As the largest business organization in Hawaii, the Chamber of Commerce Hawaii represents more than 1,000 businesses; about 80 percent are small businesses with fewer than 20 employees. We are the voice for thousands of small business owners doing the
As the largest business organization in Hawaii, the Chamber of Commerce Hawaii represents more than 1,000 businesses; about 80 percent are small businesses with fewer than 20 employees. We are the voice for thousands of small business owners doing the best they can to keep employees on payroll and our state’s economic engine running.
Two bills are moving through the Legislature. The House version would raise the minimum wage from $7.25 to $10 by 2018; the Senate bill would raise it to $10.10 by 2017.
The Chamber did not support either in their original versions or other bills this session related to minimum wage. We do understand the need to increase the minimum wage. Our concern with HB 2580 and SB 2609 is the size of increase proposed and the fast pace of implementation.
Based on the current versions, we are appreciative that the Legislature has recognized the negative impacts of tying minimum wage to the Consumer Price Index and for being open to keeping the tip credit.
For many small businesses, the prospect of absorbing a 24 percent increase in the minimum wage, as originally proposed, so quickly would be too much to bear.
Hawaii is the only state that mandates employers to provide health care to their employees, including part timers who work 20 or more hours per week.
The average annual premium for one employee is about $5,500. For minimum wage employees, $5,273 of their premium is paid by the employer. Add this to the current minimum wage for a full-time employee and the actual benefit paid by an employer to a minimum-wage employee climbs to $9.79 per hour, the highest in the nation. For employees working 30 hours each week, that rises to $10.67 per hour.
Health care costs have increased at a much higher rate since 1974, when Hawaii’s Prepaid Health Act was enacted, which has eroded the ability to further increase compensation to employees. This does not even include an increase in unemployment insurance tax, payroll tax, workers’ compensation and other mandates tied to wage.
Also, Council on Revenues economists recently lowered the forecast for this year along with the 2015 and 2016 fiscal years due to the slowdown in the visitor industry, uncertainty over prospects for renewed visitor spending growth and spending along with a recovery in the construction sector.
The reality is that decent, hard-working people run the vast majority of our small businesses. Most share the same needs as their employees — to make ends meet. As the daughter of a small business owner, I have witnessed my mom forfeiting paychecks so her employees were taken care of. I’m sure this rings true with small businesses across the state.
A higher minimum wage may cause many businesses, especially small ones, to reduce hours or benefits or put off hiring new workers to compensate for higher labor costs.
Others may simply decide to shift more staffers to under 20 hours a week, forcing more people onto Medicaid.
According to the U.S. Bureau of Labor Statistics, in 2006 and 2007 when the last minimum wage increase went into effect, even with a strong economy, several low-wage jobs in the food preparation industry saw a loss of 4-15 percent or about 2,490 jobs.
According to a new survey of chief financial officers, nearly 57 percent of retailers would reduce hiring if the federal minimum wage were increased to $10.10 an hour. It’s not simply because of the increase, but rather the affordability of the increase.
While many support increasing the minimum wage, they have yet to see the increases at the cash register. Consumers have only so much discretionary income and may end up buying less, which affects businesses and their employees.
In the end, a sizeable increase in minimum wage may eventually hurt those whom these bills are trying to help.
We appreciate the Legislature’s efforts in addressing the minimum wage issue and working hard to find a balance. We are not opposed to an increase. However, we strongly urge legislators to consider a gradual and incremental increase versus the proposed increases, which are too steep for many businesses to take on.
• Sherry Menor-McNamara is president and CEO of the Chamber of Commerce Hawaii.
