Hawaii Becomes Third State This Year to Raise Minimum Wage to $10.10, Adopts Nation’s Highest Wage Floor for Low-Paid Tipped Workers

Over restaurant industry opposition, legislature eliminates sub-minimum wage for low-paid tipped workers, guaranteeing $10.10 per hour paid directly by employers with tips in addition

Honolulu, HI – Hawaii lawmakers reached an agreement late Friday to increase the state’s minimum wage to $10.10 per hour by 2018, making Hawaii the third state this year after Connecticut and Maryland to raise its minimum wage to the $10.10 rate proposed by President Obama and Congressional Democrats. A final concurrence vote in the state House and Senate will take place on Tuesday before the bill is sent to Governor Abercrombie for his signature.

“There’s one reason why Hawaii, Connecticut, Maryland, and other states throughout the county are raising the minimum wage to $10.10 – because Congress hasn’t. The fact that a groundswell of states and cities are now taking action to boost pay for low-wage workers underscores the urgent need for Congress to follow suit and pass a long-overdue increase in the federal minimum wage,” said Christine Owens, executive director of the National Employment Law Project.

Over opposition from the state’s restaurant industry, Hawaii lawmakers also agreed to eliminate the sub-minimum wage for lower-paid tipped workers in the state: as a result, tipped workers earning less than $17.10 per hour will receive the full $10.10 minimum wage paid directly by their employers, with tips in addition. Employers will be permitted to pay $0.75 less than the full minimum wage only to tipped workers earnings at least $7 above the new minimum wage.

The agreement announced Friday marks a major victory for low-wage workers in Hawaii after the state’s restaurant industry succeeded in blocking the near-passage of a minimum wage increase under consideration in the legislature last year – a last-minute push by restaurant industry lobbyists to freeze the tipped minimum wage at its current $7.00 rate, as a condition for any increase in the full minimum wage, left legislators gridlocked through the end of the 2013 legislative session.

The National Restaurant Association and its state affiliates regularly pressure federal and state lawmakers to put the tipped worker sub-minimum wage on the chopping block when an increase in the full minimum wage is under consideration. In Maryland, the legislature recently approved a minimum wage increase to $10.10 per hour by 2018, but legislators ultimately conceded to demands from industry lobbyists to freeze the tipped minimum wage at its current rate of $3.63 per hour. Similarly, when Congress approved federal minimum wage increases in 1996 and 2007, the restaurant industry successfully lobbied to freeze the minimum wage for tipped workers, and as a result the federal tipped minimum wage has remained frozen at just $2.13 per hour since 1991.

Seven states currently guarantee all tipped workers a base wage equal to the full value of the minimum wage, with any tips received being in addition to the base wage paid directly by their employer. Of these states, Washington currently has the highest minimum wage of $9.32 per hour. California, which also guarantees tipped workers the full minimum wage, will gradually raise its minimum wage to $10 per hour by 2016 due to legislation signed into law last year. Economic data indicate that tipped workers in these states benefit from higher wages and experience significantly lower rates of poverty compared to states with lower tipped minimum wages.

Contrary to common misperception, tipped workers – 70 percent of whom are women – remain an overwhelmingly low-wage workforce. Tipped workers are than more than twice as likely to fall under the federal poverty line, with servers nearly three times as likely to fall under the poverty line. Last month, the White House released a report finding that raising the federal tipped minimum wage to 70 percent of the full minimum wage would help reduce poverty among women and their families, while making progress toward closing the gender gap.

The growing momentum to raise the minimum wage on the state and local level is spurred by broad levels of public support across the country. A February 2014 poll found that 57 percent of small business owners in the U.S. support raising the minimum wage to $10.10 per hour and indexing it to rise each year with the cost of living, with a majority of respondents citing the economic benefits of higher wages as a basis for their support.  Nationally, 69 percent of Americans support raising the minimum wage to $10.10 per hour, including 45 percent of Republicans, according to a March poll by Bloomberg news.

The most rigorous economic research over the past 20 years shows that raising the minimum wage boosts worker pay without causing job losses – even in regions where the economy is weak or unemployment is high. A recent study by the Center for Economic and Policy Research reviews the past two decades of research and concludes that raising the minimum wage had no adverse impact on employment.

Emma Stieglitz
emmas@berlinrosen.com
(646) 200-5307