A raise would generate more economic activity, reduce public assistanceBy Dwight Takamine, Director, HI State Department of Labor and Industrial Relations
POSTED: 01:30 a.m. HST, Mar 16, 2014
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."