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Beginning this week, Hawaii lawmakers will decide whether the lowest-paid workers in the most expensive state in the nation should be paid more for their labor.
Supporters — including the Abercrombie administration, unions and social justice groups — argue that an increase in Hawaii’s minimum wage is long overdue. The last increase, from $6.75 to $7.25, was more than six years ago.
Opponents — including retailers, restaurants and advocates for business — say a wage increase will be harmful to employers already burdened by high operating expenses in an economy that is still largely in recovery mode.
Both sides agree that a minimum wage of $9 an hour by 2017, as is currently proposed, will have consequences for Hawaii’s economy and its people.
Even if the minimum wage is hiked, though, a fundamental question will linger: Who can possibly get by on $18,720 a year in Hawaii?
In his testimony in support of Senate Bill 331, the minimum wage bill that now awaits conference committee, Dwight Takamine said, “Minimum wage earners in Hawaii currently earn $15,080 annually working 40 hours a week for 52 weeks. A person with one child earning $15,080 is $2,770 below the Hawaii poverty level in 2013.”
Takamine, director of the state’s Department of Labor and Industrial Relations, argued that the purpose of the wage hike is “to further the economic recovery of Hawaii and lift Hawaii residents out of poverty and to match the minimum wage to the cost of inflation on an annual basis.”
In testifying, Takamine, a former Hawaii House labor committee chairman with deep union roots, was following the lead of his boss, Gov. Neil Abercrombie, who called for the wage increase in his 2013 State of the State address.
“Nineteen other states plus the District of Columbia have higher minimum wage rates than Hawaii, with less to confront in terms of cost of living,” the governor said in late January, adding, “Everyone is worthy of their labor. Industry and corporations do not lack for support in these halls. Neither should those who work the hardest for the least return.”
Abercrombie asked for a $1.50 increase to $8.75 starting next January. A few weeks later, President Obama effectively upped the ante in his State of the Union address.
“Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9 an hour,” the president said. “We should be able to get that done. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets. And a whole lot of folks out there would probably need less help from government.”
The outcome of a federal minimum wage increase — it’s now $7.25 an hour, the same as Hawaii’s and unchanged since 2009 — is uncertain, with House Republicans already on record against it. But in Democratic-controlled Hawaii, with a native son in the White House, an increase has shown traction.
The latest draft of SB 331 calls for a phased increase, the better to help employers adjust: to $7.25 next Jan. 1, to $8.25 a year from then, to $8.75 beginning Jan. 1, 2016; and to $9 a year after that. An earlier Senate version of the bill proposed $9.25 an hour by 2016, which would return to $8.75 in 2017 but with an adjusted wage tied to the consumer price index kicking in.
The bill also says the hourly wage of tipped employees “may be deemed” to increase, based on a formula that is still being worked out. Increasing the tip credit came in response to the request of restaurants, should the minimum wage be increased.
The only consistent “no” vote on SB 331 has come from Sen. Sam Slom, the lone Republican and a leading voice for small business interests. But seven Democratic senators voted “aye” with reservations.
In the House, Democrats Sharon Har and Jimmy Tokioka voted no, as did Republicans Bob McDermott and Richard Fale; four other GOP reps and two other Democrats, including former Speaker Calvin Say, voted with reservations.
Sen. Russell Ruderman, who voted with reservations, is one of the conferees for SB 331, as is Minority Leader Aaron Ling Johanson, one of the House members who voted with reservations.
In addition to the administration, supporters of SB 331 include the Hawaii Appleseed Center for Law and Economic Justice, United Public Workers, Faith Action for Community Equity, ILWU Local 142, UNITE Here! Local 5, Hawaii Catholic Conference, Hawaii State AFL-CIO, Pacific Resource Partnership, Hawaii Alliance for Retired Americans and the Hawaii Government Employees Association.
Their arguments center primarily on the stark financial hardship faced by many in the state and its toll on society, underscoring the question of whether a $1.75 increase in the minimum wage in four years’ time would do much good.
“Hawaii’s housing and electricity costs are the highest in the nation, with more than 75 percent of people living in poverty paying over 50 percent of their income on shelter,” said the Hawaii Appleseed Center. “Food costs are 60 percent higher than on the mainland. … Due to relatively high income taxes and the GET, Hawaii is considered the fourth most regressive state for taxes. … In light of the extremely high cost of living, heavy tax burden, and wages paid, Hawaii is considered to have the lowest adjusted wages in the nation.”
“Fifty-six percent of renters — many of whom are hourly wage earners — pay 30 percent or more of their income towards rent, fourth highest in the nation; and in a 2011 report by the DBEDT — between 1980 and 2010 — Hawaii’s real average wage grew at a rate nearly 13 percentage points below that of the national average,” said Local 5. “Our people are being pushed off our islands while so many of us can’t afford homes, and more and more of our local jobs go to mainland companies while locals struggle to earn a living wage.”
“Many of these working people are parents,” said the Hawaii Catholic Conference. “In this context, raising the minimum wage is one way to strengthen the families of Hawaii. We strongly believe that an increase in the minimum wage is a matter of fairness and justice, and we hope it can be addressed as soon as possible so that it will benefit the people in Hawaii that need it most.”
Takamine, the labor director, presented a profile of those earning $7.25 an hour or less. They number nearly 16,000, or 2.3 percent of the work force. A higher percentage of males than females earn a subminimum wage. Over 83 percent were age 21 and above, including 7 percent 55 and older. And more than half of all workers at the minimum wage level or less worked at least 35 hours a week.
He highlighted other statistics as well:
• Hawaii’s cost of living is 12 percent higher than the next highest area (Washington, D.C.) and 89 percent higher than in Oklahoma, which is the least expensive area.
• The cost of groceries is 15 percent higher than in Alaska, which is the state with the second-highest grocery costs, and 71 percent higher than Kansas, which has the lowest grocery costs in the nation.
• The cost of transportation is 12 percent higher than Connecticut, which is the state with the second-highest transportation costs; and 47 percent higher than Mississippi, which has the lowest transportation costs in the nation.
“The Census Bureau recently estimated that 17.4 percent of state residents live in poverty, or about one-fifth of Hawaii residents, and that makes Hawaii the seventh highest state with the percentage of people living in poverty,” said Takamine.
Those opposed to SB 331 are just as numerous and passionate.
Opponents include the Retail Merchants of Hawaii, Foodland Supermarket, the Chamber of Commerce of Hawaii, the National Federation of Independent Business Hawaii, the Hawaii Restaurant Association, the Hawaii Food Industry Association, Aloha Petroleum, Hilo Hattie, Duke’s Waikiki and the Hawaii Bar Owners Association.
Their arguments focus on the already high cost of doing business in Hawaii, and how a minimum wage increase would actually do more harm than good.
“Please keep in mind that increasing the minimum wage also increases other labor cost for business such as workers’ compensation, Social Security tax, Medicare tax, temporary disability insurance and unemployment insurance tax because they are based on wage,” said the Chamber. “We would also like to point out that the minimum wage is a ﬂoor wage. For many employees, it is their ﬁrst job and generally, entry-level positions. Employers must invest time and money to train these individuals.”
In other testimony, the Chamber said: “This is a huge increase for business at a time when the economic recovery for many industries and businesses is still fragile.”
“The food industry runs, on average, at about a 1 percent proﬁt margin; therefore, no additional cost can result in no change to our business model,” said the Hawaii Food Industry Association. “As such, an increase in the minimum wage will result in higher food costs and layoffs.”
“The overwhelming majority of economists continue to affirm the negative impact of mandatory wage increases on jobs,” said NFIB Hawaii. “Mandatory minimum-wage increases end up reducing employment levels for those people with the lowest skills.”
“For some reason it seems difficult to get across the concept that when there is only so much of the pie to cut into wages, pension, health beneﬁts, annuity beneﬁts, sick leave, holiday pay, etc. that by dictating how much the employer will pay in one area, automatically means an decrease in other areas,” said Tim Lyons, executive vice president of the Hawaii Business League.
Lyons continued: “We also find it very difficult to compare our employee’s pay rates with employees from other states. Employers in other states don’t have the costs of the Hawaii Pre Paid Health Care Act to deal with, a cost that can add another $300 to $1,200 cost factor to each employee, per month.”
Even if lawmakers end up increasing the minimum wage, it seems inevitable that the issue will come up again, and again.
At its core, the issue is about how society chooses to take care of its citizens, and how it distributes wealth. It’s also about capitalism, competition and free market economies.
While lawmakers deliberate over SB 331 this week and move to sine die May 2, they will also be appropriating funds for collective bargaining agreements. Public sector unions are looking to not only have pay levels and benefits restored, but to see increases on top of that.
Meanwhile, legislators themselves will see their own salaries jump by 25 percent starting next year.
Finally, the Honolulu Star-Advertiser on Sunday reported that Hawaii’s top CEO’s enjoyed a 28 percent “boost” in pay compensation since 2011.
That’s a lot to lay on SB 331; it can’t possibly solve Hawaii’s widening income gap.
Lawmakers are also working on bills to address income inequality, help with housing and homelessness and strengthen the state’s safety net. And, there are bills to help spur economic growth and entrepreneurship.
A goal that both supporters and opponents of increasing the minimum wage can agree on, it’s fair to say, is that all of Hawaii would benefit from fewer people living in tents on our streets and parks.