SB505

SECTION 1. The legislature finds that the economic vitality of the State is intrinsically tied to the success and sustainability of its small businesses, which form the latent structures of our local economy. Small businesses provide essential services and employment to residents, fosters community cohesion, and increases economic activity that is critical to the State's revenue and gross domestic product. The minimum wage serves as a critical policy lever for addressing income inequality, improving living standards, and ensuring that local workers are able to meet the high cost of living within the State. A thorough understanding of the multifaceted impacts that increasing the minimum wage will have on small businesses and the broader economic landscape is essential to forming a comprehensive State approach to mitigate any negative consequences of financial and income-based inequalities.

The legislature further finds that the increasing complexity of the State's economy requires a data-driven approach to policymaking, ensuring that any changes to minimum wage policy are not only equitable to and supportive of workers but also recognize the operational realities faced by small businesses. The legislature also finds that the effects of minimum wage increases on businesses can vary widely depending upon business size, product type, industry sector, geographic location, and other socio-economic factors. Because these fluctuating market driven forces affect behaviors, investments, and revenues of businesses, there is a need for research and analysis that considers both the direct and indirect consequences of increasing the minimum wage on local businesses and the State's overall economy.

The legislature additionally finds that this type of study will provide a comprehensive and nuanced understanding of the dynamic interplay between the minimum wage policy and the health of small businesses, which will help ensure that future wage decisions are rooted in economic reality while remaining committed to the principle of fostering a fair, equitable, and thriving economy for all residents.

Accordingly, the purpose of this Act is to:

(1) Require the department of business, economic development, and tourism's research and economic analysis division to:

(A) Conduct a comprehensive study to assess the impacts of minimum wage increases on small businesses and the overall economic health of the State; and

(B) Submit a report of its findings and recommendations, including any proposed legislation, to the legislature; and

(2) Appropriate funds to establish one full-time equivalent (1.0 FTE) research consultant position to conduct the study and prepare the report.

SECTION 2. (a) The department of business, economic development, and tourism's research and economic analysis division shall conduct a comprehensive study to assess the impacts of minimum wage increases on small businesses and the overall economic health of the State. The study shall utilize both quantitative and qualitative analysis and research methods. The study shall examine:

(1) The effect that increasing the minimum wage would have on:

(A) Hawaii based small business operating costs;

(B) Current hiring practices, employee retention, and the availability of part- and full-time positions in small businesses within the retail, food service, tourism, health care, and agriculture sectors;

(C) Business operations and human resources, including the impact on employee benefits, workers' compensation, retirement benefits, and medical coverage;

(D) Prices of locally produced agricultural products and other commodities in the State, and the effect on the State's agriculture industry as a whole;

(E) Imports and exports;

(F) Consumer prices, inflationary pressures, and local economic cycles in sectors that rely heavily on small businesses and how these effects may interact with broader economic trends in the State;

(G) Wage compression and wage differentials across positions within small businesses, and income distribution and economic equity within the State; and

(H) The competitive landscape for small businesses, particularly against large corporations;

(2) How small businesses adjust to wage increases through cost-cutting measures, price adjustments, or other operational changes, and how these adjustments may affect business viability in the short- and long-term time frames;

(3) The variance in economic effects, if any, that minimum wage increases would have on businesses, depending on their size, type, and geographic location;

(4) How the impacts of minimum wage increases may vary among:

(A) Counties, considering each county's unique economic landscape and cost of living; and

(B) Industry sectors, specifically the industry sectors most vulnerable to labor cost fluctuations;

(5) How wage policy adjustments affect the State's long-term economic competitiveness in comparison to other states and countries that attract higher levels of business investment and a larger, skilled labor force; and

(6) The types of support measures that would be effective, and that small business owners find beneficial, in mitigating any negative effects of increasing the minimum wage.

(b) The department of business, economic development, and tourism's research and economic analysis division shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2026.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $200,000 or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to establish one full-time equivalent (1.0 FTE) research consultant position within the department of business, economic development, and tourism's research and economic analysis division to conduct the study and prepare a report pursuant to this Act.

The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2025.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	505
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII