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By Rachel Inafuku
Living in Hawaiʻi is expensive, and lower-income households struggle the most to make ends meet. Yet despite the high cost of living, Hawaiʻi consistently ranks among US states with relatively lower levels of income inequality. A standard measure of income inequality is the Gini coefficient, which measures how much incomes differ from perfect equality. A Gini coefficient of 0 indicates perfect equality (everyone has the same income), while a value of 1 reflects perfect inequality (a single person has all the income). All states fall somewhere in between, but Hawaiʻi typically ranks lower than most, reflecting a more equitable distribution of income.
In 2023, Hawai‘i’s Gini coefficient stood at 0.42, ranking it among the least unequal states in the nation, alongside Arizona, Michigan, and Pennsylvania. This pattern is not new; Hawaiʻi has exhibited lower income inequality than the national average for over a decade, a trend largely attributed to its unique economic structure and the draw of its climate and lifestyle amenities.
The Gini Coefficient for the US and all 50 States
Hawaiʻi’s economy is heavily dependent on tourism, a sector that predominantly offers low- to mid-wage employment. In Hawaiʻi’s relatively high-cost environment, employers often pay more than their mainland counterparts for these types of jobs. Higher rates of unionization also contribute to wage compression and reduce income inequality.
At the same time, Hawaiʻi has fewer high-paying, specialized occupations compared to many other states. This is partly because industries that typically offer higher wages—such as finance, tech, and advanced business services—are either small or largely absent in the Islands. Many of these sectors rely on frequent face-to-face interactions with clients and collaborators, which are easier to sustain in large connected metropolitan areas. As a result, these industries tend to cluster in major US cities and remain limited in Hawaiʻi, where they primarily serve a local market. For example, the professional and business services sector comprises a much smaller share of Hawaiʻi’s GDP than in the US overall, while the hospitality sector represents a significantly larger share.
In addition, workers in high-paying fields may accept lower salaries in exchange for the benefits of living in Hawaiʻi—such as our climate, amenities, and family ties. As a result, top-paying positions in Hawaiʻi often offer lower compensation than similar roles on the mainland. As noted in a previous UHERO blog, the average bachelor’s degree holder in Hawaiʻi earns less than their mainland peers across most top-earning college majors. For example, mid-career professionals in engineering, economics, and computer science majors earn roughly $20,000 more on average at the national level than in Hawaiʻi. In this sense, living in paradise comes at a cost—not only in terms of higher living expenses but also in foregone earnings elsewhere.
Share of total personal income by earnings bracket for Hawaiʻi and the US
Taken together, Hawai‘i’s wage structure—characterized by relatively higher pay for low-to-middle-income workers and lower compensation for high-income workers—compresses the income distribution. In 2023, the top 20% of earners in Hawai‘i received 48% of total personal income, compared with 53% nationally. Meanwhile, the bottom 20% took home about 5% in both Hawaiʻi and the US, and middle-income earners in Hawaiʻi captured a larger share than their mainland counterparts. Together, these patterns help explain why Hawaiʻi, despite its high cost of living, consistently exhibits lower income inequality relative to most other states.