The state House Finance Committee on Wednesday drafted a new minimum wage bill that would increase the wage to $10 an hour by January 2018 and expand a tip credit to 75 cents. But businesses would not be able to deduct the tip credit unless workers earn at least $7 an hour above the minimum wage, a threshold meant to protect the lowest-paid workers.
Rep. Sylvia Luke, chairwoman of the committee, described the bill as the "best that we can do at the moment," adding, "We do want to help both the employees and also the restaurant employers. We’re hoping that this will provide balance."
Luke (D, Punchbowl-Pauoa-Nuuanu) said she hoped the details are accepted by the full House and the Senate, forgoing the need for conference committee negotiations. The state’s $7.25-an-hour minimum wage has not been raised since 2007. The tip credit — the amount businesses can deduct from the wage of workers who earn tips — is 25 cents.
The new draft mirrors an agreement reached privately in February between state House and Senate leaders that was challenged by Sen. Clayton Hee, chairman of the Senate Judiciary and Labor Committee, over the size of the tip credit.
Hee said Wednesday evening that he would prefer to raise the minimum wage to $10.10 an hour — the amount recommended nationally by President Barack Obama — by January 2017. He said he found it strange that Luke dropped the wage to $10 an hour when the House Labor and Public Employment Committee had agreed to $10.10 by January 2018.
"I imagine we’re headed to conference," said Hee (D, Heeia-Laie-Waialua).
Rep. Mark Nakashima (D, Kukuihaele-Laupahoehoe-North Hilo), chairman of the House Labor and Public Employment Committee, signed off on the new draft.
Nakashima said he preferred a previous House idea to link the tip credit to a poverty threshold. Businesses would have been able to deduct a $1 tip credit from workers who earned 250 percent of the federal poverty level, or about $33,500 a year.
But several restaurant owners complained that the poverty threshold was too confusing. It could have also created situations where businesses would be unable to deduct the tip credit for several months during the year, since it would not be triggered until the worker earned $33,500.
Under existing state law, workers must make at least 50 cents more than the minimum wage before businesses can claim the tip credit. The new draft — Senate Bill 2609 — would expand that amount to $7. So, for example, a worker would have to earn $17 an hour when the full minimum wage increase takes effect in January 2018 for businesses to deduct the 75 cent tip credit.
Nakashima called it a "workable solution."
"Hopefully, it will get us to an agreement on a minimum wage bill," he said.
Raising the minimum wage is a political priority for Democrats this year as the party highlights the issue of income inequality. But for all the political urgency, Democrats who control the Legislature failed to approve a minimum wage bill early in the session — as many had hoped — and now appear to be flirting with conference committee, where a minimum wage increase died last year over a disagreement on the tip credit.
Business interests have warned lawmakers that a sharp increase in the minimum wage without a meaningful tip credit could lead to higher prices for consumers or the loss of hours and benefits for workers.
