The 2007 increase in the minimum wage was a modest boost for America's low-wage labor force, but it's making a far bigger splash in the Pacific Ocean, on two remote outposts of the American empire.
The legislation that increased the federal minimum wage to $7.25 over two years, after about a decade of stagnation at $5.15, had a major ripple effect in American Samoa and the Northern Mariana Islands,which were put on a path to reach parity with the wage floor for regular US workers. But the promise of higher living standards has been tempered by the threat of industry backlash.
According to a new Government Accountability Office study of a sample of private sector workers, the vast majority of whom have seen their wages rise as a result of the new wage laws, employers have responded to mandated wage increases by cutting their workforces and threatening to pull out of the islands altogether. Once again, workers are at the mercy of companies that prefer killing jobs to the "burden" of paying a living wage, but they face even greater constraints than their counterparts on the mainland.
The labor history of these semi-colonial atolls intersects with the often-forgotten history of America's expansion in the Pacific: American Samoa, a collection of volcanic islands southwest of Hawaii, was taken over by the U.S. around the turn of the 20th century as part of an agreement with Britain and Germany. The Commonwealth of the Northern Mariana Islands, north of Guam, was taken over from Japanese rule after World War II. Both territories are plagued by minimal labor regulation, poverty and routine exploitation.
The Northern Mariana Islands, with a huge foreign worker population, have become notorious for subjecting guest workers from China and other Asian countries to fraud, wage theft, sexual abuse, even forced abortion. A few years ago, Jack Abramoff worked with industry and lawmakers to kill efforts to toughen labor standards on the islands. The lobbyist extraordinaire shamelessly lavished key Republicans with Saipan vacation junkets, which offered charming coastal vistas just a stone's throw away from nightmarish workers barracks and a booming red light district.
American Samoa was recently embroiled in a slavery scandal involving Vietnamese workers held captive in squalid conditions at a Korean-owned garment sweatshop.
But workers face broader structural obstacles as well. Prior to the 2007 wage law in American Samoa, special “industry committees” established by the Labor Department would determine the minimum local pay, which revolves around the tuna industry. The Washington Post reported in 2007 that tuna canneries employed about 40 percent of the local population and paid just $3.60 per hour on average.
The economy of the Mariana Islands has been tied to tourism and garment factories. But in recent years, even with the exemptions from federal labor laws, competition under the global free-trade regime has devastated apparel exports, threatening to undercut the pending wage growth.
The 2007 minimum wage legislation set a schedule of incremental wage increases to reach the $7.25 rate by about 2014. Conservatives predictably blasted the move as a job killer. Seizing on an opportunity to attack wage protections in general, former labor official and Hudson Institute fellow Diana Furchtgott-Roth argued in a New York Sun column that “higher minimum wages are protecting some workers out of a job and into economic catastrophe” and “What makes no sense for American Samoa makes no sense for the rest of us either.”
The Samoan delegate to Washington, Eni F.H. Faleomavaega, also reflected the establishment position, contending, “The truth is the global tuna industry is so competitive that it is no longer possible for the federal government to demand mainland minimum wage rates for American Samoa without causing the collapse of our economy and making us welfare wards of the federal government.”
Three years on, the GAO investigation suggests that employers have indeed responded negatively, though the public perception and ultimate impact of the wage hikes is complex and evolving. In American Samoa, according to the report:
Many employers reported having taken cost-cutting actions, such as freezing hiring and cutting worker benefits, since the increases began. Employers also reported planning actions such as leaving American Samoa or closing by the end of 2010. More employers attributed their actions to the minimum wage increases than to other factors... In discussion groups, workers generally said that their support for the wage increases had dwindled because of concerns about issues such as the cannery closure, job insecurity, and loss of benefits.
In the Marianas, employers reported similar concerns about business suffering from the wage mandates and said they considered freezing hiring and cutting labor costs. But the workers interviewed by GAO expressed a sense that they deserved a higher wages and greater economic security:
“Minimum wage is way overdue. We can’t deny raises. People come in and want a job and it is hard to deny them that.”
“Coming from someone [who] has a home here, is a local resident, it’s definitely more positive. The wages are good for my family.”
On the other hand, employers show no qualms with squeezing the most vulnerable workers to protect their bottom line. In the Marianas, foreign workers could be especially marginalized, since companies are allowed to skim their paychecks for food and lodging, with monthly deductions of up to $100. GAO reports that “in response to minimum wage increases, some employers started to make these deductions from foreign workers’ paychecks,” potentially leading to a significant net decrease in earnings.
Still, while some employers point to minimum wage laws to justify the degradation of their workers, GAO noted that wages had risen significantly for “full-time minimum wage workers who retained their jobs and full benefits.” Meanwhile the income gap narrowed between the lowest and highest paid workers in the survey.
At the crossroads of globalization, migration, and an anemic labor regulatory system, a higher minimum wage alone clearly won't go far enough to protect workers from exploitative, heavily concentrated industries. Providing an equitable labor environment for these island communities requires not just labor regulation, but balanced development policies, political enfranchisement, and a comprehensive social safety net.
Nonetheless, the extension of a federal entitlement like the minimum wage could inspire grassroots advocacy and regulatory actions to safeguard low-wage workers. Trapped in a neocolonial no man's land, the workers of American Samoa and the Marianas can't look to a single act of Congress to resolve their struggle, but with a firmer wage floor, they are today just a little less stranded.
Cross-posted from Working In These Times