A combination of lower salaries for high-end earners and higher wages for lower-income jobs compresses Hawaii’s income wage gap, meaning the islands have a more equitable distribution of income, according to researchers at the University of Hawaii Economic Research Organization.
Hawaii has had one of the country’s lowest levels of income inequality for over the past decade and in 2023 had one of the lowest income ratios, along with Arizona, Michigan and Pennsylvania, according to a UHERO blog written by Rachel Inafuku.
“Living in Hawai‘i is expensive, and lower-income households struggle the most to make ends meet,” Inafuku wrote last week. “Yet despite the high cost of living, Hawai‘i consistently ranks among U.S. states with relatively lower levels of income inequality.”
Several factors continue to put pressure on both higher-paying and lower-paying jobs, including the ongoing need to fill lower-paying jobs and Hawaii’s “sunshine tax” that allows employers to pay lower wages for higher-skilled jobs, said Inafuku’s colleague, Steven Bond-Smith, a UHERO assistant professor who spoke for Inafuku’s findings while she’s on leave.
The strength of organized labor across the islands also likely helps close the income gap by providing middle-class jobs that let young workers earn good salaries right out of high school without racking up student loans, Bond-Smith said.
As Inafuku wrote, “Higher rates of unionization also contribute to wage compression and reduce income inequality.”
No matter what level of income, Bond-Smith said, “in Hawaii there always tends to be a labor shortage and we tend to have a lower employment rate. It’s difficult to be unemployed in Hawaii.”
The state’s isolation also makes it easier for employers to pay less for better-paying jobs because employees have fewer job opportunities than their counterparts in sprawling urban areas, Inafuku wrote.
“This is partly because industries that typically offer higher wages — such as finance, tech, and advanced business services — are either small or largely absent in the Islands,” she wrote. “Many of these sectors rely on frequent face-to-face interactions with clients and collaborators, which are easier to sustain in large connected metropolitan areas. As a result, these industries tend to cluster in major U.S. cities and remain limited in Hawai‘i, where they primarily serve a local market.
“In addition, workers in high-paying fields may accept lower salaries in exchange for the benefits of living in Hawai‘i — such as our climate, amenities, and family ties,” she wrote.
“As a result, top-paying positions in Hawai‘i often offer lower compensation than similar roles on the mainland. As noted in a previous UHERO blog, the average bachelor’s degree holder in Hawai‘i earns less than their mainland peers across most top-earning college majors. For example, mid-career professionals in engineering, economics, and computer science majors earn roughly $20,000 more on average at the national level than in Hawai‘i. In this sense, living in paradise comes at a cost — not only in terms of higher living expenses but also in foregone earnings elsewhere.”
Hawaii’s high housing rates and general cost of living also require low-income earners to have multiple jobs, further closing the income inequality gap, Bond-Smith said.
Alexandre Tumacder, 17, just graduated from Waipahu High School in May and started his career as a union carpenter as an intern and since has been hired as an apprentice.
It’s a good fit, Tumacder said, “because I never really enjoyed school much sitting at a desk all day, and I hated working at McDonald’s. I never wanted to go to college because I felt it wasn’t for me.”
As an apprentice, Tumacder earns over $21 an hour while living at home with his parents.
But he will move quickly up the pay scale on his way to earning journey-level status once he completes the mandatory work and classroom hours in approximately four to five years.
Current journey-level carpenters earn over $54 an hour, which increases on Sept. 1 to over $55 an hour, in addition to an additional benefits package worth over another $30 an hour.
When the carpenters’ current contract expires in 2028, journey-level carpenters will make almost $60 an hour.
Tumacder will have no student debt that could hurt his ability to qualify for a mortgage.
“My mom is very proud of me,” Tumacder said. “They really like me having this job.”
A carpenter colleague started working at the age of 19 and was able to buy a home within six years, Tumacder said.
Tumacder can see a future in Hawaii, in which he can buy his own home one day.
“I love this place we live in,” he said. “I don’t want to go away.”
Source: The Garden Island
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