According to the state Department of Labor and Industrial Relations, the current $7.25 minimum wage is worth 84 cents less than when it was set five years ago due to inflation.
A minimum wage increase would help Hawaii workers recover lost purchasing power and encourage more spending that can contribute to the state's economic recovery, the Labor Department suggests.
That's not the way the Chamber of Commerce of Hawaii sees it, however.
The organization represents more than 1,000 businesses and approximately 80 percent of its members are small business owners with fewer than 20 employees. A mandated wage increase could mean the difference between continued existence or bankruptcy for some of these small establishments, said Chamber President and CEO Jim Tollefson.
Tollefson said he empathizes with the need to ensure workers can make ends meet, but added, "The enactment of a minimum wage increase at this time, however, will undermine efforts made to turn Hawaii's economy around."
The state House Committee on Labor and Public Employment heard testimony Tuesday on two measures to raise the minimum wage. Committee members ultimately passed out House Bill 1691, which bases the state's minimum wage on the federal poverty level for a family of two in Hawaii.
In the bill's current form, the minimum wage would increase 89 cents to $8.14 on Jan. 1, 2013. The bill also mandates the minimum wage be adjusted for inflation at the start of each fiscal year beginning July 1, 2013.
Committee Chairman Karl Rhoads, D-Kakaako-Downtown, recommended passing House Bill 1691 because it establishes a theoretical basis for setting the minimum wage and adjusting it for inflation.
"We just have a wage, and every once in a while we change it because we feel like inflation has eroded it," he said.
The discussion made it clear Hawaii's current minimum wage is under the federal poverty level, Rhoads pointed out. "This (bill) only gets you to the poverty line if you're making minimum wage in Hawaii," he said.
The committee followed Rhoads' recommendation to defer a bill that would have increased the minimum wage $1 to $8.25 by July 1, 2013.
Passage by the Labor Committee is the first of several hurdles the bill will have to clear this session for a minimum wage increase to go into effect during the next fiscal year.
In 2010, 1.7 percent of the workforce earned the minimum wage, according to Hawaii Labor Department statistics.
Carol Pregill, President of the Retail Merchants of Hawaii, said few retailers can hire anyone at minimum wage.
Pregill pointed out a minimum wage increase would also lead to higher costs for benefits tied to wages, such as holiday and vacation pay, unemployment insurance, Social Security, Medicare and other compensation premiums.
"Our economy remains tenuous," she said. "Our focus should be on stabilizing our businesses so as to enable increasing employment and hastening recovery."
Steve Canales, Labor Caucus Chairman for the Democratic Party of Hawaii, testified in strong support of the legislation. Workers who lost jobs in 2011 face a quandary when they find minimum wage jobs, he said.
"There are those who contemplate between taking a minimum wage job or collecting unemployment insurance," Canales explained. "The reason is unemployment insurance pays a higher weekly amount. Many of these workers are optimistic about finding a higher paying job."
Some committee members expressed reservations, even as they passed the bill out of their committee.
Rep. Aaron Johanson, R-Mapunapuna-Foster Village, said the measure had merit behind it, but raised concerns about whether the bill's intent might lead to unintended consequences such as inflation and a loss of entry-level jobs.
Rep. George Fontaine, R-Makena-Kihei, said he didn't think the timing was right to raise the minimum wage. He added, "I think we should be doing more to reduce the cost of living rather than trying to raise wages to catch up with it."