- The Washington Times - Tuesday, April 1, 2014

The minimum wage hike that Congress imposed on two U.S. territories in 2007 has harmed their economies, according to a government audit released this week that shows more money for workers is more than canceled out by inflation and job losses.

The economic fallout has been so severe that the governors of both islands are urging lawmakers in Washington, who are considering a nationwide minimum wage hike, to forgo further increases in their territories.

Congress acted seven years ago in the wake of the Jack Abramoff lobbying scandal, which cast an unfavorable light on working conditions in the Commonwealth of the Northern Mariana Islands. Under political pressure, Democrats also included American Samoa in the wage hike, which was designed to gradually raise the territories’ rates until they reached parity with the states.

Three years later, with both territories’ economies flailing, Congress halted the hikes for American Samoa and delayed them for the Northern Mariana Islands.

According to a Government Accountability Office report this week, the economic situation remains bleak for Samoans and is only slightly better for the Mariana Islands.

Mr. Abramoff, who lobbied against increasing the minimum wage in the Northern Marianas, told The Washington Times on Tuesday that the GAO audit bears out his predictions.

“Our main argument was that, if they did this to the CNMI, the economy would tank. This is exactly what happened. We successfully held them off for 10 years, but when my career ended, and the Democrats assumed control of Congress, they socked it to the CNMI and the results are as disastrous as we predicted,” he said.

Senate Democrats are preparing to debate a broader national minimum wage increase from $7.25 an hour to $10.10, despite a Congressional Budget Office report that said such a hike could cost 500,000 jobs by 2017.

A key Republican lawmaker said the GAO report should be a wake-up call.

“This GAO report should be required reading for the Obama administration,” said Rep. John Fleming, a Louisiana Republican who chairs an influential subcommittee on the House Natural Resources Committee. “It describes businesses that cannot absorb the costs of another minimum wage increase, and workers who fear that another increase will lead to higher prices and lost jobs.”

In 2007, Congress enacted legislation to increase the minimum wages incrementally in American Samoa and the Northern Mariana Islands until they matched the federal minimum wage, now $7.27 per hour.

According to the GAO, the auditing arm of Congress, both territories experienced significant economic downturns from 2007 to 2009, including a complete exodus of the garment industry in the Northern Mariana Islands where the minimum wage increased five times since 2007. The current minimum wage there is $5.55 per hour.

From 2006 to 2012, the gross domestic product in the Northern Mariana Islands plummeted by 36 percent and the employment rate fell by 45 percent. Average earnings increased by 29 percent, but local prices rose by 31 percent. The wage increases have left the islands’ economies dependent on tourism from Russia and China.

Economic conditions are even worse in American Samoa.

Since 2007, the minimum wage in American Samoa has increased three times across 18 individual work sectors, ranging from $4.18 to $5.59 per hour. The GAO reported that average earnings in American Samoa rose by 27 percent, but local prices increased by 34 percent. The employment rate in American Samoa declined by 11 percent from 2007 to 2012, and average inflation-adjusted earnings fell by 5 percent. In the tuna canning industry alone, the employment rate fell by 58 percent from 2007 to 2013.

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