I live in Hawaii and recently heard my large, Hawaii-based employer use the term “cost of labor” when explaining how they derived the organization’s new salary ranges. It’s no surprise that jobs and companies in Hawaii generally pay less than equivalent jobs/companies on the mainland. But when I asked my employer on an all-company call to explain what cost of labor actually is and why Hawaii employers can pay so much less than companies on the mainland, the answer the consultant provided was largely a non-answer.
Can someone explain to me like I’m 5, why is Hawaii’s cost of labor so low compared to the mainland?
(Edit: for clarification, cost of living and cost of labor are different terms, and I’m wondering why the cost of labor in Hawaii Is so disproportionate to the cost of living compared to parts of the mainland that also have high costs of living, such as much of California, NYC, Washington, and so on. The disparity between these two terms seems much more significant in Hawaii)
In: Economics
Most employers are looking to balance hiring the best possible employees at the lowest possible salary.
In some places, like New York City or San Francisco, there are a lot of highly skilled potential employees and many employers. If there are 3 companies looking to hire someone, it pushes the salary up.
In a place like rural Arkansas, there are less employers and less potentially “high skilled employees”. So, the salaries are lower.
Hawaii is a bit weird. Because Hawaii is an island and a desirable place to live for many, the cost of living is very high (comparable to California or New York). But, the population is relatively small and there aren’t many employers. So, it keeps salaries pretty low.
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