An $18 Minimum Wage Won’t Raise Prices Dramatically - Honolulu Civil Beat

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About the Author

Will Caron

Will Caron is Director of Communications at the Hawaii Appleseed Center for Law and Economic Justice.

Would you pay 31 cents more when you eat out to help end poverty in Hawaii?

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What kind of price increases would you be willing to shoulder to help alleviate poverty for tens of thousands of Hawaii residents?

Hawaii is incredibly expensive, so shouldering a huge price increase would likely be impossible for most of us — even if we wanted to. Fortunately for all of us, the price increases we would see as a result of raising the minimum wage to $18 by 2026 — as proposed in Senate Bill 2018 — are actually very small.

How about 31 cents? Would you be willing to spend that much more on a Zippy’s chili bowl, if it meant that 269,000 Hawaii workers (roughly two out of every five), currently earning less than a living wage, would be able to move closer to self-sufficiency?

What about 45 cents more for a fast food combo? Or 29 cents more for a gallon of milk? A pound of bananas — just 5 cents more?

A comprehensive analysis of peer-reviewed research on the subject shows that, for these small price increases, we could increase the state minimum wage by a whopping 78%, spread out over four years.

Wide view of the Senate floor. Legislature Crossover 2020
Senate Bill 2018, which is moving through the state Senate, would increase the state minimum wage from the current $10.10 an hour to $18 by the year 2026. Cory Lum/Civil Beat/2020

For low-income folks, those pennies can add up. But the pinch at the grocery store would be more than made up for by the wage increases they would see.

For price increases in the 1% to 3% range, we can provide more than $16,000 in additional annual wages to minimum wage workers. Even workers making $18 an hour today (still less than $38,000 annually) will see smaller, but not insignificant, wage increases that will go a long way toward providing financial stability.

While some companies have already increased their starting pay to compete for labor, tens of thousands of Hawaii workers are still stuck trying to make ends meet on low wages at or near the minimum wage.

For low-income folks, those pennies can add up.

Over a quarter of them are parents; the majority of affected workers would be women (55.7%); and 46.4% of Native Hawaiian workers and 64.3% of Pacific Islander workers would benefit from a minimum wage increase.

The additional income from an $18 by 2026 bill would be life-changing for a lot of people. As of October 2021:

  • 31,000 renter households were not caught up on rent or mortgage payments;
  • 50,000 renter households were not at all, or only slightly confident, that they could pay the next month’s rent or mortgage;
  • 10,500 households were somewhat-to-very likely to be evicted or have their homes foreclosed on in the next two months;
  • 74,000 households sometimes or often did not have enough to eat in the previous seven days, and nearly two in three of them were households with children; and
  • 285,000 people found paying for normal household expenses like utilities, cell phone service, broadband access, school supplies and reliable transportation somewhat or very difficult.

Adults living in poverty are five times more likely to report being in poor or fair health compared to their counterparts with incomes above 400% of poverty level.

Lower-income adults are more likely to have chronic diseases that limit activity, which further affects income-earning capacity. The rate of diabetes is twice as high among low-income adults, and the incidence of coronary heart disease is 50% higher than for more affluent individuals.

The impacts of poverty on children are also devastating. In cost-burdened households with children, falling behind on rent and bills is associated with higher child lifetime hospitalizations, and poorer child health.

Poverty exacerbates toxic stress and other adverse childhood experiences (ACEs). There is a strong correlation between ACEs and cancer, diabetes and obesity, as well as anxiety, depression and antisocial behaviors. Moreover, children who experience ACEs are significantly more likely to experience episodes of homelessness in adulthood.

While increasing the minimum wage won’t fix everything (and the other end of the equation — lowering the cost of housing — is equally important), raising the minimum wage to $18 by 2026 would impact many of the same households that reported struggling as recently as last fall.

We all know that $10.10 an hour, or $21,000 a year, is nowhere near enough to survive in Hawaii.

For the rough equivalent price of a gumball added onto our plate lunches, we can ensure that these hard-working individuals — who not so long ago were hailed as “essential workers” — see a pay increase of roughly $4,356 more each year than they earn today.

For folks struggling right now, that trade-off is a no-brainer. And for those of us fortunate to be doing a little better, is 31 cents really too high a price to pay to give working families the opportunity to thrive once again in Hawaii?

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About the Author

Will Caron

Will Caron is Director of Communications at the Hawaii Appleseed Center for Law and Economic Justice.

Latest Comments (0)

Raising the minimum wage to $18.00 will get very few, if any, people out of poverty. Not discussed here is how many workers making below $18.00 per hour in Hawaii are part time (the number number making minimum wage working part time is 66% nationally according to the BLS). So pretending that the additional income will total that of a full time employee is inaccurate. While you can argue whether there is a net loss of jobs due to increases in the minimum wage, there is no doubt that the impact will be most heavily felt on small business owners. More efficient chains (retail/restaurants etc.) can better absorb the cost increases and leverage technology. For example, Starbucks would love to see the minimum wage increased to drive local competition out of business. Progressives like the author here have always been pro big business as the fewer and larger businesses exist, the more easy it is to implement their preferred policy changes. It's easier to get a CEO to mandate a change for 200,000 employees across the country than it is to get 20,000 small business owners with 10 employees each to do the same.

Downhill_From_Here · 1 year ago

" help end poverty..."You seem like a nice guy. Let me help you out. The only people's poverty that was ended were the leftists who support these initiatives. It's been ongoing for decades and yet, every couple years, it gets rehashed, repackaged, reintroduced, get it? They get famous for what they say and how they say it. But when confronted w/ the prospect that throwing money at the problem, again, won't work, again, they pick up and move on to other states/towns.And it still hasn't worked. If anyone can tell me any "war on poverty" effort that worked, and no longer needs a gov't subsidy to continue, I would be greatly appreciative. Academically.

Ranger_MC · 1 year ago

My comment continued:What is cause for most concern are the adverse employment effects that manifest themselves in employment, hour reduction, reduced labor force entry, and other metrics. For example, the vast majority (roughly 80%) of the US literature on minimum wages estimates that employment elasticities are negative. For the non-economists out there, elasticity is a statistical measure of what happens to Y when X changes by 1%. For example, if the employment elasticity for Hawaii is -.1, then a 1% increase in the minimum wage reduces employment by .1%. Regardless of the specific value, minimum wage increases demonstrably have a disemployment effect. Not to mention that firms also typically offset the increase in wages by reducing worker hours and schedule consistency. Price increases – as important as they may be – are the least of our worries.

jahokovi · 1 year ago

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