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The gap between Hawaii’s rich and poor is a palpable part of daily life.
Tourists get a hint of it when homeless people push shopping carts through Waikiki. Residents of Oahu can’t miss the contrast between the sprawling mansions of Kahala and the many people living in tents in Kakaako.
So it was a little surprising to find U.S. Census Bureau data showing that income is distributed more evenly across the state than it is across the country as a whole. In other words, “you have less income inequality in Hawaii than you have nationally,” Census survey statistician Kirby Posey told Civil Beat.
But that doesn’t mean that Hawaii is trending toward more income equality. President Barack Obama called income inequality “the defining challenge of our time,” and Hawaii hasn’t escaped it. The gap between Hawaii’s lowest and highest income brackets is larger now than it was before the recession and it is unclear when — or if — it will return to pre-recession levels.
Hawaii got hammered by the economic downturn. No other state saw a larger percentage drop in the median income or a bigger spike in the percentage of people in poverty between 2008 and 2010.
Civil Beat analyzed a few different data sets to figure out how Hawaii’s faring. First, we looked at income distribution using a measure called the Gini index. The U.S. Census Bureau uses the Gini index to examine income distribution at county, state, and national levels — it’s a way to tell how income is spread across a given population of people.
This index measures income distribution on a scale of zero to one, with zero representing absolute income equality and one representing absolute inequality. (Scoring a one on the Gini index would mean one person has all of the income.) The most recent Gini index in Hawaii was 0.4257 compared with 0.4757 nationally.
But the Gini index doesn’t convey the full picture. If roughly the same number of people moves from the middle income brackets between $50,000 and $99,999 into lower income brackets and higher income brackets at the same time, that population’s Gini index may not change much. So it’s also helpful to examine — in dollar amounts — how income levels are changing over time. Civil Beat used Census data to track those numbers, too.
What we found is that even though income equality is more pronounced in Hawaii than in the nation as a whole, the state’s middle class still appears to be shrinking.
Fewer Hawaii households earn between $50,000 and $99,999 per year now than just a few years ago. Today, more Hawaii households are either earning much less than that or much more than that.
Posey, at the Census Bureau, says the recession could be responsible for the shrinking number of households with an income somewhere in the middle.
Looking at the Gini index, income inequality in Hawaii has yoyo’d since the Great Recession began in 2008. Since 2010, the trend has been toward more income equality in the state, but it still hasn’t returned to its pre-recession level and salaries for many middle class and poor people in the state haven’t recovered.
At a national level, by contrast, the income gap between rich and poor only became more intense between 2007 and the end of 2012. (Numbers for 2013 aren’t yet available.)
About 5,000 Hawaii households vanished from the $50,000 to $99,999 income range between 2010 and 2012, the most recent year for which Census data is available. Meanwhile, nearly 1,800 households joined the lowest tier of earners making less than $10,000 per year, and about 2,000 households began earning more than $200,000 per year. In other words, a substantial number of the Hawaii households that once earned $50,000 to $99,000 are now earning much more or far less.
A county-by-county comparison in Hawaii shows that the income gap is greatest on the Big Island, followed by Maui, Honolulu, and Kauai. But the income gap on the Big Island is still smaller than it is on the national level.
Hawaii’s not alone: Nationally, 356,728 households disappeared from those $50,000 to $99,000 income ranges over two two-year periods (2007-2009 and 2010-2012), according to an analysis by The Washington Post.
Part of why income is distributed in a relatively more balanced way across Hawaii’s population is because the state isn’t home to major firms — companies like, say, Boeing and Microsoft — state economist Eugene Tian told Civil Beat. Cities like San Francisco, which Bloomberg news called “the epicenter of the income inequality debate,” and New York City are home to extremely wealthy companies that can exacerbate the gap between rich and poor. The tech boom in the bay area puts a lot of money in the hands of relatively few people, but it drives up the cost of living for many other residents.
Earlier this month Hawaii once again ranked in the top five for millionaires per capita in the country. (The firm Phoenix Marketing International produces the annual ranking based on a combination of data from the Census Bureau, the Survey of Consumer Finance, and pollster Nielsen.)
And yet Hawaii’s incomes are more balanced than those of three out of four other states with the most millionaires, as measured by the Gini index. (Among the top five most millionaire-rich states, only Alaska has a smaller income gap than Hawaii, according to Census data.)
Tian explains: “We have a higher percentage of millionaires, but on the other end, our poverty rate is lower… And Hawaii has a pretty good government assistance for most of the people at the low end. Native Hawaiians are in a group that actually has a higher poverty rate and a higher unemployment rate, but because of the government assistance in housing, it helps offset the Hawaiians [otherwise low] income.”
If Hawaii’s unemployment remains low, Posey said, he would expect income inequality to remain stable over time. When unemployment spikes upward, workers are more vulnerable to layoffs and employers efforts to lower wages while low unemployment tends to place workers in better bargaining position.
Still, even though Hawaii is faring somewhat better than the nation as a whole, income inequality remains an area of concern for some economists and lawmakers in the state.
In his State of the State address a few weeks ago, Gov. Neil Abercrombie proposed tax changes intended to help Hawaii residents with fixed or middle incomes. And President Barack Obama touched on the growing divide between the rich and the poor during his State of the Union address last week: “Those at the top have never done better. But average wages have barely budged. Inequality has deepened.”
As the Economic Research Organization at the University of Hawaii (UHERO) pointed out in 2011, income inequality was stable for three decades after World War II and has been steadily climbing since then.
From UHERO: “The bottom line is that inequality in Hawaii is changing much like it is on the mainland: Inequality is growing rapidly and almost of all this is due to the huge increase in the share of income received by the top one percent.”