Background American Samoa’s Geography and Demographics American Samoa consists of five volcanic islands and two coral atolls in the South Pacific, about 2,600 miles southwest of Hawaii (see fig. 1). American Samoa has a combined land area of 76 square miles, slightly larger than Washington, D.C. Approximately 98 percent of the population of American Samoa lives on the main island of Tutuila, and most economic activity (including tuna canning) and government operations take place in and around the harbor of the capital city, Pago Pago, on Tutuila (see fig. 2). Most of Tutuila consists of rugged terrain with little level land. With a significant portion of its population and infrastructure located in low-lying coastal areas, American Samoa faces the risk of tsunamis and other coastal hazards. In September 2009, a tsunami following a magnitude 8.1 earthquake left 34 people dead in American Samoa, and caused severe damage to homes, businesses, and water and electrical infrastructure. In February 2018, Tropical Storm Gita struck the territory, causing damage with at least 50 percent of American Samoan residents facing some level of loss to property, according to American Samoa Department of Commerce estimates. The American Samoa government estimates that the disaster caused nearly $200 million in damages to public and private property. In response to both natural disasters, the federal government issued major disaster declarations and assisted with recovery efforts. The 2010 U.S. Census found American Samoa’s population to be 55,519, a decrease of 3 percent from its 2000 population. Individuals who are neither U.S. citizens nor U.S. nationals, most of them from the Independent State of Samoa, constituted approximately 35 percent of the territory’s population in that year. BEA most recently estimated American Samoa’s 2018 population to be approximately 58,000. The 2010 census also reported that American Samoa’s median household income remained well below, and its poverty rate well above, that of the United States. In 2009, American Samoa’s median household income was $23,892, 47 percent of the U.S. median household income, while its poverty rate was 57.8 percent, nearly four times the U.S. rate of 15.1 percent. American Samoa’s Relations with the United States U.S. interest in the Samoan islands began in 1872 with efforts by the U.S. Navy to establish a naval station in Pago Pago Harbor. A U.S.-British- German protectorate over all Samoan islands ended in 1899, when the islands that constitute American Samoa were placed under U.S. control. The U.S. Naval Station in the territory was established in 1900. From 1900 through 1904, the U.S. government negotiated control over American Samoa, and the U.S. Navy subsequently took responsibility for federal governance of the territory. In 1951, governance was transferred to the Secretary of the Interior. In 1960, American Samoa residents adopted their own constitution, but amendments to the constitution may be made only by an act of Congress. Persons born to non-U.S. citizen parents in American Samoa are U.S. nationals but may apply to become naturalized U.S. citizens. In addition, U.S. non-citizen nationals from American Samoa have the right to travel freely, live, and work throughout the United States. American Samoa exercises authority over its immigration system and customs through locally adopted laws. While American Samoans may serve in the U.S. military, they do not have voting representation for legislation passed before the full U.S. Congress, including legislation setting the minimum wage in American Samoa. The United States provides assistance to the American Samoa government, including funding the majority of its revenue. In fiscal year 2018, the American Samoa government’s financial audit reported that U.S. federal grants provided approximately $150 million of $246 million in total American Samoa government revenue. Ranked by approximate grant expenditures, the largest federal grantors were the Departments of Health and Human Services ($43 million), Agriculture ($33 million), Interior ($30 million), Education ($28 million), Transportation ($18 million), and Homeland Security ($5 million). Minimum Wage Law in American Samoa The federal minimum wage was first enacted as part of the Fair Labor Standards Act of 1938 (FLSA). The FLSA specified that for industries engaged in commerce or in the production of goods for commerce, its policy was to correct and, as rapidly as practicable, to eliminate labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers without substantially curtailing employment or earning power. Since 1938, there have been nine amendments to the FLSA establishing new minimum wages and usually raising the rate through a series of steps over 2 to 4 years. The FLSA was amended in 1956 to provide for American Samoa minimum wages to be established through a special industry committee (SIC) process similar to that used in Puerto Rico and the U.S. Virgin Islands. Federal policy called for the minimum wage rates for industries in American Samoa to reach the federal level as rapidly as was economically feasible without substantially curtailing employment. The final SIC, which recommended minimum wages to be applied in 2005 and 2006, recommended minimum wages for 18 industry categories. These 18 industry categories remain in existence for present-day minimum wages in American Samoa. Since 2007, U.S. federal law has determined minimum wages in American Samoa. In 2007, Congress passed the Fair Minimum Wage Act of 2007, which eliminated the SICs and created a schedule of increases to American Samoa minimum wages that has since been revised and applied over a number of years. The Fair Minimum Wage Act of 2007 amended the FLSA, raising the federal minimum wage in a series of three steps from $5.15 to, effective July 2009, $7.25 per hour. The amended provision also eliminated the SICs in American Samoa and introduced a schedule for raising the minimum wages, by equal amounts, until all 18 minimum wage categories in American Samoa reached the federal level. According to the U.S. Department of Labor, when the law was enacted, nearly 80 percent of eligible American Samoa workers earned less than $7.25 per hour. The initial Fair Minimum Wage Act of 2007 schedule, which called for $0.50 annual increases, would have increased all American Samoa minimum wages to the current federal level by May 2016. After the initial (2007) schedule, each subsequent law revising the schedule of minimum wage increases for American Samoa extended the projected dates for American Samoa minimum wages to reach the federal level. Measures adopted in 2009 and 2010 retained the $0.50 increases but delayed their application, so that convergence between the American Samoa minimum wages and the federal level would have occurred in 2018 rather than 2016. Subsequent measures—applying increases every third year and reducing each increase from $0.50 to $0.40—delayed convergence of American Samoa minimum wages with the federal level by more substantial intervals. The current schedule establishes increases of $0.40 every 3 years for all 18 industry categories in American Samoa, with the most recent increase in September 2018 and the next increase scheduled for September 2021. If American Samoa minimum wages continue to increase by $0.40 every 3 years as scheduled, and if the current federal level does not increase, the highest minimum wage in American Samoa, for the stevedoring industry, will reach the federal level in 2027, while the lowest minimum wage, for the garment manufacturing industry, will reach the federal level in 2036. Minimum wages for the largest employer overall, government, and the largest private-sector employer, the fish canning and processing industry, will reach the federal level by 2036 and 2033, respectively. Table 1 shows past and projected minimum wages in American Samoa for these industries. (App. III shows the current federal minimum wage in American Samoa by industry.) Since 1957, American Samoa minimum wages have risen, first as recommended by SICs and then in accordance with schedules set by legislation. However, with the exception of 1986, when the highest American Samoa minimum wages—for fish canning and processing, petroleum marketing, and stevedoring—converged with the federal level of $3.35, American Samoa minimum wages have remained below the federal level (see fig. 3). From 2007 to 2018, American Samoa’s Economy Contracted and American Samoa Employment Varied, While Workers’ Earnings Generally Declined American Samoa’s economy largely contracted during the past decade. Adjusted for inflation, gross domestic product declined by 18.2 percent from 2007 to 2017, though it increased by 2.2 percent in 2018. According to the American Samoa Department of Commerce, the 2018 uptick is likely to be temporary, partly reflecting reconstruction activity for Tropical Storm Gita. Changes in government spending and the tuna canning industry, including disaster-related federal funding and cannery closures, have impacted American Samoa’s economy. From 2007 to 2018, American Samoa employment varied by year without a clear trend, while workers’ inflation-adjusted earnings generally declined. American Samoa continues to depend on the territorial government and tuna canning industry as key sectors. The American Samoa government continues efforts to diversify the economy, and in recent years, these efforts have centered on the development of a new industry, telecommunications. American Samoa Employment Varied by Year from 2007 to 2018 While Workers’ Inflation- Adjusted Earnings Generally Declined Employment Employment did not exhibit a clear trend, but varied from year to year from 2007 to 2018. Specifically, it ranged from about 16,000 to about 20,000 with a peak year in 2009. In 2018, employment was at the same level as it was in 2007, at about 17,000. Figure 5 shows the trend in employment in American Samoa over this period. In addition, we analyzed data from alternative sources, which also showed that employment lacked a clear trend from year to year. According to American Samoa Statistical Year Book data, employment ranged from about 14,000 to 19,000 from 2007 to 2017 with a peak in 2010. According to the U.S. Census Bureau’s County Business Pattern data, which mostly excludes certain groups such as the public sector, private sector employment ranged from about 7,000 to 10,000 from 2008 to 2017, with a peak in 2009. For more information, see appendix IV. Inflation-Adjusted Earnings Average earnings of employed workers contracted from 2007 to 2018 when adjusted for inflation. For the overall period from 2007 to 2018, average inflation-adjusted earnings fell by about 11 percent (from about $11,000 to about $10,000), reflecting an increase in average annual earnings of about 29 percent and an increase in prices of about 44 percent. For the most recent year available, 2017 to 2018, average inflation-adjusted earnings was almost unchanged—growing by about 1 percent. Figure 6 shows the trend in earnings in American Samoa from 2007 to 2018. For more information, see appendix IV. Government and Tuna Canning Remain Key Sectors of American Samoa’s Economy The territorial government and tuna canning industry are important sectors of American Samoa’s economy, contributing almost half of American Samoa’s employment and GDP. The American Samoa government and the tuna canning industry have historically employed the largest numbers of workers in American Samoa. In 2018, the government sector employed about 42 percent of the American Samoa’s workforce and the tuna cannery employed about 14 percent (see fig. 7). The territorial government continues to be the largest employer, while the tuna canning industry continues to be the largest private sector employer. The government and the tuna canning industry also remain large contributors to GDP in American Samoa. In 2017, government and manufacturing (primarily composed of tuna canning) contributed 42 percent of American Samoa’s total GDP (see fig. 7). The tuna canning industry plays a key role contributing to the territory’s trade, primarily through exports. According to U.S. Census Bureau data, processed tuna annually accounted for over 88 percent of exports from American Samoa to the United States from 1995 to 2018. According to American Samoa government officials, government and the tuna canning industry are the two main pillars of the economy and sustain other industries across the territory. The territory’s component units, including the Lyndon B. Johnson Tropical Medical Center, American Samoa Community College, American Samoa Power Authority, and American Samoa Telecommunications Authority, provide healthcare, higher education, utility, and telecommunications services, respectively. The tuna canning industry provides direct and indirect benefits to other industries. American Samoa Department of Commerce officials stated that the remaining cannery generates demand for support industries such as transportation and warehousing, retail and wholesale, and construction. American Samoa government officials also noted that the cannery’s large demand for shipping, transportation, and energy might reduce the cost of these services for the entire territory. In 2017, canned tuna constituted over 90 percent of American Samoa’s exports, and fish for processing constituted over 35 percent of American Samoa’s imports (see fig. 8). The American Samoa Government Continues Efforts to Diversify the Economy To reduce the territory’s dependence on its government and the tuna canning industry, the American Samoa government continues its efforts to diversify the economy. According to the American Samoa government, the territory’s dependence on the government and the tuna canning industry has exposed the economy to external risks, including changes in federal grant funding and global competition in the tuna canning industry. To reduce this dependence, the government has developed plans to diversify the economy. American Samoa’s economic development implementation plan for fiscal years 2014 to 2017 and economic development strategy for 2018 to 2022 outline economic development goals for sectors such as transportation and tourism, as well as action items to achieve these goals. The American Samoa government has identified ecotourism as an economic opportunity because the island’s mountains, tropical rainforests, coral reefs, and National Park may be attractive to tourists (see fig. 9). However, the American Samoa government has cited the federal restrictions on competition in passenger air carrier service to American Samoa as an impediment to developing the tourism sector. The United States restricts foreign airlines from carrying U.S. domestic passengers or cargo between U.S. locations, other than as part of a through trip involving a foreign location (cabotage), unless authorized by the U.S. Department of Transportation on the basis of specific criteria. According to the American Samoa government, as of August 2019, there are two passenger air flights per week between American Samoa and the United States (via Hawaii), with a third weekly flight added during peak travel seasons. American Samoa’s 2016 Workforce Innovation and Opportunity Act Unified Plan targets the development of five industries: fisheries and agriculture, telecommunications and information technology, manufacturing, visitors, and handicrafts. The plan notes that American Samoa is experiencing emigration of workers to the United States, countered in part by immigration of tuna cannery workers from neighboring islands to American Samoa. The plan cites low wages as a reason that high-skilled members of the labor force leave the territory. In recent years, the American Samoa government’s efforts to diversify the economy have centered on the development of the telecommunications industry. The government has made major investments in telecommunications infrastructure over the past 5 years. American Samoa Telecommunications Authority officials told us that they have managed the development of the territory’s telecommunications infrastructure projects. Completed in 2015, the Broadband Linking the American Samoa Territory (BLAST) project replaced the territory’s copper infrastructure with a fiber optic network capable of delivering high-speed data, voice, and cellular backhaul services. The U.S. Department of Agriculture’s Rural Utility Service funded the over $90 million project with an approximately $81 million grant and $10 million loan. According to American Samoa Telecommunications Authority officials, the Hawaiki cable project, completed and activated in 2018, added bandwidth to the BLAST network by connecting the territory via an underwater cable branch to the main Hawaiki cable trunk in Hawaii. The officials stated that the Hawaiki cable is a 15,000 kilometer, high- capacity underwater cable connecting Australia and New Zealand to the mainland United States, American Samoa, and Hawaii. The American Samoa government invested approximately $30 million to acquire its connection to the Hawaiki cable, using funding from American Samoa’s 2018 general revenue bond series. According to American Samoa Telecommunications Authority officials, other ongoing, multi-million dollar projects to enhance the territory’s telecommunications infrastructure include projects to upgrade BLAST bandwidth distribution and replace the territory’s 2G network with LTE technology. The American Samoa government believes that the newly activated Hawaiki cable and BLAST fiber optic network have raised the territory’s potential to develop new industries tied to telecommunications, including information communication technology and business process outsourcing. According to an American Samoa Department of Commerce survey of over 50 public and private stakeholders, 64 percent of respondents—the largest share—identified information communication technology as one of the most promising economic development opportunities for the territory. The next four most promising opportunities identified by approximate share of respondents (in parentheses) included “Attracting investors for capital investment projects (58 percent), “General Tourism” (47 percent), “Ecotourism” (47 percent), and “Federal Programs” (47 percent). American Samoa government officials acknowledge that despite progress made, American Samoa’s telecommunications industry is still at an early stage of development. The American Samoa government seeks to attract new telecommunications businesses, including a proposed call center, by identifying various competitive advantages for locating in American Samoa. American Samoa Department of Commerce officials stated that these advantages include an English-(American) speaking workforce with the lowest labor costs in the United States, and the territory’s qualification as an on-shoring location for call centers and other business process outsourcing operators. American Samoa Department of Commerce and American Samoa Telecommunications Authority officials stated that they are currently developing a territorial broadband strategy and proof-of- concept for a call center industry, expected to be released in mid-2020. Additionally, American Samoa Telecommunications Authority officials expect the Territorial Bank of American Samoa, opened in October 2016, to support the efforts to develop the telecommunications industry by encouraging investment in financial technology businesses. American Samoa Telecommunications Authority officials stated that the bank is partnering with the authority to develop internet banking services, which are expected to be offered in the next 2-3 years. American Samoa’s Tuna Canning Industry Faces Multiple Challenges, Including Increased Competition and Minimum Wage Increases American Samoa’s tuna canning industry faces multiple challenges, including increased competition and minimum wage increases, which led to cannery closures from 2007 to 2018. The companies that experienced the closures explained that minimum wage increases were a factor in the closures but not a main factor. With the closures, employment of cannery workers decreased, but inflation-adjusted earnings of cannery workers who maintained their jobs increased. StarKist Co. now operates the single remaining cannery in American Samoa, StarKist Samoa, but faces financial challenges. In addition to increased competition and labor market challenges, the industry faces other challenges, such as lower wages relative to those in American Samoa for cannery workers in other tuna-exporting countries. However, American Samoa offers the tuna canning industry advantages relative to the U.S. mainland and other countries, including lower wages compared to those in the U.S. mainland as well as duty-free access to the U.S. canned tuna market, according to StarKist Samoa officials. American Samoa’s Tuna Canning Industry Experienced Cannery Closures from 2007 to 2018 American Samoa’s tuna canning industry experienced cannery closures from 2007 to 2018 that adversely impacted the economy in that time period, as mentioned earlier. (For a timeline of selected events related to American Samoa’s tuna canning industry, see app. V.) StarKist Co., Chicken of the Sea, and Samoa Tuna Processors, which is owned by Tri Marine International (Tri Marine), have each operated or closed canneries in American Samoa over the years, as follows. StarKist Co. StarKist Co. (headquarters in Pittsburgh, Pennsylvania) has operated a cannery, StarKist Samoa, in American Samoa since 1963. StarKist Samoa is the one remaining cannery on the island, as mentioned earlier (see fig. 10). As of June 2018, StarKist Samoa employed 2,439 hourly wage workers. Chicken of the Sea. Chicken of the Sea (headquarters in El Segundo, California) operated a cannery in American Samoa, which it closed in September 2009. According to CRS, in the 1950s, the Department of the Interior contracted with Van Camp Seafood Company to move onto the island and develop a fish processing plant. Thai Union closed the Chicken of the Sea Samoa Packing cannery in American Samoa in September 2009. According to Chicken of the Sea officials, limited tuna supply was a key factor in the decision to close the cannery. The American Samoa minimum wage increases were a minor factor, but not as significant as other factors related to tuna supply, labor availability, logistics, and utility costs in contributing to the cannery’s closure. The company relocated its canning operations to the U.S. state of Georgia while outsourcing the more labor-intensive processes, including cleaning and cooking tuna loins (a low-tariff U.S. import), to countries with lower labor costs. By relocating to Georgia, Chicken of the Sea noted that it improved flexibility in sourcing and processing fish from multiple locations depending on where supply was readily available. Tri Marine International (Tri Marine). Tri Marine (headquarters in Bellevue, Washington) acquired the former Chicken of the Sea cannery in American Samoa in October 2010, undertook a multi- million dollar investment to renovate and expand it, and opened the new facility under the name Samoa Tuna Processors in January 2015. However, Tri Marine suspended its canning operations in American Samoa indefinitely in December 2016, primarily in response to highly competitive price setting across the global tuna canning industry, according to Tri Marine. Tri Marine explained that the American Samoa minimum wage increases were a minor factor—not as significant as rising price competition and high production costs, such as for utilities—in contributing to Samoa Tuna Processors’ closure. The company subsequently transferred its canned tuna sourcing operations from American Samoa to Thailand, Peru, and the Solomon Islands to take advantage of decreased production costs. According to a report by the Pacific Islands Forum Fisheries Agency, in 2018, StarKist Co. signed a 10-year lease agreement to use Tri Marine’s Samoa Tuna Processors facility for StarKist Samoa operations. According to a Tri Marine official, in 2019, the Bolton Group (Italy) completed its acquisition of Tri Marine. The acquisition did not include Samoa Tuna Processors, and the Tri Marine ownership change did not affect the 10-year lease agreement between StarKist Co. and Samoa Tuna Processors, according to the official. Cannery Employment Level Decreased and Worker Inflation-Adjusted Earnings Increased from 2007 to 2018 From 2007 to 2018, cannery employment in American Samoa fell from about 4,500 in 2007 to 2,469 in 2018, a decline of 45 percent. Most of the decline occurred in the period between 2007 and 2010, with the closure of the Chicken of the Sea cannery. Figure 11 shows the trend in cannery employment in American Samoa over this period. The inflation-adjusted earnings of cannery workers in American Samoa who have maintained their jobs during this period have increased by more than inflation. In American Samoa, the vast majority of cannery workers earn close to the minimum wage. Moreover, the hourly wage of minimum wage cannery workers has increased by more than inflation since 2007. Specifically, during this period, the minimum wage has risen by 70 percent (from $3.26 to $5.56, from the first half of 2007), while prices have increased by 44 percent. However, this analysis does not include those workers who have lost employment or have had hours cut. StarKist Co. Faces Continuing Financial Challenges Because of Legal Issues StarKist Co. faces continuing financial challenges because of legal issues, as follows. In 2019, StarKist Co. was sentenced to pay a criminal fine of $100 million, the statutory maximum, for its role in a conspiracy to fix prices for canned tuna sold in the United States. This fine amounts to almost three times StarKist Samoa’s cost of labor in 2018. According to StarKist Co.’s General Counsel, the company will potentially have to close the cannery in American Samoa and move operations to a foreign country to afford to pay the fine for price-fixing. For its role in price-fixing, StarKist Co. has faced—and may continue to face— lawsuits from wholesalers, food service companies and retailers, and customers. For example, in January 2019, StarKist Co. announced that its portion of a settlement with Walmart was $20.5 million, based on a combination of cash payment and certain commercial terms. In addition, in September 2017, StarKist Co. agreed to pay a $6.3 million penalty resulting from violations of federal environmental laws, according to the U.S. Department of Justice. The U.S. Department of Justice and the U.S. Environmental Protection Agency reached an agreement with StarKist Co. and StarKist Samoa, requiring a series of upgrades to reduce pollution, improve safety measures, and comply with important federal environmental laws at their tuna processing facility in American Samoa, the department reported. American Samoa’s Tuna Canning Industry Faces Continuing Challenges in Addition to Minimum Wage Increases American Samoa’s tuna canning industry faces multiple challenges in addition to scheduled minimum wage increases. One challenge is rising competition in the global tuna canning industry, as the value of foreign processed tuna exports to the United States has increasingly exceeded the value of American Samoa processed tuna exports to the United States (see fig. 12). Specifically, tuna industry officials stated that firms in the U.S. canned tuna market are highly competitive in price setting as opposed to differentiating their product lines. A tuna canning industry official stated that price competition and the financial pressures of the recent anti-trust judgements have forced the U.S. canned tuna market into a cost-cutting environment. According to the same tuna canning industry official, firms must look to lower costs related to labor, energy usage, and shipping to remain competitive in the U.S. market. The official stated that firms implicated in the price-fixing scheme have agreed as part of a legal settlement resulting from a lawsuit to supply their product at lower prices. This puts more pressure on firms to implement cost-saving measures to maintain their U.S. market shares. For example, StarKist Samoa has implemented cost-saving measures to reduce labor and energy costs and has also raised prices and relocated business off the territory. American Samoa’s tuna canning industry also faces other challenges, as described below. Competitors’ canning production strategies. According to StarKist Co. officials, StarKist Co.’s main competitors implement a supply chain production process that spans more than one country. Conversely, StarKist Samoa’s full production process still occurs in American Samoa (see fig. 13). According to StarKist Samoa officials, the cost savings between a fully U.S.-based manufacturing process and an outsourced manufacturing process is substantial and places American Samoa at a distinct disadvantage. According to StarKist Samoa officials, StarKist Co.’s main competitors use a model that outsources the workforce-intensive process to extremely low-wage countries. They explained that StarKist Co.’s competitors clean, cook, and freeze the tuna before importing it—subject to an average tariff of $11 per metric ton—into the mainland United States, where it is then thawed and packaged. Furthermore, our analysis of the global tuna industry suggests that, under certain assumptions, this model can improve cost savings and competitiveness. See appendix VI for the results of our analysis of the global tuna industry and more details about the assumptions we used. Tuna canning industry officials also stated that a new production process combined with lower labor costs for packaging tuna in foreign countries decreases American Samoa’s competitiveness as a location of operation. Lower wages for cannery workers in other countries, relative to those in American Samoa. According to a tuna canning industry official, tuna canneries have moved operations from American Samoa to Thailand, Peru, and the Solomon Islands, in part because of the lower labor costs. According to an industry official, one prominent tuna exporting country offers wages as low as $10 dollars per day, whereas a full- time worker in 2020 at the cannery in American Samoa would earn over $44 per day. Upcoming minimum wage increases in American Samoa. Upcoming minimum wage increases in American Samoa will increase labor costs for the tuna canning industry. According to data provided by StarKist Samoa, most cannery workers in American Samoa would be impacted by a minimum wage increase. Specifically, over 90 percent of StarKist Samoa’s employment (roughly 2,200 workers) could be affected by the next minimum wage increase scheduled for September 30, 2021. At 2018 levels of employment, labor costs could increase by about $2 million at 2021 minimum wage levels. Decreased direct access to tuna supply. A number of factors have decreased direct access to tuna supply. The Pacific Remote Islands Marine National Monument regulations have had the biggest impact on tuna supply to the cannery, according to StarKist Co. officials. Also according to Starkist Co. officials, marine monuments in the region have closed fishing grounds to U.S. purse seine vessels that historically delivered tuna to local canneries in American Samoa, and the Rose Atoll Marine National Monument reduced fishing grounds in U.S. waters around American Samoa that were very important to the American Samoa longline fleet. In 2017, National Marine Fisheries Service removed a regulatory exemption that had allowed certain large U.S. longline vessels to fish in portions of the American Samoa Large Vessel Prohibited Area. Delivery volume from a Chinese tuna supplier that used to send fishing boats to supply canneries in American Samoa directly has decreased significantly as a result of China paying subsidies to Chinese fishing vessels in the Pacific, according to StarKist Co. officials. The subsidy draws potential tuna suppliers from the American Samoa market to the Chinese market, the officials stated. American Samoa Offers the Tuna Canning Industry Advantages Relative to the U.S. Mainland and Other Countries American Samoa offers the tuna canning industry certain competitive advantages relative to the U.S. mainland and other countries, as follows. Lower wages for cannery workers in American Samoa relative to those on the U.S. mainland. American Samoa offers lower labor costs relative to the U.S. mainland. For example, while the 2020 minimum wage for fish canning and processing in American Samoa is $5.56 per hour, Georgia’s wage for manufacturing is $15 per hour. Tariff-free access to the U.S. canned tuna market. According to StarKist Co. officials, U.S. trade policies provide tariff-free access to the U.S. market for processed tuna from American Samoa, while foreign suppliers generally are subject to tariffs for these goods. On average, foreign suppliers’ canned or pouched tuna is subject to an average tariff rate of 12 percent. However, U.S. trade agreements with certain countries may provide those countries tariff-free or reduced-tariff access to the United States. Tax credits provided by the federal and local government. The American Samoa tuna canning industry receives both federal and local tax benefits. U.S. tax policies have reduced federal taxes on income earned by qualifying U.S. corporations investing in American Samoa. Under the Internal Revenue Code, qualifying American Samoa tuna canneries have received an economic development credit for U.S. corporate income taxes. StarKist Samoa reported saving $5.9 million in 2016 through this tax credit. Canneries in American Samoa have also benefited from exemptions from local taxes. According to American Samoa government officials, the local tax exemption has allowed StarKist Samoa to reduce its corporate tax liability to the American Samoa government to 20–25 percent of the amount owed. According to American Samoa government officials, the total corporate and excise tax revenue loss to the American Samoa government is estimated to be $15–20 million annually. Federal procurement opportunities related to canned tuna. According to StarKist Samoa officials, operating in American Samoa offers access to certain U.S. government contracts that require U.S.-sourced and -processed fish, and allows them to comply with Buy American requirements. However, according to the officials, most school districts that enter into such contracts waive the Buy American requirements because StarKist Co. is the only tuna company that qualifies, and as a result, competitive bids reveal that the cost of domestic product is significantly higher than the cost of non-domestic product. StarKist Samoa reported that $15.8 million or 4 percent of its revenue in 2018 was from federal procurement that included contracts with the U.S. Department of Agriculture and the U.S. military. The American Samoa Government and Chamber of Commerce View the Minimum Wage Increases as Conflicting with Sustainable Economic Development; Employers and Workers Noted Benefits and Challenges The American Samoa Government and Chamber of Commerce View Minimum Wage Increases as Conflicting with Sustainable Economic Development The American Samoa government and Chamber of Commerce both view the minimum wage increases as conflicting with sustainable economic development. Both expressed concerns about the reliance of American Samoa’s economy on the tuna canning industry and the potential negative impact of minimum wage increases on the remaining cannery in American Samoa. The American Samoa government stated that it supports a minimum wage that its economy can support. While the American Samoa government noted that it is committed to ensuring that the people of American Samoa can meet the basic cost of living, it stated that the impact of upcoming minimum wage increases on StarKist Co. would be extensive. The American Samoa government predicts that it would take years for the economy to recover if StarKist Co. should cease operations in American Samoa, and suggested that the burden of any economic impact would be on the federal government. The American Samoa government specified challenges that it believes StarKist Co. currently faces, including recent federal fines, decreasing supply of tuna, higher infrastructure costs in American Samoa compared to those of other countries, and increased regulation costs by the U.S. Coast Guard and U.S. Environment Protection Agency. In October 2019, the American Samoa Minimum Wage Task Force, commissioned by the Governor of American Samoa, provided us with its findings and recommendations. It reported that American Samoa's economy is unique and starkly different from the economies of all U.S. states and territories, and that, aside from the American Samoa government, the remaining and only pervasive economic driving force in the territory is StarKist Samoa. It also noted that its main objective is to express to the U.S. Congress the importance of involving the territory in the process of determining the applicable minimum wage for American Samoa. The task force identified various policy options and recommended that a combination of a moratorium on minimum wage increases and special industry classification or a special industry committee would increase and maximize the opportunity for local stakeholder participation. These have been long-standing positions of the American Samoa government. In response to a prior report, the American Samoa government requested we convey its position to the U.S. Congress to postpone the minimum wage increases. In response to another prior report, the American Samoa government recommended the pursuit of a U.S. Department of Labor-constituted committee similar to a special industry committee. While the American Samoa Chamber of Commerce noted that its employers support fair minimum wages for their workers, it stated that it supports any delay in minimum wage increases for the cannery until another economic option is feasible. The American Samoa Chamber of Commerce explained that while data show a shift in employment away from the cannery, StarKist Samoa still provides significant financial benefits to American Samoa in the form of decreasing fuel and shipping costs. The American Samoa Chamber of Commerce predicts that any increase in minimum wage could force the closure of StarKist Samoa and drive American Samoa into a recession. Selected Employers and Workers Noted Benefits and Challenges Presented by Minimum Wage Increases Public and private sector employers and workers we interviewed commented on the impact of minimum wage increases, including potential benefits and challenges. Potential positive impact on the livelihood of workers. Multiple employers and workers we met with stated that increasing the minimum wage would have a positive impact on the livelihood of workers. For example, a worker said that minimum wage increases have helped offset the increasing prices of imported products and excise tax products. Another worker stated that minimum wage increases help people to meet their community and church financial obligations. Some employers and workers noted that minimum wage increases improve customers’ ability to pay bills and their likelihood of using necessary services. Potential negative impact on the remaining cannery. Multiple workers and employers we met with generally stated that minimum wage increases could lead to a potential negative impact on StarKist Samoa. Multiple workers stated that such impact could result in a loss of jobs and increases in shipping costs, among other things. Some public employers were concerned that minimum wage increases could lead to the closure of the remaining cannery, and one of them stated that the potential closure was the main factor in the minimum wage increase discussion. One public worker stated that StarKist Samoa closing the remaining cannery is a major concern because the company is the main source of tax revenue. Another public worker added that having already seen a cannery close after minimum wage increases has raised concerns that it might happen again with StarKist Samoa. In addition, a private employer stated that after the Samoa Tuna Processors cannery closed in 2016, the employer’s retail sales decreased sharply and the economy now relies on the remaining cannery, StarKist Samoa. Increased recruitment and retention of workers. Some employers and workers we met with noted that a higher minimum wage could lead to increased recruitment and retention. For example, multiple employers noted the challenges of recruiting and retaining skilled workers given the low wages on the island, which often compel such workers to leave the island for better opportunities. One employer said that it could not recruit without minimum wage increases. Another employer stated that even low-paid workers often leave the island to obtain better pay in higher-paying countries. Some employers and workers noted that the lack of staff, especially nurses and teachers, has led to challenges, such as a negative impact on healthcare and education on the island. One of these employers stated that the minimum wage is too low and there is a lack of good teachers on the island. This employer was upset that the local school did not have a math teacher, noting that teachers leave or simply do not come to work because the pay is too low. One of these workers stated that nurses have moved off-island because their pay is too low and because overwork has contributed to potential health hazards. Keeping American Samoan youth on the island. Multiple employers and workers we met with were concerned that the current minimum wage was insufficient to keep younger American Samoans on the island, especially those who are college-educated. For example, an employer stated that there is a lack of young talent because there are no jobs on the island and pay is low. Another employer stated that some American Samoans earn degrees abroad and come back to American Samoa, but find that they cannot advance their careers on the island and leave again after 1-2 years. Some workers we met with spoke as parents about their children leaving the island, and became emotional upon sharing that they did not anticipate their children returning. Wage stagnation versus wage compression. While some workers we met with said they believed that a lack of an increase would lead to wage stagnation, other workers, as well as employers, we met with said they believed that an increase would lead to wage compression. Some workers noted not receiving pay increases despite working for an employer for many years and obtaining certifications. For example, a worker stated that if it were not for minimum wage increases, the worker would not receive any pay raises. However, another worker was upset that colleagues who had just started working were receiving more money than those who had been with the employer for many years. Funding for minimum wage increases. Multiple employers and workers said they were concerned about how future minimum wage increases could be funded. For example, a public employer noted that it did not oppose the minimum wage increases because the current minimum wage was barely enough to survive on, but was concerned about where the funding and revenue to sustain the increases would come from. Another employer stated that identifying additional funds for minimum wage increases is a major challenge. This employer noted that the company had not yet laid off workers to fund minimum wage increases, but might have to consider it. Public and private sector employers and workers we interviewed also commented on the following topics related to minimum wage increases: Proposed alternatives. Multiple employers and workers suggested alternative ways of increasing minimum wages in American Samoa. For example, an employer stated that minimum wages should be set based on the actual conditions of American Samoa rather than on what it believed to be an arbitrary federal schedule, and a worker stated that the U.S. Department of Labor reviewing the minimum wage and making changes is preferred to scheduled changes. Minimum wage levels. In addition, while cannery workers we met with generally agreed that the current minimum wage was sufficient, other workers, as well as some employers, stated that the current minimum wage and the scheduled minimum wage increases were insufficient. While cannery workers generally noted that they were happy to have previous minimum wage increases, they were fearful that future increases could lead to a loss of hours or complete job loss should the cannery close. However, other workers disagreed. For example, one worker explained that minimum wage increases did not keep pace with the cost of living. Another worker stated that 40 cents every 3 years is only about 13 cents per year, which the worker considered insufficient. Some employers and workers became emotional when speaking about their own financial situations or those of their workers, relatives, or fellow American Samoans. Varying degrees of impact on the livelihood of workers. While public employers generally stated that the impact of the minimum wage increases on their workers was minimal, private employers noted varying degrees of impact on their workers. Some public employers stated that the majority of American Samoa government workers are paid above the minimum wage, and noted that the minimal impact was a result of the local government raising the minimum wage to $5 ahead of the 2018 minimum wage increase to $5.21. Potential positive impact on the economy if the remaining cannery closes. Some private employers stated that there could be a positive impact on the economy if the remaining cannery closes. For example, a private employer stated that the American Samoa economy is so used to having the cannery as its pillar that it has not truly tried to diversify the economy. This employer added that American Samoa needed to continue shifting away from the cannery and toward the rest of the private sector. Another private employer stated that the American Samoa economy is better off without the remaining cannery and that an economist’s analysis of the cannery’s true impact on the rest of the economy is needed. Cost of living. Multiple workers, as well as some employers, were concerned that minimum wage increases could lead to increases in the cost of living, with some noting that the cost of living in American Samoa is already high because living on a remote island requires a high amount of imported goods. While a public employer stated that business owners pass the cost of minimum wage increases to customers, a private employer stated that business owners are unable to do so because of competition. Another employer noted concerns about inflation, stating that minimum wage increases might drive up prices and rent. Cultural considerations. Multiple employers and workers cited the importance of considering American Samoa’s unique culture when setting minimum wage increases. While some workers and an employer noted that the cost of living in American Samoa is unique in that communal land and living off the land through fishing and gardening could minimize housing and food costs, others noted that community and church financial obligations are significant costs. One employer stated that these costs could amount to up to a quarter of worker’s paycheck. A worker stated that nonresidents, like many of the cannery workers, pay much higher medical costs; and an employer stated that foreign workers pay much higher housing costs. Other economic challenges. Multiple public and private employers and workers cited an array of economic challenges other than minimum wage increases, including the high cost of living on the island and increased taxes and fees. For example, one employer stated that American Samoa government taxes and fee increases are more of a challenge than minimum wage increases. Agency Comments, Third Party Views, and Our Evaluation We provided a draft of this report to the U.S. Departments of Commerce, the Interior, and Labor, and the American Samoa government for comment. The Department of Commerce provided technical comments, which we incorporated as appropriate. The Department of Labor informed us that it had no comments. In its comments, reproduced in appendix VII, the Department of the Interior said it would be beneficial to the American Samoa government if we provided information on all potential alternatives to setting minimum wages, including the once-utilized special industry committees. Such a study was beyond the scope of this report, which focused on (1) economic trends including changes in employment and earnings since the minimum wage increases in American Samoa began in 2007, (2) the status of the tuna canning industry, and (3) stakeholder views on the minimum wage increases. In its comments, reproduced in appendix VIII, the American Samoa government noted that the draft report did not reference findings and recommendations of the American Samoa Minimum Wage Task Force, commissioned by the Governor of American Samoa. The task force recommended the establishment of a special industry committee and a moratorium on minimum wage increases to allow ample time for such a special industry committee to form. We have added information on these findings and recommendations. We are sending copies of this report to the appropriate congressional committees, the U.S. Secretaries of Commerce, the Interior, and Labor, and the Governor of American Samoa. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact David Gootnick at (202) 512-3149, or gootnickd@gao.gov; or Oliver Richard at (202) 512-8424, or richardo@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IX. Appendix I: Objectives, Scope, and Methodology This report updates our previous reports on the impact of minimum wage increases in American Samoa and examines (1) economic trends including changes in employment and earnings since the minimum wage increases in American Samoa began in 2007, (2) the status of the tuna canning industry, and (3) stakeholder views on the minimum wage increases. To examine economic trends including changes in employment and earnings, we analyzed gross domestic product data from the U.S. Bureau of Economic Analysis; tax and administrative data from the American Samoa government; and employment, earnings, and wage data gathered through an employer questionnaire that we submitted to American Samoa’s tuna canning industry. To examine the status of the tuna canning industry, we estimated changes in employment and earnings using the employer questionnaire, analyzed tuna trade data from the U.S. Census Bureau, and interviewed tuna cannery industry representatives and stakeholders. To examine stakeholder views on the minimum wage increases, we conducted interviews with officials from the American Samoa government and American Samoa Chamber of Commerce, and employers and workers from the public and private sectors. The federal sources generally used to generate data on employment and earnings in the United States, including the Current Population Survey and the Current Employment Statistics program, do not cover American Samoa. Therefore, we collected our own data on employment and earnings in American Samoa. Employment and Earnings Data Consistent with our prior reports, we reported on employment and earnings from 2007 to the most recent year available. Employment and earnings figures are based on our analysis of combined worker data from various sources. We used employer-level data that we obtained from the American Samoa Department of Commerce and Department of Treasury to measure the annual employment of the American Samoa government and its component units: (1) American Samoa Community College, (2) LBJ Tropical Medical Center Authority, (3) American Samoa Power Authority, and (4) American Samoa Telecommunications Authority. We used tuna canning industry employers’ responses to our employer questionnaire to estimate cannery employment and earnings. We used individual-level tax records that we received from the American Samoa Department of Treasury to measure annual employment and earnings in American Samoa’s private sector excluding the canneries. To adjust earnings for inflation, we relied on the Consumer Price Index (CPI) as provided by the American Samoa government. To estimate employment and earnings for non-cannery workers in the private sector, we relied on individual-level tax data that we obtained from the American Samoa Departments of Commerce and Treasury. We restricted the sample to tax records received for tax years 2005 through 2018. We excluded tax records that contained invalid values in the variables that uniquely identify employers and workers. We also excluded records that contained non-numeric values in Social Security withholdings. Together, these records accounted for less than 2 percent of all tax records in the sample between 2005 and 2018, and accounted for less than 1 percent of total gross wages during this period. In addition, we excluded a small number of tax records—26 out of over 130,000 total records during this period—that reported zero annual earnings under gross wages, Social Security, and Medicare wages. In addition, in less than 100 cases, we adjusted the reported gross wages of workers if the worker had reported Medicare or Social Security wages but had reported gross wages that were very extreme in value (for example, zero or over $300,000), under the assumption that these were data errors. We estimated annual employment by summing the number of workers reported by each employer, for employers for which there was at least one tax record reporting positive wages for a given year. Under this approach, it is important to note that if a worker had multiple employers, the worker was counted more than once. Because of data limitations, we did not include data for tax year 2015 in our analysis of employment and earnings in American Samoa. We excluded this year because, according to the American Samoa government, individual-level tax records for that year are incomplete. Consistent with this observation, we found that the data contained lower counts of employers and workers in the private sector excluding the canneries in tax year 2015 than in any other tax year between 2005 and 2018. With the exception of tax year 2015 data, we found the data on employment and earnings sufficiently reliable for the purposes of our reporting objectives. For more details on our methodology for estimating employment and earnings in comparison to our methodology used in previous reports, see appendix IV. Employer Questionnaire To examine the status of the territory’s key private sector industry—tuna canning—we estimated changes in employment and earnings by submitting an employer questionnaire to American Samoa’s tuna canning industry. In accordance with other federal employment surveys and with our employer questionnaires for our 2010, 2011, 2014, and 2016 reports on the impact of minimum wage increases in American Samoa, our employer questionnaire requested employment and wage data for mid- June pay periods in 2016, 2017, and 2018 from American Samoa’s tuna canning industry—in this case, the territory’s one remaining cannery, StarKist Samoa. In our 2016 report, we asked for employment in the mid- January 2016 pay period. We used the 2016, 2017, and 2018 data to update and extend the time series of employment and earnings data received from our prior employer questionnaires provided to American Samoa’s tuna canning industry. We found the data collected through the employer questionnaire for prior reports and this report sufficiently reliable for the purposes of our reporting on changes in American Samoa employment and earnings from 2007 to 2018. Data based on employers’ questionnaire responses include the reported numbers of hourly workers as well as their annual earnings at the canneries as of June in the given year. The questionnaire asked separately for data regarding workers paid an hourly wage and workers paid an annual salary. For hourly wage workers, respondents were asked to provide the number of workers paid at each wage rate. For salaried workers, respondents were asked the number of full-time and part-time workers paid at each salary level. In compiling the questionnaire-based earnings data for a given year, we assumed that all hourly cannery workers earned the minimum wage for that year and worked all year. When the minimum wage changed midyear, we assumed that the original wage applied for the first half of the year and the revised wage for the second half of the year. To adjust earnings for inflation, we relied on the American Samoa CPI. Using employer questionnaire data, we determined the number of workers that would be affected by future minimum wage increases because their wages were at or below future scheduled minimum wage increases. We estimated the cost of future scheduled minimum wage increases by calculating the cost to the cannery of increasing each worker’s wages to scheduled levels. This estimate assumed that workers worked full-time and all year (i.e., 2,080 hours) and that the minimum- wage increase would not affect the wages of workers currently earning more than the minimum wage. In addition, we interviewed cannery representatives and industry experts to obtain their views on competitive challenges facing the industry, including changes in minimum wage rates, access to fishing grounds, and preferential trade status. To illustrate other potential tuna production scenarios, we developed a model where tuna production relocates from the current status quo in American Samoa to one of two alternative scenarios of loining or canning tuna, or both, in other locations. Changes in labor and tariff costs are compared to the status quo scenario in American Samoa. The model uses assumptions based on the tuna canning industry employment count from the employer questionnaire responses and information obtained during interviews with tuna cannery employers. (See app. VI for the results of our analysis and more details about the assumptions we used.) This model is an update of the model we used for our December 2016 report. Stakeholder Interviews To examine stakeholder views on the minimum wage increases, we conducted interviews with officials from the American Samoa government and American Samoa Chamber of Commerce, and employers and workers from the public and private sectors. During our fieldwork trip to American Samoa in October 2019, we conducted interviews with government officials, employers, other private sector representatives, and workers to obtain views and information on the minimum wage increases. In total, we conducted 15 interviews: five employer interviews (the American Samoa government and three of its component units, and StarKist Samoa), two employer group interviews (private employers that are American Samoa Chamber members and ethnic business employers), and eight worker group interviews. For the primary American Samoa government and StarKist Samoa, we conducted two worker group interviews for each. In the group interviews, we followed a standard protocol that asked for participants’ views on the impact of the minimum wage increases. We interviewed a nongeneralizable sample of employers and workers selected on the basis of key industry information from prior GAO reports and employment data from the American Samoa government. Specifically, we selected the following employers and their workers: (1) the American Samoa government, (2) StarKist Samoa, (3) American Samoa Medical Center, (4) American Samoa Community College, and (5) American Samoa Power Authority. To supplement these employers and workers, we requested that the American Samoa Chamber of Commerce identify additional employers and their workers on the basis of criteria related to the tuna canning, construction, and retail industries, among other things. The American Samoa Chamber of Commerce arranged a group of 15 employers and their workers belonging to its membership and related to the tuna canning, construction, and retail industries, as well as a group of eight employers related to the territory’s ethnic (including Filipino, Chinese, Korean) business community. Overall, the number of participants in each group interview ranged from four to 20, for a total of over 100 participants. The range in number of participants applies to all of the interviews, regardless of their composition. In addition, we reviewed data and interviewed officials from the U.S. Departments of the Interior, Commerce, and Labor. We also reviewed U.S. minimum wage laws and other relevant laws and regulations. We did not review the extent to which laws were properly enforced or implemented. The scope of our study also does not include workers in the underground economy, which would include employers that may not comply with laws, including tax, minimum wage, immigration, and other laws. We did not review compliance with laws as part of this study. We conducted this performance audit from June 2019 to May 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Selected Federal Laws Related to Minimum Wages in American Samoa, 1938–2018 Table 2 summarizes key federal laws regarding minimum wages in American Samoa. Appendix III: American Samoa Minimum Wage Poster Figure 14 shows a U.S. Department of Labor poster outlining federal minimum wage requirements for American Samoa employers subject to the Fair Labor Standards Act (FLSA). According to the department, all such employers are required to post this information in conspicuous places in every establishment where employees subject to the FLSA’s minimum wage provisions are employed to permit them to readily observe it. Appendix IV: Alternative Estimates of American Samoa Employment and Earnings Employment Table 3 compares American Samoa employment data from 2007 to 2018 obtained on this review, data reported in GAO-17-83, and data from the American Samoa Statistical Yearbook 2017, an annual report produced by the American Samoa Department of Commerce. Data obtained on this review were composed of American Samoa tax records, including individual-level data, and responses from a questionnaire submitted to StarKist. Data reported in GAO-17-83 relied on aggregate data and did not include individual-level tax records. The data in the tables derived from these different sources are broadly consistent, but there are differences in certain years. The largest gaps between the alternate sources are in 2009 and 2012. According to the American Samoa Department of Commerce, some temporary government workers are not reflected in the data reported in GAO-17-83. We also compared American Samoa private sector employment data that we obtained and analyzed to County Business Patterns private sector employment data, collected by the U.S. Census Bureau. Private sector employment data that we analyzed indicated 2,000 to 3,000 more workers employed than County Business Patterns private sector employment data, depending on the year. According to the U.S. Census Bureau, this may largely be because the County Business Patterns data capture employment during the week of March 12, while the tax data include employment throughout the year. In addition, given that the American Samoa manufacturing sector is largely composed of the tuna canning industry, we also compared cannery data that we obtained on this review to County Business Patterns manufacturing data, which County Business Patterns reports in selected years. As table 4 shows, cannery employment data are in a similar range as County Business Patterns manufacturing data. Earnings Table 5 compares American Samoa workers’ earnings data from 2007 to 2018 obtained on this review and data reported in GAO-17-83. As shown, the data are broadly consistent. We also compared American Samoa workers’ earnings data from 2007 to 2018 obtained on this review to County Business Patterns data. In general, average earnings estimates in the County Business Patterns data are somewhat higher than in the American Samoa tax data, as shown in table 6. However, both series show growth in earnings over the period of 2008 to 2017 of approximately 20 to 30 percent. Additional Data Reliability Analysis of Individual-Level Earnings As an additional test of the reliability of the individual-level tax data, we examined trends in the distribution of worker-level earnings. A prior GAO report found that the minimum wage increases narrowed the gap between lower- and higher-paid workers in American Samoa from 2007 to 2009. We first examined whether the tax data also show that the gap narrowed during this period and then examined trends through 2018. One limitation of this analysis was that it was restricted to the private sector excluding the canneries. Therefore, any patterns that we documented in this sector may not reflect changes to the American Samoa workforce as a whole. We began our analysis in 2006 to provide information before the Fair Minimum Wage Act of 2007. To measure a worker’s annual earnings, we summed all of the worker’s gross wages from his or her tax records in a given tax year. According to the tax data, in 2006, workers at the 50th percentile of annual earnings earned $6,031. This amount is only 8 percent higher than what full-time workers would have earned if they were continuously employed at the lowest minimum wage that was in effect in American Samoa in 2006 ($2.68 per hour). In comparison, in the same year workers at the 90th percentile earned $18,747, or 3.1 times higher than the 50th percentile. We found that earnings at the 50th percentile experienced a larger increase than earnings at the 90th percentile from 2006 through 2009, and this ratio fell to 2.7. Figure 15 depicts trends in the gap between lower- and higher-paid workers in American Samoa from 2006 through 2018, as measured using the tax data by the ratio between the 90th and 50th percentiles of earnings. Overall, from 2006 through 2018, this gap fell by 17 percent, from 3.1 to 2.6. The decline is attributable to a 48 percent increase in earnings for workers at the 50th percentile, compared to only a 23 percent increase for workers at the 90th percentile. Appendix V: Key Selected Events, 2007– 2019 The following events highlight changes in American Samoa’s minimum wages and the status of the tuna canning industry from 2007 to 2019: 2007. Fair Minimum Wage Act includes a provision to incrementally increase American Samoa minimum wages to the federal level ($7.25 per hour). Special industry committees that previously set minimum wages in American Samoa are disbanded. Minimum wages in American Samoa rise by $0.50 as federally mandated. Minimum wage for fish canning and processing workers becomes $3.76. May 2008. Minimum wages in American Samoa rise by $0.50 as federally mandated. Minimum wage for fish canning and processing workers becomes $4.26. May 2009. Minimum wages in American Samoa rise by $0.50 as federally mandated. Minimum wage for fish canning and processing workers becomes $4.76. September 2009. Chicken of the Sea closes its cannery in American Samoa. The company relocates its canning facilities to the U.S. state of Georgia while outsourcing labor-intensive processes to countries with lower labor costs. The Samoa earthquake and tsunami cause severe damage and leave 34 people dead in American Samoa. The federal government issues a disaster declaration and assists with tsunami recovery efforts. October 2010. Tri Marine International acquires former Chicken of the Sea facility in American Samoa, located adjacent to the StarKist Samoa cannery. American Samoa government grants Tri Marine International exemption from local taxes for 10 years. December 2012. American Samoa government grants StarKist Samoa exemption from local taxes for 10 years. January 2015. Tri Marine International opens $70 million Samoa Tuna Processors cannery after large capital investments in prior years to renovate and expand the former Chicken of the Sea cannery. September 2015. Minimum wages in American Samoa rise by $0.40 as federally mandated. Minimum wage for fish canning and processing workers becomes $5.16. December 2016. Tri Marine International indefinitely suspends operations at its Samoa Tuna Processors cannery in American Samoa. September 2017. StarKist Co. agrees to pay a $6.3 million penalty resulting from violations of federal environmental laws. October 2017. StarKist Samoa temporarily halts operations for 5 weeks because of fish supply setbacks and equipment upgrades. February 2018. According to American government estimates, Tropical Storm Gita causes nearly $200 million in damages to public and private property. The federal government issues a disaster declaration and assists with disaster recovery efforts. May 2018. According to a report by the Pacific Islands Forum Fisheries Agency, StarKist Co. signs 10-year lease agreement with Tri Marine International to sub-lease its Samoa Tuna Processors facility for use in StarKist Samoa operations. September 2018. Minimum wages in American Samoa rise by $0.40 as federally mandated. Minimum wage for fish canning and processing workers becomes $5.56. September 2019. StarKist Co. is sentenced to pay a criminal fine of $100 million for its role in price fixing. Appendix VI: Comparison of Labor and Tariff Costs for Three Potential Tuna Canning Business Models Although American Samoa’s tuna canning industry faces multiple challenges in addition to scheduled minimum wage increases, American Samoa offers the tuna canning industry certain competitive advantages relative to the U.S. mainland and other countries. To illustrate tuna canning costs for other business models, we compared the labor and tariff costs associated with three potential business models for the cannery operations currently used by firms in the global tuna industry. The following analysis provides cost estimates for the three possible models, assuming constant total production under each model. Our analysis considers only labor costs and tariffs to show the effect of variation across different models. Our analysis excludes other associated costs, including transportation and refrigeration, as well as costs associated with establishing multiple production locations. Therefore, we assume that shipping costs and other conversion costs, such as for electricity usage, are identical. We also assume that fixed costs for starting operations in a new location (i.e., search costs) are equal to zero. We assume the alternative country is Thailand, on the basis of prior related reports and interviews with relevant officials and stakeholders. All of the tariff and tax assumptions used in our analysis are based on input from tuna canning industry officials. Model A (maintaining all loining and canning in American Samoa): This is the current production process for the remaining cannery operating in American Samoa. Tuna processing currently performed in American Samoa remains entirely in American Samoa. The cannery located in American Samoa hires local and foreign workers to loin—clean, cook, and cut—and can the fish. With an estimated workforce of 2,000 employees in American Samoa, the associated labor cost was an estimated $23 million in 2019. The canned tuna from American Samoa is exported directly to the United States and, according to cannery officials who utilize this model, such canned tuna is eligible for tariff-free access to the U.S. market. The cannery, which is a qualified domestic corporation, according to cannery officials, receives an estimated $5 million as a federal tax credit. Model B (relocating loining to Thailand or another country with low labor costs and canning processed loins in the U.S. states): This is the current production process for a firm operating a cannery outside of American Samoa. The loining operation—the most labor-intensive part of the operation—would move to a country with low labor costs, such as Thailand, where the fish would be loined, sealed in pouches, and frozen. The loined, frozen fish would then be exported to the U.S. mainland, where it would be canned. With an estimated workforce of 1,700 employees in a country with low labor costs making $1.25 per hour, the associated labor cost would be $4.4 million; and with an estimated workforce of 300 employees in the U.S. mainland at $15 per hour, the associated labor cost would be $9.4 million. Therefore, the total associated labor cost in 2019 for this model would be $14 million. No workers would remain in American Samoa, and 300 workers would be employed on the U.S. mainland. The imported fish would carry an average tariff of $11 per metric ton. This model assumes that the firm operating outside of American Samoa would not qualify for the American Samoa economic development credit. Model C (relocating all loining and canning to Thailand or another country with low labor costs): This is an alternative production process for operating canneries outside of American Samoa. Tuna processing currently performed in American Samoa would relocate to a foreign country with low labor costs. All operations, including loining and canning the fish, would take place in this foreign country. With an estimated workforce of 2,000 employees in a country with low labor costs making $1.25 per hour, the associated labor cost in 2019 would be $5 million. No workers would remain in American Samoa and no workers would be employed in the U.S. mainland. The imported fish would carry an average tariff of 12 percent of export revenue. This model assumes that a firm operating outside of American Samoa would not qualify for the American Samoa economic development credit. Figure 16 shows that, considering labor and tariff costs along with tax credits, Model A has higher costs than Model B. Model B presents cost savings; however, importing processed loins to the United States would incur tariffs, and wages for canning in any of the 50 U.S. states would be higher than in competing tuna processing countries. Model C presents the highest combined labor and tariff costs and would result in an estimated 2,000 fewer jobs in American Samoa. Table 7 below shows how revenue and labor and trade costs are computed for each model. Appendix VII: Comments from the Department of Interior The following are GAO’s comments to the Department of Interior’s letter. GAO Comments With respect to paragraph 4 of the U.S. Department of the Interior’s letter above, the suggested further study was beyond the scope of this report, which focused on (1) economic trends including changes in employment and earnings since the minimum wage increases in American Samoa began in 2007, (2) the status of the tuna canning industry, and (3) stakeholder views on the minimum wage increases. Appendix VIII: Comments from the American Samoa Government Appendix IX: GAO Contact and Staff Acknowledgments GAO Contacts Staff Acknowledgments In addition to the contacts named above, Emil Friberg (Assistant Director), Benjamin Bolitzer (Assistant Director), Justine Lazaro (Analyst in Charge), Samuel Huang, James Boohaker, Carl Nadler, Debbie Chung, Christopher Keblitis, Sara Daleski, Martin De Alteriis, and Alex Welsh made key contributions to this report. Related GAO Reports American Samoa: Alternatives for Raising Minimum Wages to Keep Pace with the Cost of Living and Reach the Federal Level. GAO-17-83. Washington, D.C.: December 2, 2016. American Samoa and the Commonwealth of the Northern Mariana Islands: Economic Indicators Since Minimum Wage Increases Began. GAO-14-381. Washington, D.C.: March 31, 2014. American Samoa and Commonwealth of the Northern Mariana Islands: Employment, Earnings, and Status of Key Industries Since Minimum Wage Increases Began. GAO-11-956T. Washington, D.C.: September 23, 2011. American Samoa and Commonwealth of the Northern Mariana Islands: Employment, Earnings, and Status of Key Industries Since Minimum Wage Increases Began. GAO-11-427. Washington, D.C.: June 23, 2011. American Samoa and Commonwealth of the Northern Mariana Islands: Wages, Employment, Employer Actions, Earnings, and Worker Views Since Minimum Wage Increases Began. GAO-10-333. Washington, D.C.: April 8, 2010.