Many lower income families that are already being squeezed by inflation may be headed for a particularly tough year in 2022, state lawmakers were told Tuesday.

Carl Bonham, an economist and executive director of the University of Hawaii Economic Research Organization, said those struggling families no longer have access to federal aid such as stimulus payments, advance child care tax credit payments or enhanced unemployment benefits that helped stabilize their finances during the pandemic.

“We don’t want to lose focus on those families. In fact, we want to recognize that things are getting worse for them now, even worse than it was in 2020 and 2021,” Bonham told lawmakers at an annual pre-session briefing on Hawaii’s economy.

University of Hawaii economist Carl Bonham said lower income families may have an especially difficult time this year now that much of the federal pandemic aid has ended. Cory Lum/Civil Beat/2016

Hawaii’s economic recovery is advancing in spite of setbacks from each wave of the coronavirus, but Bonham also predicted an ongoing shortage of workers combined with the growing impact of the omicron variant will cause continuing headaches for local employers in 2022.

Hawaii receives many billions of dollars in what economists call “transfer payments,” which include billions of dollars from federal sources such as social security, Medicaid, Medicare and the extra “Plus-Up” unemployment benefits.

Those transfer payments shot up by 33% in Hawaii during the pandemic, Bonham said, but the federal government does not appear likely to provide similar support in 2022. Bonham said UHERO now estimates those transfer payments will drop by 24% in the year ahead.

Disadvantaged families certainly suffered during the early stages of the pandemic, especially when they faced food insecurity or could not get access to their unemployment benefits.

But by the middle of the pandemic, “with all of the federal money coming, and if you were getting your unemployment benefits, you were almost certainly better off than you were in 2018 and 2019. But now that’s all been turned around again, because all of that federal money is gone,” he said.

Looking at the overall economy, Bonham said that “we’re in a much, much better place than we were a year ago,” in part because a large fraction of the state population has been vaccinated. By early December, 88% of Hawaii residents who are 12 years old or older had received at least one vaccine injection.

However, there are continuing concerns about Hawaii’s labor force. The state unemployment rate has declined to about 6.3%, but part of that decline has been driven by a shrinking labor pool as workers retired or left the state.

A recent report by UHERO found that the state had about 12,500 more monthly job openings than hires in 2021, which is about 70% higher than in the summer of 2019.

“With omicron it looks like the bigger impact is going to be labor force disruptions. We’re seeing that everywhere,” Bonham told lawmakers. “That could end up being the biggest effect of omicron because it basically has affected so many people that you can’t keep the labor force (on the job), and we’re talking about doing that from a reduced labor force already.”

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