State lawmakers passed legislation Tuesday that would incrementally hike the state's minimum wage to $18 an hour by 2028, potentially the highest in the nation.
Advocates say the raise is badly needed in a state that routinely tops lists for the most expensive housing and cost of living. But some businesses are warning they will have to cut staff or even close because they won't be able to afford the greater pay.
The $18 minimum would be the highest dollar amount among the 50 states and the District of Columbia. However, some states automatically boost their minimum wage when the cost of living increases, which means places like California, which currently has a $15 minimum wage, could have a higher wage in six years — given inflation.
The House and Senate approved the measure by wide margins. The bill now goes to Gov. David Ige, who has said he supports an $18 minimum wage.
Hawaiʻi's minimum wage is currently $10.10 an hour. If signed, the bill will raise the rate in increments over the next several years, starting with $12 on Oct. 1, then $14 in 2024, $16 in 2026, and finally $18 in 2028.
Lawmakers last voted to incrementally raise the minimum wage in 2014, when the minimum wage was $7.25. The most recent increase was in January 2018 from $9.25 to $10.10.
House Speaker Scott Saiki said a study showing that 42% of Hawaiʻi households struggle to make ends meet was a big factor behind his support for the increase. The Hawaiʻi State AFL-CIO also endorsed going to $18.
Saiki said he wanted the minimum to rise in tandem with the consumer price index, but lawmakers didn’t reach a consensus on that.
A state analysis published in December showed a single person working 40 hours a week would need to earn $18 an hour to pay for housing and other necessities in Hawaiʻi.
“People should be able to afford their basic needs on 40 hours a week,” said Nate Hix, the director of Living Wage Hawaiʻi, an advocacy group that has been pushing for a higher minimum wage. “Otherwise people are forced to work multiple jobs or sacrifice their basic necessities like food, shelter, clothing.”
The Chamber of Commerce of Hawaiʻi said in written testimony that many of its members say they will lay people off and some will close shop with the rate hike. The business group said Hawaiʻi’s unique-in-the-nation requirement that employers provide health insurance to those working more than 20 hours a week already adds $3 to $4 to the hourly compensation of workers.
Michael Miller, the director of operations at Tiki’s Grill and Bar in Waikīkī, favors gradually hiking the rate to $15 by 2027. He said costs for everything involving labor will go up with the higher wage.
“Who then pays for that? The consumer pays for that,” Miller said.
The legislation expands the tip credit to $1.50 by 2028, allowing employers to subtract that amount from the wage they pay if the workers earn enough in tips.
The bill makes the earned income tax credit permanent and refundable, which will help low- to moderate-income workers cut the taxes they owe and potentially increase their tax refund. Hawaiʻi’s existing earned income tax credit expires this year and is not refundable, meaning many low-income taxpayers can’t use it because their earnings are too low to require significant taxes.
Gerard Dericks, an economics professor at Hawaiʻi Pacific University, said raising the minimum wage to boost living standards focuses on the symptom of the problem and not the underlying cause.
He said it would be better for Hawaiʻi to reduce its cost of living, for example by increasing housing by allowing the construction of taller and more numerous residential towers in Honolulu. Or by repealing the Jones Act, a 1920 law that requires shipping between U.S. ports to be handled by U.S.-flagged ships. Backers of the law say it’s important for national security because it helps maintain the U.S. shipbuilding industry.
