Hawaiis Population Decline Signals Future Economic Challenges

Hawaii’s Population Decline Signals Future Economic Challenges Hawaii is one of just nine states that lost population in 2018, reflecting a level of outmigration far deeper than the brain drain of past years.

By Stewart Yerton / April 4, 2019

After all, fewer people means less demand for housing, which puts a lid on prices. And it means fewer potential workers, which can push wages up. So who could argue with cheaper housing and fatter paychecks?

Economists and demographers say it’s not that simple.

“What you just described is what was good about the Black Death,” said Paul Brewbaker, a Kailua-based economist, referring to the plague that wiped out as much as half of Europe’s population in the 14th century.

Fewer people might mean less competition for resources, but it’s a bad sign for the economy and part of a trend that could have dire consequences down the road.

“There’s something rotten in Denmark if everybody’s leaving Denmark,” said Brewbaker, former chief economist for Bank of Hawaii who is now principal of TZ Economics.

It’s a topic that’s gone far beyond wonkish academic discussions.

The idea of a brain drain in Hawaii is nothing new; what’s different now is the situation has tipped to a point where Hawaii has fewer and fewer people, even though there are more people being born than dying.

Many worry Hawaii’s high cost of living and dearth of higher paying jobs is causing people to flee the state, even as the overall economy has seen strong growth and the tourism industry soars.

The Washington Post drew national attention to the population decline in 2018, when it published an article under the headline: “Hawaii has record-low unemployment and it’s not a frozen hellscape. Why are people leaving?”

More recently, during a speech to open the 2019 legislative session, Hawaii House Speaker Scott Saiki called the decline a “sobering statistic.”

“For the first time since statehood,” Saiki said, “we have experienced two consecutive years of population loss.”

What’s Behind The Numbers The causes and extent of the decline are a topic of debate. One local economist questions whether it’s happening at all. But what seems indisputable is the trend. The state’s demographics are shifting. Not only are there more older people, but there are also proportionately fewer younger people.

“The old people aren’t moving anywhere; they’re staying,” said Jenjira Yahirun, a researcher with the University of Hawaii’s Center on the Family. “The young people are leaving. That’s the concern.”

A graphic illustrates the trend. Often, when charted on a graph by age, a society’s population will show up as a pyramid, with fewer older people at the top and more younger people at the bottom. The very bottom represents children and newborns, and can be very wide if people in their 20s and 30s are having a lot of babies.

In the 1970s, Hawaii’s population graph looked more like a classic pyramid, with a bulk of younger adults and children near the bottom. But that has changed significantly in the past 40 years. Now the pyramid looks more like a rectangle. There are more older people in proportion to the younger ones.

And that’s not good, says Yahirun.

“In order to have a sustainable society, you need more young people,” she said.

It’s not just that younger people are the ones who have babies. They also do much of the work that needs to get done – and pay the taxes needed to pay for public goods and services.

“From a population perspective, you need workers,” she said. “We’re going to need taxes.”

Fewer Taxpayers If the trend of the past two years is an indication, there will be fewer and fewer people to pay them. Hawaii was one of just nine states that lost population in 2018, the U.S. Census

Bureau reported, with a decline of 3,700 people. That followed a population loss of 3,900 in 2017.

Hawaii’s slight population dip of the last few years might seem small in the context of the state’s population of 1.4 million.

However, it becomes more pronounced considering that Hawaii still enjoys what economists call a “natural increase” in population; in other words, more people are being born than dying.

“The old people aren’t moving anywhere; they’re staying. The young people are leaving.

That’s the concern.” — Jenjira Yahirun, University of Hawaii researcher In fact, in 2017, Hawaii had 17,523 births versus 11,505 deaths, a natural increase of 6,018.

Thus, the total loss of population in 2017 was closer to 10,000, when factoring in the natural increase.

The University of Hawaii Economic Research Organization has assembled a website of economic data, including population trends. UHERO’s data shows a decline of military personnel and their families contributed to the overall decline.

But UHERO’s executive director, Carl Bonham, said more work needs to be done to understand exactly who is leaving Hawaii, and why.

“When you just have those head counts, you don’t really know,” he said.

Lawrence Boyd, a professor of economics at the University of Hawaii West Oahu, said he’s not convinced Hawaii’s population is declining. Boyd said data initially showed a similar decline from 1997 to 1999, but 2000 census data later showed population actually had grown.

Boyd did not dispute the overarching trend: that Hawaii’s demographics are changing. But he said a smaller base of workers would not necessarily mean less productivity and a smaller tax base.

The workforce could become more productive, he said, and, “wages could quite possibly rise.”

“Hawaii’s Changing Economy” is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.