Time to transform how Hawaii works

In a state with a strong labor history and where unemployment had been traditionally low, it’s been a tough slog. Tight economic times have squeezed people out of jobs and recovery is still elusive; meanwhile, it’s increasingly clear that ballooning government labor costs will be unsustainable at the status quo. The perfect storm has converged for fundamental changes in how Hawaii does business, and flexibility will be key to survival.

On this Labor Day, the glimmer of hope for economic recovery — however faint — has just been dashed by a new forecast by the University of Hawaii Economic Research Organization. Unfortunately, the group of economists said, the strongest part of the tourism rebound "is behind us," and Hawaii’s recovery will be weaker than earlier thought.

"A slackening from what was already a gradual pace of recovery is disappointing, and it leaves the economy in a relatively vulnerable position at a time when external economic conditions are increasingly gloomy," according to the report.

Gloomy news, indeed, as there is little in the way of job creation or public labor-cost savings on the horizon.

In the short term, to the job-creation issue: Hawaii will be anxiously watching with the rest of the nation as President Barack Obama presents his jobs plan on Thursday. Talk about his stimulus proposals has focused on another yearlong extension of the payroll tax cut for workers agreed to last December by Obama and Republicans; also expected is a separate tax credit for employers who grow their payrolls.

In July, Hawaii’s unemployment rate, seasonally adjusted, stood at 6.1 percent, compared to 9.1 percent nationally. Pretty good comparatively; not so good when considering that Hawaii’s joblessness rate was just 2.7 percent in 2007.

That’s the year that started this economic downturn and employers began cutting back; Hawaii then had 624,900 jobs. This July, Hawaii reported 595,600 jobs, and while that was 6,700 more than the previous month, 38,400 people remained unemployed, according to the U.S. Department of Labor. In Honolulu, the jobless rate (seasonally unadjusted) fell to 5.4 percent; in Hawaii County, it was 9.5 percent; in Kauai County, 8.5 percent; and Maui County, 7.5 percent.

All these sober numbers speak to the immediate, dire task of addressing joblessness. But even as Hawaii and the rest of the country battle to fend off recession, long-term labor issues are looming large here.

Escalating costs of government retirement benefits are adding to the strain on the state’s budget, as are underfunded health insurance liabilities. Lawmakers had opportunities to start addressing these issues last session but made scant inroads.

Unfortunately, entrenchment will not work. A case in point in unproductive conflict is the one now unfolding between the state and the Hawaii State Teachers Association, which has headed in exactly the opposition direction than what’s needed. Collaboration, fueled by today’s harsh realities, must be the path if Hawaii is to have a chance at making strides toward more-efficient job roles, downsizing via attrition and limiting seniority "bumping" practices and other possible stonewalls to productivity.

During a working visit here in spring, Thomas Kochan of the MIT Sloan School of Management and co-founder of the Employment Policy Research Network, talked of a plum opportunity for Hawaii, being at the crossroads of public labor relations. Things seemed more hopeful then, with leaders here mindful of the labor nastiness that occurred in Wisconsin. Sadly, though, precious few of Kochan’s "transformative moments" — and encouraging transformative behaviors —have yet to materialize. But for the health of Hawaii’s future, they would be well worth laboring to achieve.