Booming economy eclipses wage hike

The minimum wage will rise to $6.75, but many isle employers already pay more

ON SUNDAY, Hawaii's hourly minimum wage will rise by 50 cents -- yet for all but a few in the work force, the state's booming economy has long since given them an even bigger raise.

A 2.8 percent unemployment rate -- the lowest in the nation -- has made the labor market so tight that few employers can hope to attract or keep workers by offering minimum wage, said Beth Busch, president of Success Advertising Hawaii, organizer of three job fairs each year.

"Whether we were doing the minimum-wage increase or not this year, the wages were still going to go up because of the market," Busch said. "There always will be people who need to start at minimum wage, but there are not many people that have to in this market."

As little as 6 percent of Hawaii's work force earns minimum wage, and more than half of them work in service occupations that are supplemented by tips, said James Hardway, assistant to the state labor director.

"Less than 3 percent of workers make straight minimum wage," Hardway said.

The wage increase -- by 50 cents an hour to $6.75, with another 50-cent rise to take effect the following year -- was overwhelmingly supported by lawmakers and labor unions, who say many of the state's lowest-paid workers have to juggle multiple jobs to earn decent pay. However, it was met with criticism from small businesses and Gov. Linda Lingle.

Small businesses said increasing the minimum wage could force them to raise pay scales across the board, ultimately resulting in lost jobs if the economy turned.

Lingle, who was concerned about the impact on small businesses, had urged lawmakers to consider other measures to help businesses that would be affected by the wage increase. She endorsed reducing the pay gap for tipped workers, known as the tip credit, which is currently 25 cents an hour less than the prevailing minimum wage. Lingle also advocated lowering the rates that businesses pay into the state's Unemployment Insurance Trust Fund, but her suggestions won no support in the Legislature.

Restaurants and other service industries opposed any wage hike that did not include a larger tip credit, which is among the lowest in the nation.

The Supporting Employment Empowerment Hawaii Work program, which reimburses businesses for hiring job candidates who are receiving government assistance, is finding that most workers covered by the program already earn more than the $6.25 benchmark, said Derick Dahilig, state human services spokesman. Some 300 employers and 100 job seekers are in the program.

"It's been a great success, and most of our workers are making between $7 and $18 an hour," Dahilig said.

While lawmakers are quick to take credit for improving wages, it might be Hawaii's strong economy that workers owe their thanks to in the New Year.

"I think you'll find that minimum wage is pretty much dictated by the market," Hardway said.

The tight labor market has resulted in most retailers already paying $8 an hour or more, said Carol Pregill, president of Retail Merchants of Hawaii.

"The immediate impact of the minimum-wage increase will probably be negligible because we are already paying those rates," Pregill said. "But there probably will be some backlash further on down the road."

Although a proposed 50-cent increase in the minimum wage might not seem like much, she said, raising it to $6.75 from $6.25 would create a "trickle-up" effect, and workers making $8 an hour, for example, would demand a proportionate increase, she said.

In an economic downturn, retailers might not be able to support premium wages, and jobs could be lost, Pregill said.

Increased minimum wages also mean higher insurance payments, health care costs and taxes for employers, said state Sen. Sam Slom (R, Kalama Valley-Aina Haina).

"A lot of small businesses are worried about minimum wage," Slom said. "Many of their costs have already gone up, such as gas, electricity and rent, and they don't have the flexibility of the big-box retailers."

While all labor costs have dramatically increased, it is important that wages keep up with the cost of living, said Paul deVille, president and chief executive officer of Hilo Hattie.

"We just have to work harder and smarter," deVille said, adding that the job market is competitive in all categories.

"Whatever the job, we have openings," he said.

Transportation company Roberts Hawaii said it is paying wages that are competitive on all major islands and not just within its industry. "We are trying to attract, retain and reward our employees in a very competitive labor environment," spokeswoman Sam Shenkus said.