Don’t have more kids than there will be good jobs for. We’d all like to earn a lot of money, and I’d love to see human beings honored with skilled jobs in a more automated world, rather than doing what a stupid, simple robot will be doing in a decade anyway, but without reproductive continence, this means some people don’t get jobs.
Businesses are in business to make money, not be civic minded, not pay a “living-wage”, not be green, not give people jobs, etc. No one is entitled to employment, we earn it every day that we show up and work hard.
I have a degree in engineering and I am paid well. I suggest all of the whiners out there shut-up and get a degree in a field that earns a decent living.
A maid should not be paid what an engineer makes. I’ve done both.
Not surprising that the first comment is from someone bashing corporations for wanting to be successful. A corporation can be likened to a living creature, first and foremost it needs to be concerned about its own survival. A wolf caught in trap, will gnaw its leg off to survive, so must corporations be willing to gnaw off their own leg if caught in a government trap. A three legged wolf is not a healthy animal, but its chances of surviving are better than if it remains in place waiting for the hunter. Lunacy is waiting in place thinking the hunter will bring it table scraps. If you are trying to raise a family on minimum wages then you are allocating yourself to position of the later wolf hoping for table scraps. I have never worked a minimum wage job. I chose to take an Electronics Shop Elective in my freshman and sophomore years of High School. At the age of 16 I started working part time after school and full time in the summer as an electronics technician. While my friends made $1.65 selling movie tickets I was making $8.25 an hour.
The stupidity of thinking that raising minimum wages will some how miraculously improve a poor persons life is in complete denial that minimum wage dictates the cost of living. Couple of reasons that professional politicians keep driving the minimum wage upwards are:
1) it raises tax revenue by moving people into higher tax brackets
2) Most unions negotiate their contracts based on the cost of living. Union members make more money, their dues go up, the Union bosses who finance Democrat candidates and some Republican candidates give themselves nice big pay raises.
In the meantime small non-unionized non-subsides companies fail.
I hear from republicans that people need to be “Responsible” for their actions and people need to be more civic minded towards their friends and neighbors in this tough economic time. I absolutely agree, but why do I not hear the same GOP demanding Business(who are only made up of American Citizens) be more civic minded towards the country in which they are able to make the most amount of money in and at the same time, the owners of these businesses enjoy more personal freedoms in America than any other country in the world. Where is the loyalty to country? Where is the loyalty to fellow Americans?
A minimum wage was introduced because Capital(businesses) have always, always tried to pay the least amount possible for all wages and services while trying to charge the most for products and services to maximize profits. Simply put they (ALL BUSINESSES) wish to lower overhead(Cost of doing business) and raise prices as high as the market will bare. Sound business strategy and to this end, Capital(business) will always, always try and use Labor(Poor and Middle Class) and squeeze as much productivity as they can while giving as little as possible back. Why do you think so many jobs were sent overseas? It’s good business for Capital, who don’t care who makes their products as long as they are made as cheaply as possible- notice the prices never fell, even though these companies were saving money on labor, the saving never came to the consumer because Capital pocketed the profits.
The cannery could have been built in Somoa and still be run for less overhead with the higher minimum wage. 2000 x 3.5 = 7000$ an hour; the new factory would employ 200 so 200 x 7.55 = 1450$ an hour. SAVING almost $5500 dollars an hour!! Where is the sense of Civic responsibility! Somoas have been working for this “Business” for decades and depend on it. The “Business” could have saved money by building the new factory next to the old, but they could save even more on shipping costs by moving the Cannery “Business” to Georgia. The move has absolutely nothing to do with “Minimum Wage” and every thing to do with making as much money as possible while paying as little as possible back to the people who do all the work.
Posted by joe
Ms Diana Furchtgott-Roth, take a year away from your cushy six-figure job and live, I mean live with those minimum wages. I bet you couldn’t make it a week. . .
I bet sometime in her life she has worked for minimum wage. So now we should fault her for moving up and bettering herself? I remember when people in American used to want to improve themselves, now they just wait for the government to “improve” their lives. And yes, i have worked for minimium wage, when I had minimum wage type skills. I guess I am evil to because I paid my way through college by working three jobs and put myself in a situation where I can make a lot better salary. Oh how evil I am. If your plan is for the government to take care of every aspect of your life, you have no plan.
Do people know that the minimum wage was started to keep minorities out of the work place. Low skilled workers the ex-slave had the ability to under cut the wages of the white folks. The white power people knew if you had to pay a minimum wage above the average black mans wage companies would higher the more skilled white workers. Without the price advantage blacks became much less of an option to companies.
Boortz had a great thing on the back of his book. Middle class people cannot afford a luxury boat on a middle class wage. Solution dont buy a boat until you make enough money. For poor people, dont have children until you can afford them! If you are earning minimum wage you have not earned the right to raise a family yet. If you cant afford it dont reach into others pockets to have what you cannot afford.
As the U.S. ramped up production for war goods and equipment the federal government did some unusual things in 1941. Military contractors were required to pay wages that were three times or more than the prevailing wage. There was rationing and some products such as automobiles could not be purchased at all. The government also put in place wage and price controls. The net effect was workers had more income than they could spend. The American worker did two things with this extra income. They bought war bonds and saved.
War bonds accounted for more revenue for the war than taxes or capital raised on Wall Street. Most people thought that when the war was over that the economy would go back to the way it was through most of the 1930s. That didn’t happen. The demand for autos and other durable goods provided the incentive for manufacturing to produce peace time goods right when the demand for military hardware plummeting. Not only was all that money in savings burning a hole in the pockets of some, it was also the source of capital required by business for short term borrowing and capital investment.
High wages built a middle class in this nation out of the ashes of war. Now far be it for me to suggest that what we need is another war. On the contrary we need to employ similar if not the same tactics so as to achieve a high savings rate in this nation. We now rely on foreign depositors for this essential component of capitalism.
Next we must begin a drastic reduction in consuming oil and other fossil fuels that we import. We are no longer an oil exporter like we were in the 1930s. This type of dependency puts inflationary pressures on the dollar and drags us into the affairs of oil producers.
Thirdly, if we are to raise wages we should do so to move the work force into areas where they are needed the most. I would suggest geothermal energy plants, solar power cells, wind turbines, power grid upgrading and refurbishing people’s homes and business’ to generate power off the grid. Conservation maesures should also be developed.
Fourth, we need to develop rail and other forms of public transportation. This could be used to connect people through corridors that until now could only rely on air or highway travel. Both of which are very inefficient in the use of fossil fuels. Conservation baby.
And finally we must take a hard look at how we produce food. Our health care in this country is twice as expensive as other industrialized nations. We do not fair very well in life expectancy, morbidity and infant mortality as other nations who spend less. Perhaps it is not just that their health care system is so much better but that the foods they eat offer far better nutrition. This might well be the reason why so many nations have a healthier population than our own.
If we are going to print and borrow gazillions of dollars, let’s spend it on something that will pay dividends in the future for generations to come. It will take that long to pay back that debt. In the bargain we will clean the planet up somewhat. We will probably rebuild the middle class and just maybe become an independent nation once again.
Bismarck in a can for you!
If you had said, capitalism’s too big to keep failing to pay workers enough to live, as well as too good in theory to keep destroying defenseless nations in practice - I might have agreed.
If you had said, the abysmal cesspit of what passes for capitalism in Modern America ought to be judged by the results of its concerted action instead of by the flimsiness of its excuses, I might have recommended you for a raise.
If you had said, sooner of later the corporate rapists of the sea are going to run out of ports of call to infest as well as tuna to extinguish, I’d have said, mind your language, but you go, Girl.
If you’d mentioned that Samoans whom God preserve etc. are very likely to want to get even with and possibly render extinct the corporate fish-heads responsible this escapade, I would defend to the death your right to say so.
But clearly, Milady, that’s not what you did.
You began by making excuses for the cavalier operations of an obviously fishy corporation in a faraway tuna republic. Then you went right on making a meal out of the same old excuses for a whole slew of other rather raw-tin corporations in this Great American kettle of fish, over paragraph after tendentious paragraph. The upshot appears to be that no excuse is too fetid for corporate managers to want to trot it out, rather than pay the people who slaved to make them rich, whatever their line of trade - one sordid little example of rampant feudalism in Samoa serving as the foundation of this whole card-house argument.
Its chief ingredient being a load of chowder long past its shelf life, the above article represents a recipe for disaster, gurgling under its screw-on cap one dreadful case of journalistic botulism. Hopefully it never gets into the hands of terrorists.
Google “chicken of the sea legal” for a lengthy list of reasons why this feudal corporation should never be taken as a shining example of anything - paying their workers decent wages never having been among their virtues, if any.
Ask yourself how truthful and impartial can possibly be a spokesperson for any corporation can be, whose very name begins with elementary deception.
And please ask yourself this before citing them or any of those in bed with them as authorities on the economics of human resource.
Minimum wage or no, that’s the sort of elementary diligence any reader is entitled to expect. Those who can’t provide their readers with it shouldn’t be tossing around red herrings. There’s a lesson for the fishy chook in there too.
Let’s see…for the last half of the 20th century the peoples in American Samoa (and the rest of the Samoas too) had to deal with overbearing military presence of all kinds.
Their ancestral homes have been the playground of the superpowers: They’ve had to put up with nuclear and chemical weapons testing and have been displaced for generations to come all throughout the Pacific.
American Samoa is full of American Citizens who don’t have the right to vote in national elections because they’re unincorporated and yet they provide cannon fodder for the american military as their young see no other choice left to them. At least they should be provided with the means to make a decent living at home in exchange. Anybody who has lived in remote regions of the country, like some Alaskan small town, knows the costs of importing everything because, guess what, there is very limited production of basic necessity items and the ones available are expensive.
While the mentality of the likes of Mrs. Roth continues to determine what Samoans must earn, how they must live, who they must work for, nothing will ever change.
The Samoans and their representatives have bent over backwards over the years trying to please the companies that employ them and the foreign fishing companies that supply them but obviously it’s not enough. They must keep getting screwed over and over again. The situation of the Samoans is not unlike the situation of Native American Indians in the mainland in many respects, including being exposed to nuclear testing radiation and having to put up with nuclear waste garbage.
“I have read many comments here I am struck by the lack of logic and reason. Many here lack any understanding of business and economics. It is all about emotion and feeling. “Oh, these greedy companies! They don’t want to pay anyone!” A business is not a social service. They are in it for profit because the shareholders demand that a company be profitable in order to justify its investing in that company. A company is there only to increase shareholder value. That is business 101, folks.”
Your arguments support the need for government to regulate business so that they do not indulge in speculative frenzies that bankrupt the nation. Neither do the American people exist to provide slaves to finance capital.
I think both side of this argument are correct. Businesses have to compete, and people have to live. There are two sides to every story and the truth lies somewhere in-between.
The pains of globalization are great. Business can’t continue to use third world and developing nations labor rates as leverage, nor can labor demand high wages or they will drive away business. Labor unions in their current incarnations would destroy business. The pain will continue until the playing field becomes level.
Looks like more and more of our food will be coming from China.
What is the thinking re elimination of minimum wage?
Good 1 Dan! You are right on the money!
If you don’t want to sacrifice to enhance your hireability.. then don’t whine about what you get!!!!
I tend to agree with a previous comment. The wage hike is a government scam because it’s only the government that benefits from the hike (more taxes from a higher wage!)
Ok! So they got a bump in their hourly wage. What the hell do you think every business that pays minimum wage workers going to do to compensate for the increase in wages and taxes (remember, businesses have to match Social Security Taxes withdrawn from wages,higher wages - - higher taxes) associated with the hike???? INCREASE THE PRICES OF ITEMS SOLD. Now that bump is absorbed by those higher prices, however the Government still gets their higher taxes regardless! Truly a scam!
I’m French, and here the minimum wage is 8.87 € by hour, which makes for 12$.
And it doesn’t seem too much for me. In fact, a lot of people are in favor of raising it. I did economic specialisation to have the equivalent of your A-Level (baccaulérat) and I’m currently at Sciences Po Paris: I am definetly able to talk about these issues since I am studying them, and a lot of the comments I heard are unfounded.
In france, according to the national radio, the sum of all the benefits are shared like this:
about 50% for the shareowners, 43% redistributed in the business company, 7% to the employees.
See? In fact, if the company you’re working for was paying you more, it could afford it… and it would be better for your economy in fact: since low wages cannot enable you to save a lot of money, you end up consuming more than rich people (Keynes, money is lost by rich people). It is not the investment the basis of the economy but the consumption, if people were buying more companies would make more profit: to enable growth then, your government should decide to focus on the people rather than a few rich people who tend to pay fewer taxes, priviledging the exportations.
Guess the thought of actually EARNING a living wage never crossed anyone’s minds. Desire a higher wage, aquire a valuable skill. Of course, it is probably much easier to whine than apply oneself.