Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 294, S.D. 2, entitled:

begs leave to report as follows:

The purpose of this measure is to increase the minimum wage amount to $7.00 beginning July 1, 2005, and provide for an annual automatic increase thereafter.

This measure also provides temporary unemployment insurance contribution relief to employers by lowering the threshold at which employers will not have to pay unemployment insurance contributions for calendar years 2005 through 2007.

Specifically, the measure increases the state minimum wage to $7.00 per hour effective July 1, 2005, and beginning April 1, 2006, and on an annual basis thereafter, increases it by an adjustment issued by the Department of Labor and Industrial Relations on December 15 of each year, for the forthcoming year, using the percentage increase, if any, rounded to the nearest five cents, of the most recent gross state product deflator published annually by the Department of Business, Economic Development and Tourism; provided that the adjustment does not exceed fifty cents in any given year

In addition, the measure temporarily lowers the threshold at which employers will not have to pay unemployment insurance contributions from the existing average annual wage ($32,300) to $7,000, for calendar years 2005, 2006, and 2007.

Your Committee finds that although the minimum wage amount was recently increased effective in 2003, the increase has failed to keep pace with the escalating rate of inflation. As a result, a worker's purchasing power has continued to diminish over time. In Hawaii, the cost of living is higher than that of much of the rest of the nation, which compels many individuals to work two jobs just to make ends meet.

Your Committee also finds that although Hawaii is fortunate to enjoy one of the lowest unemployment rates in the country, unemployment insurance tax relief is needed in order to promote business growth and economic prosperity through the creation of new jobs, the expansion of benefits, and the provision of pay increases to employees.

Your Committee has amended the measure by:

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 294, S.D. 2, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 294, S.D. 3.