Increasing the Minimum Wage is Good for Hawai'i

A raise would generate more economic activity, reduce public assistance

By Dwight Takamine, Director, HI State Department of Labor and Industrial Relations
POSTED: 01:30 a.m. HST, Mar 16, 2014
Honolulu Star-Advertiser

Many of today's labor laws and worker protections have their roots in the Great Depression. The late-19th and early-20th centuries were a time of economic and social instability that included labor strife and violence. In Hawaii, the struggle to organize the plantations included disruptive strikes and violence, including incidents in Hanapepe, Kauai, where 16 workers and four sheriffs perished in 1924, and in Hilo in 1938, when police injured 50 people in firing their riot guns.

During the Great Depression, Americans' view of unions changed as widespread economic hardship created sympathy for working people. President Franklin D. Roosevelt initiated a series of important laws that advanced labor's cause: The National Recovery Act provided for collective bargaining, the National Labor Relations Act established the National Labor Relations Board to punish unfair labor practices and to organize elections when employees wanted to form unions, and the Social Security Act initiated the development of states' unemployment insurance programs.

The last significant piece of New Deal legislation was the Fair Labor Standards Act, which provided minimum-wage and overtime protections for workers to alleviate labor disputes and promote the "health, efficiency, and general well-being of workers."

It is important to remember our history, to provide context as debate over raising the minimum wage continues into the second half of this Legislature.

We are in our eighth year without an increase while the average annual salary has increased $4,200 since 2007. The minimum wage is higher in 21 states and D.C., despite Hawaii having the highest cost of living. Using data from the Consumer Price Index (CPI) and the Department of Business Economic Development and Tourism forecast for 2013-2015, a worker would have to be paid $8.57 by 2013, $8.78 by 2014 and $9 by 2015 to have the same purchasing power as in 2007.

A single parent of one child working at minimum wage 40 hours per week, 52 weeks per year, earns $2,770 or 16 percent below the federal poverty guidelines for a family of two. Hawaii's poverty rate of 17.3 percent makes Hawaii the ninth-poorest in the nation, according to the U.S. Census Bureau. If the minimum wage was increased to $8.20 an hour in January 2015, that single parent with one child as defined above would still fall $1,034 below the 2014 federal poverty guidelines for Hawaii.

More than 1 in 6 children under age 18 live in poverty in the United States. Research of early childhood development has found that income insecurity negatively affects three key aspects of brain development: positive relationships, learning resources and high stress. A 2011 study suggests that a $1,000 increase in household income raises combined math and reading test scores by up to 6 percent.

The last four times the minimum wage was increased, the number of business increased by an average of 2.4 percent 12 months later. Similarly, the number of jobs increased 2.1 percent 12 months after the last four increases. A minimum wage increase will boost consumer demand and jobs because these workers spend most of their increased wages and therefore will generate economic activity.

Only 2.2 percent of the labor force earns $7.25 or less an hour; 85 percent of minimum-wage earners are 21 or older and 84 percent of those workers work more than 20 hours a week, presumably eligible for employer-paid health care. The data also shows that we all subsidize minimum-wage workers: 1 in 5 such workers receives SNAP, have someone in the family on Medicaid, or have at least one child receiving free or reduced-price school meals.

The consensus appears to indicate a minimum-wage increase passing this year. The sticking points are about the tip credit and tying future raises to the CPI. Pertinent facts include that the average tipped worker earns just $9.87 per hour including tips, and tipped workers are more likely to live under the federal poverty guidelines.

By increasing the minimum wage and providing a mechanism for it to keep up with the cost of inflation, the purchasing power of such workers would be preserved, while providing employers with predictable, smaller increases in the minimum wage over time.

On the 50th anniversary of the "War on Poverty," the nation's growing economic inequality is a concern shared across the political spectrum and is the subject of much public policy analysis and debate. An Organization for Economic Co-operation and Development study recently found that the U.S. had the highest income inequality in the developed world, and countries with comparable income inequalities include Cameroon, Madagascar, Rwanda, Uganda and Ecuador.

President Barack Obama recently addressed the issue of rising inequality and declining mobility in the U.S. in advocating for a federal minimum-wage increase:

"It was Adam Smith, the father of free-market economics, who once said, They who feed, clothe, and lodge the whole body of the people should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed, and lodged.' And for those of you who don't speak old-English, let me translate. It means if you work hard, you should make a decent living. If you work hard, you should be able to support a family."

SB2609 needs a hearing!

The following letter was recently sent to the leadership of the Senate Ways and Means Committee.  Please sign on to this petition to add your voice!

Hawaii Needs a Raise!

Dear Senate Ways and Means members:

Our organizations are united in supporting an increase in the minimum wage this year, and we respectfully ask you to hold a hearing on this session’s bill, SB 2609, which just passed out of the Senate Committee on Judiciary and Labor.   We believe we should have a vigorous public discussion based on this year’s bill.

We understand that there are several sides to this critical issue.  Indeed, the differing views about how much the wage should increase, how to schedule the increases if they are enacted, and how to deal with the tip credit underscore the importance of holding a hearing that is open to the public.

We understand that it is technically possible for the chair to bypass the hearing process using bills from last year’s legislative session, but on an issue as important as minimum wage, we do not believe that such a move serves the public interest. SB 2609 differs significantly from the 2013 bill, SB 331, and we should base the discussion on this year’s proposal. This year, dozens of organizations, businesses, and hundreds of individuals have let their voices be heard and testified on the proposed minimum wage increases, and their input should be a key part of the decision-making process.

Our support for this increase is based on our understanding of the lives of Hawaii’s working poor, as well as the inherent immorality of the current situation.   No one working 40 hours a week in Hawaii should have to live in poverty.  Our families are struggling to pay for essentials, and this financial strain contributes too many other social problems related to poverty.  We were disappointed last year when the Legislature was not able to pass an increase in the minimum wage, but we are hopeful that this year, we will make significant gains for Hawaii’s people.

We look forward to participating in a robust, serious, and public debate of the merits of SB 2609 and we sincerely urge you to hold a hearing before the Senate Committee on Ways and Means as soon as possible.

Thank you for your attention,

Americans for Democratic Action Hawai’i
Catholic Charities Hawai'i
COFA Community Action Network
Family Promise of Hawaii
Hawai'i Appleseed Center for Law and Economic Justice
Hawai’i Commission on the Status of Women
Hawai’i Women’s Coalition
Lanakila Pacific
League of Women Voter's Hawai'i
Maui Marshallese Women's Club
Pride at Work Hawai’i
Progressive Democrats of Hawai’i
The Christian Ministry, Wailuku

Pride At Work Hawai'i Out and Organizing!