Lawmakers ignoring potential harm of minimum-wage hike

The state Legislature seems determined to hike the minimum wage to over $10.10 in the next several years despite deep concern by the business sector and economic reports that indicate it would create more harm than good.

Lawmakers appear to be redefining the “minimum wage” as a “living wage,” which it was never meant to be. It is merely a starting point for unskilled labor, an “entry” or “training” wage, which is why the majority of workers make far more than the minimum wage now and why increasing the minimum wage is not our answer to reducing poverty.

Many reports indicate it will have the opposite effect, increasing costs for all and hurting those who most need entry-level jobs.

Michael Palcic, Smart Business Hawaii legislative liaison, writes in an article, “The minimum wage is just that: a minimum. It is a mechanism for youth to gain employment and experience, for seniors to supplement retirement income, for the destitute to gain a toehold in the economy, for individuals to learn the discipline of employment: reliability, job performance, cooperation, achievement. It is a beginning for many people, not a destination. Raising the rates deprives individuals of these opportunities.”

So why the relentless effort to increase the minimum wage right now? After “the unions want it,” the other answers we hear are: “to help the poor” and “address our high cost of living.”

We certainly understand why the unions want it because it causes a wage inflation, raising wages and taxes. But unions do not pay member wages, businesses (and governments) do, and businesses are saying that they cannot afford this level of increase. Costs will be passed on to consumers and jobs will be lost when markets will not bear higher prices.

Mark Wilson sheds light on the misconceptions about “helping the poor” in “The Negative Effects of Minimum Wage Laws.” He highlights the Bureau of Labor Statistics report that only 1.8 million paid-hourly employees were paid the federal minimum wage (and Hawaii’s) of $7.25 in 2010. Of those, only 20.8 percent of all minimum-wage workers are family heads or spouses working full time; 30.8 percent are children and 32.2 percent are young Americans in school.

He writes: “Therefore, the popular belief that minimum-wage workers are poor adults (25 years old or older), working full time and trying to raise a family is largely untrue. Just 4.7% match that description. Indeed, many minimum wage workers live in families with incomes well above the poverty level.”

Regarding Hawaii’s high cost of living, it is a factor we continually have to contend with. Government has a direct hand in this and can help by preventing measures that increase costs for businesses and residents. We have the highest cost of doing business in the nation and are the only state that mandates employers provide health care to employees, including part-timers who work 20 hours or more per week.

Business organizations statewide have been warning state legislators that increasing the minimum wage as proposed will:

* Reduce current employment.

* Cause a decrease in work hours.

* Hinder job creation.

* Harm seniors and youth.

* Inflate the price of goods and services for all residents, including the poor who we all want to help.

They are not hearing us.

Even the Congressional Budget Office found that increasing the minimum wage to $10.10 an hour would reduce employment by 500,000 jobs and an increase to $9 an hour would reduce employment by 100,000 jobs.

Ask lawmakers to recognize the negative economic impacts that passing a high minimum-wage increase will have and prevent it. Doing so under the guise of “helping the poor” is wrong and will be a false prophecy.

* Pamela Tumpap is president of the Maui Chamber of Commerce.