Legislature Wrestles With a Living Wage for Hawaii
Is it fair that minimum-wage workers in the most expensive state in the nation earn only $7.25 an hour?
To put it in perspective, an employee who works 40 hours per week, earns just $290 — before the tax bite. Monthly, that averages out to a little more than $1,200 — again, before taxes.
So it isn’t entirely surprising that the minimum wage issue is among the big questions facing Hawaii legislators this year. Hawaii’s lowest pay-rate hasn’t budged since 2007, but the cost of basic needs — gas, food, housing — have grown tremendously, as the bill itself notes. Twenty-one other states and the District of Columbia all pay workers more, with Washington state leading the pack at $9.32. Twenty-eight other states, all of which are more affordable than Hawaii, have the same bottom-end wage.
Majority leaders in both the Hawaii Senate and House of Representatives said this could be the year to raise the wage, perhaps to $10.10 an hour.
Many stars are aligned: Hawaii’s unemployment is among the lowest in the nation at 4.5 percent, most economic indicators point toward continued growth and other states and municipalities are considering increasing their minimum wage, in some cases substantially. President Barack Obama and Gov. Neil Abercrombie each insisted on a wage increase in their respective annual addresses this month.
But plenty of businesses and their advocates continue to oppose boosting the minimum — or at least raising it too much or too fast. They say the economy is not as robust as reported and warn that employers are already overburdened with costs that keep profit margins thin. A higher bottom wage could mean fewer jobs and businesses shutting down, they argue.
And then there is the matter of what to do about the tip credit, the 25 cents that businesses are allowed to deduct from the minimum wages of waiters, valets and other workers who depend on tips. It was the inability of House and Senate conferees to agree on the amount of a tip credit that killed plans to raise the minimum wage to $9 in the final days of the 2013 session; the Senate wanted to make the credit $2, but the House would only accept 35 cents.
Can supporters of a minimum-wage hike sustain the energy to make it finally happen?
Charting the decline.
Wage hike advocates were heartened Thursday morning when a proposal to raise the wage easily cleared a key Senate panel.
, introduced by Sen. Clayton Hee, would gradually increase the wage to $10.10 an hour by the year 2017. All of the Democrats on Hee’s Judiciary and Labor committee (expect Les Ihara, who was absent) voted in favor of the measure. Only Republican Sam Slom said “no.”
The fact that SB 2609 had a (relatively) smooth hearing so early in the session suggests that it may end up being the vehicle to increase the wage. Hee has made the bill a priority, the senator has a knack for getting his way and any wage increase would have to pass through his committee.
But there are nine other minimum wage proposals before the Legislature this year (see below), including two from top leaders in Hee’s own chamber, and which already has the support of most House Democrats. The bills vary in terms of how much and when they would boost the minimum wage; several also address the matter of whether the tip credit should be adjusted as well. (As of Thursday afternoon, none of the other bills have been scheduled for a hearing.)
SB 2609 deals with the tip credit by deleting it. The Rev. Bob Nakata, who has worked to help the poor and homeless through the nonprofit group , told the Senate committee he was worried that the tip credit would be “the sticking point” again this year.
Increasing the tip credit would effectively negate some or all of the increase in the minimum wage for affected workers, Nakata said.
If the tip credit turns out to be a deal-breaker, it would mean no relief for the 40 percent of homeless people in the state who work but can’t afford to pay rent, he said.
Unlike the other nine minimum wage bills, which are short and direct, SB 2609 attempts to in recent years:
• Seven years ago the average price of gas was $2.81 per gallon. Today, it is approximately $3.98 per gallon depending on the price of crude oil. This is a price increase of thirty-one per cent.
• Minimum wage workers in Hawaii working forty hours per week currently earn $15,080 per year. The annual income for minimum wage workers is approximately the same amount as the cost of the least expensive new vehicle in Hawaii, which is a 2014 Ford Fiesta priced at $14,745.
• The legislature finds that the “tip credit” has made Hawaii’s service workers particularly vulnerable because of the variability of customer tips that subsidize their low wages. The legislature further finds that removing the “tip credit” will treat all workers equally.
If passed into law, Hee’s legislation would mean full-time minimum-wage workers would earn $21,008 a year.
Nakata was among the majority of testifiers who strongly urged a wage hike. Others included the Democratic Party of Hawaii, the Hawaii Alliance for Retired Americans, the Hawaii State AFL-CIO and the Hawaii Catholic Conference.
Raising the minimum wage will decrease poverty.
“We believe such an increase is consistent with the tenets of Catholic social teaching on the dignity of workers, the needs of low-income wage earners in our state, and the principles that have driven welfare reform at both the state and federal levels,” the Catholic Conference’s executive director, Walter Yoshimitsu, said in written testimony.
Randy Pereira, testifying in his capacity as the AFL-CIO president, said in his written testimony, “Even Mayor Bloomberg of New York endorsed New York’s minimum wage increase above the federal level of $7.25 an hour, proclaiming ‘the genius of the free market is not always perfect.'”
(New York recently increased its lowest hourly pay rate to $8 per hour and it will rise to $9 by the end of 2015.)
Those opposed to raising Hawaii’s minimum wage included groups such as the National Federation of Independent Business, the Chamber of Commerce of Hawaii and the Hawaii Food Industry Association.
Lauren Zirbel, the food industry association’s executive director, warned in written testimony that raising the minimum wage “by so much so quickly makes it almost impossible for food retailers to budget these new wages for their businesses.” She also complained about tying the minimum wage to “the unpredictable price index,” which Hee’s bill does, “means that it would be impossible for business owners and managers to create budgets in advance.”
Testifying before Hee’s panel Thursday, Zirbel said many businesses operate on a profit margin of just 1 percent. Increased labor costs could force businesses to close.
Sherry Menor-McNamara, president of the chamber, said a wage hike would be yet another burden on business owners who already have to deal with workers’ compensation and taxes for Social Security, Medicare and unemployment taxes that are all based on wages.
“The overwhelming majority of economists continue to affirm the negative impact of mandatory wage increases on jobs,” the business federation wrote in unsigned testimony. “Mandatory minimum-wage increases end up reducing employment levels for those people with the lowest skills.”
The most salient testimony — written and oral — came from Dwight Takamine, a former legislator who now heads the state Department of Labor and Industrial Relations under Abercrombie.
He noted that 85 percent of minimum-wage workers in Hawaii are above 21 years of age, dispelling notions, he suggested, that most low-wage jobs are entry-level positions held by teenagers. More than 14,000 people, or 2.2 percent of the total workforce, are paid no more than minimum wage; more than half of those employees work 20 to 34 hours a week. Takamine said he believed many of the workers were single parents.
But Slom, a consistent advocate of small business who has long complained about the state’s reputation as a bad place to do business, repeatedly questioned the testimony of Takamine and other supporters of a wage hike.
Hee called for a decision to be made on SB 2609 — another indication of just how much Hee wants his own minimum wage bill to move. It now heads to Ways and Means, where the chairman is David Ige.
Many western states do not have a tip credit provisions in law.
That could make for more fireworks. Ige and Senate President Donna Mercado Kim are the authors of , which would increase the minimum wage to $9.25 per hour by 2017 and amend the tip credit by an as-yet unspecified amount that an employer would be able to deduct from an employee’s wage.
Will Hee’s bill remain intact? And will Hee even agree to hear someone else’s minimum wage bill?
Keep in mind that Ige is running for governor and Kim for Congress, and politics are always a part of the equation at the Legislature. And, should a Senate wage bill cross over to the House, that chamber’s members already have their own ideas about how things should be done.
A bill introduced by Rep. Mark Nakashima, for instance, would raise the wage to $9.50 by 2017 and delete the tip credit. Nakashima heads the House Labor and Public Employment committee that would hear any wage bill in that chamber. Supporters of Nakashima’s bill include Speaker Joe Souki, Majority Leader Scott Saiki, Vice Speaker John Mizuno and Rep. Sylvia Luke, who chairs Finance — the other key committee that a minimum wage bill must get through.
In other words, a minimum wage increase isn’t yet a sure thing.
Read the Bills
introduced by Sen. Clayton Hee
Increases the minimum wage to $8.20 per hour beginning in 2015, $9.15 a year after that, and up to $10.10 at the start of 2017. Repeals the tip credit. Authorizes the department of labor and industrial relations to adjust the minimum hourly wage to the nearest 5 cents based on the Honolulu region consumer price index beginning on 09/30/17 and on September 30 of each year thereafter (to take effect at the start of the following year).
introduced by Sens. Donna Mercado Kim and David Ige
Increases the minimum wage to $8.25 per hour starting in 2015, $8.75 in 2016, and $9.25 when 2017 begins. Amends the tip credit amount an employer may deduct from an employee’s applicable minimum wage.
introduced by Sens. Russell Ruderman and Suzanne Chun Oakland
Increases the minimum wage to $8.25 per hour beginning in 2015, $8.75 the following year, and $9.25 in 2017. Boosts the tip credit to not less than 50 cents per hour below the applicable minimum wage at the start of 2015 and 25 cents per hour below the applicable minimum wage beginning in 2016 and 2017.
and introduced on behalf of Gov. Neil Abercrombie
Increases the minimum wage to $8.75 on January 1, 2015, $9.50 a year later, and up to $10.00 in 2017.
introduced by Rep. Roy Takumi
Increases the minimum wage by $1 in mid-2014, and another dollar at the start of 2015 and then again a year later.
introduced by Rep. Marcus Oshiro
Increases the minimum wage to $10.00 per hour, effective at the start of 2015. Increases the tip credit to $1.25.
introduced by Rep. John Mizuno
Increases the hourly minimum wage to $7.75 on January 1, 2015, $8.25 a year later, $8.75 the year after that, and then up to $9.00 in 2018.
introduced by Reps. Kyle Yamashita, Linda Ichiyama and Gregg Takayama
Increases the minimum wage to $8.00 per hour at the start of 2015, $8.50 the next year, and $9.00 in 2017. Increases the tip credit to $1.00. Requires employers to increase wages of non-tipped employees by $1.00 (if using the tip credit for their tipped employees).
introduced by Rep. Mark Nakashima and supported by 30 other representatives
Annually increases the minimum wage at the start of 2015, 2016 and 2017. As of Sept. 20 of 2017, the DLIR would have to adjust the minimum wage in accordance with the Honolulu region consumer price index. Deletes tip credit.
