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.
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."