Minimum wage for thee, but not for me -- or my district

SF Rep. Nancy Pelosi seems to have a strong enough grasp of arithmetic to understand that minimum-wage laws are damaging, especially to poor people. The problem is that she wants it both ways: advocate a minimum wage hike loudly for a national audience, while protecting her district quietly:

On Wednesday, the House voted to raise the minimum wage from $5.15 to $7.25 per hour.

The bill also extends for the first time the federal minimum wage to the U.S. territory of the Northern Mariana Islands. However, it exempts American Samoa, another Pacific island territory that would become the only U.S. territory not subject to federal minimum-wage laws.

Normally, I wouldn't much care about the vagaries of a bill in relation to a small US territory. Except that in this case...

One of the biggest opponents of the federal minimum wage in Samoa is StarKist Tuna, which owns one of the two packing plants that together employ more than 5,000 Samoans, or nearly 75 percent of the island's work force. StarKist's parent company, Del Monte Corp., has headquarters in San Francisco, which is represented by Mrs. Pelosi.

At the same time the Dems are struggling to get their weak earmarks legislation through, since those damn Republicans want to make it stronger.

The Senate's new Democratic leaders, the fragility of their thin majority on display for the first time, were set back Thursday when nine Democrats joined with Republicans in support of stricter House-passed rules on lawmakers' pet projects [...]

The measure, an amendment to an ethics and lobbying bill, would have adopted a wider definition of "earmarks," specific projects inserted in bills, to include Corps of Engineer water projects, Pentagon weapon systems and items from other federal entities.

Understand that earmarks legislation is not in most politicians' interest. It's not that they are "bad people", it's that earmarks are an important way for a politican to show the folks back home that s/he is working on their behalf. So while a constituent, when asked, might object to "earmarks", they probably enjoy that federally-funded bike path even more.

Earmarks win more votes than ethics reform, I am sorry to say. Or at least that's my calculation. Maybe it will change someday.

(h/t Instapundit)

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Here is the buzz on Memeorandum.

Comments

[poptones]

What is the prevailing wage in Samoa? How on earth can you attempt such a disingenuous argument?

A third of the people in American Samoa work in the canneries. The population of AS has grown 100% in recent years and people continue to move there for the opportunities - among them, for the young people who graduate high school to join the US military or move to the greater economy of the US mainland. AS is essentially a boom town (er, territory), and it's mostly because of the half billion dollars of annual tuna exports - those who don't work in the canneries work in government, municipal services, or support industries for the canneries.

Yes, like the Detroits, Daytons, Flints and Pittsburghs of old it's a one-horse town - but it's still a boom town, and one we need to foster until it has the strength to diversify without having to undergo the economic ravages that all but destroyed so many mainland american cities through the 70's and 80's.

It's also a boom town that's due to explode in a few years. What happens in five years when AS loses its competitive advantage to places like Ecuador, where the prevailing wave is less than a fifth that of AS, where they will be extended the same trade standing as our own US territories while requiring virtually none of our environmental or workplace regulation?

American Samoa needs to diversify - but that takes time. What we need NOW is to make sure the tuna industry remains in the well regulated, US based tax haven of American Samoa rather than packing up for the wild wild west of an unregulated and exploitative central american banana republic.

[Matt S]

What argument are you referring to, pt? It just struck me as odd that our dear Ms. Pelosi managed to attempt such an exception. It has since be rectified, from what I understand.

I don't know a whole lot about AS, but you might give a read to this article. It spells out that unemployment is near 30%. The new federal minimum wage would double their existing minimum wage.

I am against the new minimum wage hike, since it is likely to hurt more than it helps, IMHO. In the case of Samoa, it seems that it would be especially damaging.

[poptones]

Idealism doesn't play well in real life, and I think casting Pelosi as some sort of villainous sellout for trying to work in the real world on this is hypocritical. American Samoa has lower than continental wage laws, but it does have regulation - unlike the other islands covered under this legislation, which so far (thanks to Abramoff and his cronies) have been exempted from numerous labor laws which extend beyond a mere regulation on minimum wage. So far as I know (and I have friends from there) AS doesn't have such problems as garment sweat shops and a pervasive sex tourism trade. This is likely due to cultural differences as well - but one sure way to destroy a culture is to destroy its economy, which losing the canneries will likely do to AS.

Here's some background from 2002, when Abramoff was still running the show. Note that Bumblebee tuna manages to be competitive while operating in Ecuador because, ultimately, they do still employ US citizens in the actual canning operations - they exploit a bit of a loophole in the law.

From the DOL report on AS, circa 2005:

From 1987 to 1998, American Samoa’s tuna processing employment continued to grow, while Puerto Rico’s industry employment fell significantly. Specifically, the American Samoa portion of the U.S. total increased from 31 percent to about 72 percent, while Puerto Rico’s total fell from 62 percent to about 14 percent. The transfer of processing employment coincides with the increase of Puerto Rico’s minimum wage to the mainland’s rate in the late 1980s.

Note the formula that reports uses for calculating the economic impact upon the canners operating in AS:

For tuna canneries, the largest private sector employer, it is informative to estimate by how much total production costs would rise, given a five percent increase in the minimum wage. A rough answer is found by multiplying the percent that labor costs are of total (mostly raw fish) costs - 8.0 percent - times the percent increase in the hourly wage bill, 2.5 percent (assuming that a minimum wage increase will not impact other workers). The result (0.025 X 0.08) is 0.2 percent, i.e., one-fifth of one percent.

This sounds trivial except when one takes into account the rise in minimum wage isn't 2.5 percent in this case, but something closer to 100% ($3.65 to $7.20). This doubles labor costs for the American Samoan industry from 8% to 16% - pretty much ensuring the growth of the Ecuadorian tuna industry (where prevailing wages are something like a buck an hour) and the collapse of the AS tuna industry.

Removing the tarrifs (as is set to happen soon) will remove much of the incentive the other brands have for keeping their canning operations in American Samoa. Like all things real and political it's not a simple issue. Removing these tarrifs is already a done deal unless Congress steps in again and changes its mind; a reasonable minimum wage law is about the only thing left protecting the otherwise relatively productive AS economy: drive the tuna canneries to Ecuador and the American taxpayer gets to pay twice: we get to support the crashing american samoa economy and we lose a substantial export industry.

[Matt S]

I'll cop to being unfair to Ms. Pelosi.

The better question for poptones: do you have a blog? And if not, why not? This sort of analysis is deserving of wider notice. Obviously you know more about this topic than most.

[poptones]

I have one, but I rarely write in it. I just never "got" the whole blog thing. It's much easier to write a response to an argument than to write something cold.

I used to be a staunch libertarian but I got over it. Tarrifs are not just about picking friends - they are about social engineering, which is also one of the claims of the free market libertarians. The difference is tarrifs present a stick, and the free market presents more of a carrot. The problem is we're driving ourselves into debt and destroying our middle class while dangling all those carrots. This is not about protecting corporations; it's about fostering economic growth for less advantaged nations WHILE protecting our middle class - and the underclasses of these developing nations (not to mention our oceans and air) - from rampant corporate exploitation.

Balance.

And no, I'm definitely not a centrist. Like you, I am a fish a bit out of water: I am an old school liberal in the heart of the conservative south.

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