There is the other side of the affordable housing issue. Which moves it well beyond homelessness and poverty.

Why don’t people earn enough to afford homes?

The most recent census statistics report median household income in Honolulu as $73,985. A mortgage calculator indicates that a household with slightly above that income, with excellent credit, could afford a home mortgage of $336,556.

The most recent median condo price, according to the Honolulu Board of Realtors, was $374,000.

“Affordable” housing is very much a middle class problem. Not solely a poverty problem solvable by welfare programs. (But programs to combat homelessness are part of solution).

“Affordability” is also about middle class incomes and wages.

It’s actually a deep question. Normally housing prices are determined by the incomes of residents in a given location. (That’s the principle component of demand for housing).

Hawaii’s rental market is among the nation’s most expensive and the gap between renters wages and their rent is the largest in the country.

Cory Lum/Civil Beat

Wages are only generally set by the supply and demand for labor. They are also set by the bargaining power of all employees.

Rather than actually negotiate Hawaii state government has adopted a legalistic strategy whose main aim is to minimize public employee wages. (And it has been successful). This policy in turn undermines the bargaining power of private and public sector workers, union and nonunion alike. It has led to gross distortions in government budgets, deeply wounded public education, and has led to gross governmental inefficiencies.

That the policy has broad public support is part of what makes it effective.

An example: CEOs of Hawaii’s 15 publicly traded companies rose by 13 percent in the last year. The mean salary rose to $2.2 million.

Teachers will be getting a bit above 13 percent over 4 years. This comparison is especially apt because teachers and CEOs have the same educational levels. And both faced the same general economic conditions,

One might think this is small potatoes, 15 people? It’s not, because its systemic. People who derive their income based on prices, not only CEOs, but their shareholders, benefit from high prices. Out of state real estate owners especially. Wage earners, in Hawaii, suffer from them. It’s an example of a systemic problem.

Compare the public response to the two. The Honolulu Star-Advertiser had an editorial about controlling labor costs”— of public employees..

In 1997 starting teachers’ salaries were $35,000, today they are $45,000. Taking inflation into account, $45,000 is now worth $28,875. That means starting salaries for teachers would have to rise by $6,000 merely to return to 1997.

Using the Census’s Regional Price Parity (RPP) index one can compare mean incomes for Hawaii Firefighters and Police Patrol Officers to the national mean incomes of those occupations.

The Bureau of Labor Statistics, Occupational wage survey, tells us Hawaii firefighters, earn a mean income of $56,470. The national median is $50,520. Yet Hawaii firefighters’ purchasing power is equivalent to a mainland income of $48,347. To bring them up to the national mean would require a one time raise of $2,172.

Hawaii police patrol officers’ median salary is $70,060; nationally it is $62,790. Taking the Hawaii price level into account Hawaii police officers earn a mainland equivalent salary of $59,782. Police would need a $3,008 raise to merely come up to the national median.

Police and firefighters are middle, middle class jobs on the mainland. Prices here make them lower middle class. And prices in the RPP index are driven by housing.

Imagine the outcry these sorts of raises would provoke?

These statistics probably come as a surprise to many readers.

That’s because the numbers most see are numbers described as “labor costs,” which purport to show wages and benefits. These are bogus. The main costly benefit is health insurance and public employees pay anywhere from 50 percent to high 30 percent of these premiums as “copays.” So these numbers are always artificially inflated.

What about all those 4 percent annual raises?

The Hawaii State Teachers Association contract was reported as being 13.5 percent, over 4 years. It has two across the board raises that total 7 percent over that period.

In two years there are “step increases.” Teachers are moved through the steps and that is what makes 7 percent 13.5 percent. People in the bottom and top steps get no increase.

Step increases are “modeled.” To calculate their worth it is assumed that no one retires, or quits, and there are no new hires. The most recent turnover rate for new teachers is 37 percent. Those teachers won’t benefit from step increases.

Overall this means of “modeling” step increases makes raises seem greater, and costs higher.

These inflated numbers are then fed into the state budget. Combine these with chronic turnover, and unfilled positions, and you have surpluses.

I perceive a cyclical budget cycle. Public employees get some increase; high anxiety about their affordability (potential budget crisis); things go well, surpluses accumulate; levels of government prepare budgets to spend the money; they plead poverty in arbitration; some raises are awarded; and we start over.

The point here is we have moved away from broad policies that benefit the middle class. Middle class subsidies like education (lower and higher), public transportation and wage increases are subjected to beyond normal scrutiny. While business subsidies, like tax credits, or the Hawaii convention and business bureaus, are seen as “job creators.”

Some might think state government is operating like a business. Wal-Mart faces many of the problems the Department of Education and state government faces — high turnover, employee demoralization, dirty bathrooms. Their response has been to raise associates’ salaries nationwide from $9 to $13. In one fell swoop. More than the needed rise needed to return starting teacher salaries to the level of 10 years ago.

I don’t fault “politicians” for this. It goes well beyond them, it’s a pervasive attitude. One that needs to be challenged on a broader economic level. Which is a story for another day.

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