The High Cost Of Cheap Labor: American Samoa

The recent flap over American Samoa not being eligible for the new minimum wage law piqued my interest so I did a little digging and found some very interesting information. It's an old, old story: The high cost of cheap labor.

Here's the original story to refresh your memory...

"Under a Democrat-backed legislation that is now before the House of Representatives, employers on the Northern Mariana Islands would have to pay workers the federal minimum wage. American Samoa and the tuna industry that dominates its economy would, on the other hand, remain free to pay wages less than half the bill's new mandatory minimum.

Democrats have long tried to pull the Northern Marianas under the umbrella of U.S. labor law, accusing the island's government and its industry leaders of coddling sweatshops and turning a blind eye to forced abortions and indentured servitude.

Samoa has escaped such notoriety, and its low-wage canneries have a protector of a different political stripe, Democratic delegate Eni F.H. Faleomavaega, whose campaign coffers have been well stocked by the tuna industry that virtually runs his island's economy.

Faleomavaega has long made it clear he did not believe his island's economy could handle the federal minimum wage, issuing statements of sympathy for a Samoan tuna industry competing with South American and Asian canneries paying workers about 67 cents an hour.

...The wage bill coming to a vote this Wednesday (Thursday on Saipan) would raise the federal minimum from $5.15 an hour to $7.25 over two years, the first such increase since 1997. The 10-year stretch between wage increases is the longest since the mandatory minimum was created, and passage is expected to be overwhelming.

...But in American Samoa the tuna industry rules the roost. Canneries employ nearly 5,000 workers on the island, or 40 percent of the work force, paying on average $3.60 an hour, compared to $7.99 an hour for Samoan government employees. Samoan minimum wage rates are set by federal industry committees, which visit the island every two years.

...But after the same meeting, Faleomavaega said he understood that the Samoan canneries were facing severe wage competition from South American and Asian competitors.

Department of Interior testimony last year before the Senate noted that canneries in Thailand and the Philippines were paying their workers about 67 cents an hour. If the canneries left American Samoa en masse, the impact would be devastating, leaving Samoans wards of the federal welfare state, warned David Cohen, deputy assistant secretary of the interior for insular affairs."

K, so what is the current reality on American Somoa?

I gleaned this information from a report entitled: American Samoa FY 2005-2006 Plan Of Work

...The population has almost doubled in the last 30 years to about 60,000 people. The population density in 1995 was 736 per square mile. The population is 88.2% Samoan with the median age being 21. The minimum wage set in October 1998, ranges from $2.57 for miscellaneous activities to $3.87 for shipping and transportation. In 1996, 13,949 people were employed with over 5,000 being employed by the Government of American Samoa and 4,542 by the two canneries. The unemployment rate is 5.2. 61% of the population lives at or below the poverty line.

...While the canneries provide jobs, the jobs are not considered desirable to many people. Most of those persons employed in the entry level positions at the canneries are (Western) Samoan nationals.

...The government provides and subsidizes practically all of the medical services through the LBJ Tropical Medical Center and five Public Health Clinics on three islands. Residents pay $5.00 per doctor’s visit, $5.00 per prescription, $7.50 each day for hospitalization. Surgery and medical tests are not included in the visit/hospitalization fees. There are three private part-time clinics, one each for medical, dental and eye care. All medical testing and prescriptions are provided through the hospital and are somewhat limited. Many persons have to be referred offisland for treatment, which greatly increases the cost of health care.

...The average family size in 2000 was 6.24 individuals. The median household income for 2000 was $18,219, resulting in a per capita income of $4,357. Of the 8,706 families in 2000, 61 percent had incomes below the poverty level as determined by the U.S. Bureau of Census. More than 62.2 percent of families below the poverty level had children less than 18 years of age. Coupled with low-income levels is the ever-increasing cost of living. .Since 1982, the current index registered at 153.8 index points as of the fourth quarter of 1996. This means that the cost of living has increased by close to 54 percent, or an annual average of about 3.8 percent. A single household in American Samoa spent an average of about $18,318 in 1988 compared to $12,235 in 1982. More than 50 percent of average spending went to food and housing.

Okay, couple of things. I realize what I'm about to say will shock our globalist friends but let's press on shall we?

If the reality of a globalized market is competing against .67 cents an hour wages, we cannot compete. So that means any business that isn't tied to soil, I.E. a restaurant or a construction firm, is gone, we can't have them because we cannot pay people those wages here.

Does that make sense? You can't compete against slave wages, in fact, you shouldn't even try. Am I to understand that these South American and Asian Tuna companies can't pay a decent wage? Why not? I sense the hand of slave owners here somewhere. The truth is that wages are such a small part of a major business concerns costs that it's a little astonishing to me how much they whine and pule about what literally comes down to a couple of cents to them.

So in our quest for "cheap labor" we pay American Samoans 2.57 to 3.87 an hour but we pay all medical expenses? Care to guess how much that "free" medical care comes to? 3.95 million dollars!

This is wrong any way you slice it. frankly I think it's time to go back to nasty regressive tariffs, I really do. Not to hurt those on the other side of the trade equation, but to help Americans be able to earn a decent wage in those industries that go head to head with countries that pay less than peanuts.

You cannot "compete" with a country that's paying it's citizens .67 cents an hour, nor should you try, it's a fools game that the globalists and psychotic "free traders" have led us into to our own hurt.

Also, why are we, through government dollars, subsidizing these tuna companies to the tune of four million dollars a year? Is this not protectionism? The greatest evil in the world according to free trade pirates? The correct term is socialism, which also creeps into the equation vis-a-vis illegal immigration on the mainland as the government, spending your money, pays the healthcare costs of illegal aliens freeing criminal companies from their rightful obligations to take care of their empoyees. Dumping that expense into our laps then whining that if we don't keep on with the freebies they'll go out of business.

Good, this whole deal, this whole free trade deal is a pyramid scheme and it will bite us in the ass in a serious way somewhere down the road.

Here is what I have come to believe about "free trade." You can only have free trade between economies of similar scale. We can have free trade with Canada because they're not paying their people .67 cents an hour, same goes with Europe and the rest of the first world countries. Where free trade breaks down is when you have economies of vastly differing scales next to each other, it just doesn't work as we see time after time. This isn't the "creative destruction" of a healthy economy, it is the economic equivalent of locusts stripping the ground bare and then moving on to the next field, rinse and repeat as necessary.

Too many of the countries that we have these destabiliziing trade agreements with currently are fond of bad governance. Mexico and Latin America have a love affair with retarded socialism, China is of course a Communist country, and so forth and so on. Know what? Not our problem, and frankly the idea that we should take advantage of the situation to keep from paying four dollars for a 'Tickle Me Elmo' at Wal-mart is repugnant to me as an American. I would refer to this as profiting off the misery of others, not exactly something to be proud of in my book.

If we are going to have trade agreements with third world countries we need to configure a new way to do so. The current methods simply don't work, are shameful in so many ways and frankly, we can and should do better.

I want to leave you with this quote from Richard Cobden, often referred to as the "Father of Free Trade" to show you what a lunatic religion it was even from the beginning...

"I believe that the physical gain will be the smallest gain to humanity from the success of this principle. I look farther; I see in the Free Trade principle that which shall act on the moral world as the principle of gravitation in the universe - drawing men together, thrusting aside the antagonism of race, and creed, and language, and uniting us in the bonds of eternal peace."

Yeah, how's that been workin' out?

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