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
The way I explain salary levels to people is that salaries are your replacement cost.
What salary would I have to pay to get someone to do your job when all factors are taken into consideration. The answer to that is “market salary” or “cost of labour”.
If all other things were equal (ie you didn’t have to relocate, you had the same friendship groups in both locations, your family was perfectly fine with either) would you work in Hawaii or Gary, Indiana (google tells me that’s the worst city in the USA)? How much more would you need to be paid to move to Gary?
Latest Answers