“Lingle’s Law” of unintended consequences of government interventions, Part III

When the US Congress increased the minimum wage in 2007, it removed an exemption from coverage granted historically to businesses operating on American Samoa. In so doing, the minimum wage for low-skilled Samoan workers was raised from $3.26 an hour to $5.25 today & that must increase to the current US minimum of $7.25 by 2015.

Unsurprisingly, these imposed hikes in labor costs had consequences. For example, Chicken of the Sea, one of the largest employers in the territory, closed tuna canning operations in September 2009 with more than 2,000job being eliminated. And another canner, StarKist, announced plans to lay off up to 800 workers to reduce its employment roll to 1,200 employees by 2011 from 3,000 before the minimum wage hike.

While minimum wage hikes do not explain all changes in the unemployment rate in American Samoa, it rose there from less than 10% in 2003 to about 30% with real incomes down by 6% from 2006 to 2008.

In turn, the US Congress is considering a grant worth $18 million to aid American Samoa to correct the problems that its previous actions caused.

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About christopher

Content of "Natural Order" attempts to reflect the commitment of Universidad Francisco Marroquin to support the development of a society of free & responsible individuals. The principal commentator for this blog is Christopher Lingle.

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