Hawai‘i’s economy is one of the weakest in the nation after decades of stagnation, claims a new report from the University of Hawai‘i.
UH’s Economic Research Organization published on Sunday a report — “Beyond the Price of Paradise” — breaking down the economic pressures facing the state.
Steven Bond-Smith, UH professor and lead author of the report, told reporters Monday that the report was an investigation into what has motivated people to leave the Islands in droves over the last two decades. Bond-Smith said that, for 23 of the last 25 years, more residents have moved away than new arrivals have moved in, with the leavers commonly citing a high cost-of-living as their reason for moving elsewhere.
However, that high cost-of-living isn’t the whole picture, Bond-Smith said, explaining that the state’s economic growth hasn’t been able to keep up with the rest of the nation.
Beginning in the late 80s, Bond Smith said the state’s compound annual growth rate — which had previously been consistent with the national average — slowed, leading to a widening gap between Hawai‘i and the rest of the country. The result, he said, has been wage stagnation, and a reduction in labor opportunities.
Adjusting for inflation and the higher cost of goods in Hawai‘i, Bond-Smith said the state’s economic growth is more reminiscent of a decaying post-coal Rust Belt town.
“Hawai‘i is expensive, but once we adjust for that, it’s clear that Hawai‘i is also being left behind, comparable to some of the most economically distressed places in the country,” Bond-Smith said.
Bond-Smith said communities in Appalachia that were once economically reliant on the coal industry began stagnating as the demand for coal dropped because those communities didn’t have diverse enough economies to cover the shortfall.
In the same way, Hawai‘i's tourist-centric economy doesn’t have other sectors robust enough to make up for weaknesses in the tourism industry, he said: the state simply lacks a major export industry to attract dollars from out-of-state.
The report notes that other areas with high costs of living such as San Francisco or Los Angeles are still able to maintain populations through the prospect of high wages. Hawai‘i, however, has the worst of both worlds: high costs and low incomes, leading to more people leaving the state.
The report concludes with only a few solutions. On one hand, the report acknowledges that tourism will remain the backbone of the state’s economy for decades, and Bond-Smith said that the tourism industry will likely provide the greatest opportunities for economic growth.
Bond-Smith said boosting value within tourism, such as through sports or event tourism, could help stimulate growth in an industry that has otherwise plateaued.
Meanwhile, UHERO Executive Director Carl Bonham said that identifying and removing barriers preventing new industries from taking root in Hawai‘i will be essential to diversify the economy. However, the report states that such new industries will likely grow out of the existing activities and industries within the state — that is, from tourism.
"It means investing in infrastructure that supports economic activity, increasing skills that allow workers to move into higher-value jobs and creating the right conditions for new tradable industries," Bond-Smith said.
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