State research confirms economic benefit of minimum wage hikes

The Department of Business, Economic Development and Tourism’s latest report demonstrates that a living wage is not only possible, it is economically desirable.

Last month, the State of Hawai‘i’s Department of Business, Economic Development & Tourism (DBEDT) released a timely report, “The Minimum Wage in Hawai‘i: Labor Market Impacts.”

It provides helpful perspective on our current minimum wage, takes a look at previous waves of increases to the minimum wage here in Hawai‘i, and estimates how many workers would be affected by future increases.

DBEDT starts by pointing out that, “even though Hawai‘i has recently increased its minimum wage, the high cost of living means the state’s $10.10 minimum wage is not worth as much as the $7.25 federal minimum wage. Some other high-cost localities have taken into account their high costs of living and increased their minimum wage to as high as $15.”

Table 1 of the report (recreated below) shows that Hawai‘i’s minimum wage, when adjusted for cost of living, is actually worth less than not only the federal wage, but also the minimum wage levels already in place in various high-cost-of-living cities:

 

“While Manhattan and San Francisco have higher costs of living, they also have higher minimum wages; a minimum wage comparable to $10.10 in Honolulu for Manhattan ($12.78) and San Francisco ($10.21) would be lower than the minimum wage in those cities,” it explains.

Then DBEDT looks back at recent waves of minimum wage increases in Hawai‘i, with the most recent happening between 2015 and 2018. It analyzes a few data sets in different ways to tease out the effects of increases to the minimum wage:

  • One analysis “suggests that the minimum wage not only increased wages, but also employment in the low-wage food services industry”; 
  • Another suggests that increases to “the minimum wage had little effect on employment outcomes, while generally increasing income and wages”; and 
  • And another “confirms that there were no large negative employment effects when the minimum wage was increased in Hawai‘i.”

Next, DBEDT looks forward at the potential labor market effects of raising the minimum wage to $12, $15, $17, and $20 per hour. The report estimates that, “around 15% of workers would be affected by a $12 minimum wage, 28% would be affected by a $15 minimum wage, 36% would be affected by a $17 minimum wage, and 48% would be affected by a $20 minimum wage.”

In addition, DBEDT looks at how different occupations in our state would be affected, and finds that the occupations and demographic groups most likely to be affected by raising the minimum wage are:

  • Food preparation and serving related occupations;
  • Personal care and service occupations; 
  • Sales and related occupations;
  • Females;
  • Younger workers;
  • Workers from poorer families; and
  • Workers with less education.

Figure 9 of the report summarizes these findings:

This new report provides a nice bookend to DBEDT’s latest “Self Sufficiency Income Standard: Estimates for Hawaii 2018,” which calculates that a single full-time worker with no children and employer-provided health insurance needed to earn $16.90 per hour in 2018 to “meet their basic needs.”

That means it takes more than $17 an hour in 2020 for a single person to afford the basics in our state, according to DBEDT.

In other words, our own state agency concludes that $10.10—or even $13—an hour falls far short of a living wage in Hawaiʻi. On top of that, DBEDT concludes that past increases to the minimum wage did not result in negative economic effects in Hawaiʻi, reinforcing research conducted last year by Hawaiʻi Appleseed Center that came to the same conclusion. 

DBEDT’s findings should make our state lawmakers feel confident that they can and should raise our Hawaiʻi’s minimum wage to a living wage this session. The economic benefits are clear, and our state’s struggling low-wage families cannot afford to continue struggling paycheck to paycheck.