ÌìÃÀÊÓƵ

Raising the minimum wage in Hawaii is part of a broader need. All wage earners here need a 20 percent wage increase. The nature of minimum wages is such that they place a floor under all wages and their rise pushes up low wages from below. It’s not the whole solution.

To understand why reveals much about Hawaii’s economy.

Speaking broadly, there are those who derive their incomes from high prices. And those who earn wages that suffer from them.

One group, Realtors, whose incomes are based on home prices, does well. According to the Bureau of Labor Statistic Occupational Employment and Wage Survey, a real estate agent’s average salary here is $72,740. They are third after New York and Texas. (Texas Realtors deal in oil and gas). Teachers are a little above $50,000.

A list of those who benefit from high prices can be found in contributors to the Affordable Hawaii PAC. (Irony is alive and well here). The PAC was set up to defeat a constitutional amendment that would have allowed the state to collect property taxes to fund education. Of the $1,000,072 received, $200,000 came from the National Association of Realtors and $600,000 from the local Chamber of Commerce.

And this provides a clue as to why wage earners are in trouble here. And why we need significant minimum wage increases, and wider, substantial, wage increases.

Labor markets produce higher wages because higher prices shift out the demand for labor. Wages usually outpace prices. Currently our price rises are tied to real estate, a necessity for all, yet one that employs relatively few people. A further market check on home prices is they are usually determined by the incomes of local residents. Here they are determined by outside buyers.

In terms of the minimum wage, a further look at the occupational survey tells us that food preparers’ and servers’ average salary is a bit above $34,000. They are the highest paid in the nation. And that’s because of the minimum wage. That’s a livable wage here. But the statistic says half don’t make that.

A $17 minimum wage would move up that lower half. Except?

All those bad side effects critics claim, lower employment, hours and earnings?

Survey Says …

Google Scholar reveals that 666,000 scholarly research papers were published on the minimum wage between 2000 and 2018. Some found no effects related to minimum wages rises. Others found that there were some effects on earnings hours and employment. There is no consensus. (The difference is a complicated methodological issue).

Seattle currently has a $15 per hour minimum wage and it’s booming. So much so that an author of a paper that found negative effects has revised his results.

Hawaii raised the minimum wage incrementally between 2014 and 2018. The total rise was 39 percent. The increase here follows a long-term pattern found in other minimum wage increases, of phased in minimum wage rises over a number years.

One can extract data from the Current Population Survey micro data sets to look at the effects of Hawaii’s wage rise.

Minimum, including sub-minimum, wage worker’s average weekly earnings went from $217 in 2016 to $402 in 2018, a rise of 85 percent rise ($20,900 annually).

Minimum wage increases push from below.

Some of this was a result of an increase in average hours worked from 25 to 29. The number of minimum wage workers went from 1,554 to 8,071. The direst prediction in the minimum wage literature predicts a 39 percent rise in the minimum wage would lead to a 39 percent drop in employment, hours, or earnings.

Minimum wage increases have ripple effects among employees that earn hourly wages up to 50 percent above the minimum. Between 2016 and 2018 weekly income among these workers went from $316 to $462, a rise of 46 percent ($24,024 annually).

The minimum wage is a policy tool that counters poverty. The poverty line for one person in Hawaii is $13,960; 15 percent above the 48 contiguous states. Among hourly workers here, those below the poverty line went from 5.3 percent to 3.9 percent between 2014 and 2018. The number of hourly workers below the poverty line declined by 20 percent.

Minimum wage increases push from below. The recent Local 5 contract demonstrates union wage gains pull from above. Around 2,000 Local 5 members will go from $22 an hour to $25 over three years. This will spread to other Local 5 hotels, and non-union hotels.

A $15 minimum wage hike phased in over several years should not be a problem.

What keeps me up at night is that real estate booms are followed by real estate busts. And I am not looking forward to a massive labor struggle that needs to achieve wage gains of 20 percent.