Earlier this year, Hawaii gained the dubious distinction of having the worst traffic in the nation and some of the worst roads.
Now, the state can add another poor rating to the mix: a CNBC special report named Hawaii the second-to-worst state in the nation for business in 2012.
State officials weren’t surprised by the news.
“We always rank at the bottom. It’s not something new,” said Eugene Tian, the economic research administrator at the Hawaii Department of Business, Economic Development & Tourism. Last year, Hawaii only did marginally better in the rankings — 48 out of 50.
Sen. Donovan Dela Cruz said that despite its predictability, the low score should still be cause for concern.
“It’s not enough just to agree we’re anti-business,” he said. “We have to change it.”
Dela Cruz said that because the state ranked at the bottom in almost every category, the study can’t be ignored.
“If the rest of the world is looking at the rankings and they’re seeing that we’re anti-business, how are we going to attract investment?” Dela Cruz said.
Questioning Methodology and Relevance
But not everyone is taking the rating so seriously.
Carl Bonham, executive director of the University of Hawaii Economic Research Organization, questioned the methodology of the study and said that the rating should be taken “with a grain of Hawaiian salt.”
“If you don’t know how things are being measured then it’s hard to read too much into it,” Bonham said. “There’s just not enough information to really know if these are useful comparisons.”
The CNBC report considered a variety of factors in determining the best and worst states for business, including education, economy, and transportation and infrastructure.
See how Hawaii placed in each area:
Bonham questioned how the study determined the rating for the education category, in which Hawaii ranked No. 39. One of the factors for education was the number of higher education institutions in the state.
“The number of higher education institutions… doesn’t necessarily say anything about access to education,” Bonham said. “At a minimum you want to do something like the share of the population that has a higher degree of education or the number of education institutions per capita. They [researchers at CNBC] may have done that but you can’t tell from what they’re writing.”
Similarly, Bonham questioned the ranking for transportation and infrastructure, which took into account “the value of goods shipped by air, land, and water.”
“Granted our roads are a mess. But we have better access to the rest of the world by airplanes and ships than most of the other states in the United States,” Bonham said.
In addition to questioning the study’s methodology, Bonham said that the report restated a lot of what is already known.
“If you look at the categories where we came in at the bottom — cost of doing business, cost of living — no one’s going to argue with those,” he said. “Those are not really the areas where we have a lot of room to make changes.”
“The cost of living is very difficult to do anything with,” he said. “So is the cost of doing business. I think comparing with the U.S. mainland cities may not be a fair comparison because of our location.”
Tian suggested comparing Hawaii with international locations that have the same geographic limitations or the same reliance on the tourism industry. But he said he did not know of any studies that drew such comparisons.
Karl Fooks, president of the Hawaii Strategic Development Corporation (HSDC), which promotes economic development by helping new businesses grow, also said that the rating should be considered in the context of Hawaii’s unique situation.
“There are limits as to what kind of growth Hawaii can support and I think there should be limits,” Fooks said. “I think we should reflect on what it means for Hawaii if we were number one.”
While Fooks said that there is always more that the state can do to help businesses succeed, he said that Hawaii’s unique physical and economic limitations restrict the types of businesses that can flourish.
“We are not going to be able to become a low cost of living state,” Fooks said. “The businesses that are going to be successful here are going to be businesses that can survive.”
The Need for Action
But Dela Cruz says it’s “hogwash” to think that the rankings don’t matter given Hawaii’s “unique” situation.
“That’s just justifying why we haven’t made any progress,” Dela Cruz said. “We should want to be the best.”
Jim Tollefson, president of the Hawaii Chamber of Commerce, said that while, like Bonham, he also does not understand the methodology behind the study, policymakers should pay attention to it.
“Regardless of the validity [of the rankings], we need to understand that we are in a global economy and we are competing for business, not only with the other 49 states but with the rest of the world,” Tollefson said. “We need to continually strive to improve the business climate here so we can compete more effectively.”
According to Dela Cruz, the low rating is a “clear indication” that the business climate in Hawaii has not improved. He said that there needs to be coordinated strategic planning across government departments and a specific plan to diversify the economy, and has written on the issue.
“The fact that we’re at the bottom of everything —we have to address this,” he said.
Quality of Life
Despite its abysmal performance in most categories, Hawaii did do well in one area. The Aloha State ranked number two in quality of life, just behind New Hampshire.
But according to Charles Wathen of the Hawaii Housing Alliance, which advocates for affordable housing, that assessment may not reflect the experiences of many people in Hawaii.
“The quality of life of people who are suffering, who don’t own a home, don’t have a babysitter for their kids, can’t afford an education —their quality of life can’t be that good,” Wathen said.
Instead of attributing the high cost of living to geographic limitations, Wathen points to political apathy.
“People really don’t care about affordable homes and the homeless,” he said. “If they did there would be legislative action to make changes…We really can’t get much done until we get the public to say that’s enough.”
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