40 years of economic data makes clear the need to create a new, people-centered economy
Since 1980, the cost of living in Hawaiʻi—especially housing costs—have ballooned, while all but the highest wages have stagnated, creating an unsustainable economic system.
HONOLULU, Hawaiʻi — The Hawaiʻi Budget & Policy Center (HBPC) released a new report today entitled “The Case for a New Economy.” The report examines four decades of economic and demographic data in the State of Hawaiʻi to determine what has happened to Hawaiʻi’s working class during that time period. Is it easier or more difficult to live and work in Hawaiʻi now than it was then?
“What we found looking at the data was that, in general most costs have increased slightly, but the cost of housing has exploded over the past 40 years and wages have not even come close to keeping up,” said Beth Giesting, director of HBPC. “The highest wage earners have seen some growth in their earnings, but for low- and middle-wage workers, their earnings have remained practically inert once adjusted for inflation.
“It’s created a situation in which the foundation of our economic system—working families—can no longer get by and are being forced to move away,” she added. “If this erosion of the economic base continues, the things we love about Hawaiʻi—its warmth and diversity, its desirability as a place to raise our children—cannot survive.”
However, despite the many economic forces that influence Hawaiʻi’s wages and costs, smart public policy can build opportunities and secure a better future for working families in Hawaiʻi. The report also includes a series of recommended public investments designed to make life more affordable for low- and middle-wage workers.
“The upheaval of the COVID-19 pandemic could push Hawaiʻi toward a long-term economic reversal with reduced hopes and opportunities, or it could encourage new ideas and voices to bring about the change that leads to thriving communities,” said Giesting. “We have a choice.”
In Hawaiʻi, the growth in inflation-adjusted hourly wages for low-income workers increased by just 98 cents in 40 years, while high-end wages increased by 12 times that amount. The decision to let our minimum wage stagnate for years at a time while housing and other living costs have continued to march upward has left struggling workers with a wage that covers less than 60 percent of Hawaiʻi’s subsistence household budget for a single wage earner.
At the same time, our tax policy has resulted in the lowest-income households paying two-thirds more of their income in taxes than the top 1 percent do.
“For decades, our public budgets have not invested enough in education, housing, or programs needed to support the health and wellbeing of families,” said Giesting. “Failures to fund infrastructure projects and adopt policies that could generate greater housing affordability have resulted in rent burdens that have grown at nearly twice the rate of wage increases for middle-income earners, and nearly four times the rate for low-income workers. And low-income households with children now may have to put a third of their earnings toward preschool and education costs.”
These aren’t the inevitable outcomes of the passage of time. Rather, they are the inevitable outcomes of public policy choices. Over the past 40 years, our policies have led to stark inequities in income, health, education and opportunity, leaving nearly half of Hawaiʻi’s residents in economic jeopardy today. However, if short-sighted and ineffective public policy over the past 40 years has failed us, smart and equitable public policy can help create a more vibrant and thriving Hawaiʻi going forward.
“Smart policy that works for all residents requires the contribution of many ideas and voices, public and private sector leaders who listen and work together with the community, and a shared commitment to equity,” said Giesting. “Smart policy invests in decent housing that working families in Hawaiʻi can afford; it helps low-income working families get ahead by reducing their tax burden; it ensures that the minimum wage covers the basic costs of living; and it gives every keiki a better future by making good public education accessible from preschool through higher education.”
