One of the biggest private employers in the territory, GHC Reid & Co. Ltd, tells the General Accountability Office team that reviewed impacts of increases in the minimum wage, “As much as we want our people to have the best living standards and be given the same benefits as all US citizens, we need to consider and take action to avoid the long term consequences that will impact our local businesses.”
General Manager Cherith Lober-Soliai says American Samoa is probably the weakest economy within the US and imposition of the minimum wage will continue to weaken the capability of local businesses to support our economy.
She identifies the private sector especially locally owned businesses and businesses with a large workforce as those that will be negatively impacted the most if the minimum wage is increased.
Lober-Soliai says the market has become more competitive within the last 10 yeas., with more products, more competition and a larger selection of cheap and generic brands imported by Chinese retailers who also operate as wholesalers .
The consequence is a reduction in volume purchased through local wholesalers like GHC Reid, she points out.
“Unfortunately American Samoa does not have any legalization that protects and allows only locally owned businesses to operate specific business categories such as wholesale,” says the company GM.
When there’s a reduction in sales a business will resort to either increasing sale prices or reducing overall costs to support net operating income.
She tells GAO their company has implemented cost cutting each time there a government fee or tax imposed on their company and there will be further cost cutting if there’s a hike in the minimum wage.
Further, if the wage costs are passed on to the consumer their products will be more expensive and will be less competitive in the market.
Lober Soliai draws attention to the contribution of locally owned businesses to the economy through taxes, fees, and employment of skilled and unskilled workforce. In addition donations and sponsorships to non profit organizations and government events, community projects, sports teams and the like.
She said an increase in wage costs means their company cannot offer the same level of support.
She estimates an increase of 9% to operational costs if the hourly wake was increased.
She shared that in the last 10 years GHC Reid reduced its workforce by 30% due to a combination of events…the 2015 wage increase, closure of Samoa Tuna Processors in 2016, scanner fees in 2017 and the 2018 wage increase.
In addition workhours were reduced from 80 to 70 hours except for critical positions.
Lober-Soliai said if there was another wage hike their company will be forced to reduce workhours or lay off staff which will defeat the purpose of the minimum wage increase.
Lober Soliai said GHC Reid can no longer absorb costs or impart those costs to consumers due to the already competitive nature of the marker. So it has to resort to reducing headcount and restructure operations.
She predicts that their company would probably have to cease recycling operations which is helping protect the environment.
The GHC Reid GM concludes, “GHC Reid will definitely take action to reduce any imposing costs and will again resort to a reduction in headcount. And there’s no doubt our economy’s main private sector lifeline, StarKist Samoa will be affected. American Samoa should be content that we have something now that is working for all of us to hold on to, than later on having nothing to support our people. Increasing the minimum wage is good for our people, but this is not the right time…only until we have an economy that supports the consequences of job losses.”
