On late Tuesday night, Hawaii lawmakers passed an increase in the state’s minimum wage from the federal floor of $7.25 to $10.10 an hour by January 2018. Gov. Neil Abercrombie (D) is expected to sign it on Wednesday.
That’s the wage that President Obama and Democratic members of Congress are pushing for the entire country, and the Senate will vote on raising it to $10.10 on Wednesday. Hawaii is the third state to pass a wage at that level this year, following Connecticut and Maryland.
But one aspect of Hawaii’s law is unique: it will apply to tipped workers such as waiters and taxi drivers. Workers who make less than $17.10 an hour including their tips will have to be paid the $10.10 wage plus tips, and the employers of those who make more than that level can deduct a 75 cent tip credit from their wage. By contrast, Maryland’s tipped workers’ minimum wage is still frozen at $3.63 an hour and in Connecticut it will remain at 63.2 percent of the higher wage, rising to $6.38 per hour once $10.10 takes effect. At the federal level, the tipped minimum wage remains at $2.13 an hour, where it has been for two decades.
Five other states have considered raising their wages to $10.10 an hour, although with many legislative sessions ending, there may not be many more that pass it for now.
That wage level is where the minimum wage would be if it had kept pace with inflation since its peak in the late 1960s. If Congress were to pass it nationally, nearly 5 million people would be lifted out of poverty and the gender wage gap would shrink by 5 percent. Spending on food stamps would also decline significantly, dropping by $46 billion over the next decade. Still, living on that wage would still leave many families struggling to get by, and it’s far below where the minimum wage would be if it had kept up with increases in workers’ productivity over the years.
While the Congressional Budget Office warned that a $10.10 minimum wage could mean job losses, a variety of economic evidence suggests that higher wages don’t have an impact on employment. Two economists studying minimum wage increases at the state level over two decades didn’t find any clear evidence that they affected job creation. Employers can actually benefit from lower turnover and higher efficiency, plus the $31 billion in extra earnings that would create more demand for their products. Other real world evidence from states and cities that raised their wages shows that their economies fared the same or better compared to their neighbors.