Editorial: It’s time to raise minimum wage

In the numbers game that is setting a minimum wage, one figure stands out: $5 an hour. That’s the estimated worth of Hawaii’s $10.10-per-hour minimum wage when adjusted for cost of living, according to a 2020 report from the state Department of Business, Economic Development and Tourism.

The Hawaii State AFL-CIO puts that figure specifically at $4.98 per hour, well below the federal minimum wage of $7.25.

Such evidence makes it clear we are overdue for a bump-up in the baseline wage for Hawaii’s lowest- paid workers.

With House Speaker Scott Saiki favoring a gradual increase in the minimum to an $18 hourly endpoint, the issue is likely to be front of mind as the Legislature prepares to convene on Jan. 19.

It will be a protracted dance, as minimum wage battles always are. The cost-effect on businesses, especially in food service, personal care and retail, is direct and obvious. For employees, results aren’t as straightforward. The DBEDT report estimated that 28% of Hawaii’s workers would be affected by a bump to $15 per hour in the minimum wage. But “affected,” the report states, could mean a bump in pay or a decrease in hours, as employers juggle the higher cost.

Those costs ripple out from the base wage, as an increase pushes up fees for unemployment insurance, workers’ compensation and other mandates. And workers already earning above minimum wage often also get a bump in pay.

The DBEDT report goes on to say, however, that based on “robust analyses,” minimum wage increases since 1990 showed “no large negative employment effects.”

It is important to note that potentially more than a quarter of the workforce would have more money to spend. Whether that goes to settle debts or consume more, many businesses could see an uptick in revenues. The numbers game is layered with consequences, many of which come down to best guesses.

The last increase in Hawaii’s minimum wage was in 2018, to the current $10.10. We were on a path to a higher minimum just last year, with momentum in the Legislature building toward a $12 per hour rate, even as President Joe Biden was pushing for a $15 minimum on the federal level. A year before that — pre-pandemic 2020 — the Chamber of Commerce of Hawaii was backing a $13 minimum.

COVID-19 derailed all of that. Businesses were in too precarious of a position, lawmakers agreed, and talk of an increase was tabled.

The intervening months have brought a more encouraging scenario. The pandemic is far from over, with many unknowns complicating every projection — yet the economy is rebounding. Many businesses are facing labor shortages and find they must offer more in wages and benefits to lure workers. The Chamber of Commerce is on board once again, favoring an increase of some kind, but urging caution.

How much should the first step increase be, and how fast do we progress to $18? Is $18 even the right number?

One thing is clear: With inflation up, that $12 rate proposed in 2021 is obsolete. A better number is $15, implemented as soon as possible, as we’re lagging behind other high-cost-of-living communities around the nation. New York City pays $15 per hour; Seattle pays $17.27 — just a couple of examples.

Aside from a straight base number, lawmakers will need to assess such options as sliding rates for smaller businesses, exemptions for workers who earn tips, even tax credits to help employers afford the increase. The Legislature’s new Working Families Caucus further proposes tying future increases to the cost of living, an idea worth discussing.

Expect this to be a hot-button topic in the months to come. Hawaii needs a competitive minimum wage to keep from losing employees to other places. Workers need it to survive in a state growing more expensive all the time.