ISLAND VOICES
Minimum-wage hike would hurt everyone
By State Rep. Colleen Meyer
Three shuffling shells, one pea, the promise and expectation of easy money and a little sleight of hand are all that is necessary to separate people from their money in one of the oldest cons around. The Legislature plans to raise the minimum wage from its current rate of $6.25 to as much as $8. This 28 percent wage hike is drastic by any standard and will move Hawai'i's minimum wage from 12th-highest in the nation, far beyond the highest-minimum-wage state, Washington, at $7.35.
This is nothing more than a sophisticated shell game, run by legislative Democrats who have their eye on the governor's race in 2006 and are seeking to curry favor with labor unions.
If relief for Hawai'i's working poor was the real objective, raising the standard deduction on state income tax would be a far more effective (and long overdue) way of providing relief. Raising the standard deduction would help low-wage earners without the negative ripple effects.
Studies show clearly that significant raises in the minimum wage hurt, rather than help, entry-level workers by reducing the number of jobs, increasing inflation and hurting locally owned businesses.
Unions are the big fans of this increase because raising the minimum wage translates into negotiating power in the form of a new elevated wage floor. From this new wage floor, they will increase wages throughout the entire wage structure.
Initially, this sounds great. It sounds like everybody will get a raise, but remember the shell game: Easy money isn't easy. See if you can follow the pea — remember three shells, two empties and only the one with the pea pays.
The first empty shell is the wage structure ripple effect. Employers will be forced to either cut the pay of their longtime employees, relative to entry-level workers, or bump everybody's wage up — rippling the minimum-wage increase throughout the entire pay structure. For the smallest businesses, it will mean thousands of dollars, for others hundreds of thousands. It's the difference between a small profit and not breaking even.
Not every employer will produce a ripple effect. For many companies, the increase will compress the pay scale, put second and third-year employees on par with new hires and stagnate future wage increases. Ultimately, this will hurt people with lower levels of education and experience by reducing the number of entry-level jobs, increase the demands made of current workers and force even more of Hawai'i's businesses off the books and under the table.
The second empty shell is inflation and higher prices. Inflation is when your dollar won't buy as much as it used to. Whenever government actions are used to artificially prop up or inflate an aspect of market equilibrium, in this case labor costs, inflation ensues and consumers pay more for goods and services.
Small businesses will be especially affected; local shops already operating on razor-thin margins will be forced to raise prices. The long-term result is that the average consumer will shop at local stores less and at big national chain stores such as Wal-Mart, Home Depot, etc. more — ultimately driving "mom and pop" out of business. National chains can spread out the wage increase across hundreds of stores, but small local businesses have no choice but to pass these costs on.
Hawai'i residents are already at a financial breaking point. Residents are besieged by the fourth-highest taxes in the nation, by bottle-bill deposits, a tripling of the conveyance tax, rising real property taxes, sewer fees and an imminent 25 percent increase of the general excise tax. All of this on top of having among the highest costs of living in the nation. Honolulu ranks in the five most expensive cities to live in, along with New York City and San Francisco.
And the shell with the pea under it? The union shell. If the minimum wage is increased, unions will demand higher wages, period. Hawai'i unions will push hard for across-the-board raises or strike.
In this game of shuffling shells and high stakes, who loses? We all do — even those who think they've won. We are all negatively influenced when unions strike and hold businesses and services hostage, but the elderly on fixed incomes, paycheck-to-paycheck households and those reliant on public assistance are particularly affected. Do we need another bus drivers' or dockworkers' strike? When unions flex their muscle either by gaming the Legislature or by striking, Hawai'i loses.
Our future is far too valuable to gamble with. We should be akamai to the short-sightedness of this minimum-wage increase and see it for the inflationary, wage-compressing, job-reducing shell game that it is. It will mean fewer entry-level jobs and increased inflation. It will not help Hawai'i's struggling families. Raising the standard deduction is a far more responsible option, one where there are no losers, only winners.
State Rep. Colleen Meyer, R-47th (Ha'iku, Kahalu'u, La'ie) is House minority floor leader. She wrote this commentary for The Advertiser.
