Hawaii’s High Cost of Living

Our Hawaii video articles previously covered Gov. Ige’s recent state-of-the-state in which he affirmed that easing Hawaii’s high cost of living would be a central objective of the 2020 legislative session. The Economic Research Organization at the University of Hawaii (UHERO) has issued a report that underscores the difficulties facing Hawaii’s executive and legislative branches as they seek to reduce the high price of living in paradise.

The most recent government statistics show that the price of goods and services in Hawaii are more than 18% higher than the national average. Rents alone are 50% higher than the national average. Exacerbating the problem, personal incomes in Hawaii are only a few percentage points higher than the national average. As a result, the purchasing power of Hawaii residents is the fourth lowest in the US.

Thus the problem for Hawaii’s lawmakers is that boosting the minimum wage and increasing tax credits for working families is unlikely to make a significant difference in purchasing power. UHERO sees the possibility of more Hawaii residents heading for less expensive locales on the mainland. They also see the possibility, perhaps even likelihood, of stagnant job growth. Perversely, as a positive outcome emerging from a negative trend, these trends could keep the cost-of-living in Hawaii from increasing.

Bottomline: realistically these factors are likely to continue to impose hardships on Hawaii’s families of modest-to-moderate income. Expensive housing will continue to be the main driver: Hawaii’s rents are more than 50% higher than the national average, and higher still in Honolulu. The high rents reflect the appeal of living in Hawaii. Restrictions and regulations facing developers result in building costs that are among the highest in the world! A significant portion of these costs are passed on to Hawaii’s consumers.