Hawaii’s lowest-paid workers could be earning nearly $2 more per hour starting Oct. 1 following a compromise reached Friday by state House and Senate leaders.

A legislative conference committee approved a final version of House Bill 2510, which would boost Hawaii’s current $10.10 minimum hourly wage to $12 on Oct. 1 then to $14 at the start of 2024, followed by increases to $16 in 2026 and finally to $18 in 2028.

The bill also makes the state’s earned income tax credit, which is scheduled to expire at the end of this year, refundable and permanent.

Raising Hawaii’s minimum wage, which was last increased in 2018 under legislation passed in 2014, was one of the most contested issues at the Legislature this year with business interests advocating for a more moderate increase and advocates for workers seeking a quicker advance to the $18 mark.

Initial positions in the House and Senate differed widely. House leadership preferred an initial bump to $11 in January followed by annual steps to reach $18 in 2030 along with a host of tax credit policy adjustments, while Senate leadership pushed for quick acceleration to $12 in October and getting to $18 in 2026.

Gavin Thornton, executive director of the Hawaii Appleseed Center for Law and Economic Justice, said the compromise announced Friday is reasonable and still represents significant progress for workers.

“This is a tremendous step forward for working families,” he said. “It is really historic.”

Nicole Woo, director of research and economic policy for Hawaii Children’s Action Network Speaks, said the earned income tax credit should deliver $425 a year on average to qualified moderate- and lower-income families.

“This is a wonderful win for Hawaii’s working families,” she said. “The earned income tax credit is sorely needed especially now that we have (high) inflation. This is the most expensive state to live in.”

At the current minimum wage, a full-time worker would earn $21,008 a year. At $18 an hour the figure becomes $37,440.

Some business advocates urged lawmakers earlier this year not to raise the minimum wage to more than $15 or $16 a hour and contended that a relatively fast increase to $18 would lead to reductions in employment and hours for workers.

Leaders in the Legislature, however, promoted their goal of a major increase from the start of the legislative session in January.

“We had to postpone action on the minimum wage in the last couple of years because of the pandemic, but we promised the public we would address it in this legislative session,” said House Speaker Scott Saiki. “That is exactly what we have done. This is a good bill.”

In addition to the minimum wage step-ups and the earned income tax credit, HB 2510 includes a tip credit provision that allows employers to pay less than the minimum wage to employees who receive tips in certain instances. Under the bill, the existing tip credit of 75 cents increases to $1 on Oct. 1, then to $1.25 at the beginning of 2024 and finally to $1.50 in 2028.

A change in the tip credit also was a compromise between House leadership, which favored an increase, and Senate leadership, which wanted to do away with the credit.

Sen. Brian Taniguchi, chair of the Senate Committee on Labor, Culture and the Arts, expressed partial disappointment in the bill’s final draft but appreciated that the first step-up is only five months away.

“Coming to a compromise on an issue of this magnitude is not easy and we recognize that this is not a perfect bill,” he said in a statement. “But given the circumstances, we did the best that we could.”

The bill now is headed for House and Senate floor votes next week, and if approved would then be sent to Gov. David Ige for consideration.