GAO Says No Garment Factories Left in Marianas Islands Due to Wages, China
An April 2010 report from the Government Accountability Office found that following 2007 increases to the minimum wage in the Commonwealth of the Northern Mariana Islands (CNMI) and certain other factors, employment continued an existing downward trend, including closure of the last garment factory.1
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(In 2007, the U.S. enacted a minimum wage law incrementally raising the minimum wages in American Samoa and CNMI. The law applied the first $.50 per hour increase in July 2007 and mandated additional increases in each subsequent year until the minimum wages reach the level of the U.S. minimum wage—currently $7.25 per hour. )
Combination of Increased Minimum Wage, Imports from China Led to Closures
The combination of implementation of minimum wage increases in the CNMI, where the garment industry was one of two major employers, and the lifting of World Trade Organization restrictions on Chinese imports to the U.S. in 2005, which increased the amount of apparel imports from China, led to garment factory closures. The last garment factory in the CNMI closed in early 2009.
The following are highlights of the report, which focused on the impact of the minimum wage increases:
Employers Attribute Cost-Cutting Actions to Minimum Wage Increases
In responses to a GAO questionnaire, CNMI employers reported having taken cost-cutting actions, such as freezing hiring, since the minimum wage increases began and also reported planning additional such actions by the end of 2010. Employers attributed their actions both to the minimum wage increases and other factors, such as immigration laws.
2008 Report Indicated Garment Factory Workers Earned Minimum Wage
In its 2008 report on the effects of the minimum wage increases, GAO found that in the garment industry, almost all workers in the garment factories operating in the CNMI at the end of 2007 earned no more than the minimum wage. Because its August 2009 questionnaire (on which the April 2010 report is based) was sent only to employers currently in operation, GAO was unable to present updated information from the garment firms operating in 2007 that subsequently closed.
GAO’s 2008 report noted, however, that more than 95 percent of foreign garment workers earned the minimum wage at the end of 2007 and it projected that, based on the 2007 wages, by 2015 almost all foreign workers would be affected by the minimum wage increases. In addition, according to tax data GAO obtained from the CNMI government, almost all garment workers were foreign.
1The American Recovery and Reinvestment Act requires GAO to report annually on the impact of the minimum wage increases in American Samoa and the CNMI. In this report GAO describes, since the increases began, wages, employment, employer actions, inflation-adjusted earnings, and worker views.
GAO report on effects of minimum wage increases on American Samoa and the CNMI dated 04/08/10 available at http://www.gao.gov/new.items/d10333.pdf.