Hawaii's minimum wage hit $16 an hour on January 1. That's a 14.3% jump from $14, the biggest single-step increase the state has seen in years. And it landed right in the middle of what economists are calling a rough year for local business.

This is the third step in a schedule set by Act 114 in 2022. One more increase is coming: $18 an hour in 2028.

For reference, the federal minimum is still $7.25. Hawaii is now one of the highest-paying states in the country on base wages, trailing only Washington and California.

How Local Business Owners Are Feeling About It

Mixed. Genuinely mixed.

Nicole Smythe, owner of Plenty Aloha, put it honestly:

"As small business owners, we're fearless and we'll figure things out, but it is getting harder and harder."

Sherry Menor-McNamara, CEO of Chamber of Commerce Hawaii, said she'd already seen "several small businesses closing their doors" before the wage increase even took effect. Her read on 2026: "I think 2026 will definitely be challenging, which impacts jobs and people in our community."

But not everyone's dreading it. Martha Duerr, owner of Seaweed Snack Shop in downtown Hilo, was direct: "The minimum wage should be raised. I think to keep people here and motivated to work, they need to have money to raise their family and live."

Why the Timing Is Tough

The wage increase didn't arrive in a great year. Tourism has been sluggish. Tariffs pushed up the cost of goods. UHERO described 2026 as a "mild recession and weak recovery." For a restaurant owner or a small retail shop that was already navigating all of that, a 14.3% jump in base labor cost is a real hit.

Carla Kuo of the Hawaii Island Chamber of Commerce said the organization supports fair wages but is "mindful of the challenges they present, particularly for small businesses in tourism, retail and agriculture."

What Employers Need to Know Right Now

The $16 rate applies statewide to almost all employees. Tipped workers can be paid a lower cash wage but their total pay including tips still has to hit $16. Getting that wrong is expensive: the state added a minimum $500 civil penalty for wage and hour violations this year.

The 2028 increase to $18 is the one worth planning for now, not in November 2027. Businesses that build it into their budgets and pricing models today will have a lot less scrambling to do when it arrives.