When Hawaii senators in January proposed a nearly 20% increase in the state’s minimum wage to $12 an hour from $10.10, the bill appeared to have not just legs but wings. It sailed through three Senate committees with a total of just two no votes.
But fast forward three months, and the minimum wage bill’s wings had been clipped. The House lawmaker in charge of the bill’s fate hasn’t even scheduled a hearing, and he says he doesn’t plan to.
Rep. Richard Onishi, who chairs the House Committee on Labor and Tourism, says that it’s not a matter of ignoring people at the bottom to help rich business owners. Rather, Onishi said, the issue is that, based on economic analyses he’s studied, raising the minimum wage isn’t the way to help those who need it most.
“I fully believe and I fully support the concept that right now, coming out of this pandemic, our most important role is to get our economy back online, help support businesses so they can begin to operate and hire people back, so that people who are not on unemployment have jobs,” he said.
Debates over minimum wage increases often conjure up caricatures of greedy industrialists hoarding profits on one side and wild-eyed liberals making unreasonable demands on the other. In Hawaii, the debate has been somewhat less polarized.
That’s partly because there’s a broad consensus that too many people are struggling economically. A study conducted by the Aloha United Way, for instance, has become a touchstone for policy debates. The report refers to people barely making it as “Asset Limited, Income Constrained, Employed,” or ALICE.
The latest report, published in 2020, found that 42% of Hawaii’s 455,138 households were below the ALICE level, including 9% living in poverty.
The report, which was commissioned by the Hawaii Community Foundation and Bank of Hawaii Foundation, focused not only on income, but also factored in Hawaii’s high cost of living. When considering the state’s housing costs, for instance, the report found that a single person in Hawaii needs a full-time job earning just over $15.50 an hour merely to survive, while a senior needs more than $17. A family of four with two adults, a young child and an infant, meanwhile, needs almost $91,000 annually.
The Senate Labor Committee alluded to the high cost of living when it voted to pass the bill, saying that increasing the minimum wage could benefit workers without leading to job losses.
The committee added: “Your Committee further finds that currently, there is a significant difference between the minimum wage and what is needed to afford basic needs in Hawaii.”
To Onishi, the issue is not that simple. He said in an interview that he has been studying how to help the ALICE population since the first ALICE report was issued in 2018, when he was part of a committee formed by Rep. Sylvia Luke, chair of the House Finance Committee, to study bills to deal with Hawaii’s high cost of living, including areas like housing and child care.
Onishi said increasing the minimum wage now could have the unintended effect of hurting workers by causing their employers to cut hours as they try to recover from the economic crisis created by the COVID-19 pandemic.
For example, while the Senate committee reported that “higher minimum wages appreciably boost workers’ earnings with little or no effect on employment,” Onishi pointed to a March 2019 study by the University of Hawaii Economic Research Organization that suggests the situation is more nuanced.
The UHERO paper looked at two studies on the effects of minimum wage increases in other locales. Based on those studies, UHERO Executive Director Carl Bonham and co-author Ashley Hirashima concluded that whether a wage increase produces negative results might depend on the size of the increase.
For example, one study looked at citywide minimum wage policies adopted in Chicago, Washington D.C., Oakland, San Francisco, San Jose and Seattle from 2009 to 2016. There, wages were raised to the $10 to 13 per hour range. The study compared data on total employment and average earnings in the food service industry in each city before and after the wage increases. The finding: a 10% increase in the minimum wage had little effect on employment, which ranged from a 0.3% decrease to a 1.1% increase.
But a 2018 study in Washington showed something different, according to UHERO. It looked at Seattle’s minimum wage increase from $9.47 to $11 in 2015, then to $13 in 2016. That study found the increase from $9.47 to $11 in 2015 led to reductions in employment or hours that approximately offset the impact of the higher minimum wage on total worker earnings. The subsequent increase to $13 led to more reductions in hours for low-wage workers, which offset the average hourly wages, leading to “a $74 per month average reduction in the amount paid to workers in low-wage jobs in 2016,” UHERO reported.
“Smaller regular minimum wage increases has less effect on the business and the economy versus large increases,” Onishi said, paraphrasing the UHERO paper. “Smaller increases does not affect the number of jobs. In fact, history shows that it increases demand for jobs. Large increases in studies have shown that it does not necessarily affect jobs, but it affects the number of hours that employees are asked to work, which has a net effect of reducing or keeping their income at the same level because businesses don’t want to increase their costs.”
There’s also the issue of how high the wage should be. Lawmakers have also proposed a $15 per hour wage, Onishi noted. And many people who testified for the current measure said it should raise the wage to $17 instead of $12.
“I fully understand,” he said. But doing that could raise the pay of many government workers, for whom lawmakers are already struggling to find money.
“If we got on a path to raise the minimum wage to $12, $15, $17, whatever, it has this effect on what government employees are getting paid,” he said.
Asked why he wouldn’t hold a hearing to discuss these ideas, Onishi said he would not hold a hearing on a bill he planned to defer.
“I wasn’t going to pass a minimum wage bill without a plan as to how we’re going to address our ALICE population,” he said.
Often lost in the debate over Hawaii’s minimum wage is that many workers earn far more than $10.10 an hour, even those in the hospitality industry. Federal jobs data published on UHERO’s data portal, for instance, shows the median wage for hotel and restaurant workers in Hawaii, even during the worst days of the pandemic in July, was more than $16 per hour. By January, the wage had rebounded to about $18 an hour.
Russell Ryan, chief financial officer of the Highway Inn restaurants in Waipahu and Kakaako, said that the wage paid to employees is just one part of the compensation the restaurant workers receive. Employees also get substantial tips, he said, as well as benefits like 401K matches, paid time off and health insurance. For a new 50-year-old employee, he said, the company can expect to pay $900 for health insurance.
Increasing the minimum wage could drive up wages for higher paid staff, Ryan said. But that would also probably mean raising prices — which could mean fewer customers and thus less demand for workers. As for the hourly wage, he said, the market for good workers is such that only the least experienced are working for anything close to the minimum wage.
“People won’t work for $10.10 an hour because they can’t live on that,” he said. “The market has already adjusted for that.”
If lawmakers want to help people who are truly struggling to make it, he suggested helping with other things that drive up the costs of living, like housing and transportation. Even direct payments to people who need help would be more effective than trying to force businesses to pay more, he said.
“If the legislators could really address this, then find a way that’s much more a scalpel than a blunderbuss,” he said.
That’s what Luke’s committee was doing at the start of the 2020 legislative session, Onishi said, looking at things like universal child care, which he said is a huge cost for Hawaii’s ALICE families.
“Then the pandemic hit, and everything went haywire,” he said. “If it wasn’t (for) the pandemic, we would have had some measures in 2020 that would have started to address these issues, and I’m willing to pick up the ball again in the interim.”
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