Hawaii’s minimum hourly wage will rise to $18 over the next six years, after Gov. David Ige signed the increase into law Wednesday.
House Bill 2510 will initiate a series of incremental wage increases beginning on Oct. 1, when the minimum wage will rise from $10.10 an hour to $12 an hour. After that, the minimum wage will rise by $2 every two years — to $14 in 2024, $16 in 2026, until it culminates in 2028 at $18 an hour — the highest in the nation.
At a signing ceremony in Honolulu on Wednesday, Ige said the increase will benefit more than 190,000 workers in Hawaii.
“This will help working families pay for housing, food, health care and other necessities,” Ige said. “The minimum wage increases will also give our economy a boost, as these families have more income to purchase what they need from local businesses.”
The bill was contentious throughout its journey through the state Legislature, and initially proposed an even faster increase schedule, originally raising the minimum wage to $18 by 2026. Eventually, however, the House bill was gutted and replaced by the text of a competing Senate bill that had died earlier in the legislative session.
Trevor Abarzua, the Chamber of Commerce Hawaii’s associate vice president of business advocacy, said the organization has some misgivings about the bill’s particulars, but has been advocating for a minimum wage increase for years.
“We’ve been hearing from some mom-and-pop businesses that starting in October might be too soon to adjust, for example,” Abarzua said.
On the other hand, Abarzua praised a few other features in the bill. The legislation provides an increase to the state’s tipped income credit, something the previous iterations of the bill did not do.
The tipped income credit allows employers to pay tipped workers a certain margin below minimum wage — the current margin is $0.75 — as long as their wages and tips combined are at least $7 above the minimum wage. The bill will increase that margin to $1 in October, $1.25 in 2024, and finally to $1.50 in 2028.
Abarzua said increasing the tipped income credit will help alleviate the burden on businesses caused by the increased wages, while not having a noticeable impact on any given tipped employee’s paycheck.
The bill also makes the state’s earned income tax credit permanent and refundable.
While the credit was previously going to sunset after 2022, that date has been removed entirely, and taxpayers whose credit exceeds their tax burden can claim the excess as a refund, rather than carrying that excess over to the next year’s tax return.
Abarzua said the changes to the earned income credit were present in previous versions of the bill, but were removed and were only restored in its last conference committees at the end of the legislative session.
“We’re looking forward to working with the Legislature to help support small local businesses,” Abarzua said, suggesting that the state consider further actions to alleviate the wage burden on businesses, such as lowering the cost of doing business in Hawaii or decreasing regulations.
Worker advocacy groups praised Ige’s signature Wednesday.
“Research consistently shows that, when families can afford to pay for their basic needs, the benefits reach deep within our society,” Nicole Woo, director of research and economic policy at Hawaii Children’s Action Network, said in a statement. “Beyond the proven economic benefits, this law will reduce poverty and inequality, improving health outcomes and educational attainment for children in working families, improving social cohesion and even reducing crime.”
Ige also signed a bill Wednesday that will give taxpayers a refund of up to $300 on their 2021 tax returns. Individuals who earn less than $100,000 a year, or couples who jointly earn less than $200,000, will receive the full $300, while individuals and couples whose earnings exceed those thresholds will receive $100.
The Department of Taxation announced Wednesday that those refunds start going out in the last week of August, with more details to come within the next few days.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.