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Wednesday, May 3, 2000

Minimum wage
hike defeat
was no disaster

Bullet The issue: The Legislature failed to approve an increase in the state minimum wage proposed by Governor Cayetano.
Bullet Our view: The increase might have forced small businesses to reduce their staffs, offsetting gains by workers with jobs.

GOVERNOR Cayetano is fuming because the Legislature failed to approve his proposal for an increase in the state minimum wage. Cayetano maintains the raise is needed because several thousand families stand to lose their welfare benefits next year and will be looking for jobs, while the current minimum wage, $5.25 per hour, is too low.

This is twisted reasoning. The governor in effect wants to force the private sector to make up for the projected loss of government assistance. If the government wants to help low-income workers, it should do it itself, through such means as the earned income tax credit, which was designed for this purpose. The proposal might not work, anyway.

The impact of an increase in the minimum wage is felt mainly by small businesses that have been struggling to survive in the weak economy that has persisted since the early 1990s. Even a small increase in their costs could force them out of business -- which is why they fiercely resisted Cayetano's proposal to increase the general excise tax.

If employers had to pay higher minimum wages without corresponding increases in revenue, they might compensate by reducing the number of workers on their payroll. This would offset the benefits of the increase for those who were hired.

In a period of low inflation and economic weakness, there is little justification for raising the minimum wage. As the economy strengthens, employers will be forced to increase wages in order to retain and attract workers -- without government intervention. Fortunately, the economic outlook for Hawaii has brightened and the job market seems to be tightening, which will push wages up.

However, Cayetano may be right in questioning the need for tax breaks for hotel construction, which he criticized in the light of the Legislature's failure to approve an increase in the minimum wage. The governor is wrong in picturing the tax breaks as benefiting only the rich -- if effective, they would provide jobs. That's why labor often supports such incentives.

BUT there is reason to believe that the resurgence of the visitor industry has made the tax breaks unnecessary. With hotel occupancies rising, there may be incentive enough for renovation of existing properties and development of new ones without tax concessions.

The governor has vowed to veto tax credits of up to 20 percent for hotel renovations or new construction, and says he hasn't decided whether to sign an alternative administration-sponsored bill that would provide a 4 percent credit. Neither measure seems necessary at this point.

Lockerbie trial

Bullet The issue: Two Libyan men are going on trial in the bombing of Pan Am flight 103 over Lockerbie, Scotland.
Bullet Our view: The trial could serve as a precedent for future terrorist trials.

IT'S been more than 11 years since Pan Am flight 103 blew up over the Scottish village of Lockerbie. Now two Libyan men are going on trial in the Netherlands for the deaths of the 270 people on board and on the ground. Although long overdue, the trial offers an opportunity to achieve a measure of justice.

It is also a rare example of international pressure succeeding in forcing an outlaw regime to change its policy and turn over the accused for prosecution. The United States and Britain campaigned for years to establish Libya's responsibility for the explosion.

Under an agreement brokered by the United Nations last year, the trial is being held under Scottish law but at an abandoned U.S. air base in the Netherlands. The base, Camp Zeist, has been declared Scottish territory for the proceedings.

Libyans Abdel Basset al-Megrahi and Al-Amin Khalifa Fahima stand accused of murder, conspiracy to murder and violation of the aviation security act.

They are accused of being Libyan intelligence agents who in December 1988 hid a bomb in a radio-cassette recorder that was placed inside an unaccompanied suitcase on a plane to Frankfurt, Germany. From there it was transferred in London to the doomed New York-bound flight.

The suspects deny working as secret service agents and maintain that they were just employees of Libyan Arab Airlines.

For seven years the United Nations imposed economic sanctions against Libya to force it to surrender the accused men. Finally the pressure worked. Libyan leader Muammar Gaddafi agreed to turn them over for a trial -- but not in Britain or the United States. The abandoned base in the Netherlands was selected as the site for the trial.

Relatives of the victims, who were mostly Americans, are on hand for the trial, although they don't expect that it will answer all their questions about the crime.

Even if the accused are convicted, the verdict would only establish who carried out the bombing -- not who ordered it. It must be assumed that the accused won't implicate their superiors; otherwise they wouldn't have been turned over.

Even so, the case has significance beyond the grieving relatives of the victims. It establishes a precedent for dealing with international terrorism that may lead to prosecutions in other terrorist crimes.

Published by Liberty Newspapers Limited Partnership

Rupert E. Phillips, CEO

John M. Flanagan, Editor & Publisher

David Shapiro, Managing Editor

Diane Yukihiro Chang, Senior Editor & Editorial Page Editor

Frank Bridgewater & Michael Rovner, Assistant Managing Editors

A.A. Smyser, Contributing Editor

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