Report on Income Inequality in Hawaiʻi and its Alignment with Sustainable Development Goals

Executive Summary

A 2024 analysis by the University of Hawaiʻi Economic Research Organization (UHERO) reveals that despite a high cost of living, Hawaiʻi maintains one of the lowest levels of income inequality in the United States. This report examines the economic factors contributing to this trend and analyzes their implications for several United Nations Sustainable Development Goals (SDGs), particularly SDG 10 (Reduced Inequalities), SDG 8 (Decent Work and Economic Growth), SDG 1 (No Poverty), and SDG 11 (Sustainable Cities and Communities).

Analysis of Income Inequality: Progress Toward SDG 10

The primary finding of the UHERO research directly addresses SDG 10 (Reduced Inequalities). Hawaiʻi’s Gini coefficient, a standard measure of income distribution, was 0.42 in 2023, positioning it among the most equitable states in the nation.

• Gini Coefficient: 0.42 in 2023.
• National Ranking: Among the states with the lowest income inequality.
• Historical Trend: Hawaiʻi has consistently demonstrated lower income inequality than the U.S. national average for over a decade.

Economic Drivers and their Relation to SDG 8

The state’s compressed income distribution is a result of a unique economic structure that aligns with certain aspects of SDG 8 (Decent Work and Economic Growth). The key drivers include:

1. Tourism-Dominated Economy: The prevalence of tourism provides numerous low- to mid-wage jobs. To remain competitive in a high-cost environment, employers often offer higher wages for these positions compared to their U.S. continent counterparts, contributing to the “decent work” aspect of SDG 8.
2. High Unionization Rates: Strong union presence contributes to wage compression, elevating the floor for wages and reducing the gap between low and high earners, which supports the goal of fair and equitable employment.
3. Limited High-Wage Industries: Hawaiʻi has a smaller presence of high-paying sectors like finance and technology. This limits the upper end of the income scale.
4. Lifestyle Compensation: Professionals in high-paying fields may accept lower salaries in exchange for the quality of life in Hawaiʻi. This further narrows the overall income gap, as top-tier salaries are often lower than in major metropolitan areas.

Challenges to Sustainable Development: Interplay of SDG 1 and SDG 11

While Hawaiʻi shows positive indicators for SDG 10 and SDG 8, its economic model presents significant challenges to other core development goals.

Implications for SDG 1 (No Poverty)

• The state’s extremely high cost of living means that even with relatively higher wages for low-income jobs and lower inequality, many households struggle to make ends meet.
• This high cost of living acts as a major barrier to achieving the targets of SDG 1, as it can push households into poverty despite being employed.

Implications for SDG 11 (Sustainable Cities and Communities)

• The economic pressure created by high living expenses strains the goal of creating inclusive, safe, and resilient communities.
• Affordable housing and access to essential services are compromised, making it difficult for lower-income families to thrive within urban and community centers.

SDGs Addressed in the Article

• SDG 10: Reduced Inequalities

  This is the central theme of the article. The text is an analysis of income inequality in Hawaiʻi, using the Gini coefficient as a primary metric. It explicitly states, “Hawaiʻi consistently ranks among U.S. states with relatively lower levels of income inequality” and delves into the reasons for this, such as wage compression and economic structure.

• SDG 8: Decent Work and Economic Growth

  The article discusses Hawaiʻi’s unique economic structure, which is “heavily dependent on tourism, a sector that predominantly offers low- to mid-wage employment.” It analyzes wage levels, the impact of unionization, and the lack of diversification into “high-paying, specialized occupations” like finance and tech. These topics are directly related to achieving decent work and sustainable economic growth.

• SDG 1: No Poverty

  While not the main focus, this goal is relevant because the article highlights the consequences of the state’s economic conditions on its population. It notes that “Living in Hawaiʻi is expensive, and lower-income households struggle the most to make ends meet.” This struggle, driven by a high cost of living despite lower inequality, touches upon the concept of relative poverty and economic vulnerability.

Identified SDG Targets

SDG 10: Reduced Inequalities

1. Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average.

   The article directly addresses this target by analyzing Hawaiʻi’s income distribution. The finding that Hawaiʻi has lower income inequality, attributed to “relatively higher pay for low-to-middle-income workers,” demonstrates a wage structure that supports the economic standing of lower earners, which is the core principle of this target.

SDG 8: Decent Work and Economic Growth

1. Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men… and equal pay for work of equal value.

   The article’s discussion of Hawaiʻi’s wage structure relates to this target. It notes that employers in the high-cost environment often pay more for low- to mid-wage jobs than their mainland counterparts. It also mentions that “Higher rates of unionization also contribute to wage compression,” which is a mechanism for promoting decent work and more equitable pay.

2. Target 8.2: Achieve higher levels of economic productivity through diversification… including through a focus on high-value-added… sectors.

   This target is relevant in its absence. The article explains that Hawaiʻi has “fewer high-paying, specialized occupations” and that industries like “finance, tech and advanced business services—are either small or largely absent.” This points to a lack of economic diversification away from tourism and towards high-value-added sectors, a key challenge identified in the analysis.

SDG 1: No Poverty

1. Target 1.2: By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions.

   The article implies the challenge of relative poverty. The statement that “lower-income households struggle the most to make ends meet” due to the high cost of living, despite lower income inequality, highlights a key dimension of poverty where income is insufficient to afford a basic standard of living in a specific location.

Indicators for Measuring Progress

• Gini coefficient

  This is an explicit indicator mentioned in the article, which calls it the “standard measure of income inequality.” The article provides a specific data point: “In 2023, Hawaiʻi’s Gini coefficient stood at 0.42.” This directly measures progress toward reducing inequality (Target 10.1).

• Wage Structure and Compensation Levels

  This is an implied indicator for Target 8.5. The article provides qualitative data by describing Hawaiʻi’s wage structure as “characterized by relatively higher pay for low-to-middle-income workers and lower compensation for high-income workers.” It also notes that “the average bachelor’s degree holder in Hawaiʻi earns less than their U.S. continent peers,” which serves as a comparative measure of compensation.

• Economic Structure (Sectoral Dependence)

  This is an implied indicator for Target 8.2. The article’s analysis of Hawaiʻi’s economy being “heavily dependent on tourism” and having small or absent high-wage sectors like “finance, tech and advanced business services” can be used to measure the level of economic diversification.

• Unionization Rates

  This is an implied indicator for Target 8.5 and Target 10.1. The article identifies that “Higher rates of unionization also contribute to wage compression and reduce income inequality,” suggesting that tracking this rate is relevant to measuring progress on decent work and inequality.

Summary Table of SDGs, Targets, and Indicators

Source: hawaii.edu