Best-Ever Example of the Destructiveness of Minimum Wage

This is from the Wall Street Journal today (1 JUNE 2010).

The New Cannery Row

Congress wants $18 million to offset the jobs it destroyed in Samoa.

Hidden inside the latest Democratic spending bill is an $18 million taxpayer handout to American Samoa. How did that get in there? Read on for another lesson in the uncreative jobs destruction of the minimum wage.

When Democrats in Congress increased the minimum wage in 2007, the U.S. territory of 65,000 in the South Pacific pleaded for its traditional exemption from the wage law to prevent job losses. But Democrats followed union orders and said that if multinational companies like StarKist, one of Samoa’s largest employers, could pay its CEO millions it could afford to pay workers $7.25 an hour. So they raised the minimum wage for low-skilled Samoan workers from $3.26 an hour to $5.25 today and by 2015 it will rise to the current U.S. minimum of $7.25.

Job losses have followed the way that any economics 101 student would expect. Last September Chicken of the Sea closed its tuna canning operation in the territory, leaving more than 2,000 Samoans jobless.

Then last month StarKist announced it will lay off as many as 800 workers, bringing its work force there from 3,000 before the minimum wage hike to 1,200 by 2011. StarKist explained that because of the minimum wage hike Samoa is no longer competitive with other tuna canning countries. American Samoa’s unemployment rate, which was less than 10% in 2003, has climbed to some 30% or more today. Sorry, Charlie.

The Government Accountability Office recently surveyed businesses and workers in the territory and found that many firms will be “leaving American Samoa or closing by the end of 2010.” Because of the job losses, real incomes declined by 6% from 2006 to 2008 in the territory. As the jobs disappear, GAO also found that worker support for the minimum wage had “dwindled.” Samoan workers apparently would rather have a secure job at $3 or $4 an hour than no job at $7.25 an hour.

Which brings us to the $18 million that Democrats have earmarked for American Samoa. Congressman Eni Faleomavaega explained in a May 20 press release that IRS business tax credits for operating on the island are “no longer useful to companies doing business in American Samoa because a company can only take advantage of the credit if the company is operating at a profit. StarKist, American Samoa’s largest private-sector employer, is operating at a loss.”

Why? Because, he added, the firm “can no longer compete against low-wage rate countries like Thailand that pay fish cleaners $0.75 and less per hour.” Without this money, the Congressman warned, “StarKist will be forced to close its operations in American Samoa and, if this happens, the Territory’s economy, which is barely hanging by a thread, will collapse.”

We’ve rarely seen a more devastating real world indictment of the impact of the minimum wage. Congress could simply lower the minimum wage to bring the jobs back, but instead taxpayers get to shell out $18 million to undo the damage that Congress’s economic illiteracy has caused. Please remember this the next time a Member of Congress says the minimum wage helps “working families.”

Democrats: Destroying economies wherever they go.

About Alex Scipio

About Alex Scipio: Alex moved out of the People's Republic of California to the Free State of Arizona, finally tiring of the lack of the Bill of Rights, the overgrown idiocracy, and the catering to non-Americans & welfare recipients. He still wonders how America got from Truman, Eisenhower, and Daniel Patrick Moynihan to the Liberal and Conservative extremes so badly managing America today. And, yes, islam DOES need to be annihilated. And doing what he can to get folks away from the extremes of political life.
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