In coming decades, Hawaii will face challenges associated with climate change and rising sea levels, an unsustainable reliance on fossil fuels, and deteriorating or inadequate infrastructure. All of these will be priorities requiring the sort of political will it can be difficult to muster, and all promise to be expensive.

Successfully addressing these issues will also require a sufficient labor force and fiscal resources, things which shifting demographics threaten to make particularly difficult for Honolulu.

Honolulu faces three daunting challenges, all of which have implications for its economic future: 1) an aging population, 2) decelerating population growth, and 3) the out-migration of residents unable to find jobs that pay well enough to afford housing costs.

An aging population is a statewide issue.

In 2010, the share of the Hawaii population between 18 and 64, the age range which is the broadest measure of Hawaii’s potential labor force, was 63.4 percent; the state Department of Business, Economic Development and Tourism forecasts this will shrink to 56.5 percent by 2045. Between 2010 and 2045, Hawaii’s 65 and above population will grow by 86 percent, with the 0-17 and 18-64 population segments remaining unchanged in size. DBEDT anticipates the 65 and above population will account for 24 percent of Hawaii population in 2045, which is a higher level than the Census Bureau forecasts for the entire nation in 2060.

Population growth is slowing statewide, but most notably in Honolulu. Between statehood and 2017, state population increased by 129 percent. Honolulu saw a 102 percent increase, easily exceeding the 83 percent increase in the U.S. Demographers anticipate this reversing between 2017 and 2045, with the state seeing 15 percent growth and Oahu just 9 percent, both well below the 20 percent growth forecast for the U.S. through 2045.

Cory Lum/Civil Beat

The out-migration situation is most dire on Oahu, which between 2010 and 2017 has seen a net domestic loss (local residents moving away) of 47,970, with the outflow growing annually to reach 13,473 in 2016-2017.

Population numbers are influenced by three other factors: international migration, births and deaths. Oahu births peaked in 2008 at 13,712, according to Department of Health data, which reports a preliminary total for 2017 of 12,863. When young working families relocate, their potential to have children goes with them. The result of these ongoing shifts is that Honolulu’s population has declined since peaking in 2015.

Less rapid population growth or even fewer people on Oahu might be good news to some. But a declining population will result in a reduced tax base, making paying for projects, both those already committed to and those which loom, more difficult. Reduced demand for housing has the potential to result in lower property prices, and thus valuations, which would in turn negatively impact county finances.

The inability of Oahu’s population to grow has less obvious implications as well. Most large projects (from new schools to rail to even retail developments) are predicated on anticipated population growth. Student populations, rail ridership, and shopper counts won’t increase unless population does. And developers won’t build housing unless there is demand for it.

Oahu’s Burden

At the root of the county’s population issue is a housing problem. Among Hawaii’s four counties, Honolulu had the lowest rate of housing unit growth between 2000 and 2017. Despite Oahu’s stagnating population, housing unit growth fell short of population growth, exacerbating an already major affordability problem.

Over the last two decades, single-family home price growth on Oahu has outpaced median household income growth. What was difficult to afford a generation ago is more challenging now, and rising interest rates will do would-be buyers no favors.

At the root of the county’s population issue is a housing problem.

For too long Hawaii’s success in attracting visitors (and the jobs their presence created) was the main source of economic growth. It is unwise to assume that tourism can continue to play such a role. It is also naïve: between 1990 and 2017, visitor arrivals to Oahu grew at a compound annual rate of 0.37 percent.

In 1990, the ratio of Oahu visitor arrivals to accommodations industry employees stood at 259.6; in 2017, it reached 303.3, meaning what visitor growth there has been has not resulted in a parallel increase in industry employment. When expressed in current (2017) dollars, total visitor spending on Oahu flat-lined between 2007 and 2017, with per person per day spending declining from $233 to $199.

Unless Hawaii, and more importantly Honolulu, whose burden is the greatest because it is the state’s primary economic driver, can create more and better paying jobs, there is little reason to think the labor force exodus will cease. If Honolulu continues on its current path, which is equivalent to outsourcing its workers due to a lack of opportunities here, the state’s economy will atrophy as a result. So will our future.

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