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View Point

By Bette Tatum

Wednesday, August 18, 1999

Wage hike would
hurt economy

GOVERNOR Cayetano was quoted recently as saying he may pitch a minimum-wage increase to legislators next year. He wants to help the working poor in Hawaii who are among the thousands expected to be removed from the state's welfare rolls in two years.

Truth is, hiking the minimum wage is a wildly inefficient way to provide relief to low-income families. A decade ago, the Progressive Policy Institute, not exactly a conservative think tank, noted in its report on "Work and Poverty" that artificial hikes in the minimum wage carry significant costs: slower job creation, fewer hours, lost jobs and increased inflation. In effect, it's a hidden tax that hurts the poor far more than others.

Its report concluded that the earned-income tax credit was a far more efficient way to help the working poor.

The governor and Legislature should be focusing their attention on improving Hawaii's pathetic business climate in an effort to help Hawaii citizens earn an actual living wage, not to settle for a government-imposed minimum.

Will increasing the minimum wage help business create the 15,000 or so jobs needed in Hawaii for welfare reform?

The evidence is overwhelming that raising the minimum wage helps very few working men and women. On the contrary, it means fewer jobs in our already job-hungry state, and fewer hours because government demands that small business do more with fewer resources.

A real concern small business has with the government's mandating a minimum-wage increase is that raising it has a ripple-up effect. It causes higher-level wages to be increased also, thus boosting inflationary pressures in the economy.

Hawaii already has a cost of living around 30-40 percent higher than the mainland. And it must be emphasized that wages are only one component of what businesses pay. Other mandated benefits are substantial and, because they are based on the wage rate, would go up along with the minimum wage.

If the minimum wage were increased, employers -- and we all know most of Hawaii's employers are the owners of small businesses -- also would have to pay more Social Security, workers' compensation and unemployment benefits.

Do we want to add yet another cost to business, resulting in the loss of even more jobs?

The economy and jobs should be uppermost in lawmakers' minds. Job making, not job breaking, is where the focus must be.

Government manipulation of the minimum wage has utterly failed as a tool of social or economic justice.

It has not reduced poverty. It has not narrowed the income gap. The reality of a mandated wage hike is that it prices low-skilled workers out of the job.

IT'S basic Economics 101. When you increase the cost of something, you get less of it.

By increasing the minimum wage, Hawaii's small-business owners, already fleeing the islands in droves, thus reducing state revenues, will be forced to make tough choices: lay off workers, increase prices, decrease employees' hours or throw in the towel.

What social goal is achieved by a policy that slams the door of opportunity on the unskilled and inexperienced? How are they helped by making it harder to get a toehold in the job market -- that all-important first job that gives them a chance to contribute to society?

We must stop playing on emotions and begin to seek real solutions to help Hawaii's working poor and the small business community, which is our best hope of providing new, well-paying jobs.

An increase in the minimum wage will not help the working poor, but will harm the very thread of growth that is the fabric of Hawaii's economy: small business.


Bette Tatum is state director of the National
Federation of Independent Business in Hawaii.




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