When is it the most opportune time for government to compel businesses to bump up what they pay their lowest wage earners? Never, of course.
Employers will say that an increase in the minimum wage means a heavier added burden, beyond merely raising the lowest pay. The minimum wage sets the floor, and raising it often drives up pay for those working well above the minimum as well.
However, leaving the minimum wage at $7.25, where it’s been stuck since 2007, is not the right course for a state concerned about how many of its people are living in poverty, or on the brink. Mandating a modest, gradual increase in the rate would be a reasonable step to take.
Of the two measures that grapple with this issue, the approach taken in House Bill 1028 seems the most balanced, a compromise between helping families falling short of basic income requirements and employers, especially those with small businesses that may be on the edge themselves.
The bill offers a more measured rate increase, spread over a longer period, reaching $9 an hour by 2017. It also would delay implementation of a hike in the unemployment insurance tax rate that was scheduled to happen. It makes sense to have both initiatives enacted in the same measure as part of a coordinated policy, enhancing worker pay packets while providing businesses some insulation, too.
The precise formula will have to be worked out over the course of the remaining weeks of the Legislature, with decisions to be shaped in part by economic policies made in Washington, D.C. The impact of the sequester — the automatic set of federal budget cuts that went into effect at the beginning of March — must guide lawmakers in shaping Hawaii’s bill. State administration officials have rightly expressed some worry about pending job losses depleting the unemployment fund, which has just begun to recover from the drain of the economic downturn of 2009.
It’s impossible to separate worker interests from those of business owners, as some of those appearing before legislative committees recently would attest. Having more income means families will be able to support businesses with increased spending; at the same time, cutting too deeply into a business’ bottom line could curtail its hiring prospects, and that won’t help the unemployed stave off poverty, either.
Some economists make a strong argument that the earned income tax credit, which gives some tax revenue back to the working poor, is a more efficient way of combating poverty than a minimum-wage hike. They point out that some of those earning the minimum wage do not depend on that money for essentials and are youths living with family members, or for whatever reason are not poor themselves.
But others counter with statistics indicating that minimum-wage employment is not only the territory of the teenager or young, occasional worker. The National Employment Law Project pulled together figures for Hawaii recently indicating that 88 percent of those to be affected by a minimum-wage increase are more than 20 years old, with most putting in more than part-time hours.
Raising the minimum wage would lift many boats, as the saying goes, and if more people have a little extra in their wallets to spend, what little wealth they have is spread around.
Perhaps the strongest point made by advocates for a minimum wage increase is that pay packets have lost so much of their purchasing power due to inflation. The minimum hourly wage of 1960 was the equivalent of $10.50 today. There’s no reason why Hawaii’s workers more than 50 years later shouldn’t be earning at least $9 an hour. And while workers’ living conditions go up, businesses shouldn’t have to bear the full brunt of the improvement, either.
