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
People want to live there and they have limited options for employment? If you live on an island and people are paying shit you either accept it or leave. You aren’t commuting daily for work.
It’s like that in San Diego too. Think of it like a “universal perk” that everybody gets by living (and hence working) there. Since you’re getting this perk, which is something that has a significant real world value (people pay lots of money to just visit) it will naturally be a consideration when people are considering which job to take.
In other words, some people would rather earn 30% less and work in Hawaii than earn 30% more and work in, say, North Dakota.
I groomed for the season in North Lake Tahoe. I took home 8k after taxes over 5 months. Poverty wages in a 400K piece of equipment. Godspeed to the ski industry, you can’t pay rent let alone live on that.
Lots of people not many jobs means I can pay you less because you have fewer options and vice versa.
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.
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.
I went to University of Hawaii and have family in the state. There’s two things affecting this phenomena in my opinion. #1: A captured labor market-there are few alternative options for employment in such a small place, so people take what they can get, since not buying into the bullshit wage/salary cartel means moving to the mainland and leaving friends/family/one of the most beautiful places on the planet. #2: Very controversially, plantation culture. Hawaii was, until very recently (and arguably still is) somewhat of a banana republic with very oppressive labor practices. The economy of the state during the territorial era revolved entirely around plantations (sugar and pineapple primarily), and was reliant on near-slave conditions of immigrant workers. Bold and loud workers were not long for that world, and 4-5 generations of obedient “don’t rock the boat” culture created a working class that is “thankful to have a job”. I saw it with my own eyes at the various companies I worked for there, and I see it in my family. Couple that with the fact that the majority of folks in Hawaii are of Asian descent, and value humble, hardworking, and obedient behavior, and you have a very exploitable workforce.
Like many others, I love Hawaii and mentally masturbate to living there whenever I visit. On one such trip I decided to look into job opportunities and the possibility of actually making it happen. Maui 2009, I was an auto mechanic making $35 per hour, easily transferable job, can take my skills anywhere so this is an apples to apples comparison. I walked into a couple independent shops and a couple dealerships near the airport. The highest offer I received was $18 per hour. The cheapest 1 bedroom apartment I could find, nowhere near the beach of course, was around $1,700 per month. I figured in a few other expenses and decided there was no way I was going to make it work and have any kind of life. There is absolutely a paradise tax, I was literally told they didn’t have to pay more because of it. There’s also a lot of poverty there. Was in Oahu last year and saw it, drive a few minutes up past the Aulani resort and you’re in the Hawaiian hood. Not the only poor area of Oahu but it’s probably the most obvious.
I was just in Maui as a Minnesotan where people are notoriously nice and outgoing. People in Maui, especially at grocery stores, are rude as all get out. Just really nasty people. I had a few verbal confrontations which I have never had in Minnesota. Would still go back, amazing place.
Labor is supply and demand just like any commodity. If there is a high supply of people wanting to work in Hawaii the the price of labor will decrease.
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