Recovery bypasses isle poor

It’s been years since the country recovered from the Great Recession spurred by the subprime mortgage crisis, but economic conditions for Hawaii’s low-income residents haven’t fully rebounded, according to a report by the Hawaii Appleseed Center for Law and Economic Justice, a nonprofit law firm that advocates on behalf of the poor.

About 18 percent of residents are currently living in poverty, according to the Census Bureau’s Supplemental Poverty Measure, which takes into account Hawaii’s cost of living and available government assistance. Under this metric, Hawaii has the sixth-highest rate of poverty in the country.

And when it comes to Hawaii’s homeless — the numbers have continued to climb.

The number of homeless has increased in Hawaii every year since 2011. For the past three years, Hawaii has had the highest rate of homelessness in the country.

“The recovery did not touch everyone equally,” said Victor Geminiani, co-executive director of Hawaii Appleseed, in a news release. “People struggling before the recession were hit the hardest, and they still haven’t recovered.”

The report, released Tuesday, shows that raw figures — such as average wages and unemployment figures — mask the true economic conditions facing Hawaii residents.

Hawaii has the third-highest median income in the country, according to the report, but Hawaii residents earn the lowest wages when adjusted for the state’s cost of living.

An average worker in Honolulu’s private sector earns $25.10 per hour, but that equates to earning just $14.66 per hour in a state where the cost of living is the national average. By this metric, the wages for Honolulu private-sector workers are the second lowest in the country.

“While other cities such as New York and San Francisco also face sky-high prices, their wages are also significantly greater,” the report says.

Hawaii also has a low official unemployment rate that’s hovered at 3 percent. However, the report found that nearly 1 in 10 people who want to work full time are either unemployed, underemployed or haven’t looked for a job during the past month.

Termed the “real unemployment rate,” this figure stood at about 6 percent before the recession and now stands at about 10 percent.

The report doesn’t delve into the details about why conditions for low-income residents haven’t improved at pace with the economy. But Gavin Thornton, co-executive director of Hawaii Appleseed, said it appears that “wages aren’t really going up and the cost of living is.”

Thornton said that the high cost of living in Hawaii is, not surprisingly, tied to the state’s high housing costs, which consume too much of a low-income resident’s budget.

Policy experts consider housing “affordable” when a household spends no more than 30 percent of income on rent or a mortgage — but many Hawaii residents are spending much more than that.

For instance, about 1 in 3 households earning between 51 percent and 80 percent of the county area median income, $95,800 for Oahu and $68,200 for Hawaii island, are spending more than 50 percent of their income on housing. Another 37 percent of this income bracket is spending more than 30 percent of their income on housing.

“These are things that we have known for a long time,” said Thornton. “But one of the big take-home messages for us is the tax burden that is being placed on people.”

Hawaii Appleseed is pushing state lawmakers to support bills that would help redistribute income and ease the tax burden on low-income residents. This year, a bill that would create a state earned income tax credit was shelved by lawmakers. But another measure that would expand the low-income renters tax credit is still alive.

Lawmakers are also planning to pour millions into affordable housing and homeless programs.

“Despite more and more attention being devoted to (these issues), the fact that it continues to go up is very frightening,” Thornton said of the rise in homelessness and affordable housing needs.

He said one of the biggest tax issues facing low-income workers is the general excise tax, which disproportionately affects the poor and applies to nearly everything residents and visitors purchase, including retail items, such as gasoline and alcohol, hotel rooms and services.

Hawaii residents who comprise the bottom 20 percent of earners pay 11 percent of their income in excise taxes, according to the study. By comparison, the top 1 percent of earners pay abut 1.2 percent.

Tom Yamachika, president of the Tax Foundation of Hawaii, said that it’s “indisputable” that low-income residents are paying a much greater percentage of their income in excise taxes than the wealthy.

He said that most states have a retail sales tax. But Hawaii’s GET taxes much more. “Ours is the broadest of all the states,” he said.

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A full copy of the report can be found here: hiappleseed.org/poverty-2016.