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Detractors of
living-wage bill
say taxpayers would
subsidize its cost

If the bill passes, firms
with state contracts would
have to pay employees
at least $9.43 an hour

---

By Lisa Asato
Star-Bulletin

This session's wage debate at the state Capitol doesn't stop at raising the minimum wage.

Lawmakers are also moving ahead on a living-wage bill that has some observers worried that taxpayers will be covering the added cost.

Under the bill, private firms that receive state contracts would have to pay contracted employees at least $9.43 an hour. That amount, the so-called living wage, is the amount needed to support a family of four above the federal poverty level.

It's also 80 percent more than the minimum wage of $5.25.

UH economics professor Jim Mak called the bill "terrible" because unlike a minimum wage, it would affect only a small group of workers while increasing the cost of government contracts.

"It doesn't achieve the objective ... because only those people who provide services on contract to the state government under certain circumstances, with all the (bill's) exemptions, get to receive the $9.43 wage," Mak said. "Who ends up paying for this? Everybody who submits a bid for a state contract must pay those wages; basically, then, the taxpayers are paying for that amount."

Tom Smyth, administrator of the Business Support Division of the state Department of Business, Economic Development and Tourism, said the larger state contracts would not only benefit the employee, but also the company, whose profits are based on the size of the contract.

"These arguments may not be such a good idea if taxpayers are going to subsidize that," he said.

The bill, approved recently by the Senate Labor Committee, would affect both nonprofit and for-profit organizations that receive contracts of at least $100,000 or subcontracts of at least $25,000.

It would apply to for-profit firms of at least 25 full-time equivalent workers and nonprofit firms of at least 100 full-time equivalent workers. The term "full-time equivalent" describes the number of employee hours that equal one full-time position.

In 1998 and 1999, about half of the state departments that were contracting out work to private firms were paying wages above that year's living wage, according to a study released last year by the Legislative Reference Bureau.

The study, citing limitations in recordkeeping, found that in those two years, 583 private-sector workers were paid less than the living wage.

Rep. Roy Takumi (D, Pearl City-Waipahu), the bill's sponsor in the House, said that although taxpayers would fund the increased wages, the effort would help move families off public-assistance programs such as welfare.

"This is not a Cadillac income; it's more of a Volkswagen income," he said. "We're not saying, 'Private sector, pay all your employees $9.43.' We're saying tax dollars, which we control, should not reduce someone into poverty."

But Mark Pennington, regional director for Jani-King Hawaii, which does janitorial work for the Department of Human Services, wasn't happy about the proposal.

"Rules like that preclude us from bidding for (contracts)," he said, adding that his company does only a small amount of work with the state. He estimated the going rate for janitorial workers is $7 an hour.

"For them to have a blanket policy of about $10 an hour, it would probably be OK for some industries, but it would be adverse for ours," he said.

Nationwide, living-wage laws exist in about 50 cities or counties. Hawaii would be the first to enact it at the state level.