Case Study: The Cost Of Living In Hawaii

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The Cost of Living in Hawaii Why is it so high.
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The most frustrating thing about researching and studying economics, is

that so much of it includes so many different variables. This makes it extremely

difficult to really understand any economical situation, and everything that goes

into it. Due to this comparing several different situations is all but impossible. So I

have decided to only focus on the economic factors that cause basic living

expenses in the Hawaiian Islands to be far greater than in the continental 48

states.
The first area I will examine is available land, land ownership, land

suitability, and how the demands of tourism effect living expenses in Hawaii. I will

also examine how Hawaii's existence as a island chain a significant distance

from any continent affect the price of goods. Finally I will examine how living

expenses are also influenced by Hawaii's connection to the greater United States

politics and economy. These are I believe the major forces that influence the

basic living expenses in this state. Before I examine these areas however I will

show how much more expensive cost of living in Hawaii is.

Hawaii has the highest cost of living in the United States according to the

US Commerce Department Bureau of economic analysis report in June 2014.

This report further states the cost of living is 16% higher than the national

average. A good example of this is that you may earn up to $54,800 and still
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qualify for housing assistance in Oahu in the family four may have an income of

$78,300 before being cut off from housing assistance. Hawaii also has the most

expensive electricity per kilowatt hour of $.37 while the national average is only

$.12.
it seems that this continues in almost every variable from the average price

per gallon of gasoline to the price of food being more than 70% higher than the

national average.

Land in the state of Hawaii is scarce, as it is composed of an island chain

originally formed by volcanoes it is also quite mountainous. Most of it is

controlled by only a few landholders in fact the largest landholder with 365,000

acres is the Kamehameha school system they six other trusts control 24% of all

land in Hawaii. Due to the existence of only a few large landowners much of

Hawaii real estate uses a leasehold system. In this system the buyer only has the

right to use the land for a set number of years, it is not constant payments such

as rent but a one-time purchase. The result of land being difficult to purchase and

being quite rare on the market causes it to be extremely expensive. Unfortunately

due to the manner the Hawaiian Islands were formed much of the land is

extremely difficult to use being extremely rugged. With the increase in tourism

more land has been given over to nonresidential needs causing an even larger

increase in home prices for example due to the competition of deep-pocketed
corporations.

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Hawaii is near the center of the Pacific Ocean, it is nearly 4000 km west of

California, and 6500 km east of Japan. The small population of Hawaii being only

just 1.4 million causes increased shipping expenses due to small size of its

market Its geographic location presents numerous difficulties as well, the primary

one being it is simply in the middle of nowhere and as such shipping costs are

higher, a good example of this is in the 2014 rate and services guide for UPS,

“ for each UPS Next Day Air ® Early A.M.® package with a dimensional weight of

more than 150 pounds,multiply the weight by the price per pound and add $30.00

". I believe this shows that even regularly scheduled service to Hawaii simply

costs more. There is an additional problem facing shipping to Hawaii due to the

merchant Marine act of 1920, all shipping to American ports from American ports

must be carried in US flagged, owned, crewed, and built ships. This causes an

even higher expense in shipping than distance and time would allow, for example

is stated in the Maritime Executive August 5, 2014

yards is 3 to 4 times that of Korea or Japan. " With both distance and regulatory

difficulties it is no wonder that all imported goods in Hawaii are so much more

expensive.

Hawaii is an expensive place to live, hopefully I have shown some of the

reasons in this essay. Unfortunately there are entirely too many more and as

dealing with most of the subjects of economics it seems that there are no simple

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answers, all of the causes are not readily apparent and even economists with

vastly more experience do not seem to have all the answers. Though I will say

the political debate in Hawaii does seem to be more concerned with shipping,

transport, and land-use than most of the continental US so maybe this interest

will create more studies and thought to actually come to some irrefutable

conclusions.

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