Minimum Wage

In 2007 the new Congress, amid much publicity, passed a law increasing the minimum wage to $7.25 per hour. Initially the law excluded the U.S. territory of American Samoa, but after some controversy it was eventually included. American Samoa had never previously been included in the federal government’s minimum wage laws, so its minimum was much lower than the rest of America’s. Jumping all the way to $7.25 would have resulted in drastic disruptions to the local economy, so after much lobbying from American Samoa’s nonvoting representative to Congress, as well as by local businesses that employ the majority of the island’s work force, Congress decided to phase in the wage increases in order to prevent massive layoffs.

These mandated wage increases were implemented on schedule the first couple years, but since 2010 each scheduled increase has been postponed. In fact, the next increase isn’t expected to happen until 2015, at which time Congress will likely postpone it again.

So why is Congress exempting American Samoa?

Because members of Congress have realized that arbitrarily making it more expensive to employ people leads to fewer people being employed.
A 2011 report by the Government Accountability Office showed that even the incremental minimum wage increases had drastic negative employment consequences for American Samoa, including hiring freezes, hours being reduced, and layoffs. Even an entire tuna cannery, the main industry in American Samoa, was shut down. All of this was caused by higher labor costs.

Political pushes for raising the minimum wage often use terms like “fairness” or “living wage.” But these arguments, as well-intentioned as they may be, disregard the very real consequences of this policy. There’s nothing fair about government policy causing layoffs and hiring freezes. Low-wage workers aren’t benefited when their hours are cut. Quite the opposite, in fact. Policymakers, and the voters who ultimately guide their actions, can’t be content only to have good intentions. We must be cognizant of what our policies actually do. For that is what matters in the end.

Dig deeper:

Blog: The Minimum Wage Debate

Article: American Samoa minimum wage freeze approved by Congress

Report: American Samoa: Employment, Earnings, and Status of Key Industries 

Article: How the Minimum Wage Destroyed 1.4 Million Jobs