Affording the basics remains a challenge for many in Hawaii, as the cost of housing, rent, and gasoline continues to rise each year. But there’s a flipside to the struggle that many workers face making ends meet — far too many jobs in Hawaii pay low wages that leave full-time workers stuck in poverty.

Despite having the highest cost of living in the country, Hawaii’s minimum wage remains stuck at the federal level of $7.25 per hour, which translates to just $15,080 per year for a full-time worker. This outdated and inadequate minimum wage means that many of the jobs in the state’s main industries, like retail and hospitality, pay too little for workers to afford a basic standard of living.

A proposal currently pending in the Legislature would help address the growth of low-wage jobs in Hawaii by raising the state’s minimum wage to $9.25 per hour and indexing the minimum wage to rise automatically each year with the cost of living.

This proposal would boost the local economy while delivering a much-needed raise to the state’s lowest-paid workers. Roughly 74,000 workers in Hawaii would receive a raise if the state’s minimum wage were increased to $9.25 per hour. This pay raise would generate more than $54 million in new consumer spending and support the creation of 470 new full-time jobs, as businesses expand to meet increased customer demand.

Nineteen states across the country have already raised their minimum wages above $7.25 per hour, including states with much lower costs of living like Montana, Arizona, and Nevada. Moreover, more than a dozen states across the U.S. are considering legislation this year to raise their minimum wages, forming a growing movement to boost pay standards for low-paid workers.

As lawmakers in Hawaii consider raising the state’s minimum wage, there is ample evidence available to guide them – and the weight of this evidence shows that increasing the minimum wage to at least $9.25 per hour, and indexing the minimum wage to rise automatically with the cost of living, remains a smart step for Hawaii’s economy.

Modern economic research shows that businesses can readily adjust to minimum wage increases. A study from 2010, published in the prestigious Review of Economics and Statistics, compared employment levels in over 250 counties in the U.S. with differing minimum wage rates at any point over the last 20 years. This comprehensive study found that higher minimum wages did not reduce employment or encourage businesses to relocate to areas with lower minimum wage rates.

There are several reasons why recent economic research has found that low-wage employers can afford to pay higher wages. Contrary to commons misconception, fully two-thirds of all low-wage workers are employed by large companies with over 100 employees, not the small mom and pop shops that many assume. And the largest employers of low-wage workers – the national retail and fast food chains like Walmart and McDonalds – are earning strong profits today and can afford to pay higher wages.

Furthermore, there are often-overlooked savings that result from paying higher wages. When workers earn higher pay, they are spared from having to balance multiple jobs in order to make ends meet – as a result, employers that pay higher wages benefit from reduced employee turnover and higher worker productivity. Many major companies such as Costco are able to offer low-price products while paying their workers high wages precisely because of the savings generated by higher wages.

While the benefits of raising Hawaii’s minimum wage are clear, it is also important for legislators to approve a minimum wage increase that provides for annual adjustments based on the rising cost of living – this key policy reform, known as “indexing,” has already been adopted in ten states throughout the U.S., and it ensure that the purchasing power of the minimum wage will not gradually erode as the price of basic expenses rises. Nine states adjusted their minimum wage rates on January 1st of this year to keep pace with the cost of living, and these increases boosted pay for nearly 1 million workers and generated over $183 million in consumer spending.

Hawaii’s lawmakers are showing wise judgment in calling for a minimum wage increase. A higher minimum wage will promote economic growth, offer some relief to the state’s lowest-paid workers, and help protect the promise of upward economic mobility for those who work for a living.

About the author: Jack Temple is a policy analyst at the National Employment Law Project, a nonprofit group that conducts research on policies and programs for lower-wage workers.


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