Minimum wage pay goes up today

Hawaii’s hourly minimum wage increases today in what is the second of four annual step-ups prescribed by the state Legislature in 2014.

Workers at the bottom of the earnings scale will see their hourly pay rise by 75 cents, or 10 percent, from $7.75 to $8.50.

The pay raise will be a welcome income boost for a wide range of workers including students, retirees and people without skills that command higher pay. Higher-paid workers also stand to benefit from the pressures employers face to raise their wages to remain competitive.

Employers, meanwhile, may be considering some unpleasant moves such as cutting back staff, reducing employee benefits, taking in less profit or raising prices for goods and services to adjust for higher payroll expenses.

The state Department of Labor and Industrial Relations views the minimum wage increase as benefiting economic growth by generating more consumer spending from low-wage workers who will have more money in their pockets.

“The gradual rise in the minimum wage will continue to boost consumer demand and jobs because minimum and low-wage workers spend most, if not all, of their increased wages and thereby generate economic activity as reflected in the continued decline in unemployment,” Linda Chu Takayama, the department’s director, said in a statement. “The increases also increase the purchasing power and living standards for our hard-working Hawaii residents, which as the research shows, lifts many of them out of poverty.”

About 10,000 people in Hawaii earned $7.25 an hour in 2013, representing 3.1 percent of the state’s 325,000-person labor force, according to the U.S. Bureau of Labor Statistics. Another 1.5 percent, or 5,000 people, earned below the minimum.

In 2014, a full-time worker making the minimum wage earned $15,080 in a year. This figure rose to $16,120 in 2015 and will rise to $17,680 this year.

Employees who earn tips, and the businesses who employ them, also will be affected by the minimum wage law change taking effect today.

Tipped employees can be paid 75 cents below the minimum wage starting today as long as the employee’s total pay from the employer including tips is at least $7 more than the minimum wage. Last year, this so-called “tip credit” was 50 cents. Before that the tip credit was 25 cents.

The next two years will bring additional rises in the minimum wage — to $9.25 in 2017 and to $10.10 in 2018.

Some businesses and trade associations expressed concerns about or were opposed to raising the minimum wage in 2014.

The Chamber of Commerce of Hawaii opposed the bill shortly before it was passed, and described the $2.85 hike over four years as a “huge increase” that would harm local businesses, job creation and the state economy.

“With this large increase in the minimum wage, some businesses may have to cut back hours, reduce benefits, or limit hiring of new employees,” the Chamber, which represents 1,000 Hawaii businesses, said in written testimony on the bill. The Chamber was supportive of a more gradual minimum wage increase over a longer period of time.

The Department of Labor figured that this year’s 10 percent increase potentially could add $1.6 million to the payroll of the University of Hawaii.

Cheeseburger Restaurants Inc., which has five Hawaii restaurants and more than 500 employees, projected that taking the minimum wage from $7.25 in 2014 to $9.25 in 2017 would add about $500,000 to its annual labor cost, according to written testimony the company submitted on the bill.

Some businesses and trade groups also noted that higher pay would trigger higher employer taxes and fees for unemployment insurance, workers compensation, Social Security, Medicare and temporary disability.

Richard Parry, president and CEO of Aloha Petroleum Ltd., had estimated that last year’s minimum wage increase would cost his company more than $300,000 and that it would increase to $1.7 million by 2018, according to his written testimony on the bill.

Aloha Petroleum has more than 500 employees, with roughly 360 working at 42 convenience stores. Parry wrote that hourly starting pay ranges from $8 to $10, and the company would have to increase pay for all its convenience store workers to avoid an inequity.

To compensate, Parry said Aloha Petroleum likely would reduce its number of employees. “The economics of the convenience store industry in Hawaii do not support the type of wage increase proposed in this law,” he wrote.

Parry could not be reached for comment Wednesday or Thursday for an update.

Carol Ai May, vice president of local home improvement store chain City Mill, said being a competitive wemployer is a continual effort that requires adjusting compensation as market conditions, including a minimum wage increases require.

City Mill is advertising 19 job openings in a labor market that economists regard as being close to full employment, where employers face stiff competition for available and desirable workers who are hard to find.

The unemployment rate in November was 3.2 percent, which was down from 4.1 percent in November 2014 and 4.5 percent in May 2014, when the minimum wage bill was passed.

“We’ve always been very competitive,” Ai May said, noting that City Mill wages have been above the minimum wage for as long as she can remember and that the company offers benefits that include nine paid holidays a year, 15 days of annual paid time off, an employer-sponsored 401(k) and health care. “We have always paid above the minimum wage and we are continuing to stay ahead of it.”