Editorial: Hawaii’s minimum-wage bill needs work

Hawaii has two counts against it in the quest for a fair minimum wage. One is that in a largely service economy, many people are actually trying to survive on what these entry-level jobs will pay them.

The other is that this state has a disproportionately large number of small businesses — many of them very small — for which wage mandates, such as what’s proposed in House Bill 1191, represent a real challenge to their survival.

Ultimately it seems right that the minimum will need to move up from its current hourly rate of $10.10 to be competitive with other high-cost communities, and to provide some support for those at the lowest end of the wage scale.

But it has to be done carefully … very carefully. And it needs to be fair — which means rejecting one surprise proposal for a two-tier scale, with state employees getting a higher entry-level rate.

The legislative vehicle for the wage minimum cleared its final committee in the Senate and, pending passage on the floor, soon will move to conference committee to rectify the difference between the House and Senate versions.

The final bill, if one emerges, should more closely resemble the House proposal, which would incrementally raise the minimum rate in five steps, until it becomes $15 an hour starting Jan. 1, 2024.

Acknowledging the employer cost of health care, employees who receive this benefit would have their cash wages stepped up to a final hourly rate of $12.50, the balance being calculated as the value of the health-care premium.

Whether or not the wage differential is at the right level, this generally seems a reasonable notion, given that in many states that may have a nominally higher minimum wage, fewer private employers provide health insurance.

Because of Hawaii’s Prepaid Health Care Act, any employee working at least 20 hours a week must receive this benefit. According to a study by Kaiser Family Foundation, Hawaii has the highest proportion of private employers paying this benefit, at 81.8 percent.

One idea that the Senate Ways and Means Committee restored in its draft is a tax credit for small businesses to soften the blow of the wage mandate. That is a reasonable accommodation that a conference committee should consider.

But there was another, regrettable amendment that is unfair and unnecessary. The panel proposed that state workers receive $17 an hour this year, while other workers upshift to the $15 rate by 2023.

The higher $17 figure is what advocates for an increased minimum wage strongly supported as necessary for a “living wage.” It was, in fact, the proposal in the original version of the bill, which had it taking effect in 2025. Supporters cited 2016 state data showing the “self-sufficiency income standard” was $15.84 an hour and adjusted it upward for 2019.

Transitioning this quickly upward from today’s $10.10 hourly rate, however, would be undeniably difficult for employers, which is why the more attainable $15 was proposed — albeit only for private employees.

At the end of the March 28 Ways and Means hearing, state Sen. Brian Taniguchi, the Senate’s labor committee chairman, proposed bifurcating the wage minimum. Taniguchi, in an emailed response to the Honolulu Star-Advertiser, said that Ways and Means Chairman Donovan Dela Cruz had sought his agreement to a $15 rate for state employees.

“I posed a question to him that if we were going to require private employers to pay a higher minimum wage, shouldn’t the Legislature do better and pay state employees a living wage,” he added. “He agreed and included the $17 in his version.”

Taniguchi acknowledged that public employee salaries are constitutionally a matter for collective bargaining, not statutory adjustment, but added that “this would be more of an aspirational guide for our state negotiators.”

On top of being patently unjust, this doesn’t make any sense. It’s the public employee unions that will be pushing for higher wages — many already making well above any minimum rate. Setting the negotiable wage floor in statute amounts to lawmakers doing the unions’ job for them. That’s not why they were elected.

More broadly, it is at least debatable whether unskilled minimum- wage jobs should be considered living-wage employment. At one time they were first jobs held by youths making money while at school, working toward a more sustainable job, whether blue- or white-collar employment.

Today’s economy often finds retirees holding these jobs for extra income; younger workers with limited skills find fewer of the better- paid jobs that once existed in manufacturing or other sectors. More people who fail to attain the required credentials for higher pay do end up taking minimum wage.

The public-policy goal should be to educate the workforce in preparation for better jobs, and to encourage businesses that can offer them.

To sustain the population that now exists, though, it falls to lawmakers to enact wage policies that are realistic — and equitable. They’re not there yet with HB 1191.