Does Hawaii need a $15 an hour minimum wage?

California and New York recently concluded that their residents deserve to earn at least that much — guaranteeing that nearly 60 million workers will live in states with a $15 hourly minimum by 2022, after several annual pay increases go through.

Hawaii is more expensive overall than either of those states. And yet our minimum hourly wage is $8.50 and it will rise in two increments to $10.10 by 2018. There are no plans for an increase beyond that.

Mull over the cost of rent, electricity, food, transportation, health care, clothing, taxes and, if you have kids, child care. Now think about what sort of life you could eke out working for $10.10 per hour — before taxes — in the islands.

Do the math and it becomes clear that the salaries-versus-prices equation is broken. There’s a reason why Hawaii has been ranked the worst state to earn a living in the country.

This leads to some crucial questions. For one, how much do people need to earn a simple living in the islands?

The Legislature voted in 2014 to gradually increase the minimum wage to $10.10. Given workers' low buying power in the islands, the state should consider a greater increase.

The Legislature voted in 2014 to gradually increase the minimum wage to $10.10. Given workers’ low buying power in the islands, the state should consider a greater increase.

PF Bentley/Civil Beat

The Massachusetts Institute of Technology’s 2016 Living Wage calculator — which includes an array of basic costs — puts the necessary minimum hourly income for an individual in the most expensive county in Hawaii, Honolulu, at $14.66 per hour. Full-time, that adds up to $30,493 per year, before taxes.

A breadwinners for a family of four must collectively gross nearly double that, $28.95 per hour — or $60,216 per year — to cover basic living costs, according to MIT’s wage calculator.

So a pair of “living-wage” earners in a single household would reach that threshold, but it would take about three and a half full-time current minimum wage salaries to reach that “livable” income level.

Here’s the problem: The typical household in the island only has about three people in it, and some of them are children or non-working elderly folk; so the numbers don’t come close to being “livable.”

The Low-Income Masses

Nationally, 42 percent of working Americans earn less than $15 per hour, according to a recent report by the National Employment Law Project.

That is more than two out of every five workers — and it includes millions of secretaries, janitors, cleaners, fast-food and big-box store workers, salespeople, administrative assistants, farm laborers and many others.

Plenty of workers here in the islands fall into those categories.

The report debunks the long-held myth that low salaries are something young people earn as starter wages before moving up. Nationally, 46 percent of people who earn less than $15 per hour are over the age of 35, according to the report.

The impact of low salaries in high-cost Hawaii is underscored by a report released by the Hawaii Appleseed Center on Tuesday.

 

The Legislature voted in 2014 to gradually increase the minimum wage to $10.10. Given workers' low buying power in the islands, the state should consider a greater increase.

The Legislature voted in 2014 to gradually increase the minimum wage to $10.10. Given workers’ low buying power in the islands, the state should consider a larger increase.

PF Bentley/Civil Beat

It says that Hawaii retains, again, its title for the highest cost of living and rents of any state, and the lowest wages when adjusted for the cost of supporting a family.

The islands also have the sixth-highest poverty rate when government assistance and the cost of living are factored in.

And nearly one in three households doesn’t have enough cash to survive three months at the poverty level, if it needed to.

Beyond Hawaii’s working poor, there is a large swath of the middle class that struggles mightily to cover costs and save for the future.

The Cost Of Higher Wages

Another good question: Can Hawaii afford to raise its low-end wages?

After all, some people almost certainly would lose jobs as businesses, particularly small ones, immediately seek to cut other costs to make up for paying higher salaries. And, logically, many prices would rise to some extent.

This is where some interesting research comes into play that highlights a positive boomerang effect of minimum wage increases.

One recent study from the University of California Berkeley highlights how people at low income levels in the U.S. generally need to spend what they earn to satisfy fairly basic needs, meaning that they save little or nothing.

When people who don’t earn a livable wage get a raise, they tend to spend that, too. More spending by a lot of people acts as an economic stimulus program, resulting in more business, including for some of the companies that have had to raise the wages they pay, creating a fortuitous cycle.

So, when Berkeley economics professor Michael Reich examined the potential impact of a $15 minimum hourly wage in New York, he concluded that rather than costing jobs in the state, it would slightly increase overall employment.

When an economics professor examined the potential impact of a $15 minimum hourly wage in New York, he concluded that rather than costing jobs in the state, it would slightly increase overall employment.

There are other benefits to higher salaries at the low end, according to the extensive literature on the issue.

Higher wages generally make it more likely that employees will stay at their workplace. That brings benefits ranging from more institutional knowledge to savings on training new employees.

But there is also a worthwhile big-picture question for places contemplating a large minimum-wage pay increase: What if the economy tanks?

California actually took the possibility of a downturn into account in its recent minimum-wage agreement.

Wage increases have been slated for each year through 2022; but there is an escape clause that lets the governor suspend the raises if the state hits major economic and budgetary turbulence.

That helped to comfort the reservations of California Gov. Jerry Brown, who said that several recent measures aimed at supporting the lower and middle classes are an attempt to rebalance the situation for many working people.

“We’re living in a world that, we all know, is growing in inequality,” Brown said during a press conference in Sacramento this week.

The Search For Alternatives

In a more balanced economic environment, a minimum-wage increase might not be necessary.

Ideally, market forces would respond naturally to Hawaii’s profound buying-power problem by driving up wages. Unfortunately, there are few signs that will happen at anywhere near the necessary level.

In a state where unemployment clocks in at a remarkably low 3.1 percent, you might think that businesses would have to compete for unskilled and semi-skilled workers by raising their salaries.

But for whatever reason, that rarely happens in the islands — perhaps because so many people work two or more jobs to try to pay their bills. Put another way: Few people are unemployed, but many people who already work also can fill open job slots.

There is also the reservoir of people coming from the mainland who are sometimes naive about the cost of living here, who can fill tourism-related jobs.

Speaking of the main driver of the state’s economy, the visitor industry isn’t known for its fast-rising salaries.

Military spending and federal funds that have long helped to sustain the islands have been more restrained due to shifting budgetary priorities in Washington, so big new outlays for Hawaii seem unlikely.

And while it would be nice if Hawaii’s nascent steps toward building a tech hub one day were to bring tens of thousands of solidly mid-level salaries to the islands, there are few signs that will happen any time soon.

So, while a more substantial minimum wage hike isn’t the only way forward, the ongoing failure to bolster buying power suggests that Hawaii should seriously consider tipping the scales to make the state more livable for its workers.

You can read personal stories about the human impact of Hawaii’s high cost of living on our Connections story page, and then click on the red pen and share your own.

And join Civil Beat’s Facebook group on the cost of living in Hawaii to continue the conversation and discuss practical and political solutions.

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