Editorial: Low-wage earners deserve pay boost

The magic number is 18, as in dollars-per-hour — a new minimum wage nearly $8 higher than the current $10.10.

The state House and Senate agree on the amount; now it’s a matter of how many years it takes to get there.

Senate Bill 2018, which quickly passed out of the Senate and awaits House debate, raises the rate to $12 on Oct. 1, $15 next year and $18 in 2026. House Bill 1771, now in committee, proceeds slower: to $11.50 on Jan. 1, increasing yearly in $1.50 increments to hit $16 in 2026, then taking a $2 jump to $18 on New Year’s Day 2027.

It is heartening to see political will coalescing on a pressing need, to raise a minimum wage last changed in 2018. The state has estimated the current $10.10-per-hour minimum is really worth about $5 when adjusted for Hawaii’s cost of living.

Now to get to the meat of it.

Both bills are relatively brief — the Senate’s is less than 200 words, basically a schedule of yearly increases. (Offering an interesting trip down memory lane, the schedule lists minimum wage rates since 2003, when it was $6.25. How quaint that seems, but that’s still higher than the $5 our current minimum is really worth.)

The House’s more gradual strategy comes in tandem with changes in tax policy that would allow lower-paid workers to keep more of what they earn. House proposals would make permanent the state’s Earned Income Tax Credit, which would otherwise expire this year. It also makes the credit “refundable,” meaning it can factor into a higher tax refund. The House would also increase the food/excise tax credit for low-wage earners.

House Speaker Scott Saiki estimates that by 2027, if passed, all these changes taken together could increase the income of a family of four by about $33,000 annually.

Rep. Aaron Ling Johanson, in a recent Honolulu Star-Advertiser editorial board meeting, explained the House’s more gradual approach as allowing small businesses to better afford each increase, hopefully without cutting workers or shaving their hours. The approach also provides a better net benefit to workers through the tax benefits, he said.

On the face of it, both approaches seem too slow, given that Hawaii is already so far behind — but the minimum wage doesn’t exist in a vacuum, as much as we want to see the situation for low-income workers improve.

The Hawaii Restaurant Association, in testimony on the Senate bill, said the Senate’s increases “are just not sustainable.” The association is promoting a much more modest schedule of increases that end at $15 an hour in 2027.

The House does seem to have crafted a more holistic approach that provides for lifting the prospects of the state’s lowest-paid workers without putting all the burden on employers. It does rely on those workers having the wherewithal to claim their tax credits, so it is not as seamless as a straight-up raise — but as it does get hourly wages to $18 eventually, its connected components are well worth consideration when the two chambers eventually meld their aims in conference.

The House bill further eliminates the tip credit that had allowed employers to pay below the minimum to workers who earn tips — bound to be controversial. It also includes a provision that in the future — beyond 2027 — would tie the minimum wage to Honolulu’s Consumer Price Index, so that increases could automatically come into play yearly without legislative action.

That second proposal is a solid one, as it ties wages to measurable costs and breaks this cycle of having to catch up every few years. The process would have to include guardrails, however, to deal with anomalous years like this one, where inflation is driven not by normal market forces, but by supply-chain shortages and pandemic fallout.

As always, when it comes time to raising Hawaii’s minimum wage — and now is that time — finding a workable balance will be key.