Republicans Complain Minimum Wage Increase Does Not Cover Pacific Island Economy

The hypocrisy of certain House Republicans is displayed in this AP story:

Fending off charges of favoritism, House Democrats say a just-passed minimum wage bill will be changed to cover all U.S. territories – including American Samoa – before it reaches President Bush’s desk. House Speaker Nancy Pelosi, D-Calif., told reporters she has instructed the House Education and Labor Committee to help get the bill changed to “make sure that all of the territories have to comply with the U.S. law on minimum wage.” Her remark Friday followed accusations from Republicans a day earlier that American Samoa, which is not now covered by the $5.15 an hour federal minimum wage, was not included in the law raising the federal pay floor to $7.25 an hour because StarKist has a large cannery in the island chain. StarKist is owned by Del Monte Foods Co., which has its headquarters in San Francisco, Pelosi’s district. “Something is indeed fishy when the federal minimum wage is good for all Americans as espoused by the Democrat majority, yet we exempt a small, in many terms economically struggling island,” Rep. Patrick McHenry, R-N.C., told colleagues on the House floor last week … Spokesmen for both Pelosi and Rep. George Miller, D-Calif., the author of the minimum wage bill, said it excluded American Samoa at the request of nonvoting Delegate Eni Faleomavaega, a Democrat who represents the Pacific island territories in the House. Raising the federal minimum wage would devastate the local tuna industry, Faleomavaega said in a statement last week, noting that American Samoa’s economy is “more than 80 percent” dependent on two U.S. tuna processors, Chicken of the Sea and StarKist.

In fairness, Dean Baker had a similar complaint.

John Amato has video of Patrick McHenry in a battle with Barney Franks where McHenry seems to think procedural matters is the time to argue for the down trodden workers of American Samoa. You can check out Congressman McHenry’s other positions here. In general, he strikes me as the standard faire for a conservative Republican – tax breaks for small businesses, less regulation on businesses, privatization of Social Security, and support for a host of rightwing interferences with personal liberties. But McHenry does seem to depart from the free trade and labor mobility across borders rhetoric of President Bush. So maybe he is a Lou Dobbs Democrat at heart.

Will McHenry also push for a $7.25 minimum wage for places like Iraq and Vietnam? We noted a couple of things that McHenry forgot to admit. First, the Department of Labor documents that there is a $3.26 minimum wage for this sector in American Samoa. We also note that there are some who think a higher minimum wage would cause an increase in unemployment on this island. While we present a counterargument – when was the last time you saw a conservative Republican Congressman arguing higher minimum wages increase employment?

Update: Virtual Slavery in Tuna Land? Tim Graham over at NRO’s The Corner reviews the debate over a higher minimum wage by attacking PBS by raising the liberal bias allegation:

Exhibit A of a liberal bias at PBS is still the program Now, first hosted by Bill Moyers, and now by David Brancaccio. On Friday night, the blatantly partisan ghost of Moyers was still hanging over the broadcast as Brancaccio led off by linking House Majority Leader Tom DeLay to slavery: “The ethical questions dogging Majority Leader Tom DeLay continue to grow. Have his favors to lobbyists led him from family values to supporting virtual slavery?” The program dealt with DeLay’s relationship with lobbyist Jack Abramoff, who lobbied for the Mariana Islands and their low-wage clothing makers. Brancaccio’s opening echoed liberal Rep. George Miller, who said conditions in the Marianas were close “to indentured servitude, to slavery.”

If the labor market on these islands is perfectly competitive, allowing market determined wages should not be compared to slavery. But what is the labor market is one of monopsony power? Isn’t there some degree of exploitation:

Monopsony power, like monopoly power, results in economic inefficiency. This is because the monopsonist avoids purchasing the last few units of a good whose value to the monopsonist is greater than their marginal cost, in order to hold down the price paid for prior units. In principle, inefficiency from monopsony can be mitigated by a well- placed legal price floor, which removes the monopsonist’s power over price and eliminates its incentive to restrict the quantity it purchases. A modest price floor forces the monopsonist to take price as given and increase its purchases toward the level of competitive buyers. However, if the price floor is too high, the monopsonist will reduce its purchases – just as competitive buyers would do in response to a price floor — and inefficiency recurs. In labor markets, “buyers” are employers, “sellers” are individual workers, the “good” is time and effort, and the “price” is the going wage or salary level. An employer who enjoys monopsony power holds down the wage by limiting the number of workers it hires. At the resulting inefficient level of employment, the value of the last worker’s contribution to output is greater than the wage she or he receives. This gap was termed the “rate of exploitation” by Pigou

Update II: John Shadegg joins Patrick McHenry in his support for workers in American Samoa. It seems Faux News is also in this attack on Speaker Pelosi:

GRETCHEN CARLSON: It just so happens Steve that Star Kist tuna ploys 75% of the island’s work force. They are making a lot of tuna there. Apparently then that is shipped off to San Francisco in a district where Nancy Pelosi is from. And now her people are saying that, you know, she has never been influenced by Star Kist at all but other people are saying, hey, this is a little bit of hypocrisy because how can this particular group of people benefit by not having to pay the new minimum wage which is almost $2 more an hour before.
KILMEADE: They have two major plants there and then all of a sudden they don’t have to pay this money and this is a woman I’m going to fight corruption and things on the up and up and make things transparent. Reps. Eric Cantor and Patrick McHenry are beside themselves. Cantor says he is shocked. Now Patrick McHenry when he realizes this, hopped up on the Senate floor, says wait a second have you exempted the American Samoa you have included all these other regions and territories, everything else?

Ms. Carlson is confused. They don’t make tuna in this cannery. They package it. And the minimum wage is $3.62. But Kilmeade is even more confused with his “all of a sudden they don’t have to pay this money” as the legislation does not lower the minimum wage that was already in place. But all of this praise for Eric Cantor and Patrick McHenry strikes me as odd as these two have not been advocates of higher minimum wages before. I smell a small rightwing conspiracy at work.

Update III: We have had a few comments saying my monopsony model is not applicable because the supply curve is elastic. When there is only one employer (OK, we may have two tuna canneries), then the elasticity of labor supply has to be infinite for the degree of exploitation to be zero. If anyone has evidence that the labor supply elasticity in American Samoa is infinite, I’d like to see it.