Increases state minimum wage to $6.50 per hour, beginning September 1, 2001; provides automatic annual cost of living increases at a specified formula for computing.

A BILL FOR AN ACT

SECTION 1. The legislature finds that the minimum hourly wage paid to an employee should yield a basic "living wage" to a person working 2,080 hours per year at the rate of forty hours per week for fifty-two weeks. This reflects the spirit and the intent of the original minimum wage effected by the Federal Fair Labor Standards Act of 1938. The original minimum wage standard, which was deemed worthy of this spirit and intent, was that the minimum hourly wage should be one-half the national average hourly wage paid to non-farm, non-supervisory employees.

A weakness of this standard, based on a national average, is that in areas of the country, such as Hawaii, where the cost-of-living differential is substantial, the federal minimum wage falls far below the spirit and intent of a "living wage" minimum wage. For instance, in the 1994-1996 period, the cost of living differential for Hawaii from the national average was variously estimated by reputable sources to be between fifteen and twenty-five per cent. In fact, this differential is commonly referred to as the "paradise tax" and the "price of paradise."

Accordingly, the legislature has provided for a state minimum wage that is higher than the federal minimum hourly wage. In 1995, for instance, the federal minimum wage was $4.25 per hour, while Hawaii's was $5.25 per hour.

However, a problem has developed over the years, both at the federal level and here in Hawaii, with keeping the minimum wage current. For instance, in February, 1995, the national average hourly wage, according to the U.S. Bureau of Labor Statistics was $11.31. Yet the federal minimum wage at that time was only $4.25, instead of one-half of the $11.31 national average, or $5.65. Similarly, in Hawaii at that time, at a twenty-five per cent cost of living differential, the state minimum hourly wage calculated under the original federal-standard would have been $7.06 ($5.65 x 125 per cent). At a lower fifteen per cent estimate of the Hawaii cost-of-living deferential, the minimum wage yielded from this formula would have been $6.51. Splitting the difference would have put the Hawaii "living wage" minimum wage at approximately $6.78 per hour.

The legislature further finds that an effective remedy for keeping the state minimum wage current is to first increase it to an adequate level and then provide for an automatic annual cost-of-living adjustment. The legislature believes that an important general principle is involved with raising the minimum wage; and, that principle is that a "rising tide lifts all boats." Raising the minimum wage has traditionally had an overall ripple effect of raising all employee wages, and that, in turn, means that raising the minimum wage in response to cost-of-living inflation helps all of Hawaii's employees keep up with the effects of price and rent escalation.

The legislature further finds that other important benefits of raising the state minimum wage to be a true "living wage" include:

The legislature further finds that raising the minimum wage to be a "living wage" rewards work, reduces poverty and its many negative social effects, enhances state revenue, and boosts the general economy of Hawaii.

The purpose of this Act is to increase the state minimum wage to $6.50 per hour beginning on September 1, 2001, and to provide for certain cost of living adjustments annually thereafter.

SECTION 2. Section 387-2, Hawaii Revised Statutes, is amended to read as follows:

"§387-2 Minimum wages. (a) Except as provided in section 387-9 and [this section,] subsection (b), every employer shall pay to each employee employed by the employer wages at the rate of not less than $3.85 per hour beginning January 1, 1988, $4.75 per hour beginning April 1, 1992, [and] $5.25 per hour beginning January 1, 1993[.], and $6.50 per hour beginning September 1, 2001. Beginning January 1, 2002, and on an annual basis thereafter, the minimum hourly wage shall be adjusted to be equal to one-half the national average hourly wage for nonsupervisory employees multiplied by the sum of one hundred per cent and the then current cost-of-living differential percentage between the State's cost-of-living and the average cost-of-living for the mainland United States. The annual adjustment to the minimum wage shall be issued on December 15 of each year, for the forthcoming year, by the department using the most current available statistics gathered from the U.S. Bureau of Labor Statistics and from relevant state agencies.

(b) The hourly wage of a tipped employee may be deemed to be increased on account of tips if the employee is paid not less than twenty cents below the applicable minimum wage by the employee's employer and the combined amount the employee receives from the employee's employer and in tips is at least fifty cents more than the applicable minimum wage."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.