Price of paradise shrinks

By Susan Hooper
Advertiser Staff Writer

Hawai'i residents for years have had to make their paychecks stretch further than those of their Mainland counterparts to cover the state's higher living costs. But several factors, including low inflation, have combined to aid island wage-earners, analysts say.

A recent federal survey painted a solid picture of average hourly wages for many jobs in Honolulu — even when compared with Mainland salaries.

Economists say helping boost those wages are factors including Hawai'i's inflation rate and the recent growth in the number of jobs statewide, which has helped increase the size of the state's work force, and the fact that living costs in many Mainland areas have risen, making the difference from Hawai'i prices less dramatic.

And while forecasters say Hawai'i's economy may grow more slowly this year than last, many are still optimistic about the prospects for workers.

"Overall, the employment situation is still very positive," said state economist Pearl Imada Iboshi.

Last week's U.S. Labor Department survey of Honolulu wages found that average hourly wages for many occupations were higher — in some cases by several dollars — than the U.S. average in 1999, the latest year for which data are available.

Among the survey's other findings:

• The average hourly wage for all Honolulu workers in February 2001 was $16.50 — down 26 cents, or 1.6 percent, from January 2000. The national average hourly wage was $15.36 in 1999.

• The average hourly wage for blue-collar jobs rose from January 2000 to February 2001, while the average hourly wages for white-collar and service jobs declined slightly during that period.

• Nationally, about 18 percent of all jobs are in service industries, while 32 percent of Honolulu's jobs are in that sector. Because service jobs traditionally pay less than other positions, the comparatively high percentage of service jobs locally may have actually reduced the area's average hourly wage, according to Stanley Stephenson, the U.S. Bureau of Labor Statistics' San Francisco regional commissioner.

Federal researchers culled data from 192 private-sector, state and local government establishments in the city and county. They looked at wages of 197,500 workers — nearly a third of the state's work force.

But Lawrence Boyd, a labor economist with the Center for Labor Education Research at the University of Hawai'i-West O'ahu, cautioned against drawing conclusions about local wages from looking at hourly wage data alone.

Instead, he said, wage data must be considered along with other aspects of the employment market, including the unemployment rate and growth in the last few years in both the state's work force and the number of jobs. Honolulu's unemployment rate in June was 4.2 percent — below the U.S. rate of 4.7 percent.

"You can't look at wages in isolation from the unemployment rate and what we know is happening there," Boyd said. "You have new entrants into the labor market and other people who have been unemployed for a considerable amount of time entering the market, and you have increased hours worked."

For example, the decline in the Honolulu average hourly wage from 2000 to 2001 could be caused by new workers coming into the labor market at a lower pay scale, rather than by an actual decline in workers' wages, he said.

"All of these (factors) tend to combine and lead to the conclusion that the economy is in fairly good shape," Boyd said.

Hawai'i's inflation rate also affects workers. Inflation in Hawai'i in the second half of 2000 was 1.7 percent — half of the national rate of 3.4 percent. Because some employers tie raises to the local inflation rate, employees may not have seen sizable raises recently. But at the same time, wage-earners are not seeing prices on consumer goods rise as much as their Mainland counterparts are, so their paychecks go further.

Hawai'i's cost of living is a sensitive issue for many workers, who know that Hawai'i traditionally has had some of the highest living costs in the country. In 1992, Hawai'i's living costs were 36.2 percent higher than the Mainland's, according to Paul Brewbaker, vice president and chief economist with Bank of Hawaii. As a result, workers' purchasing power was far below that of their Mainland counterparts.

But Brewbaker and other economists say that, in the years since, low inflation in Hawai'i and rising costs elsewhere have combined to bring Hawai'i more in line with the Mainland.

Brewbaker estimates Hawai'i living costs are now about 25 percent higher than the Mainland average. And, he adds, some areas such as San Francisco now even outpace Hawai'i in crucial categories such as housing costs.

"Sometime in the 1990s, around the tail end of the decade, Hawai'i stopped being so much more expensive than other western U.S. cities, which is the basis for most (Hawai'i) people's comparisons, and indeed became outright cheaper than many of those locales in a variety of specific spending categories, if not in the total," Brewbaker said. "So maybe the cost of living here is still higher on average, but I think for sure there are plenty of categories where it's a tough case to make."

In spite of the many hopeful signs for Hawai'i wage-earners, economists say there is cause for some concern.

Imada Iboshi, who is economic research administrator with the Department of Business, Economic Development & Tourism's research and economic analysis division, said state officials are projecting growth in personal income of 2.7 percent for this year — slightly below the 3.1 percent actual rate of personal income growth in 2000.

(Personal income includes wages and salaries as well as dividends, transfer payments such as Social Security income and rental income, Imada Iboshi said. The department does not forecast wage growth alone, she said.)

And Leroy Laney, professor of economics and finance at Hawaii Pacific University, said wage growth locally many not look as good at the end of this year as it did at the beginning.

"The year 2000 seemed like a turnaround year (for the Hawai'i economy)," he said. "The year 2001 probably will not be as good a year as 2000 in most things, including wages."