The Minimum Wage Task Force that Governor Lolo set up a review the impact of the wage hike that went into effect September 30 and come up with recommendations for the future has submitted its report to Governor Lolo.
The 31 page report gives a comprehensive history of minimum wages in the territory , provides a snapshot of the economy as well as a comprehensive analysis of the impacts of the 40 cent hike in the hourly minimum wage, and comes up with alternatives to federally mandated minimum wage increases.
KHJ News focuses on what the Task Force says about the economic impacts of the recent 40 cent increase in this bulletin.
The Department of Commerce Economic Analysis Office used the American Samoa Economic Model to analyze the anticipated aggregate impacts of the 2018 wage increase
It says as a result of the base wage rate change, private sector employment in the territory is expected to decrease by 244 Full time equivalent payrolls, versus the scenario in which the minimum wage is unchanged.
Cannery payrolls are forecast to drop by 22 ( -0.9%) while all other private sectors combined are anticipated to fall by 222 (-3.2%).
Both of these values would likely be much larger if not for growth in private revenues in 2018, which is largely attributed to a surge in federal dollars that flooded the territory following Cyclone Gita in February.
Similarly government payrolls are expected to decrease by just 54 or -0.7% if the higher minimum wage is enacted, which also would have been estimated at a higher level if not for federal emergency funds and the subsequent economic activity that boosted government revenues.
The report from DOC says total aggregate employment would drop at a forecast of 1.7% in 2018 as a direct result of the increase to the minimum wage rate,.
The average annual wage would likely increase by more than $300 (2.3 %) but with fewer workers buying goods and services, personal consumption expenditures would fall by an estimated $600,000 in 2018 and $300,000 in 2019.
Net exports are expected to increase by $2.3 million or 1.1% as diminished consumer spending leads o lower imports of durable and non durable goods.
The report goes on to say that the growth in net exports gives nominal gross domestic product a short term boost. GDP is forecast to be $1.6 million higher (0.2%) in 2018 before reversing and coming in $900,000 lower ( 10.1%) in 2019.
Adjusted for inflation, GDP is estimated to be $2.1 million higher (0.3%) in 2018 and $800,000 lower, (-0.1%) in 2019, versus the scenario in which the minimum wage rate is unchanged.
According to the Minimum Wage Task Force report, the relatively subdued impacts of the 2018 minimum wage increases can be largely attributed to post Cyclone Gita growth in private and public revenues, which more than offset additional labor costs for employees.
It says this further highlights the importance of imposing minimum wage increase when employers in various industries can best absorb the additional costs without adversely affecting the workers in those sectors .
If not for the short term surge in economic activity, following the cyclone in early 2018, the base wage rate would have almost certainly led to a net decrease in employment and ultimately gross domestic product.
Cannery output represents about 80% of American Samoa’s exports and 24% of imports.
The sheer volume of freight that moves in and out of the port of Pago Pago as result of cannery operations creates economies of scale that drive down shipping costs by as much as 40% for the rest of the territory.
Currently total 2019 exports are forecast to be $410.2 million while imports are estimated to come in at $615.6 million, netting a negative trade balance of $205.4 million.
According to DOC ‘s Economic Analysis Office if cannery operations were to cease in 2019, exports are expected to fall by as much as 82.3% to an estimated $72.5 million and imports would fall to a forecasted level of $474.1 million, yielding a trade balance of -$401.6 million or $196.7 million lower than the scenario in which Starkist continued to operate unimpeded.
