Chair Nakashima, Vice-Chair Yamashita, Members of the Committee:
The League of Women Voters of Hawaii supports SB2609, SD1 which incrementally increases the amount of the minimum wage from $8.20 per hour in 2015 to $10.10 beginning in 2017. Since its founding in February 1920 the League has been working to improve the quality of life for Americans, striving first for child labor laws, a minimum wage and equal opportunity for women in government and industry.
We were disappointed to see the Senate Ways and Means Committee reintroduced the tip credit to this measure, without specifying the size of the credit. In recent years the tip credit has proved a stumbling block to passing a minimum wage increase in Hawaii. We do not want to see this issue again become a barrier to raising the minimum wage. Based on the testimony we have heard this session, it is difficult to see how a tip credit can be fairly and efficiently administered by an employer who has a mix of “back of the house” workers and “front of the house” workers earning tips. For example, if a restaurant bill is paid with a credit card to include the tip, calculating the tip credit is straightforward, but if the customer pays in cash documenting the tip credit is less clear, particularly if tips are not pooled among all workers. Let’s not get distracted with the basic purpose of this measure by haggling over a tip credit.
Excellent testimony from the Department of Labor and Industrial Relations has already shown that Hawaii has a good track record for absorbing minimum wage hikes without jeopardizing job growth. Research comparing similar states and localities in which one has increased the minimum wage while another state or locality has not, shows that increasing the minimum wage does not have much discernible effect on employment – perhaps due to the increased consumer spending referred to above, or to the needs of employers.1
We expect that nearly every dollar received by current minimum wage workers will be spent on necessities of life, thus adding to consumer spending and tax revenue for the state. We also point out that when the minimum wage is increased, some families will see their household income increase enough so they will no longer receive public benefits such as food stamps, food banks, shelters or public housing or Medicaid. (This would be true for example, . for some families where one worker already earns substantially more than the minimum wage, but another earns the minimum wage.) These families will cost the public less than they do now. We hope that the Department of Labor and Industrial Relations or the Department of Taxation will provide some analysis of these effects for the benefit of the Legislature, so that you have a better quantification of the fiscal impact of the measure. We want to move forward with confidence that the changes proposed by this bill will provide additional tax revenue to the State while reducing public welfare costs.
Not having an index virtually guarantees periodic reconsideration of the minimum wage by the Legislature, and also means sudden surges in wages when an adjustment is first made. If this Committee concurs with eliminating indexing, we hope you will document your rationale in the Committee report, for the benefit of the public.
We urge you to pass this bill without a tip credit. Thank you for the opportunity to submit testimony.
1 Schmitt, John. “Why Does the Minimum Wage Have no Discernible Effect on Employment,” Center for Economic and Policy Research, February 2013.