Minimum Wage

Increases the state minimum wage to $6.50 per hour beginning on
September 1, 1999, and provides for certain cost-of-living
adjustments annually thereafter.

THE SENATE                              S.B. NO.           1239
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that the minimum hourly
 2 wage paid to an employee should yield a basic "living wage" to a
 3 person working 2,080 hours per year at the rate of forty hours
 4 per week for fifty-two weeks.  This reflects the spirit and the
 5 intent of the original minimum wage effected by the Federal Fair
 6 Labor Standards Act of 1938.  The original minimum wage standard,
 7 which was deemed worthy of this spirit and intent, was that the
 8 minimum hourly wage should be one-half the national average
 9 hourly wage paid to non-farm, non-supervisory employees.
10      A weakness of this standard, based on a national average, is
11 that in areas of the country, such as Hawaii, where the cost-of-
12 living differential is substantial, the federal minimum wage
13 falls far below the spirit and intent of a "living wage" minimum
14 wage.  For instance, in the 1994-1996 period, the cost of living
15 differential for Hawaii from the national average was variously
16 estimated by reputable sources to be between fifteen and
17 twenty-five per cent.  In fact, this differential is commonly
18 referred to as the "paradise tax" and the "price of paradise."
19      Accordingly, the legislature has provided for a state

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 1 minimum wage that is higher than the federal minimum hourly wage.
 2 in 1995, for instance, the federal minimum wage was $4.25 per
 3 hour, while Hawaii's was $5.25 per hour.
 4      However, a problem has developed over the years, both at the
 5 federal level and here in Hawaii, with keeping the minimum wage
 6 current.  For instance, in February, 1995, the national average
 7 hourly wage, according to the U.S. Bureau of Labor Statistics was
 8 $11.31.  Yet the federal minimum wage at that time was only
 9 $4.25, instead of one-half of the $11.31 national average, or
10 $5.65.  Similarly, in Hawaii at that time, at a twenty-five per
11 cent cost of living differential, the state minimum hourly wage
12 calculated under the original federal-standard would have been
13 $7.06 ($5.65 x 125 per cent).  At a lower fifteen per cent
14 estimate of the Hawaii cost-of-living deferential, the minimum
15 wage yielded from this formula would have been $6.51.  Splitting
16 the difference would have put the Hawaii "living wage" minimum
17 wage at approximately $6.78 per hour.
18      The legislature finds that an effective remedy for keeping
19 the state minimum wage current is to first increase it to an
20 adequate level and then provide for an automatic annual cost-of-
21 living adjustment.  The legislature believes that an important
22 general principle is involved with raising the minimum wage; and,
23 that principle is that a "rising tide lifts all boats."  Raising

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 1 the minimum wage has traditionally had an overall ripple effect
 2 of raising all employee wages, and that, in turn, means that
 3 raising the minimum wage in response to cost-of-living inflation
 4 helps all of Hawaii's employees keep up with the effects of price
 5 and rent escalation.
 6      Other important benefits of raising the state minimum wage
 7 to be a true "living wage" include:  
 8      (1)  A significant reduction in welfare payments from the
 9           state general fund as a "living wage" minimum wage
10           lifts many employees out of poverty and off of the
11           welfare rolls;
12      (2)  The stimulation of the local consumer economy brought
13           on by a reduction of profits taken directly out of the
14           State by national and transnational corporations, which
15           in turn, increases the amount of money in circulation
16           in the state economy;
17      (3)  An increase in the tax base as more income taxes and
18           general excise taxes are paid as the result of a raise
19           in employee-consumers' pay;
20      (4)  A reduction in the likelihood of "budget shortfalls"
21           because the increase in hourly wages reduces welfare
22           payments and increases tax revenues; and
23      (5)  The creation of the ultimate "public-private

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                                     S.B. NO.           1239

 1           partnership" where the private sector exercises its
 2           social responsibility through ensuring that all of its
 3           employees receive a basic "living wage" at times when
 4           employees are exercising maximum social responsibility
 5           through paying a significant amount of their incomes in
 6           taxes.  
 7      In short, raising the minimum wage to be a "living wage"
 8 rewards work, reduces poverty and its many negative social
 9 effects, enhances state revenue, and boosts the general economy
10 of Hawaii. 
11      The purpose of this Act is to increase the state minimum
12 wage to $6.50 per hour beginning on September 1, 1999, and to
13 provide for certain cost of living adjustments annually
14 thereafter.
15      SECTION 2.  Section 387-2, Hawaii Revised Statutes, is
16 amended to read as follows:
17      "387-2 Minimum wages.  Except as provided in section 387-9
18 and this section, every employer shall pay to each employee
19 employed by the employer wages at the rate of not less than $3.85
20 per hour beginning January 1, 1988, $4.75 per hour beginning
21 April 1, 1992, [and] $5.25 per hour beginning January 1, 1993[.],
22 and $6.50 per hour beginning September 1, 1999; provided that
23 beginning January 1, 2000, and on an annual basis thereafter, the

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                                     S.B. NO.           1239

 1 minimum hourly wage shall be adjusted to be equal to one-half the
 2 national average hourly wage for non-supervisory employees
 3 multiplied by the sum of one hundred per cent and the then
 4 current cost-of-living differential percentage between the
 5 State's cost-of-living and the average cost-of-living for the
 6 mainland United States.  The annual adjustment to the minimum
 7 wage shall be issued on December 15 of each year, for the
 8 forthcoming year, by the department using the most current
 9 available statistics gathered from the U.S. Bureau of Labor
10 Statistics and from relevant state agencies.  The hourly wage of
11 a tipped employee may be deemed to be increased on account of
12 tips if the employee is paid not less than twenty cents below the
13 applicable minimum wage by the employee's employer and the
14 combined amount the employee receives from the employee's
15 employer and in tips is at least fifty cents more than the
16 applicable minimum wage."
17      SECTION 3.  Statutory material to be repealed is bracketed.
18 New statutory material is underscored.
19      SECTION 4.  This Act shall take effect upon its approval.
21                           INTRODUCED BY:  _______________________