UHERO: Hawaiʻi’s Price-Adjusted Economy Ranks Among Nation’s Weakest

UHERO’s new report, “Beyond the price of paradise: Is Hawaiʻi being left behind?” released February 1, shows that Hawaii’s apparent strength on paper evaporates once incomes and GDP are adjusted for the state’s high local prices. The University of Hawaiʻi Economic Research Organization finds that price-adjusted per-person GDP, income, and productivity growth have stagnated since the early 1990s, and that Hawaiʻi now ranks among the weakest-performing states on real, RPP-adjusted measures.

The contrast is stark. State data put Hawaiʻi’s 2023 gross domestic product at $108.02 billion and GDP per capita at $70,778, ranking 40th and 31st respectively by those nominal measures. Hawaiʻi salaries rank 11th in nominal terms, but Hawaiʻi falls to 43rd once wages are adjusted for cost of living. UHERO’s RPP adjustments compress differences across states in most cases, but Hawaiʻi is an outlier: Figures 18 and 21 in the report show the state’s relative position plunging to levels comparable with Kentucky, Tennessee, and New Mexico on price-adjusted metrics.

The long-run story is one of slowed growth. “Hawaiʻi incomes and economic growth, adjusted for inflation, started slowing in 1990, and they’ve remained below national averages ever since,” Bond-Smith of UHERO says. UHERO quantifies that Hawaiʻi’s per-person GDP growth since the early 1990s has averaged less than half the national rate. That weak trajectory predates the pandemic and helps explain why residents say they feel squeezed even when nominal statistics look decent. “So everyone here feels like they’re not getting paid enough,” Colby told reporters, noting that job counts remain “stuck at 2016 levels.” Colby added, “And the reason for that rate is not because our economy is hot, hot, hot. It’s because we don’t have enough workers, which is a very big constraint on the Hawaiʻi economy.”

Sector shocks and structural limits amplify the problem. UHERO and state analysts point to tourism dependence and the pandemic as deepening a preexisting slowdown. The 2023 Maui wildfires killed more than 100 people, destroyed upward of 2,000 structures, and caused roughly $5.5 billion in damage while paralyzing tourism. UHERO researchers, as reported by Hawaii Business, expect visitor numbers to decline significantly in 2026; the Department of Business, Economic Development and Tourism is more optimistic, forecasting a bounce and continued growth through 2026 after a 4 percent drop in early-year visitor spending.

High living costs compound weak growth. Forbes data cited by DBEDT put Hawaiʻi as the nation’s most expensive state with average household expenditures above $55,000. Child Care Aware of America finds child care consumes 18 percent of median married-couple income in Hawaiʻi, the highest share in the nation. State policy has responded: the legislature approved $200 million in 2022 for new prekindergarten classrooms and Lt. Gov. Sylvia Luke champions a goal of universal pre-K for three- and four-year-olds by 2032.

For Big Island County residents, the calculations matter. Price-adjusted weakness translates into lower purchasing power for wages, persistent service-sector labor shortages, and continued stress on housing and family budgets. UHERO’s bottom-line recommendation is policy rebalancing: tackling productivity and growth drivers is at least as important as cost-of-living relief. Raising R&D investment, expanding workforce pipelines, and shoring up tourism resilience are among the longer-term fixes needed. Short-term relief such as expanded early education and targeted workforce supports may blunt pressure, but UHERO warns that without structural change Hawaiʻi’s price-adjusted ranking is likely to remain a drag on living standards and local opportunities.