As the most isolated inhabited land mass in the world, Hawaii’s geographical location and limited natural resources present particular economic challenges. In the last 50 years, Hawaii has transitioned from an agricultural economy to one based on tourism, state and local government, and federal — especially military — spending. Hawaii’s economy measured by real GDP is projected to show a 1.8 percent increase in 2017, according to the state Department of Business, Economic Development and Tourism.
Tourism is the state’s primary industry.
But a 2015 U.S. Census Bureau report found the federal government spent more than $20.09 billion in Hawaii during the calendar year.
By comparison, expenditures by visitors who came to Hawaii by air or by cruise ships in 201 totaled $16 billion.
Because of the state’s reliance on tourism, Hawaii’s economy is heavily dependent on both the greater U.S. economy and on the Japanese economy.
Hawaii’s tourism sector moved slightly up and has been showing an increase over expectations in 2017. Visitor arrivals are now expected to increase 2.0 percent in 2017, 0.5 of a percentage point above the previous forecast. The forecast for visitor days in 2017 increased 0.8 of a percentage point to 2.2 percent. The forecast for visitor expenditure growth in 2017 was revised upward to 5.1 percent, from 2.9 percent growth projected in the previous forecast. For 2018, the growth rate of visitor arrivals, visitor days, and visitor expenditures are now expected to be 1.5 percent, 1.4 percent, and 1.9 percent, respectively.
Hawaii has a total labor force of about 632, 120 according to the state Department of Labor and Industrial Relations. Monthly unemployment averages around 2.7 percent.
A high percentage of Hawaii’s work force is unionized, both in the public and private sector. Nationally, the union membership rate — the percent of wage and salary workers who were members of a union — was 12.3 percent. Hawaii — with a total of 123,000 union members — was one of four states last year with union membership rates over 20 percent, according to the U.S. Department of Labor.
Among Hawaii’s top private employers are Hilton Hotels, Hawaii Pacific Health, Starwood Hotels, Queen’s Health Systems, Kaiser, Wal-Mart, Hawaiian Airlines, Hawaiian Electric, Bank of Hawaii, Alexander & Baldwin, Foodland, First Hawaiian Bank and Kamehameha Schools.
Price of Paradise
Hawaii is a desirable — and expensive — place to live. The high cost of living in the state is known as the Price of Paradise. One of the reasons that it’s more expensive to live in Hawaii than in many places on the mainland is the cost of shipping goods to the islands and between the islands.
The cost of living index, which measures relative price levels for consumer goods and services, for Honolulu gives an indication of Hawaii costs. Honolulu’s index was 186 during the first half of 2016; the U.S. average is 100. The median sale price of a single-family home on Oahu in 2016 was 650,000, according to the Tax Resource website
While costs are high, the state’s per capita income is roughly $35,000. However, the state’s median household income for 2009 was $86,000.
Taxes contribute to the high cost of living in Hawaii. Although Hawaii has among the lowest property tax rates, it has a high income tax rate and a broad-based Hawaii General Excise and Use Tax of 4.5%. Hawaii taxpayers pay $4,399 per capita in state and local taxes. Hawaii’s 2009 state and local tax burden of 9.6 percent of income is slightly below the national average of 9.8 percent, according to the Tax Foundation.