Last week a team of six Maui Chamber of Commerce members went to the state Capitol to meet with our Maui delegation and other legislators to discuss the high minimum- wage increase that is being discussed in conference committee.
It was part of our continuing effort to share the concerns of our broader membership.
The Maui Chamber does not oppose an increase, however we disagree with the amounts proposed and the number of increases that would be scheduled over the next three to four years.
The Senate version seeks to raise the minimum wage to $10.10 over three years, starting in January of 2015. The House bill is more favorable with a four-year phase-in to $10. We feel both measures have increases that are too high and not reflective of the economic realities businesses are facing, particularly small businesses.
The Maui Chamber members who went to the Capitol are each owners of their companies.
They took a full day off from work and flew to Oahu at their own expense because they see the unintended consequences both versions of the bill would have on their business and the economy.
The owners had analyzed the impact on their particular business and all were concerned about the wage compression that would lead to a wage inflation. They recognize that this will lead to higher costs that will be passed on to consumers. However, three of the members shared why they cannot simply pass on the higher costs to consumers as many lawmakers believe they can.
The owner of one of our larger businesses, with over 100 employees, who pays all of his workers well over the minimum wage, analyzed the impact of the wage inflation on his business and determined it would cost his company $500,000 more by 2018 with no productivity gain. With increasing competition, he said this would make him less competitive and he does not know where this money will come from.
Another member explained that he is under multiyear contracts with labor costs locked in. As a medical service provider, he is already being squeezed to smaller margins on the federal level and would not be able to pass on the increased minimum-wage costs given the contracts in place. "It is not sustainable," he said.
Another gave an example of how he recently increased his price on a very popular product given other expense increases and now that product is not selling at that price, which means lower production and fewer man hours required.
We also provided lawmakers with a handout that detailed our many concerns, highlighting the perceptions we hear and the realities businesses face. We do support a lower increase and shared that message, but were told the political will was strong to take it to $10 or more an hour. We knew going in it was an uphill battle.
While we recognize that the high increase would be a challenge for many businesses in Hawaii, it would be particularly hard on small businesses. So, we looked to see if an exemption for small businesses could be considered.
In the House, our concerns were heard and the House put forward a new proposal that would delay the increase for employers with fewer than 100 employees. They would not have to pay $10 an hour until 2019, phasing in the increase over five years. Unfortunately, the Senate rejected this proposal.
Discussion on the bill's details continued in conference committee this week and a small business exemption is out. The deadline to make a decision was Friday, but had yet to be made at the time this article was written. The Maui Chamber addressed its members' concerns all the way through, down to the wire.
* Pamela Tumpap is president of the Maui Chamber of Commerce.