Just about everyone in Hawaii knows by now that we have one of the highest costs of living in the nation, one of the most regressive tax systems and a serious lack of affordable housing.
Every day, more Hawaii residents are leaving the islands in search of greener pastures, resulting in a net decline in the state’s total population for several years in a row — and it appears that trend will continue.
One recommendation that has gained traction as a way to help Hawaii residents cope with these unfortunate economic circumstances is to significantly increase the state’s legal minimum wage.
Unfortunately, proposals to increase the minimum wage too often downplay the effect that an increase could have on the state’s economy. In general, businesses respond to wage hikes by reducing hours, turning to automation, cutting staff or closing altogether. None of these outcomes would be helpful to Hawaii’s low-income hourly employees.
Numerous studies demonstrate that minimum wage hikes are hard on small business and only marginally effective, if at all, at helping low-income workers. At a panel hosted by the Maui Chamber of Commerce in July, University of Hawaii economist Sumner La Croix pointed out that minimum wage hikes can operate like a regressive tax, raising the prices of goods and services in ways that are especially hard on those whom the increases were intended to help. That is the unintended downside of forcing a hike in the minimum wage.
What we need in Hawaii is to give everyone a raise by bringing down this state’s incredibly high cost of living. The national Tax Foundation recently estimated that the real value of $100 in Hawaii is only $84.39. In other words, we have less purchasing power than the residents of any other state in the country. Clearly, the best way to help Hawaii’s workers, at all income levels, would be to increase the purchasing power of the money that they do have.
That means saying no to more government spending. It means lowering lower taxes and fees, opening up more land for housing and changing the state from one that is regulation-heavy and unfriendly to business to one that welcomes entrepreneurs and spurs innovation.
This is not a simple fix such as that promised by a minimum-wage hike. It will take broad-based thinking and cooperation from many individuals, policymakers and special interests.
But there is no doubt that lowering the cost of living would be an effective way to help working families. It would help not just those making the minimum wage. By increasing the purchasing power of each dollar in Hawaii, everyone would receive a raise, regardless of their income level.
Let’s give everyone in Hawaii a raise by embracing policies that will grow the economy and reduce the cost of
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Joe Kent is executive vice president of the Grassroot Institute of Hawaii.
Only a Socialist government can control or lower prices to a level where working families are able to live a middle class standard of living.
On the other hand, in a capitalist society, the duty of government is to protect and ensure the welfare of its citizens.
There are 24 states and many more cities and counties that have passed legislation to increase the minimum wage to $15 an hour.
Which does the Grassroots Institue prefer?
“lowering lower taxes and fees,”
Care to be specific?
“opening up more land for housing”
What about the traffic?
“regulation-heavy and unfriendly to business”
Any examples?
Since we can’t actually lower the cost of living we might want to at least raise the minimum wage substantially. We need a living wage for anyone who works.
Gary Hooser needs to read this carefully.
RG DeSoto
Good advice falling on deaf politicians and bureaucrats!
RG DeSoto
Ninety-One Hours in a Work Week?!
by Tom Yamachika, President, Tax Foundation Hawaii
Recently, the website howmuch.net, a financial literacy website with interesting visualizations about various financial topics, came out with a comparison called, “This is How Long You Need to Work to Live Comfortably in Every State.”
Those folks tried to calculate, for each state, the annual wage required to live comfortably, by earner, and the number of hours per week that an earner would need to work to earn it. “Hawaii is the single most difficult state for workers to get ahead,” they said, “requiring $96.1K to enjoy a comfortable life and 91-hour workweeks to get there.”
Huh?! A 91-hour workweek doesn’t sound like a comfortable life at all!
The second-highest jurisdiction where it costs the most to enjoy a comfortable living is Washington, DC, where it costs $78,310 and would require a 44-hour workweek to earn it. The number of hours in DC is much lower because people there, on average, make lots more per hour.
The next five places went to California, Oregon, New York, Massachusetts, and Maryland, with costs in the $60K range and workweeks between 51 and 63 hours.
Which means that we are way out of line compared to other states.
How did howmuch.net come to that conclusion? They said that they figured out the median wage for workers in 2018 in each state from the Bureau of Labor Statistics, and then used numbers from the BLS to calculate average annual consumer expenditures. They added 20% to each state’s average to represent comfortable living. Then, they divided that figure by the number of earners in an average household and obtained the annual expenditure per earner. That amount was adjusted to each state’s cost of living using data from the Missouri Economic Research and Information Center (MERIC, which is part of Missouri’s state government and seems to be their counterpart of Hawaii DBEDT’s Research and Economic Analysis Division or READ). The result was divided by the median wage, giving the number of hours needed to make that wage.
According to MERIC, Hawaii’s cost of living was 201.3 percent of, or double, the national average, with the primary problem being housing costs that punched in at a staggering 347.1 percent of the national average. Our grocery costs were at 160.8, utilities at 185.2, transportation at 135.7, and health care at 120.3 percent of the national average respectively, earning us 52nd place, namely dead last, out of 50 states plus Washington DC and Puerto Rico. The next most expensive cost-of-living jurisdictions were DC with 164, California with 140, Oregon with 137, and New York with 135 percent of the national average.
Although we might be able to quibble with some of the pieces of the methodology, like why they chose a 20% bump to represent a “comfortable life,” the underlying message of the study echoes what we have seen several times before regarding Hawaii’s cost of living in general and housing cost in particular. You may also have noticed that our residents have been heading for the exits over the last few years (at least). If this keeps up, who is going to be left to pay for government?
Lawmakers take note! If you are seriously interested in making our State a better place to live and work, please make it a priority to do something to calm our raging cost of living, especially the cost of housing. Who can possibly work 91 hours a week to have a comfortable life? Or 76 hours a week (taking away the 20% bump) to have an average, uncomfortable life?
We live on an Island in the middle of the Pacific Ocean. Things are going to cost more here than in Indiana. Our cost of living is less than San Francisco. How exactly do you propose to lower the cost of housing? By building more homes and creating more traffic? By turning Kauai into Honolulu? Are you saying the government should use our tax dollars to subsidize low income housing, in a Socialistic manner? Simply stated, not everyone who would like to live in San Francisco can afford to; same as here.
If you want to lower the cost of living in Hawaii, get rid of the Jones Act so that everything being shipped here becomes competitive and shipping costs will be reduced.
A perfect example of the socialist mentality.
Raise the wages and costs go up. Duh.
Some people just can’t understand the basics of economics. Or rather, they choose not to.
Half the world would like to live here. That is called demand. It drives prices up because there isn’t enough space to keep rents down. Businesses pay rent and taxes, so do the owners. They accept the challenges of Supply vs. demand.
….no use trying to explain. I suspect the author simply wants a fair world. Good luck with that.
An excellent start!
That and revoke the Jones Act!
These two actions would go a long way in increasing the purchasing power of every Hawaiian!
Raising minimum wage would increase the costs at grocery stores, fast foods, big box stores and small businesses. As a result local inflation rather than inflation at a global economy. The $15 would be equivalent of $10 today. Government takes a bigger cut as more people hit AMT. government pats themselves on the back for a job well done. Just the stroke of a pen according to our local spokesman.
We live in a primarily capitalistic society. Prices are generally regulated by the laws of supply and demand. While gov’t actions like raising the minimum wage laws could help some, there is no escaping the fact that Kauai is a desirable place to live, as is San Francisco, Tokyo, etc. Not everyone will be able to afford to live in places where the cost of living is very high. The letter saying the cost of living should be reduced is absurd. How exactly will this happen? What will it look like? Can you even do it legally, even if you had specifics and some sort of plan, any kind of a plan. This writer gives us none of that and no road-map of how do accomplish his premise. Increased building, more businesses, more density, etc. They tried this in Honolulu and it is much more crowded than Kauai and even more expensive to live. Do we really want Kauai to become like Honolulu? I would say that most of us would say “No” except maybe RG.
A lower cost of living is achieved by having as much free enterprise as is humanly possible. On Oahu the cost of electricity could have been reduced by about 30% for everyone if the Kahe power plants had been converted to natural gas.
Why didn’t this happen?
The short answer is lower electrical cost conflicts with the strait jacket mandate of the “renewable” energy lobby which holds sway in Democrat politics.
Singapore’s recipe for having a economy that produces an average 9500 per month household income compared to Hawaii’s 6500 a month household income is pursuing a society that is Clean, Safe and Pro-Business.
If Hawaii adopted this model, seems it would be a boon for everyone but those with their fingers in the pie?