Give everyone a raise by lowering the cost of living

This “Other Voices” commentary was originally published, without the footnotes, on Dec. 25, 2019, in The Garden Island newspaper.

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Just about everyone in Hawaii knows by now that we have one of the highest costs of living in the nation,^[1] one of the most regressive tax systems^[2] and a serious lack of affordable housing.^[3] 

Every day, more Hawaii residents are leaving the islands in search of greener pastures, resulting in a net decline in the state’s total population for several years in a row^[4] — and it appears that trend will continue.^[5]

One recommendation that has gained traction as a way to help Hawaii residents cope with these unfortunate economic circumstances is to significantly increase the state’s legal minimum wage.^[6]

Unfortunately, proposals to increase the minimum wage too often downplay the effect that an increase could have on the state’s economy. In general, businesses respond to wage hikes by reducing hours, turning to automation, cutting staff or closing altogether.^[7] None of these outcomes would be helpful to Hawaii’s low-income hourly employees.

Numerous studies demonstrate that minimum wage hikes are hard on small business and only marginally effective, if at all, at helping low-income workers.^[8] At a panel hosted by the Maui Chamber of Commerce in July, University of Hawaii economist Sumner La Croix pointed out that minimum wage hikes can operate like a regressive tax, raising the prices of goods and services in ways that are especially hard on those whom the increases were intended to help.^[9] That is the unintended downside of forcing a hike in the minimum wage.

What we need in Hawaii is to give everyone a raise by bringing down this state’s incredibly high cost of living. The national Tax Foundation recently estimated that the real value of $100 in Hawaii is only $84.39.^[10] In other words, we have less purchasing power than the residents of any other state in the country. Clearly, the best way to help Hawaii’s workers, at all income levels, would be to increase the purchasing power of the money that they do have.

That means saying no to more government spending. It means lowering lower taxes and fees, opening up more land for housing and changing the state from one that is regulation-heavy and unfriendly to business to one that welcomes entrepreneurs and spurs innovation.

This is not a simple fix such as that promised by a minimum-wage hike. It will take broad-based thinking and cooperation from many individuals, policymakers and special interests.

But there is no doubt that lowering the cost of living would be an effective way to help working families. It would help not just those making the minimum wage. By increasing the purchasing power of each dollar in Hawaii, everyone would receive a raise, regardless of their income level.

Let’s give everyone in Hawaii a raise by embracing policies that will grow the economy and reduce the cost of living.