Increasing workforce productivity will better prepare Hawaii

Developing community consensus on a preferred future is desirable if possible — for example, slower growth based on mostly high-spending visitors and other environmentally friendly industries that create more good jobs.

But the unexpected changes we’ve seen since statehood indicate more contingency planning may be wise in the future. In other words, if our preferred future doesn’t materialize due to an increasing number of factors beyond local control, what — if anything — can we do to maximize the benefits AND minimize the problems of either more rapid or too little future growth?

Increasing workforce productivity (output per worker), as much or more than job creation, may do more to prepare Hawaii for the future — no matter what happens.  

For example, during future economic expansions, higher productivity could slow long-term workforce and population growth (and growth-related environmental and social problems).   In turn, increasing productivity more than job creation in future expansions could help reduce the need for wage cuts and layoffs in future recessions. Research by the state Department of Business, Economic Development and Tourism suggests much room for improvement due to subpar and uneven productivity growth in Hawaii since statehood.

Gradual government streamlining, more high tech development, and especially better workforce education might all contribute to this preferred future and increased productivity. But none of these can guarantee enough good jobs due to increasing global competition and/or possible advances in labor-saving technology. However, a growing body of research indicates that sharing ownership and decision-making with employees can improve productivity and job quality in any business by increasing efficiency, service quality and business spending on employee training, while also reducing absenteeism, workers comp claims and employee turnover.   

Moreover, sharing ownership can ensure employees benefit financially from labor-saving technology, further increasing productivity. All of this could help us make the most of whatever mix of businesses and jobs we have in the future. In addition, some research indicates sharing ownership can increase job creation initially.

As our population ages, enhancing and better promoting existing tax incentives for sharing business ownership with employees could help perpetuate many locally owned family businesses — most of which otherwise don’t survive beyond the first or second generation. And if non-local firms continue to displace locally owned businesses, better incentives to share ownership and profits with local employees could help capture — and more broadly distribute — more profits locally even if it had no effect on productivity, and might attract more investment.

For example, with adequate incentives, investors might be enticed to gradually transfer complete ownership of businesses they create to local partners after a certain return on investment. (In the past, Hawaiian Electric invested in similar deals in China.) Even some government functions could be privatized by transferring ownership to employees.

Nevertheless, sharing ownership and profits with employees will not guarantee the success of all businesses in Hawaii. So labor unions could help by pooling employee-owned stock from many businesses in mutual funds to spread risk. This would reduce the negative impact on the employees of businesses that fail. In addition, a variety of under-used alternatives exist which could help plug financial "leaks" in household budgets and the local economy as a whole. These could help mend our fraying social safety net, but without increasing dependency on welfare and charity.

While difficult future development decisions will remain, the combination of all of these measures could help maintain the aloha spirit by narrowing the divide between those who favor, and those who fear, more growth and change.