Democrats ease on down the sleaze trail

In the opening week of the new Congressional session, Democrats have generally kept to their promises, including their stated committment to clean up the ethics and pork-barrel mentality in Congress.

But now comes an example of why they should be subjected to close scrutiny.

The new minimum-wage bill, which would raise the wage from $5.15 to $7.25, fulfills one of their "100 hour" pledges. But dig into the details, and you find the wage doesn't apply to every location under American jurisidiction. For instance, it will affect the Northern Marianas, home of notorious garment sweatshops. But it specifically exempts American Samoa.

What's so special about Samoa? It has a Democratic delegate to Congress, for one thing. Further, it's dominated by the tuna industry. And one of the biggest tuna canners, StarKist, is owned by Del Monte, which has its corporate headquarters in Pelosi's San Francisco district.

The direct Pelosi link is a bit hyped -- Del Monte is a huge and geographically diverse company, and none of the StarKist operations are in San Francisco -- but the exemption makes no sense. If a minimum wage is good for the Marianas and the U.S. proper, it's good for Samoa.

And the Republicans don't escape untainted here, either. They opposed the minimum wage measure, so it's a bit disingenuous to see them complaining that it doesn't cover every last inch of U.S. territory. And they did pretty much nothing about the Marianas sweatshops when they were in power; at least the Democrats are doing something.

The story notes that canneries in Southeast Asia pay 67 cents an hour instead of the average of $3.60 that Samoan canneries pay, raising the concern that applying the new minimum wage to Samoa would cause the canneries to leave en masse and make Samoa one big welfare client, because the canneries employ about half of the Samoan workforce.

But is making people work for $3.60 an hour really a solution? Doesn't that just perpetuate a bad situation -- and, given the low Asian wages, one that isn't going to get better? Isn't the real answer to diversify the Samoan economy so it no longer has to rely on such low-wage jobs, especially jobs concentrated in a single industry?

The minimum wage should apply to Samoa. And if that causes the canneries to leave, then a two-pronged response is called for: a look at how to draw investment to Samoa to replace them, and an examination of the goals and economic rationale behind the minimum wage.

Opponents have long said that the minimum wage hurts small businesses and low-wage businesses and the workers they employ, both by making those businesses less competitive and by giving them incentive to hire fewer workers. If the canneries leave Samoa, that would seem to prove the opponents right. Supporters would then need to show why Samoa is an exception, or why such localized effects are outweighed by the overall benefit of a higher wage.

Those benefits are usually described in terms of overall benefit: 900,000 workers making $7 an hour collectively make more money ($6.3 million) than 1 million workers making $5 an hour ($5 million). So even though some workers are laid off, as a group minimum-wage workers are better off. And while those 100,000 laid-off workers may end up on welfare, a higher minimum wage makes getting a job an attractive alternative to remaining on welfare, so overall one should see a decline in welfare rolls as well.

Finally, the ripple effect of a higher minimum wage means wages higher up the payscale will likely see a minor bump, too, spreading the benefit to more workers and helping increase real wage gains in an economy, like this one, that has seen wage increases lag far behind corporate profits.

The question comes down to whether the benefits outweigh the costs, and that depends on the size of the various effects: In my example above, if raising the wage to $7 results in a 30 percent layoff rate instead of 10 percent, the group benefit for low-wage workers disappears.

Sorry for the tangent. Bottom line: if the Democrats want to apply the minimum wage, it should apply to all U.S. territories. Anything else is unfair.

ethics, Samoa, minimum wage, politics, midtopia