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Friday, January 3, 2014
Flawed Minimum Wage Hike Advocacy Will Cost Hawaii's Poorest Workers $7M this Year
By Andrew Walden @ 12:34 AM :: 7615 Views :: Labor, Small Business, Cost of Living

by Andrew Walden

Sticking it to restaurateurs is apparently more important than giving a raise to Hawaii's lowest-paid workers.  That's what last session's fight over SB331 teaches us about those lobbying for a minimum wage hike. 

Had it been enacted, SB331 would have "increase(d) the hourly minimum wage to $7.75 on January 1, 2014, $8.25 on January 1, 2015, $8.75 on January 1, 2016, and $9.00 on January 1, 2017."  But the bill stalled in conference and died for the session.  The reason?  Wage hike advocates refused to compromise on the "tip credit"--a clause creating a lower minimum wage rate for employees whose income is substantially derived from tips rather than salary. 

As a result, Hawaii's lowest income earners are out $0.50 per hour starting this week.  A full time worker working at minimum wage for all of 2014, would lose approximately $1000.  Fortunately, few work an entire year full time at minimum wage without a raise.  Nonetheless, they who can least afford it are losing money because of an anti-business political stratagem employed by those who pretend to speak for them. 

The federal tip credit is $5.12 per hour which sets the national minimum wage for tipped employees at $2.13.  Seventeen states have tip credit amounts in excess of $5.00 per hour.  Only six states require tipped employees to be paid at a rate higher than the federal minimum wage of $7.25/hr.  If SB331 were to pass without a substantial concession on tip credit, Hawaii would become the seventh. 

Hawaii's $0.25 per hour tip credit is among the smallest in the nation, forcing restaurateurs to pay $7.00 per hour to waiters many of whom are making more than $20 per hour when tips are included.  This increases prices for everyone and makes it more difficult for restaurants to properly compensate back-of-the-house employees who do not receive tips.  Higher restaurant expenses squeeze tourist spending, reducing the available amount for other activities and entertainment.

According to the US Bureau of Labor Statistics, of Hawaii's 331,000 wage workers, 7,000 earn minimum wage and another 7,000 earn less than minimum wage--4.2% of all workers.  BLS reports that 3/5ths of minimum wage workers nationally are employed in food service positions, a proportion which is likely much higher in tourism-intense Hawaii.  Just over 50% are under age 25.

In essence, 7,000 well-paid waiters are being played against 7,000 underpaid dishwashers.  At $1,000 each, that means a political strategy which valued squeezing small business over helping low wage workers cost $7M in lost wages for back-of-the-house staff.   

SB331 is still alive in the upcoming session.  Have its supporters learned anything from their failure?


Text, Status: SB331 SD2 HD1

2013: How Hawaii Minimum Wage Workers Earn $24.24 per hour

USDOL: State by State list of Tip Credit Amounts 

Hawaii Employers Council: Tip Credit Laws Made Clear


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