Numerous bills to increase Hawaii's minimum wage are continuing to be heard this legislative session. Based on the increases being proposed, businesses do not feel that lawmakers understand their realities and how the high increases will hurt job creation.
Two measures are particularly offensive: The measure to increase the minimum wage by $2.75 per hour on Jan. 1, 2015, to $10 per hour, and a bill that seeks to tie an increase to the Honolulu Consumer Price Index.
While the economy is picking up, many are still operating with fewer employees than before and are struggling to keep up with rising costs that are beyond their control, especially rising health care costs. They need an environment where they can stabilize their business, then grow and thrive. Raising the minimum wage will inflate their costs and does not increase productivity or improve their bottom line.
Minimum wage increases cause a wage compression, squeezing or eliminating the gap between the wage of new hires and those who have been with a company awhile, requiring employers to look at their pay structures across the board to be fair and equitable to all employees. That, combined with other costs, brings expenses to a rate that outpaces gains, which is not sustainable. It threatens to put businesses out of business and will cost jobs. It is not realistic to think they can simply charge more because in many cases the market will not bear it.
The majority of businesses pay higher than the minimum wage now, but they would still be hurt because the boost is subjective and creates wage increase expectations. Since the raise is not based on merit, why shouldn't all those employees who have been with the business over time and are working hard to help it succeed get an additional raise as well?
Further, it hikes all other related worker costs tied to wages, such as workers' compensation, Social Security tax, Medicare tax, temporary disability insurance, and unemployment insurance tax. We already have the highest cost of doing business in the nation and this would elevate it even further.
In addition, we adamantly oppose tying future minimum wage increases to the Consumer Price Index because automatic increases take away the opportunity to consider economic realities and hear business concerns on the matter moving forward. That is just wrong.
It is important to remember that a minimum is not, and is not meant to be, a living wage. It is a starting point for unskilled workers. Businesses make huge investments in training these employees to give them skills and help them move up.
The bottom line is that the negative impacts of the current proposals on businesses and our economy have not been adequately weighed. We believe they set the stage for economic hardships and job losses, and we are asking lawmakers to fully consider the economic impacts before passing a minimum wage increase.
We cannot continue to make decisions in a vacuum, absent the impact on businesses and the economy. There is a two-tiered recovery right now and many businesses are not seeing the same returns that the visitor industry is. Increasing the minimum, as outlined in the bills proposed, will be detrimental to businesses in Hawaii and would pass higher costs onto consumers, hitting all families here.
Join us in asking lawmakers for better measures that take into account what businesses are facing and to work with business organizations on creating winning solutions.
* Pamela Tumpap is president of the Maui Chamber of Commerce.