Hawaii residents face financial challenges deeper and more widespread than previously realized, as low wages, a high cost of living and limited options for economic mobility hinder the financial well-being of more than two-thirds of the state’s 1.12 million adults.

That’s the overarching finding of a comprehensive study developed by the Hawaii Community Foundation in partnership with the Financial Health Network, a national organization that collaborates with business leaders and policymakers to build more financially resilient communities.

The finding that only about a third of Hawaii residents are financially healthy is in part the result of how The Financial Health Pulse, as the report is called, defines financial health. Living in a state with the nation’s highest cost of living, many Hawaii residents cope by working multiple jobs, living with extended family, or dipping into savings to make ends meet, the study found. While such strategies allow people to survive, they’re also signs of financial stress, according to the report’s criteria.

The results of the study are “bittersweet,” said Peter Ho, chairman, president and chief executive of Bank of Hawaii, which helped sponsor the report through the Bank of Hawaii Foundation.

The study is sweet, Ho said, because it provides insight into a critical question facing Hawaii in what could be the best of times: with tourism booming and an unemployment rate consistently around 2%.

“If unemployment is so low and the economy seems to be doing well,” Ho said, “why is it that so many people don’t seem to be doing that well?”

The bitterness lies in the answer, Ho said, part of which can be found in an earlier study.

Titled “ALICE: A Study of Financial Hardship in Hawaii,” that report found a family of four in Hawaii needed a household income of more than $72,000 to afford basics like food, clothing, transportation, health care and housing. It identified families with income below this amount as “asset limited, income constrained, employed,” or ALICE, and estimated 48% of people in Hawaii were living below the threshold.

Ho likened the ALICE report to a corporate income statement, which in Hawaii’s case shows that the bulk of households are barely in the black. The Health Pulse is like a corporate balance sheet, Ho said, showing the assets that residents are able to accumulate, including savings for retirement, after paying their bills. For many in Hawaii, it’s not much.

With nearly half of households barely above water, it’s not surprising that 69% of people in Hawaii are struggling with their financial health, Ho said.

“What’s bitter is it just kind of sucks,” he said.

Study Dovetails With Legislative Push

Released on Tuesday, The Hawaii Financial Health Pulse was the result of online and telephone surveys of more than 1,600 Hawaii residents conducted in June and July. The 41-question survey explored eight indicators of financial health, including whether respondents paid all their bills on time, spent less than their income, and had sufficient savings.

The survey found that more than 828,000 people, or 69% of adults, were struggling in these or other regards. The report includes recommendations for employers, financial institutions, policymakers and colleges and universities.

“The Hawaii Financial Health Pulse underscores the urgency for quick and bold action by multiple stakeholders in Hawaii,” the study says. “To improve people’s financial health, coordinated action is required to bring systemic change to the nature of jobs and employment and the high cost of living.”

The report comes as Hawaii’s political, business and community leaders have mounted a coordinated effort to support a series of bills designed to address many of the social and economic needs mentioned in the report. These include measures to increase the minimum wage, promote the development of affordable housing, and takes steps to expand a state pre-school program, among other things.

The package of bills is the result of an unusual, coordinated effort by the business and political communities. The report marks the latest in a series of studies and analyses underscoring the need to address issues that pose a threat to the state’s social and economic health.

In its forecast for 2020 released in December, for example, the University of Hawaii Economic Research Organization included a section on how Hawaii’s cost of living, which is the highest in the nation, is propelling people to leave the state, leading to three straight years of population decline.

Among other things UHERO showed how seemingly high per capita personal income was far below the national average when adjusted for Hawaii’s high cost of living.

The Hawaii Financial Health Pulse paints a more granular portrait than previous studies, showing how people in Hawaii cope with a high cost of living and middling wages and salaries.

“The expanded lens of this study reveals that a greater percentage (69%) of people in Hawaii are facing financial challenges than estimated in other studies, such as the 48% of households identified in the ALICE Report,” the report says. “While some of this increased percentage can be attributed to a difference in methodology, the analysis does suggest that the extent of financial challenges in Hawaii may be more widespread than previously recognized.”

The study divided respondents into three categories.

It found only 31% were “financially healthy,” meaning they scored high on all of the eight criteria. At the other end of the spectrum, 15% were found to be “financially vulnerable,” defined as those meeting few if any of the criteria.

In the middle, some 54% of residents were found to be merely “coping.” This meant they met some but not all of the criteria.

The study does show some silver linings. For example, compared to the nation as a whole, Hawaii residents are doing better planning and saving and are not borrowing too much.

But Hawaii residents were doing worse in other regards such as spending and maintaining adequate insurance.

For example, fewer than half of those surveyed, 46%, said they spent less than their income, compared to 54% nationally. And 50% reported they either had no insurance or were not confident they had enough to cover them in an emergency, significantly more than the 42% nationally.

Another downside is that people in Hawaii are struggling despite taking steps to cope, like working multiple jobs and living with extended family. Almost a quarter of Hawaii workers hold more than one job, nearly 40% higher than the national average, the study found.

The percentages are even higher for some age groups. Not only did almost two-thirds of people working past retirement age report working more than one job; young people, ages 18-25, reported the same. And it wasn’t much different for people entering their prime working years: nearly three out of 10, or 29%, of people aged 26-34 had more than one job.

Living with relatives to reduce housing costs is another widely used coping strategy.  More than one in four, or 26%, of Hawaii residents are living in extended households, the study found, compared with less than one in three, or 16%, nationally.

“Such living arrangements may help people manage the high cost of housing, utilities, childcare, and transportation by sharing these expenses among more people,” the report noted.

And it wasn’t just older residents and retirees living with extended family that were driving the high percentages of multigenerational homes. In fact, living with relatives was most common for an age range when people often are launching careers and starting families: 38% of those aged 26-34 in Hawaii reported living with extended family. That was more than twice the 18% reported nationally.

Meanwhile, just 15% of Hawaii residents aged 50-64 and 4% of those 65 and older said they lived with extended family.

It’s often not a matter of choice that leads extended families to share a home, the survey found.

“While living in extended households is part of the culture in Hawaii, the data reflect that households that have poor financial health are more likely to have such a living arrangement,” the report says.

Ho said such findings are troubling for the state’s future.

“You take all of these coping mechanisms, and they point to a less than positive situation for young people,” he said.

The study was sponsored by the Bank of Hawaii Foundation and the Hawaii Community Foundation’s Omidyar Donor Advised Fund.

Employers, Banks, Schools Can Help

Recommendations for employers included options beyond simply giving workers raises.

“While the most direct way an employer can improve their employees’ financial health is through increased wages over time, there are several additional ways employers can improve worker financial health today,” the study said.

This could include benefits like paid child care and parental leave that address the high cost of child care in Hawaii.

Concerning financial institutions, the study found that unusually high percentages of people in Hawaii use alternative financial services, such as payday lending and check cashing outfits, auto title lenders, money orders and pawn shops. In fact, the survey found that even among the financially healthy, 11% had used such services compared to 4% nationally. And 40% of the financially vulnerable had used such services.

The report suggested that local banks understand the needs of these market segments to develop products and marketing to reach them. The report also suggested banks and credit unions could partner with community development financial institutions to help underserved communities.

Finally, the report suggests the financial institutions step up on housing.

“To address the high cost of housing specifically, banks and credit unions could offer federal mortgage financing programs that would allow households to reduce the down payment and closing costs needed to purchase homes,” the report suggests.

Colleges and universities could do more to develop educational and training programs, including vocational training, to meet the current and future staffing needs of employers, the report suggests.

Policymakers, meanwhile, could strengthen affordable housing programs and encourage the growth of industries “that more fully employ Hawaii’s educated workforce and halt the trend toward low-wage, volatile income employment.”

Nick Redding, the Hawaii Data Collaborative’s director, said in some ways the report simply tested hypotheses, confirming or quantifying what people already knew or suspected. In other cases, it raises issues few thought about.

“One of the things these reports do for me is they raise more questions,” he said. “They’re a conversation starter.”

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

The Omidyar Donor Advised Fund, established by Pierre and Pam Omidyar, is managed by the Hawaii Community Foundation. Pierre Omidyar is the CEO and publisher of Civil Beat.

The full report can be found below: