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President's Message | January 2018

We have completed another year – a year of growth for businesses here on the Island of Hawai‘i. We look forward to 2018 anticipating that this year, too, will be economically strong. We start with a federal tax package that reduces taxes on virtually all or our businesses and on the tax rates paid by our employees.

Without getting particularly political, the political theater that we have been exposed to over the last several months has been fascinating to watch. One side of the aisle has decreed this to be a very positive game changer that will result in lower taxes for all, increased business investment in the United States and repatriation of billions of dollars from foreign shores for even further investment.

The other side of the aisle has called this the worst package that has ever been seen and will result even in the deaths of persons (how that would happen was not explained). Time will tell which side was closer to reality – but the initial answers came within a day when major companies across the U.S, (Banks and industrial giants like Boeing and AT&T) declared immediate bonuses for their employees, increases in minimum wages and very significant new investment plans – all citing the just (only hours earlier) signed tax bill for the cause for their actions.

Here in the State of Hawai‘i, four banks – including both Bank of Hawai‘i and First Hawaiian Bank – followed suit with bonuses of up to $1500 per non executive employee and raises in the minimum wage paid from about $12/hour to $15/hour or more (a significant 25% raise for those earning the minimum wage at those banks). As small businesses often struggle to grow, the reduction in taxation means money that will not go to Washington, D.C. will be available to grow businesses here. However you may cut all of that – this was at least a very good Christmas present to employees and owners in our business community.

As to local government, we see the struggle that will go on to come up with a budget for 2018/2019. The salary commission has declared significant wage increases for many of the leaders of our County government. The commission has final say on when, how much and to whom these raises go. Their decisions are the result of months of study looking at similar positions in the community. Certainly it is in the best interest of the County to pay fairly. At the same time, where the dollars will come from given that taxes have recently been increased largely as a result in negotiated increases between the State and public employee unions. As we reflect on this – and we should – we look at our own businesses and consider what factors need to be in place for us to increase the wages that we pay our staffs. In general there are only a handful of factors that allow businesses to increase employee wages:

Our ability through either the introduction of new goods or services, or general inflation allowing us to raise prices. Resulting increased margins allow us to then pass on higher wages.
Increased productivity of our workforce. This may come about as a result of greater utilization of staff, new equipment or sales growth that did not require hiring new staff.
Without such business improvements it is very hard to increase wages – there are no additional pools of income to pull from.

If government does not show an increase in productivity or provide new services, we have a one for one movement of dollars from the private sector to the public. Notice above (i.e. the Federal Tax Reduction) what happens when the government takes fewer dollars. We can generally expect the opposite when dollars flow the other way. These are not easy decisions for the County or State to make – nor is finding places to pull the dollars from. We will see how all of this plays out in the months to come.

January 2018 Chamber Connection Newsletter