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
Cost of labor just means what the general wage level is in the area. If cheese is cheap in Hawaii, the cost of cheese there is low.
I’d guess Hawaii doesn’t have the hottest job market as it’s a bit remote. A lot of high paying jobs need to cluster near similar businesses or be near their customers. I’d also guess Hawaii is dominated by tourism, which often doesn’t pay great.
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