Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 32 entitled:

begs leave to report as follows:

The purpose of this measure is to increase the minimum wage amount and to provide for an automatic annual adjustment for cost-of-living increases.

Testimony in support of this measure was submitted by the Hawaii State Teachers Association, the United Public Workers, ILWU Local 142, the Hawaii State AFL-CIO, the Labor Democrats of Oahu County, and one individual. Testimony in opposition to this measure was submitted by the Department of Business, Economic Development and Tourism; the Chamber of Commerce of Hawaii; the Retail Merchants of Hawaii; the Hawaii Business League; and three individuals. Comments on the measure were submitted by the Department of Labor and Industrial Relations.

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. As we have turned the corner, heading towards improved economic times, your Committee believes that it is necessary to assist entry-level workers to allow them to share in this period of economic growth and prosperity. Prior to the most recent increase, no previous adjustment had been made to the minimum wage amount since 1993. In order to avoid the Legislature's need to continually revisit the issue year after year and to prevent the necessity for large increases when no adjustment has been made for several years, an automatic annual adjustment should be instituted. Furthermore, your Committee's intent is that the Department of Business, Economic Development and Tourism shall annually calculate and publish the gross state product deflator to be utilized in making the annual adjustment.

Your Committee further finds that some concern exists regarding the current tip credit law. The law currently allows an employer to presume that tipped employees are receiving a certain level of tips each pay period, thereby allowing the employees' pay to be reduced accordingly. A majority of the states across the nation have tip credit laws. Of those states with tip credit laws, the amount of the tip credit ranges from about one to three dollars, well over the twenty-five cents allowed here in Hawaii. Testimony received by your Committee indicates that one way in which to address the financial burden imposed upon employers due to increases in the minimum wage amount is to raise the tip credit amount to offset the additional costs. Your Committee believes that the issue should be further examined throughout the session so as to determine whether such an increase is appropriate.

Accordingly, your Committee has amended this measure as follows:

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 32, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 32, S.D. 1, and be referred to the Committee on Ways and Means.