A. Samoa firm takes drastic steps to cope

A tuna cannery in American Samoa has announced drastic cost-cutting measures to cope with minimum wage hikes.

StarKist Seafood, one of the two major canneries in American Samoa, said that initial measures are being taken to eliminate all discretionary overhead, wage, and benefits. Changes are also being applied to operations and manufacturing.

Under the company’s new policy, all vacation and holiday pay will be calculated at the 2006 wage rate. Salary overtime policy will be revised and limited to lower job grades only. All night transportation and bus subsidy will also be eliminated.

Simultaneously, StarKist also proposed a new state tax structure which, the company said, reflects the tax scale already provided to others doing business in American Samoa, as well as the deteriorating economy.

The company added, however, that the proposed tax agreement does not guarantee the cannery will continue operations and sustain employment at current levels.

StarKist said that under current conditions, the company can only agree to a required tonnage of 238 tons per day and 1,485 employees. This is a reduction from the 450 tons per day and 2,520 employees provided in the expiring agreement between StarKist and the American Samoa government.

StarKist added that it cannot agree to any further capital investments as part of the tax structure.

“In proposing this local tax structure and implementing the other cost controlling measures, our goal is to minimize disruption in hope that the Congress will act quickly and reverse the dangerous course of the island’s economy. However, should the current trajectory continue, we anticipate additional measures will become necessary,” StarKist said.

StarKist’s response to the minimum wage hike mirrors actions taken by local employers after the first 50-cent increase was implemented in July 2007. Both the CNMI and American Samoa governments are lobbying Congress to postpone the second increase set for May 25, 2008.

In a letter to U.S. senators, Gov. Benigno R. Fitial and American Samoa Rep. Eni Faleomavaega outlined their concerns about further minimum wage hikes.

“Simply put, the fragile private sectors of American Samoa and the Commonwealth of the Northern Mariana Islands cannot support additional costs when we are already in economic decline,” they said.

In the CNMI, they noted, the local government is reeling from a loss of 35 percent of its revenue over the last two years, as garment factories have shut down and moved on to cheaper locations. Out of 34 factories, only seven remain and most will close after the next minimum wage increase.

The decline of the garment industry is compounded by a struggling tourism industry, exorbitant power costs that have caused the exodus of many citizens and businesses, and massive job loss from government downsizing.

In American Samoa, further escalations of the minimum wage could the loss of its only industry, as tuna cannery operations will move to foreign jurisdictions where labor costs less. Presently, more than 80 percent of the private sector economy is dependent on two canneries, which employ more than 74 percent of the workforce.

With the loss of the canneries, American Samoa expects to lose substantial shipping schedules. This, in turn, will likely result in higher costs of goods for all residents on the islands.