Hawaii lawmakers passed legislation Tuesday that would hike the state’s minimum wage to $18 an hour by 2028, potentially the highest in the nation.
Advocates say the raise is badly needed in a state that routinely tops lists for most expensive housing and cost of living. But some businesses are warning they will have to cut staff or even close because they won’t be able to afford the greater pay.
The $18 minimum would be the highest dollar amount among the 50 states and the District of Columbia. However, some states automatically boost their minimum wage when the cost of living increases, which means places like California, which currently has a $15 minimum wage, could have a higher wage in six years given inflation.
The House and Senate, both controlled by Democrats, approved the measure by wide margins. The bill now goes to Gov. David Ige, who has said he supports an $18 minimum wage.
Hawaii’s minimum wage is currently $10.10 an hour. The bill would raise the rate in increments over the next several years, starting with $12 on Oct. 1.
An earlier draft of the bill included other benefits for low-income residents that were removed during committee hearings.
“Legislation is about working out compromise,” said South Hilo and Puna Rep. Richard Onishi, who introduced the earlier draft of the bill. “The bill we agreed to had a little bit of what we wanted and a little bit of what (the Senate) wanted.”
The final draft of the bill includes an increase to the state tip credit, unlike Onishi’s draft, which would have removed it entirely. Onishi said allowing the credit to continue should help offset the increased wage burden on restaurant owners.
The bill also makes permanent an earned income tax credit to qualifying taxpayers, another of Onishi’s recommendations. However, other provisions, such as an increase in food tax credits and a broadening of eligibility for the household and dependent care tax credit, did not make it into the final draft.
“That’s something we can work on next time,” Onishi said.
House Speaker Scott Saiki said a study showing that 42% of Hawaii households struggle to make ends meet was a big factor behind his support for the increase. The Hawaii State AFL-CIO also endorsed going to $18.
Saiki said he wanted the minimum to rise in tandem with the consumer price index, but lawmakers didn’t reach a consensus on that.
A state analysis published in December showed a single person working 40 hours a week would need to earn $18 an hour to pay for housing and other necessities in Hawaii.
“People should be able to afford their basic needs on 40 hours a week,” said Nate Hix, the director of Living Wage Hawaii, an advocacy group that has been pushing for a higher minimum wage. “Otherwise, people are forced to work multiple jobs or sacrifice their basic necessities like food, shelter, clothing.”
The Chamber of Commerce of Hawaii said in written testimony that many of its members say they will lay people off and some will close shop due to the rate hike. The business group said Hawaii’s unique-in-the-nation requirement that employers provide health insurance to those working more than 20 hours a week already adds $3 to $4 to the hourly compensation of workers.
Michael Miller, the director of operations at Tiki’s Grill and Bar, a Waikiki restaurant, favors gradually hiking the rate to $15 by 2027. He said costs for everything involving labor will go up with the higher wage.
“Who then pays for that? The consumer pays for that,” Miller said.
The legislation expands the tip credit to $1.50 by 2028, allowing employers to subtract that amount from the wage they pay if the workers earn enough in tips.
Gerard Dericks, an economics professor at Hawaii Pacific University, said raising the minimum wage to boost living standards focuses on the symptom of the problem and not the underlying cause.
He said it would be better for Hawaii to reduce its cost of living, for example by increasing housing by allowing the construction of taller and more numerous residential towers in Honolulu. Or by repealing the Jones Act, a 1920 law that requires shipping between U.S. ports to be handled by U.S.-flagged ships. Backers of the law say it’s important for national security because it helps maintain the U.S. shipbuilding industry.
On the other hand, some believe the wage measure doesn’t go far enough.
“The compromises pushed by members of the House of Representatives are unfortunate,” said Cade Jameson of the Hawaii Workers Center. “The Hawaii Department of Business Economic Development and Tourism estimates that the self-sufficiency wage for a single adult with a preschool aged child in Hawaii County is $25.80 per hour. If this bill is enacted, then we still have work to do if we want a genuine living wage in Hawaii.”