Working at minimum wage

The minimum wage has gone up many times since the first national standard was set in 1938. But each time, it seems there’s been a battle.

Now it’s become an issue again, in both federal and Hawaii halls of government — the state Senate is poised to pass a measure to raise it. In this state, different formulas have been discussed: Senate Bill 331 would take the current minimum hourly rate of $7.25 and boost it in stages, between now and 2016, to $9.25.

In the current version of the debate, the usual sticking points are stickier than ever.

What makes the opponents of an increase especially uneasy is the potential for job losses — or, at least, the raising of another impediment to economic activity and job growth in an era of stubbornly high unemployment. A bump in the minimum puts upward pressure on all wages, multiplying the impact on business.

But, as the proponents in this state point out, Hawaii’s minimum hourly rate has not increased since 2007. Over the decades, inflation has eroded the buying power of each dollar, which means more the lower on the pay scale you go. For example, those in the minimum-wage workforce about 50 years ago got pay packets with about one-third more buying power than low-wage workers now earn.

And, as Gov. Neil Abercrombie pointed out in his State of the State address before the start of the legislative session, 19 states and the District of Columbia have higher minimums; considering the cost of living here, this is a memorable statistic.

There’s also a dispute over who bears the brunt of minimum wage stagnation on the workforce side. Winton Schoneman, owner of the Bubbies ice cream parlor in Hawaii Kai, told the Senate Judiciary and Labor Committee that he employs eight part-time workers enrolled in college or high school. A hike in the minimum would mean higher prices, he said, which is likely to drive away customers.

In his testimony, Schoneman described the typical minimum wage worker as young entry-level employees. "Further," he added, citing a national Bureau of Labor Statistics figure, "minimum wage earners tend to be single."

Others would beg to differ.

Some are leaders of the social advocacy nonprofit, Faith Action for Community Equity (FACE), which is planning its annual Equity Conference for Saturday at the University of Hawaii.

Among the presenters will be Jack Temple, a policy analyst for the National Employment Law Project, a 501(c)3 nonprofit organization supporting improved working conditions. NELP will be presenting some data profiling the minimum-age worker in Hawaii, gathered for the event by the Economic Policy Institute (see highlights on Page F1).

"When I reviewed the Hawaii numbers, I was surprised how similar they are to the national picture," Temple said in a telephone interview from his office in Ann Arbor, Mich. "There’s a growing number of older workers, more skilled, and workers supporting children."

Nationally, he added, minimum wage is most common in the retail, hospitality, hotel and restaurant industries, all of which are dominant sectors in Hawaii’s tourist economy.

Although the service economy is not as prone to job outsourcing as manufacturing, the recession has tended to slow the move out of the bottom of the salary scale.

"There’s such a surplus of workers available that it puts downward pressure on wages," Temple said.

A discussion of this issue is certain to unearth some warring statistics. For example, countering Schoneman’s assertion about low-pay workers being single is data showing the impact on household members. Temple pointed to data from the Economic Policy Institute that tallied more than 52,000 children who have at least one parent to be affected by an increase in the minimum wage.

Another prevailing theory is that minimum-wage workers are supplementing their income with a second job, said Bill Kunstman, spokesman for the state Department of Labor and Industrial Relations. But that isn’t necessarily typical any more, he said, pointing to Hawaii figures showing that roughly half the people working for the minimum wage put in 35 hours or more.

However, there are also many who strenuously argue that raising the minimum wage is not the best answer.

Last week the University of Hawaii Economic Research Office issued a report evaluating the Legislature’s push for an increase in the minimum wage as a means to improve life for the working poor. The economists’ general conclusion: Passing the proposal for an earned income tax credit, paring off some of the state’s tax revenues, would boost household income for those at the lowest end of the wage scale without the burden on business that a hike in the minimum wage would pose.

The report — authored by economics professors Sang-hyop Lee and Carl Bonham and researcher Atushi Shibata — partially neutralizes at least one of the critiques raised against boosting the minimum wage. A survey of the literature on the subject suggests that "a small increase in Hawaii’s minimum wage is unlikely to significantly reduce the number of jobs available to unskilled workers," according to the report.

The most underpaid jobs nationally are in food service, according to the Bureau of Labor Statistics, a fact that the report acknowledged.

"Since a large proportion of Hawaii’s jobs are service jobs (roughly 10 percent in food service), if the wage distribution for unskilled workers in Hawaii is similar to the country as a whole, then raising the minimum wage may have a larger impact than in other states," according to the report.

This is a two-sided coin: On the one hand, more people may be positioned for a raise, but more employers could curtail their hiring.

"A policy of increasing the minimum wage could sacrifice many unskilled workers in an attempt to raise the living standards of those workers who still have jobs," the authors wrote.

They also express doubt that the increase would generally lift the lower-paid workers as a whole out of poverty. Because at least a large number of minimum-wage earners are teenagers who are not shouldering the costs of rent and food for the household, they wrote, some of the money spent by the business sector on the wage increase will have no effect on the household budgets of families.

"As an antipoverty tool the minimum wage is undoubtedly inefficient," the economists wrote. "There is surprisingly little correlation between a worker earning the minimum wage and living in poverty. … Most teenagers earning below the minimum wage are not members of poor families."

The better bang for the buck is the earned income tax credit, they said, but the sacrifice of state tax revenue makes it unpopular with state policymakers.

This undoubtedly will be a strike against the tax credit — even as a legislative bill for it advances — in a year when elected officials are worried about pending cuts in federal funds.

Moreover, the Abercrombie administration is pushing for the minimum wage increase. Dwight Takamine, the state’s labor director, said in testimony last week before the Senate Ways and Means Committee that another element in the bill — pegging future rises in the minimum wage to increases in the Consumer Price Index, a provision that business groups also oppose — will help end the decades-long trend of the baseline pay falling behind the cost of living.

"This will also benefit business by making increases in the minimum wage predictable and in smaller increments instead of having to do large increases," Takamine said. "It will also provide an incentive for those moving from welfare to work to earn wages that will enable them to become self-sufficient."

The downward slide in the real value of a paycheck needs to be reversed, Temple said.

"The federal minimum wage has lagged behind cost of living for 40 years," he added. "Employers in the late 1960s were really paying the equivalent of $10.50.

"At the end of the day, there’s no reason why employers can’t do $9.25 today."