Bill ties minimum wage
to cost of living
Hawaii's minimum wage -- which recently got a $1 boost after staying the same for nine years -- would be tied to annual cost-of-living increases starting next year under a bill advancing in the state Senate.
The state's minimum wage, now at $6.25 an hour, automatically would go up on Jan. 1 by an amount equal to the annual increase in Hawaii's cost of living as of Oct. 15, under the measure.
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Labor Committee Chairman Brian Kanno (D, Kalaeloa-Makakilo) noted that before 2002, Hawaii's minimum wage was frozen at $5.25 for nine years. It moved to $5.75 in 2002 and to $6.25 at the start of 2003.
"Rather than a struggle with having to pass legislation to give one pay increase like that and to wait nine years, we have a mechanism to have modest increases to go along with the cost of living," he said, "so that if it were to go up 13 cents in one year, that would be much more manageable than a $1 bump."
The federal minimum wage is $5.15 an hour.
Kanno said if the cost-of-living figure happened to decline, it would not result in a smaller minimum wage, just no increase that year.
The measure was approved Friday by the Labor Committee and goes next to the Senate Ways and Means Committee for further consideration.
During a public hearing before the Labor Committee last week, representatives of the business community opposed the measure while representatives of labor unions endorsed it.
The lone vote against the measure on Friday came from Sen. Sam Slom (R, Diamond Head-Hawaii Kai), who is president of Small Business Hawaii.
"As every business knows, you don't make your profits automatic, you don't make your revenues automatic," yet one of the biggest costs in business -- labor -- would increase automatically, Slom said.
While the bill talks about providing a "living wage," Slom said in reality it serves as an entry-level wage for workers as they are trained on the job for positions where they will earn more based on merit and productivity.
Slom said increases in the minimum wage put pressure for increases all the way up the pay scale, adding to a business's cost for mandated workers' compensation, prepaid health and temporary disability insurance and Social Security matching contributions that are tied to the wage.
The Labor Committee also approved an administration bill that establishes a new method to determine how much the state and county governments need to contribute toward the public workers pension fund.
The change, which is assumed in the administration's six-year financial plan, would save the state an estimated $348 million over four years, starting in 2005.
Budget and Finance Director Georgina Kawamura told the committee that it would eliminate the fluctuations that under the current system have exceeded tens of millions of dollars annually in recent years because of the volatile investment market.
The state and county contributions are now based on actuarial valuations needed to amortize the projected unfunded liability of the Employees' Retirement System within 29 years, as of June 30, 2000.
The bill would put the state and county annual contribution to the ERS at 15.75 percent of the total wages paid to police and firefighters and 13.75 percent of total wages for all other employees.
Kawamura said under the current system, the state and county ERS appropriations went from $22.4 million in 2000 to $8.1 million in 2001, to $167.5 million in 2002, to $188.5 million on 2003 and to $269.7 million in 2004.
ERS Administrator David Shimabukuro supported the change.
"This bill will provide employers with a more predictable budget and the ERS with a more predictable cash flow," he said.
