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Panel: More money, more problems with wage hikes

Economic experts discuss living wage at chamber installation

Eugene Tian (from left) of the state Department of Business, Economic Development and Tourism, Sumner La Croix of the University of Hawaii Economic Research Organization and Keli‘i Akina of the Grassroot Institute of Hawaii speak during a panel discussion about what constitutes a living wage Tuesday in Wailea. The Maui News / KEHAULANI CERIZO photo

WAILEA — Hiking minimum wage to help lower-income earners in Maui County and Hawaii won’t offer a silver-bullet solution to complex socioeconomic challenges, cautioned economic experts at a panel discussion Tuesday in Wailea.

Because about 75 percent of the wage premium is passed on to consumers, prices will rise; and people who receive minimum wage increases will likely be the ones paying for it, said Sumner La Croix of University of Hawaii at Manoa’s Department of Economics and UHERO (University of Hawaii Economic Research Organization), citing various studies.

La Croix, who supports a smaller, spaced-out increase in minimum wage, said reviews are mixed on the actual benefits reaching low-wage workers.

“It turns out minimum wage acts like a regressive tax,” he said. “The poor pay a higher percentage of these goods with higher prices than the rich do. Whenever we’re talking about minimum wage, it’s not an effective end-poverty program.”

Also, employers typically cut hours, reduce fringe benefits and take other cost-saving measures when minimum wage is increased, panelists said.

Living wage, minimum wage and cost of living were discussed at the Maui Chamber of Commerce 2019 annual Board Installation Luncheon. La Croix, along with panelists Eugene Tian, state economist with the Department of Business, Economic Development and Tourism, and Keli’i Akina, Grassroot Institute of Hawaii president and chief executive officer, spoke to about 100 local business leaders at Fairmont Kea Lani in Wailea.

Instead of looking at minimum wage, Akina said, the real solutions lie in how to reduce the high cost of living faced by Hawaii residents and in studying multiple pathways to higher wages.

“It’s not a question of whether minimum wage is good or bad,” he said. “It’s a recognition that whatever you do about minimum wage is not the answer. We really have to come up with solutions that bring the overall cost of living down.”

Tian said a living wage is the minimum income necessary for a worker to meet their basic needs, defined as food, housing and other essentials such as clothing.

The goal of a living wage is to allow a worker to afford a basic but decent standard of living. Due to the flexible nature of the term “needs,” there is not one universally accepted measure of what a living wage is and as such, it varies by location and household type, Tian said.

He presented state DBEDT data from 2014, the most recent study of its kind, that showed Maui atop Hawaii’s average annual total household expenditures by county — at $65,197. The state average was $60,384. The national average was $53,495.

The bulk of Maui residents’ spending, 40.3 percent, was due to housing. Transportation was second at 15.7 percent and food was third at 15.6 percent.

Nationally, housing was 33.3 percent, transportation was 17 percent and food was 12.6 percent.

Of Maui County’s 75,350 employees last year, 5.4 percent received minimum wage, according to Tian. Since 2018, Hawaii’s minimum wage has been $10.10.

La Croix main policy suggestions are making Hawaii’s Earned Income Tax Credit refundable and raising the minimum wage to $12 over a two-year period.

Akina, who leads the independent think tank Grassroot Institute of Hawaii and serves as Office of Hawaiian Affairs trustee, said the distinction between living and minimum wage is important.

“Living wage itself is a socioeconomic measure,” he said. “You can’t simply rally around minimum wage and think that’s going to help the cost of living and so forth.”

Instead of mandating a living wage, he said, people should consider how “things we do in the economy” can bring down the cost of living because when the economy is good, wages rise.

His top suggestion is lowering the cost of living by making housing more affordable.

“You realize that only 6 percent of the land on Maui is actually developed?” he said. “Ninety-four percent is either environmental preserve or agriculture.”

Akina cited David L. Callies, author of “Regulating Paradise,” who discusses that Hawaii has similar numbers with 5 percent developed. If it’s increased by one percentage point to 6 percent, then supply increases 20 percent and so on. Also, the price point comes down.

“If you can find a way to sell that to Hawaii people rather than foreign investors, we could solve our problem easily by increasing the supply of land and housing,” Akina said.

He said the average time it takes to get an affordable house built from permit to conclusion is 13 years on Maui and 95 percent of affordable housing projects in the last decade have been scuttled.

Also, Akina said the onerous red tape for starting a business needs to be removed in Maui County.

“If your child wants to start a lemonade stand, technically they have to get a permit,” he said.

Maui Chamber of Commerce 2019-20 board of directors, along with new Chairman Rick Nava, were inducted by county Managing Director Sandy Baz during the luncheon. The chamber, which is more than 100 years old, has about 700 member business owners and operators, according to outgoing chairman Kit Okazaki. Its mission is to “advance and promote a healthy economic environment for business, advocating for a responsive government and quality education, while preserving Maui’s unique community characteristics.”

* Kehaulani Cerizo can be reached at kcerizo@mauinews.com.