Hawai‘i's Economic Struggles: A Deep Dive into the Affordability Gap

A recent report from the University of Hawai‘i Economic Research Organization (UHERO) highlights a critical issue facing Hawai‘i: a combination of high living costs and stagnant wages, which has led to an affordability gap that mirrors economically distressed regions like West Virginia and Mississippi. The report, titled “Beyond the price of paradise: Is Hawai‘i being left behind?”, indicates that while residents earn average incomes, the high cost of living significantly diminishes their purchasing power.

Hawai‘i’s Cost Of Living Is High. But There’s Another Huge ProblemManoa: VNR: Adjusted for local prices, Hawai‘i’s economy among worst in nation, UHERO findsAdjusted for local prices, Hawai‘i’s economy among worst in nation, UHERO finds

The UHERO report reveals that Hawai‘i's economic performance has stagnated for over three decades, with real income growth lagging behind the national average. When adjusted for local prices, Hawai‘i's per-person GDP has grown at less than half the national rate since the early 1990s. This stagnation is largely attributed to the state's reliance on tourism, which has not seen significant growth since 1989. Steven Bond-Smith, the lead author of the report, emphasizes that the lack of economic diversification exacerbates the situation, as no new industries have emerged to replace the stagnating tourism sector.

Manoa: VNR: Adjusted for local prices, Hawai‘i’s economy among worst in nation, UHERO finds

The report also addresses the consequences of this economic stagnation, particularly the outmigration of residents seeking better opportunities elsewhere. This trend threatens not only economic productivity but also cultural continuity, as long-time residents and Kanaka Maoli families leave the state. Bond-Smith notes that the benefits of living in Hawai‘i are increasingly overshadowed by the struggle to afford basic necessities.

Hawai‘i’s Cost Of Living Is High. But There’s Another Huge Problem

State and local policymakers have recognized the high cost of living and have implemented measures to address housing affordability, such as developing below-market rate homes and creating tiny home villages for the homeless. However, Bond-Smith argues that these efforts are insufficient. He states, “If we resolve cost of living, if we make housing more affordable, all we’re doing is kicking the can down the road,” as the underlying issue of stagnant income remains unaddressed.

Hawai‘i’s Cost Of Living Is High. But There’s Another Huge Problem

The UHERO report calls for a shift in focus from merely addressing the cost of living to enhancing income and productivity growth. It suggests that revitalization will require strategic investments in infrastructure, digital connectivity, and human capital to foster new industries. The authors contend that without addressing these fundamental economic weaknesses, the pressures of affordability will persist.

Hawai‘i’s Cost Of Living Is High. But There’s Another Huge Problem

• “Our prices and incomes combined actually make us look more like Mississippi or Alabama or West Virginia.” — Steven Bond-Smith, UHERO Assistant Professor

Hawai‘i’s Cost Of Living Is High. But There’s Another Huge Problem

• “Hawai‘i’s tourism economy is regularly hit by short-term crises. But our analysis shows the state has also been facing a slow-moving crisis for more than 30 years,” — Steven Bond-Smith, UHERO Assistant Professor

Adjusted for local prices, Hawai‘i’s economy among worst in nation, UHERO finds

• “If we resolve cost of living, if we make housing more affordable, all we’re doing is kicking the can down the road, because that gap is going to continue to widen,” — Steven Bond-Smith, UHERO Assistant Professor

Hawai‘i’s Cost Of Living Is High. But There’s Another Huge Problem

Hawai‘i's economic challenges are complex, driven by a combination of high living costs and stagnant wages. The UHERO report underscores the need for comprehensive policy responses that not only address affordability but also promote economic growth and diversification. As the state grapples with these issues, the future of its residents and cultural heritage hangs in the balance.

Manoa: VNR: Adjusted for local prices, Hawai‘i’s economy among worst in nation, UHERO finds