A new analysis from the University of Hawaiʻi Economic Research Organization (UHERO) reveals that despite average nominal incomes, the state’s economic standing is significantly weaker than previously believed when local prices are factored in. Released on February 1, 2026, the report titled “Beyond the price of paradise: Is Hawaiʻi being left behind?” shows that Hawaiʻi’s per capita GDP and productivity growth have trailed the national average for over three decades.
While surface-level data suggests the state’s economy aligns with the U.S. average, adjusting for the high cost of living exposes a prolonged period of stagnation. According to lead author Steven Bond-Smith, an assistant professor at UHERO, residents’ purchasing power has eroded due to persistently low real income growth, making their economic experience more comparable to distressed regions like Appalachia or the rural South than to other high-income coastal areas.
Key findings indicate that since the early 1990s, Hawaiʻi’s price-adjusted per-person GDP has grown at less than half the national rate. Even though the high cost of living is often blamed for financial strain, the report argues that underlying structural weaknesses—particularly in income and productivity—are equally critical. The tourism sector, which remains the backbone of the economy, has seen no real growth in spending since 1989, and limited diversification efforts have left the state vulnerable.
The researchers warn that without deliberate policy interventions aimed at boosting innovation and removing barriers to economic diversification, improvements in affordability alone will not ensure long-term sustainability. They recommend governance reforms focused on accountability, monitoring, and adaptive strategies to revitalize growth.
UHERO stresses that addressing Hawaiʻi’s slow-moving economic crisis requires the same level of attention typically directed toward struggling mainland regions. A virtual press conference was scheduled for February 2 to discuss the findings, and the full report is available on the UHERO website.
— news from University of Hawaii System
— News Original —
Mānoa: VNR: Adjusted for local prices, Hawaiʻi’s economy among worst in nation, UHERO finds
VNR: Adjusted for local prices, Hawaiʻi’s economy among worst in nation, UHERO finds n nVideo News Release n nUniversity of Hawaiʻi at Mānoa n nContact: n nMarc Arakaki, (808) 829-0750 n nSpokesperson/Content Producer, UH Communications n nPosted: Feb 1, 2026 n nLink to video and sound (details below): https://spaces.hightail.com/receive/ye1U6uOsDC n nUHERO researchers will be available to answer questions at a virtual press conference tomorrow, February 2 at 10:30 a.m. Contact Marc Arakaki at marcra@hawaii.edu for the Zoom link to participate. n nHawaiʻi residents earn about average incomes for the U.S.—but that money doesn’t go nearly as far as it does in other parts of the country. After adjusting for the state’s sky-high cost of living, a new report from the University of Hawaiʻi Economic Research Organization (UHERO) shows that Hawaiʻi’s wages and productivity have lagged the rest of the country for more than three decades, placing the state among the most economically distressed in the U.S. n nThe report, “Beyond the price of paradise: Is Hawaiʻi being left behind?,” released on February 1, documents how Hawaiʻi’s per-person GDP, income and productivity growth have stagnated since the early 1990s. On paper, Hawaiʻi’s economy appears to perform roughly on par with the U.S. average. As a result, when residents feel economic distress, the blame is often placed almost entirely on the high cost of living. n nHowever, once incomes are adjusted for local prices (the actual price of goods and services in Hawaiʻi), Hawaiʻi’s long-run trajectory also looks far weaker than previously understood. The report concludes that addressing the underlying weakness in the state’s economic path is at least as important—and perhaps more important—than addressing the cost of living itself. n n“Hawaiʻi’s tourism economy is regularly hit by short-term crises. But our analysis shows the state has also been facing a slow-moving crisis for more than 30 years,” said lead author and UHERO Assistant Professor Steven Bond-Smith. “Once we account for Hawaiʻi’s high prices, the state looks increasingly similar to regions on the U.S. continent widely recognized as economically distressed, such as parts of Appalachia, the rural South and the Mississippi Delta where the lower cost of living cushions their lower earnings. But this type of economic distress is not just about the cost of living—it reflects decades of weak income and productivity growth.” n nKey findings include: n nReal income growth in Hawaiʻi has lagged the U.S. for more than three decades. When adjusted for local prices, Hawaiʻi’s per-person GDP has grown on average at less than half the national rate since the early 1990s. n nThe way residents experience Hawaiʻi’s economy more closely resembles economically distressed states than high-income coastal regions. Using price-adjusted incomes, Hawaiʻi ranks among the weakest-performing states in the country. n nPersistently low income growth threatens long-term economic sustainability. As Hawaiʻi’s wages fall further behind the national average, it becomes increasingly difficult to fund public services, support local households and maintain the state’s quality of life. n nFixing the cost of living alone will not solve the problem. Even if affordability improved, weak real income growth means the same pressures would return within a few years unless Hawaiʻi’s productivity and income trajectory strengthen. n nThe UHERO report contends that Hawaiʻi’s long-term stagnation warrants the same kind of attention often called for in distressed continental U.S. states, alongside the focus on the cost of living. Affordability remains essential, but the authors conclude that lifting Hawaiʻi’s long-run income and productivity trajectory is equally, if not more critical for the state’s future. UHERO writes that revitalizing growth will require deliberate, well-designed policies that identify and remove barriers to diversification and innovation, supported by strong governance that emphasizes continuous monitoring, accountability and adaptation. n nThe full report is available on the UHERO website. n nUHERO is housed in UH Mānoa’s College of Social Sciences. n nSee more at this UHERO Focus video. n nLink to video and sound (details below): https://spaces.hightail.com/receive/ye1U6uOsDC n nVIDEO: n nBROLL: (0:47) n n0:00-0:47 – scenes of Hawai‘i n nSOUNDBITES: n nSteven Bond-Smith, UHERO Assistant Professor and lead author n n(0:15) n n“So Hawaiʻi is expensive and people feel pressure from that—the whole priced out narrative. But the report reveals that the bigger pressure or the growing pressure is the lack of growth in Hawaiʻi that’s lagged behind the rest of the U.S. for more than three decades.” n n(0:17) n n“When you look at real tourism spending, total real tourism spending is less in 2025 than it was in 1989. So basically the tourism economy hasn’t grown for more than 30 years and that’s our main industry and yet nothing else is really emerging to diversify into.”