Based on many measures, Hawaii hardly looks like an economic powerhouse.

With one of the nation’s highest costs of living and salaries and wages that just don’t keep up, the Aloha State has had the dubious distinction of being a national leader in population loss, year after year.

The state’s gross domestic product growth rate, which measures goods and services produced, has lagged that of other Western states. And according to one widely quoted study, more than four in 10 residents are struggling to get by financially.

But there’s one, often overlooked area where Hawaii does well: overall well-being, or, to put it simply, happiness.

The state consistently ranks high in studies looking at well-being: in fact, Hawaii ranked second after Massachusetts in a 2021 study by the health care services company Sharecare. And it has ranked in the Top 10, usually in the top spot, in similar studies by Gallup.

Even those struggling to make it in Hawaii tend to be happier – or at least less unhappy — than their counterparts in other states, says Inessa Love, an economics professor at the University of Hawaii who studies the economics of happiness.

“There are a lot of mitigating factors at play here,” says Love, who co-authored a paper delving into the economics of happiness in Hawaii, which was published in 2019 by the University of Hawaii Economic Research Organization. Titled “Drivers of well-being in Hawaii: Quantifying individual and community impacts,” the paper analyzed Gallup data to show the demographics of happiness in Hawaii.

Strong community support, the ability to barbecue at the beach, a clean and beautiful environment: these sorts of things can enhance quality of life of residents, even the working poor, Love said.

An estimated 42% of residents are in a category known as ALICE, or “asset limited, income constrained, employed,” meaning they’re struggling with limited assets, income and employment opportunities, according to the Aloha United Way.

Love and her co-author, fellow UH economist Philip Garboden, took this into account in their study. They looked at well-being at various income levels, including those in poverty and the working poor similar to ALICE.

People with comfortable incomes were notably happier than ALICE families and those below the poverty line, the report showed. But it also showed that those struggling financially were generally better off in Hawaii than other places.

“It still sucks,” Love said. “But it’s not as bad as living in that category somewhere else.”

Bhutan’s Gross Happiness Index

It’s not entirely new for economists to try to look at the pursuit of happiness as a driver of human behavior. Writing in the Harvard Business Review, the journalist Justin Fox traced discussions on the economics of happiness from the 18th century English economist Jeremy Bentham to Robert F. Kennedy and a quote from the 1968 presidential campaign trail.

Like many proponents of happiness economics, Kennedy saw the limitations of GDP as a measure of economic well-being.

“Our gross national product … counts air pollution and cigarette advertising and ambulances to clear our highways of carnage,” Kennedy said on the presidential campaign trail in 1968. “It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl … Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play.”

Fast forward a half century, and policymakers and NGOs are taking this idea to heart, some in major ways. There’s a burgeoning cottage industry of indexes measuring alternatives to GDP, things like happiness and wellness, including the Happy Planet Index, Indigo Wellness Index, Bloomberg Healthiest Countries Index and World Happiness Report.

The government of Bhutan has probably gone the farthest. It has developed a Gross National Happiness Index, studying the happiness of its citizens through extensive surveys seeking to quantify happiness objectively by looking at things like health, education, culture, good governance and community connections.

The index is “not easily transferable to other countries and cultures,” Love said. “A lot of the things are specific to Bhutan.”

Money Can Buy Happiness — To A Point

One thing economists tend to agree on is that income is important, but less important than many people think. The pioneering happiness economist Richard Easterlin coined what’s known as the “Easterlin paradox” concerning income and happiness in countries.

It holds that a nation’s people tend to get happier as they become wealthier, but only to a certain point. After that expectations and aspirations tend to grow, income levels rise for everyone and it’s harder and harder for people in these rich countries to keep being satisfied, even if they’re getting wealthier.

Meanwhile, at the same moment in time, people in developing countries seeing their lives improve quickly might report being happier than their counterparts in richer countries.

“After basic needs are met, other factors such as rising aspirations, relative income differences, and the security of gains become increasingly important, in addition to income,” the economist Carol Graham explained, writing in the journal World Economics.

Among other things, Love and Garboden found that in Hawaii women generally were notably happier than men. Older people were happier than younger ones. Education was a marker of happiness, and so was being married and employed.

To see whether employed and well-educated people were really happy just because they made more money, the economists parsed the data and concluded education and employment alone were indicators of happiness, regardless of income.

“Clearly, an important part of a drop in well-being caused by unemployment is a drop in income,” they said. “However, the fact that it continues being significant even after income is controlled for suggests that there are impacts of unemployment that go beyond just the income effect. Specifically, the unemployed may suffer a drop in self-esteem and don’t feel like a useful and productive member of society.”

“So far, the impact of unemployment has the strongest negative effect on well-being in terms of the magnitude of the effect,” they reported.

Love and Garboden also found that wealthier neighborhoods – places like Kailua, Waialae/Kahala, Hawaii Kai and Kaimuki – were among Oahu’s happiest places. Part of that might have been the result of an “area premium.” A particular place might make people happier because it’s close to the beach, they said.

But, they noted, “areas that have predominantly richer people living in it will have higher than average well-being because, as we saw earlier, income has a strong correlation with well-being in Hawaii.”

For government officials, all of this points to developing economic policies that go beyond merely growing incomes, says Sumner La Croix, a professor emeritus of economics at the University of Hawaii.

That includes promoting cultural activities, social connections, education and other things that go with life satisfaction.

“One of the things governments need to do is focus on things that are important to people instead of just boosting their incomes,” he said.

“Struggling To Get By” is part of our series on “Hawaii’s Changing Economy” which is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.