Minimum wage ‘compromise’ bill watered down to appease business owners
The House labor committee's draft of the minimum wage increase bill is pitched as a compromise, but still favors small business owners over their employees.
Small business owners—especially restaurant owners—continued to submit testimony against the Senate minimum wage increase bill, SB2609, at the House Committee on Labor (LAB) hearing held March 18, 2014.
The arguments made by the business owners against the bill have shifted as the bill has moved through the legislative process. When the bill was still in the Senate, business owners were testifying in diametric opposition, claiming the sky would fall if any increase were to pass. After minimum wage bills from both chambers crossed over though, the opposition has shifted focus to simply watering down the language and whittling away at its effectiveness.
Roger Morey, the executive director of the Hawaiʻi Restaurant Association, perfectly demonstrated this shift in strategy with his testimony:
Is there going to be an increase in the minimum wage? Well of course there is. We would just ask that you make it not quite so steep, so quickly. Whatever actions you take here are going to have a significant impact on those small business.
The labor committee, chaired by Representative Mark Nakashima (House District 1, Hāmākua, North Hilo, South Hilo), passed out a House Draft of the bill that the chair pitched as an attempt to reach compromise between employees and small business owners. But it was clearly the owners who came out on top.
Language concerning the tip credit—which allows employers to pay their workers less than the minimum wage if they earn tips (effectively asking customers to subsidize workers wages)—was upheld.
“Many restaurant owners have claimed that unless they increase the tip credit, they will not be able to pay back of the house employees (who are customarily untipped) increases in wages, or as much as they would like to,” said Jenny Lee, a staff attorney for the Hawaiʻi Appleseed Center for Law and Economic Justice.
Lee suggested restaurant owners could institute a tip-pool to solve that problem, backing up her argument with a Ninth Circuit Court of Appeals ruling in Cumbie v. Woo that found, in 2010, that under the Fair Labor Standards Act there is nothing preventing restaurant owners from setting up such a system to help back of the house employees without denying front of the house workers a wage increase.
Jack Temple, an analyst for the National Employment Law Project, pointed out that in seven states, tip credits have been eliminated altogether, and that those states have actually seen a faster rate of restaurant industry job growth than the national average, as well as lower rates of poverty among tipped employees.
On the other hand, language that would peg the minimum wage to the consumer price index (CPI), allowing it to rise (or conceivably fall) along with the cost of doing business was removed. This CPI language was hard fought for by advocates of raising the minimum wage because it keeps the wage at or near a self-sufficiency level every year, preventing the need for repeated legislative battles over minimum wage hikes and, most importantly, ensuring workers always have enough to survive.
“There has been an argument that indexing to the CPI is too unpredictable,” said Lee. “If the minimum wage had been raised incrementally since 2007, it would have amounted to just a $0.12 increase annually—significantly less than the increases proposed in this bill. The CPI index is actually a more stable mechanism than stepped increases where we don’t know the economic climate.”
The increase schedule itself was also modified from a three-step process, to be completed by January of 2017, to a four-step process to be completed by January of 2018, meaning the wage will increase at a slower rate. The House Draft proposed to hike the minimum wage 50 cents starting January 1, 2015, followed by three other hikes in January of 2016 and January of 2017, with the final one happening in January of 2018.
“Many comments have been made about the unique cost that businesses in Hawaiʻi face,” said Temple. “But of course, we want to reiterate the unique costs that workers and those who live in Hawaiʻi face as well.”
Temple pointed out that Hawaiʻi is tied for the lowest minimum wage in the country, saying there is “considerable room” for the proposed $10.10 per hour rate. He also highlighted the fact that, in the late 1960s, the minimum wage was $1.60 per hour which—translated into today’s dollar amount—comes out to roughly $10.70 per hour.
“So roughly 40 years ago, employers were already [able to afford] a $10.70 minimum wage in Hawaiʻi,” Temple said.
Chair Mark Nakashima said he hoped both sides would be satisfied with his compromise language. “We have been through this a number of times, and we continue to try and find a middle ground on where we are going to go on this,” he said after the hearing.
While the restaurant owners certainly got most of what they wanted out of Nakashima’s house draft, employees did get some protection for their poorest members. Protective language exempting workers who earn less than 250 percent of the poverty level (about $30,000 a year) from the tip credit was included in the House Draft—language that came from Finance Committee Chair Sylvia Luke (House District 25, Makiki, Punchbowl, Nuʻuanu, Dowsett Highlands, Pacific Heights, Pauoa).
Bart Dame, of the Progressive Democrats of Hawaiʻi, said he wanted the CPI mechanism preserved. “I’ve heard of no reasonable argument for eliminating it,” he said. However, he did say that he was pleased with the inclusion of the “poverty trigger” language. “I think it’s a very good way to balance the interests of employers and employees.”
Senator Clayton Hee (Senate District 23, Kāneʻohe , Kaʻaʻawa, Hauʻula, Lāʻie, Kahuku, Waialua, Haleʻiwa, Wahiawā, Schofield Barracks, Kunia), who wrote SB2609 and who chairs the Senate Judicial and Labor Committee, has not scheduled a hearing for the House minimum wage bill that crossed over, HB2580 (which Rep. Nakashima said he still prefers). That could mean the end of that bill. Representatives Roy Takumi (House District 35, Pearl City, Mānana, Waipiʻo), Aaron Ling Johanson (House District 31, Moanalua, Red Hill, Foster Village, ʻAiea, Fort Shafter, Moanalua Gardens, Āliamanu, Lower Pearlridge) and committee Vice Chair Kyle Yamashita (House District 12, Spreckelsville, Pukalani, Makawao, Kula, Kēōkea, ʻUlupalakua, Kahului) all voted ‘aye with reservations,’ saying they prefer HB2580 over the senate bill as well.
SB2609 now goes to Rep. Luke’s Committee on Finance (FIN). She has the option of further tweaking the bill into a second house draft.
