Pelosi's Fishy Deal
It took the flip-flopping of the Democrats over the minimum wage in American Samoa to highlight the negative consequence of raising the minimum wage: lost jobs.
When news broke that the House hourly minimum-wage increase to $7.25 did not include the territory of American Samoa, home to large employers StarKist Tuna and Chicken of the Sea, Speaker Nancy Pelosi assured reporters that the bill would be changed. It would include American Samoa, as well as the Northern Mariana Islands, before it is sent to the president.
American Samoa may initially have escaped the minimum-wage increases because the San Francisco-headquartered Del Monte Foods, owner of Star-Kist Tuna, is in Ms. Pelosi's district. But now Speaker Pelosi has been shamed into backing down.
There should be general rejoicing in American Samoa on hearing that everyone would get a raise. But not so. The governor of American Samoa, Togiola Tulafono, stated that increasing the minimum wage "would kill the economy," and the Samoan congressional delegate, Eni Faleomavaega, said that it would devastate the local tuna industry.
A quick look at American Samoan local wage rates tells us why. The current hourly minimum wage for fish canning and processing is $3.26. The minimum wage for government employees, who undoubtedly have an easier job than tuna canners, is $2.91. Shipping has the highest minimum wage, at $4.09. Garment manufacturers get the lowest, at $2.68 an hour.
Fans of minimum-wage increases say the hikes have no effect on the economy or on jobs, but American Samoans are smarter. They know that industries are going elsewhere if they have to pay $7.25 an hour. With higher unemployment in American Samoa, the American taxpayer will be called upon to come to the rescue.
In all the states, raising the minimum wage also costs jobs, albeit fewer because the difference in old and new wage rates is smaller. The Democrats from California leading the charge for minimum-wage increases already have a state minimum that is higher than the new proposed federal minimum. They want to raise the costs of primarily Republican states, which have not raised their state minimums. Affected states include Texas, Utah, Indiana, Nebraska, and Oklahoma. According to a professor at the University of Chicago, Richard Epstein, "Raising rivals' costs is a constant theme of federalism and it seems to have taken hold here as well."
It's too bad that it takes American Samoa to show us that higher minimum wages are protecting some workers out of a job and into economic catastrophe. What makes no sense for American Samoa makes no sense for the rest of us either.
Ms. Furchtgott-Roth, a former chief economist at the U.S. Department of Labor, is a senior fellow and director of Hudson Institute's Center for Employment Policy.
