• Key takeaway: It is no secret that Hawaii is an expensive place to live given that the Aloha State has the highest cost of living of all 50 states. While Hawaii’s economy has mostly recovered from the Great Recession of 2008, the minimum wage has failed to keep up with the rising cost of living. The minimum wage has remained at $10.10 since January 1, 2018, but legislators are debating a new bill which could significantly increase it over the next several years. According to the Hawaii Department of Business, Economic Development & Tourism (DBEDT), the living wage of a single person with no children is $17 (annual salary of$35,360), a significant gap from $10.10 (annual salary of $21,008). A living wage is defined as the hourly rate that an individual must earn to be self-sufficient in a given geographical area. Adjusted for the cost of living, Hawaii has the lowest minimum wage rate in the country. Stagnant wage growth combined with rising costs of living are likely the main factors driving Hawaii’s recent population loss, which impacts the labor market and retail sales, among other factors.

• Service and sales jobs: Hawaii’s economy is particularly sensitive to changes in the minimum wage because nearly half of residents work in the service or sales industries, which typically have low median wages. These occupations are the most vulnerable to wage stagnation, and will be impacted the most from a minimum wage increase. Three out of every ten jobs in Hawaii are in food prep & serving related, sales & related, personal care & service and healthcare support occupations, all of which have median wages below the estimated living wage.

• Making ends meet: In Hawaii, 31% of full-time workers fall below the living wage of $35,400, for a single person. For a family with two adults and two children, the living wage is $72,336, more than double the U.S. family poverty level of $27,890; a threshold which 48% of households in Hawaii fail to meet.

• Picking up the tab: Families in Hawaii that struggle to make ends meet rely on $1.4 billion in government and nonprofit assistance, in addition to $2.2 billion in healthcare resources. Families earning below the living wage are forced to make difficult choices between healthcare, child care, food and other living essentials. Ultimately, this burden weighs not only on these families, but also gets passed on to other Hawaii residents through increased insurance premiums and taxes.

• Senate Bill 789: Currently advancing through the legislature, SB 789 would increase the minimum wage from$10.10 to $12 during 2020 and then to $15 by 2023. If SB 789 passes, this would be a step towards closing the gap between the minimum and living wage, but it would still fall short of the salary needed to be self-sufficient in Hawaii. While Hawaii’s nominal wages have been steadily increasing over time, real wages have not increased since the 1970s after adjusting for inflation. The majority of SB 789’s critics are business owners who argue that increasing labor costs will undercut thin margins and force small businesses to shutter. In light of these concerns, many states and cities where minimum wage policies were passed adopted nuanced guidelines sensitive to the number of employees, proximity to metropolitan areas, and different wage schedules dependent on industry and tips.

Figure 1: Annual Living Wage and Median Wages of Major Occupation Groups (2018)

Figure 2: Figure 2:  Hawaii Minimum Wage Growth (2004-2023)

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