According to a recent analysis from the University of Hawaiʻi Economic Research Organization (UHERO), the economic disparity between Hawaiʻi residents and the rest of the United States is growing annually, primarily due to stagnant productivity and wage growth rather than high living costs. Released on March 5, the report highlights how the state’s economic stagnation, which began in the early 1990s, continues to afflict residents.
The report, titled “The Lost Decade Never Ended in Hawaiʻi,” authored by Steven Bond-Smith and Erich Schwartz, describes the consequences of the economic boom in the 1980s, which ultimately made Hawaiʻi more susceptible to the repercussions of Japan’s asset bubble collapse. While there was an apparent recovery in the 2000s, this analysis reveals that Hawaiʻi’s real per capita GDP has remained on a trajectory of underperformance.
Despite national metrics that suggest Hawaiʻi kept pace with the U.S. economy for many years, the analysis indicates a stark reality when local prices are accounted for. Between 2005 and 2023, the average real per capita growth rate in Hawaiʻi has only been about 0.7% per year. This stagnation has resulted in a growing gap between Hawaiʻi and the mainland U.S. economies, primarily driven by a plateau in the state’s dominant tourism sector and the failure of other sectors to emerge as viable alternatives.
The report asserts that this extended economic underperformance has significant social implications. Issues such as outmigration, housing affordability, and the struggle for middle-class families to maintain a standard of living are dire consequences of the longstanding economic challenges. Thus, the authors urge for a reassessment of policies to focus on addressing the structural weaknesses in Hawaiʻi’s economy, rather than attempting to superficially remedy the cost of living.
The findings build on a prior UHERO report, “Beyond the Price of Paradise: Is Hawaiʻi Being Left Behind?” which emphasizes the critical need for sustainable growth strategies in the state to ensure a more equitable future for residents.
The analysis presents a call to action, highlighting that bolstering productivity and diversifying economic sectors could provide a pathway for Hawaiʻi to recover and thrive, ultimately bridging the widening gap with the mainland U.S.