What’s behind the report that labels Hawai’i among the worst economies in the country

University of Hawaii UHERO report overview

The University of Hawaiʻi Economic Research Organization (UHERO) released a report titled ‘Beyond the Price of Paradise: Is Hawaiʻi Being Left Behind?’ on Sunday.

The research coverage says Hawaiʻi ranks as the worst economy in the nation once its high prices are factored in, according to UHERO’s cost-of-living-adjusted rankings.

UHERO says that per-person GDP, income, and productivity have lagged the rest of the U.S. for more than 30 years. The report says this long persistence threatens long-term economic sustainability.

World Population Review ranks Hawaii as the priciest

World Population Review lists Hawaii as having the highest cost of living in the United States. UHERO’s report says wages do not go as far in Hawaii because prices for goods and services are higher than in most states.

Steven Bond-Smith says that, after adjusting for Hawaii’s high prices, the economy looks similar to those of other economically distressed U.S. regions, such as the rural South, parts of Appalachia, and the Mississippi Delta.

UHERO tracks 30 years of stalled growth

UHERO says that per-person GDP, income, and productivity have lagged the rest of the U.S. for more than 30 years. The study says this pattern has kept the state from matching national gains.

The report calls the problem persistent and says long-term economic sustainability is at risk if growth continues to lag. It also says lowering the cost of living alone would not fully solve the problem.

UHERO links outmigration to weak wages

UHERO lead author Steven Bond-Smith said the report examined why people have been leaving Hawaii over the last two decades. He said that for 23 of the previous 25 years, more residents had moved away than had moved in.

Bond-Smith said many people who leave cite the high cost of living. He added that prices alone do not explain the trend because income and job growth have also lagged.

UHERO says growth slowed in the late 1980s

Steven Bond-Smith said Hawaii’s compound annual growth rate slowed beginning in the late 1980s. He told reporters that Hawaii had previously tracked the national average, but that slower growth since the late 1980s has widened the gap with the rest of the country.

Bond-Smith said the result has been wage stagnation and fewer labor opportunities. The report links this to slower income and productivity growth over the decades.

UHERO contrasts Hawaii with SF and LA

UHERO notes that other high-cost areas, such as San Francisco and Los Angeles, maintain population because wages are high enough to offset high prices. The report argues that Hawaii faces a different mix.

Bond-Smith said Hawaii has high costs and low incomes simultaneously. He said that the combination helps explain why more people have left the state than have arrived in many years.

Hawaii tourism and the federal share in 2026

Hawaii Business Magazine’s 2026 outlook issue says that about one-third of Hawaii’s economy comes from tourism and federal spending. Author Cynthia Wessendorf shared that summary with Hawaii Public Radio. The outlook was published recently.

Wessendorf said about 80 percent of visitors come from the U.S. mainland. That concentration means mainland travel trends can strongly influence hotel demand, restaurant activity, and related service jobs.

Defense spending totals $10.2B in 2023

A Hawaii Military and Community Relations Office factbook highlighted the military’s role in the state economy, according to Big Island Now. The factbook says defense spending totaled $10.2 billion in 2023, ranking Hawaii 21st nationally.

The report also says that about 17 percent of all jobs in Hawaii are tied to military spending. That includes direct military positions and related civilian work connected to bases and defense contracts.

UHERO says costs alone do not explain

Bond-Smith said high living costs are a common reason residents cite for leaving Hawaii, but the report finds that expenses alone do not fully explain the exodus. He said Hawaii has lagged behind the rest of the U.S. for more than three decades.

The report ties that lag to stagnant pay and fewer opportunities for workers to move into better jobs. UHERO says fixing the cost of living alone will not fully resolve the state’s economic challenge.

UHERO warns that tourism reliance limits exports

Bond-Smith compared Hawaii’s situation to parts of Appalachia that relied on coal. He said those communities stagnated when coal demand dropped because their economies were not diverse enough to replace lost activity.

He said Hawaii’s tourist-centric economy faces a similar risk. The report says other sectors are not robust enough to offset tourism’s weaknesses, and the state lacks a significant export industry that brings in dollars from abroad.

UHERO suggests higher value tourism paths

UHERO concludes tourism will remain the backbone of Hawaii’s economy for decades. Bond-Smith said tourism will likely offer the most significant near-term opportunities for economic growth.

He said boosting value within tourism could help stimulate growth in an industry the report says has plateaued. Examples in the report include sports tourism and event tourism, which can raise spending per visitor.

UHERO urges barriers be removed for new sectors

UHERO Executive Director Carl Bonham said removing barriers that prevent new industries from taking root is essential for diversifying Hawaii’s economy. The report says diversification is needed because tourism-centered activity cannot carry the load.

The report also cautions that new industries are likely to emerge from existing activities in the state. Tourism-linked services, suppliers, and related infrastructure may serve as a starting point.

For a real-world example of how wage policy is affecting workers in Hawaiʻi, check out how Hawaii gives workers the biggest minimum wage raise in the country.

UHERO lays out steps to rebuild growth

The UHERO report title asks if Hawaii is being left behind. The research finds that Hawaii appears economically distressed after adjusting for high prices, even though the state is viewed as prosperous.

Bond-Smith said the pattern reflects decades of weak income and productivity growth rather than a price spike. UHERO says the persistence of low growth threatens long-term sustainability.

To compare how other places are handling costs, services, and long-term planning, check out Is your city one of America’s worst-run cities?

What do you think about what’s behind the report that labels Hawai‘i the worst economy in the country? Please share your thoughts and drop a comment.

This slideshow was made with AI assistance and human editing.

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