Debate will continue today over how much Hawaii businesses should compensate their minimum-wage employees.
The state’s benchmark has remained at $7.25 an hour — the same as the current federal minimum — since 2007.
Two bills to increase Hawaii’s minimum wage have worked their way through the Legislature this session, drawing plenty of public testimony on the issue.
Many business owners say that raising the minimum wage by $2 an hour or more will hamper small entrepreneurs who have struggled to weather a challenging economy. Meanwhile, advocates for boosting the wage argue that in a state with the highest cost of living in the nation and 17.3 percent of its populace living below the poverty line, just keeping up with the federal minimum isn’t doing enough to help low-income residents make ends meet.
On Thursday, the state Senate Committee on Ways and Means deferred for a second day discussion of Senate Bill 2609 until this morning. The bill seeks to increase the minimum to $8.20 beginning in 2015, followed by incremental increases each year until 2017, when it would reach $10.10 an hour. The legislation would also repeal the state’s “tip credit” law, which allows employers to pay their employees 25 cents less than the minimum wage, provided they earn enough in tips to make up the difference.
“For seven years, the minimum wage in Hawaii has remained at $7.25 per hour while the costs of goods and services have increased,” the bill reads. “For example, seven years ago the average price of gas was $2.81 per gallon. Today, it is approximately $3.98 per gallon depending on the price of crude oil. This is a price increase of 31 percent. The median price of a single-family home in Honolulu rose 14.2 percent from 2012 to 2013. The median home price is currently $685,000. …
“Despite having the highest cost of living in the nation, Hawaii does not have the highest minimum wage. The state of Washington has the highest minimum wage at $9.32 per hour. In addition to Washington, 20 other states and the District of Columbia have higher minimum wages than Hawaii.”
In testimony provided to the Legislature, Cathy Betts, executive director of the Hawaii State Commission on the Status of Women, explained that if the minimum wage had kept pace with inflation since 1968, it would be more than $10.70 an hour.
“In Hawaii, this translates to a growing sector of our working population becoming reliant on state and/or federal benefits,” she wrote. “Currently, one in five minimum wage earners receive Supplemental Nutrition Assistance Program benefits. One in five minimum wage workers have someone in the family reliant on Medicaid. … Currently, 22,000 of Hawaii’s children under 6 live in low income working families.”
She added that most female minimum wage earners are the sole breadwinners for their families, meaning more women live below the poverty level and are more reliant on state and federal benefits in order to do “essential things, like pay their rent and feed their children. Increasing the minimum wage to $10.10 per hour boosts annual earnings and is enough to pull a family of three out of poverty.”
Not everyone agrees that an increase in the minimum wage will bring about the intended results, however.
A recent report from the nonprofit Grassroot Institute found that a raise in the minimum wage will benefit less than 4 percent of low-income families while raising the costs of low-skilled labor by 39 percent, according to a press release from the organization.
“The probable result is that the proposed raise in the minimum wage would be ineffective in lifting working families out of poverty, but would create an additional burden for Hawaii’s business and have a damaging effect on the rate of teenage unemployment,” the release states.
Rather than increasing the minimum wage, many Big Island business owners believe that “solutions lie within the economy and the marketplace to create more jobs for more people,” Judith Fox-Goldstein, president of the Hawaii Island Chamber of Commerce, said.
“We have still not recovered from the economic tsunami that befell our nation,” she stated via submitted testimony. “Yes, we are in recovery mode, but raising the minimum wage will significantly damage the recovery efforts. Let our businesses recover before imposing government regulations that will have negative ramifications on the sustainability of local business and the spirit of entrepreneurialism that is the foundation of our country. We need to minimize the influence of Government power relative to small business.”
In a Thursday email to Stephens Media Hawaii, she added that in addition to the proposed wage hikes, “workers’ compensation, Social Security tax, Medicare tax, TDI and Unemployment tax are all based on wages, thus the bill would (in addition to increasing direct labor costs), increase all the benefit costs and tax which are mandated.”
In addition to the Senate bill, state Rep. Mark Nakashima, D-Hamakua, Hilo, has introduced the similar House Bill 2580, which proposes an increase to $8 an hour in 2015, $8.75 an hour in 2016, and $9.50 an hour in 2017. Thereafter, regular adjusted wage increases would be calculated using a consumer price index. It also proposes doing away with the tip credit.
Steve Ueda, vice president of sales at Suisan Company Ltd. in Hilo, said via testimony that HB 2580 would have “drastic and long-term negative effects on my business, my customers, and my employees.”
“The cost of employing someone is more than just the cost of their wages, and the pay structure of all employees is linked. A rapid and high minimum wage increase will cost my business much more than the amount of the increase itself. This affects every aspect of my business, especially the number of employees I can afford to maintain and the prices I can charge,” he wrote.
Hawaii Island Chamber of Commerce board member Spencer Oliver, who has worked in the restaurant industry since 1985 and formerly served as president of the Hawaii Restaurant Association’s Big Island chapter, added Thursday that one unintended consequence of dropping the “tip credit” would be to increase the disparity between what servers make compared with cooks and other workers who may have more experience and education.
“The front of the house (in a restaurant), which is normally college students or young people getting started in entry-level positions … can end up making $13-$20 an hour, which is a great wage. Meanwhile, the back of the house, including chefs, who have gone to school and have associate degrees and are working full time, we struggle to pay them between $13 and $17 an hour,” he said. “Every time you force restaurant owners to pay the front of the house more, the back of the house gets neglected.”
The House Committee on Finance voted to pass HB 2580 with amendments Thursday afternoon.
“I think that it is important we pass a minimum wage bill this year,” Nakashima said Thursday morning before the vote of the finance committee. “The price of everything around us has gone up, and the lowest paid employees in the state have been paid … the same amount for going on seven years.”
Email Colin M. Stewart at email@example.com.