‘Let Special Industry Committees set wage hikes’

[I]Editor’s Note: The following is the full text of the letter that CNMI Gov. Benigno R. Fitial, American Samoa Gov. Togiola Tulafono, and American Samoa Delegate Eni Faleomavaega sent to Interior Secretary Ken Salazar, Sen. Daniel K. Inouye, chairman of the Senate Appropriations Committee; Rep. George Miller, chairman of the House Education and Labor Committee; Sen. Edward Kennedy, chairman of the Senate HELP Committee; and Sen. Jeff Bingaman, chairman of the Senate Committee on Energy and Natural Resources.[/I]

Dear Mr. Secretary:

We are writing to request the Administration’s support in re-establishing Special Industry Committees to determine federal minimum wage increases in American Samoa and the Commonwealth of the Northern Mariana Islands until such time as the Government Accountability Office can assess the impact of past and future increases and report back to Congress no later than April 15, 2010, as mandated by the American Recovery and Reinvestment Act.

For your information, P.L. 110-28 mandated an automatic increase of 50 cents per hour effective July 2007 and every year thereafter until 2014 for American Samoa, and 2015 for CNMI. Recognizing that neither CNMI nor American Samoa had the local capacity to provide Congress with the hard statistical data it might need, P.L. 110-28 also mandated the U.S. Department of Labor to undertake a study to determine what impact these increases might have on both economies.

On Jan. 25, 2008, DOL released its findings. The findings show that neither economy can sustain these increases. Also, the DOL reported that “by comparison, if U.S. minimum wages were increased to the level of the 75th percentile of hourly-paid U.S. workers, that the adjusted wage rate would be $16.50 per hour.”

Despite these findings, the Senate HELP Committee and the House Committee on Education rightly stated that they were not pleased with the study undertaken by the DOL and, therefore, would not support deferments or rollbacks. While we understood the Committees’ concerns and acknowledged that there may be disagreements about a report issued by a previous Administration, we did not believe then and do not believe now that either economy should be placed in jeopardy just because the DOL failed to accomplish its mandate.

This is why we worked to request a new study. This year, as a result of these efforts, Senator Daniel K. Inouye, Chairman of the Senate Committee on Appropriations, with the support of Senator Jeff Bingaman, Chairman of the Senate Committee on Energy and Natural Resources, made certain that language was included in the American Recovery and Reinvestment Act directing the GAO to conduct a new study and report back to Congress no later than April 2009, which was to provide us with a window of opportunity, if necessary, to defer the third increase scheduled for July 2009, pending the outcome of the GAO’s findings. Regrettably, in the final conference report, the due date of the GAO report was changed from 2009 to 2010. It is my understanding that the Senate was not responsible for altering the due date of the report.

Certainly providing the GAO with more time to complete its study will yield a report that is more thorough, and we support this outcome. However, given the serious implications this change in date may hold for American Samoa and CNMI, by way of separate letter we are writing to Chairman Miller and Senators Inouye and Bingaman to request their further help and assistance in offering an amendment to the FY09 Omnibus appropriations bill that will reestablish Special Industry Committees until Congress can be provided with the information it needs to make a responsible decision about both economies. To date, it is our understanding that Congress will not defer minimum wage until it has more reliable data.

The irony of this situation is that, on the one hand, Congress is insisting that it cannot defer minimum wage because it has no data. On the other hand, Congress is automatically increasing minimum wage year after year with no data to justify its actions. In fact, no Congressional hearings were held prior to the enactment of P.L. 110-28 about the impact automatic increases might have on the economies of American Samoa or CNMI. After the fact, a field hearing was held, at our request.

Also, prior to enactment of P.L. 110-28, we asked that Congress bring CNMI under American Samoa’s umbrella and work with us to reform Special Industry Committees. After enactment of the Fair Labor Standards Act of 1938, Industry Committees were established to phase low-wage industries in to the minimum statutory wage making American Samoa, as well as all other U.S. Territories, exempt from mainland minimums but bound by minimums determined by Special Industry Committees. At the time, Congress believed that application of mainland minimum wage rates to territorial island industries would “cause serious dislocation in some insular industries and curtail employment opportunities.”

For this reason, beginning in 1956, and in accordance with Sections 5, 6, and 8 of the Fair Labor Standards Act (29 U.S.C. Sections 205, 206, 208), the Wage and Hour Division of the U.S. Department of Labor conducted Special Industry Committees every two years in American Samoa to determine minimum wage increases. While these Industry Committees were phased out in other U.S. Territories due to their more diversified economies, to this day American Samoa is still a single-industry economy and this is why Special Industry Committees continued in American Samoa until enactment of P.L. 110-28 in 2007.

While we agree that there were problems associated with the Special Industry process, reforming the process makes more sense than automatically increasing rates as now mandated by federal law. As any report will show, the economies of American Samoa and CNMI are very different than the economies of the States. For example, more than 80 percent of American Samoa’s private sector economy hinges on two tuna canneries, StarKist and Chicken of the Sea, which employ more than 74 percent of the local workforce. As has been stated before, a decrease in production or departure of one or both of these canneries will devastate the local economy causing widespread lay-offs and insurmountable financial difficulties.

Because of American Samoa’s dependency on these two canneries, American Samoa is concerned about the unintended consequences of P.L. 110-28. Since enactment of P.L. 110-28, StarKist Samoa, which was previously owned by Del Monte, was sold to Dongwon Industries, a South Korean conglomerate which, in response to automatic federal increases in minimum wage, recently announced that it will introduce cost-saving measures in American Samoa by eliminating twenty full-time salaried positions; hourly employee pension benefits; seven paid holidays; paid vacation for hourly employees; and additional activities that benefit hourly workers currently employed at StarKist Samoa. A copy of StarKist’s announcement is attached.

Chicken of the Sea/Samoa Packing has followed suit, announcing on February 13, 2009 that effective March 31, 2009, it will freeze the retirement plan for its employees; vacation pay for hourly production workers will stop effective February 28, 2009; and there will be no more paid holidays for the hourly workers effective February 28, 2009. A copy of this announcement is also included for your information. It is also rumored that Chicken of the Sea is looking to relocate to Thailand, home of its parent company, Thai Union.

Whether or not StarKist and Chicken of the Sea would have made these announcements even if minimum wage had not been increased, we do not know. But, we recognize that American Samoa’s canneries are faced with global problems that are beyond their control, including low wage rates in competitive countries, and rising energy costs due to the remote location of American Samoa. With wage rates for fish cleaners at $0.70 cents and less per hour in competing countries, it is difficult for American Samoa’s canneries to remain competitive with escalating federal minimum wage rates that are currently at about $4.25 per hour.

Also, American Samoa’s distance from the mainland compounds rising energy costs which impact the local canneries. As you may know, American Samoa lies 2,300 miles southwest of Hawaii, covers a land area of 76 square miles, and has a per capita income of about $4,300 per year. Economic growth and development in American Samoa is limited due to scarcity of land, labor and capital. This is why the need for us to save American Samoa’s only private sector industry is a must, despite whatever troubles the tuna industry may have brought on itself.

It is also imperative that we help CNMI. CNMI is reeling from a devastating loss of 35 percent of its revenue over the last two years, as the garment industry has rapidly shut down due to a lack of competitiveness with foreign countries where labor is cheap and abundant. As of the end of January, the CNMI will no longer have any operating garment factories. Out of 34 factories, only seven remained open after the first minimum wage increase, and now all are closed. So, the impact of the scheduled third minimum wage increase will have the greatest effect on the one remaining industry, tourism.

Tourism has been seriously curtailed by Asia’s worsening economic conditions and CNMI suffers from a lack of air service from Japan following the 2005 pull out of Japan Airlines due to its own financial instability amid rising costs of fuel. As a result, tourism is in about a 25-percent decline, and the effect of a third increase in the minimum wage this year will further exacerbate the financial strain on the Commonwealth.

Notwithstanding these problems, CNMI is committed to building a sustainable economy based on tourism and other economic initiatives, and has indicated its support for future increases in the minimum wage as warranted by existing economic conditions. At the same time, costs of power in the CNMI have increased over 100 percent, a scenario that has caused the exodus of many citizens and businesses. As a result of these serious trends and an estimated loss of as many as 25,000 people from its population, the CNMI government now faces the need for a rapid downsizing in the coming months. However, there may not be jobs waiting in the private sector with the minimum wage increase and rising costs of doing business. A copy of an economic forecast and report prepared for CNMI by McPhee and Associates is included for your review.

Given the seriousness of both situations, we are hopeful that the Administration will support efforts to put in place a modified version of Special Industry Committees which will empower the U.S. Secretary of Labor to determine future increases until more data can be collected, especially since workers in American Samoa and CNMI have finally received a long overdue increase of $1 per hour since enactment of P.L. 110-28. But, given the uncertainty as to whether or not the second increase is sustainable over time, we are convinced that further increases in minimum wage must proceed cautiously and be preceded by further study. Also, recognizing that the next scheduled increase due in July 2009 is only five months away, we are compelled to find alternatives to help save American Samoa’s economy from collapse. Because the potential hardships are simply too great to our local communities, we hope that the Administration and Congress will work quickly to help our local governments build a safety net.

We believe this can best be accomplished by adding language to the FY2009 Omnibus bill to reestablish a modified form of Special Industry Committees in American Samoa, and to bring CNMI under this umbrella, so that, under the direction of a new and long-awaited Administration, it would be up to the U.S. Department of Labor, not Congress, to determine future minimum wage increases, given the unique status of our territories.

Historically, as already noted, since 1956, minimum wage rates for American Samoa were always determined by Special Industry Committees administered by the U.S. Department of Labor. And, it was the House Resources Committee and the Senate Committee on Energy and Natural Resources that had primary jurisdiction for all matters pertaining to the Territories, including minimum wage. Only in 2007 was there an historical shift in which the House Committee on Education and Labor, and the Senate HELP Committee, became involved in how minimum wage should be administered in American Samoa and CNMI.

Also, by way of information, American Samoa was not included in the original minimum wage bill put forward by Chairman George Miller. In fact, it was not a Democratic initiative but Republican politics that led to American Samoa’s inclusion in P.L. 110-28. During the markup of the bill, a Republican offered an amendment to apply federal minimum wage standards to American Samoa as a way to embarrass Speaker Pelosi. Republicans went so far as to perpetuate a false story that suggested Speaker Pelosi was exempting American Samoa from minimum wage increases because she was accepting campaign contributions from StarKist’s then parent company, Del Monte, which was one of her hometown companies. To give their story legs, House Republicans wore stickers on the House floor emblazoned with the StarKist logo and the words, “Something’s Fishy.” The Washington Times and other media outlets carried the story. Copies of some of these stories are included for your review.

As you can appreciate, as a result of these distortions, Democrats were left with little choice but to acquiesce to Republican demands to include American Samoa in the minimum wage bill, although the Speaker never at any time accepted campaign contributions from Del Monte and although American Samoa was in full compliance with federal law which established Special Industry Committees to determine wage rates in the territory due to its unique status.

Contrary to the ignorance that was perpetuated during these debates, American Samoa and CNMI, as well as the other U.S. territories, continue to have different relationships with the federal government, than do States. CNMI is under a “covenant” relationship with the U.S., and American Samoa is an “unincorporated” and “unorganized” territory. Given our unique status, which entitles us to be treated differently, we have made a good-faith effort to support the intent of P.L. 110-28, even though the reasons American Samoa was included in the bill remain in question.

Having done our best to support the law’s intent, neither American Samoa nor CNMI is able to move forward with further increases in minimum wage until data can be collected which will determine one way or the other whether or not our economies can sustain further increases. To move forward with further increases without sufficient data to justify this course of action would be to play Russian roulette with the lives of our people, and we are confident that this is not what Congress intended when it passed legislation to increase minimum wage rates in American Samoa and CNMI.

Now faced with a global financial crisis and the near collapse of the American economy, I am asking for immediate relief and the re-establishment of a modified version of Special Industry Committees which would empower the U.S. Secretary of Labor to make further determinations about future increases in American Samoa and CNMI until such time as Congress can gather the information it needs to make an informed decision.

Without the Administration’s support, American Samoa and CNMI could become welfare wardens of the federal government. But, because our people want and deserve better, I am hopeful that the Administration will stand with us by supporting the inclusion of language in the FY2009 Omnibus Appropriations bill which is respectful of the intent of P.L. 110-28 but which also protects our local economies.