When it comes to living in Hawaii, Laura Dunn, a scholar of Eastern religions who recently earned her doctorate from the Graduate Theological Union in Berkeley, embodies the situation many residents face: it is simply hard to find good work with reasonable compensation here, despite the state’s notorious high cost of living.

So even though Dunn has returned home to Hawaii after four years in the Bay Area, she’s continuing to work in California remotely – as an administrator and adjunct professor – while living in Honolulu.

“I need to work in California to be able to stay in Hawaii,” Dunn said.

Unfortunately, things in Hawaii are only getting worse for people trying to make ends meet. As Hawaii emerges from the worst of the economic crisis caused by the Covid-19 pandemic, prices for things like food, housing and energy are escalating, according to the U.S. Department of Commerce’s Bureau of Labor Statistics.

And it’s far from clear when the increases will end.

Specifically, the Consumer Price Index rose 4.6% for July compared to the same month in 2020, according to the latest available data. That compared to a 4.6% increase in June, 3.8% in May and 2.8% in April.

“There’s definitely something there,” said Carl Bonham, executive director of the University of Hawaii Economic Research Organization, when asked about the escalating cost of living. “The question is what’s going to happen next year and the year after that.”

Gasoline Prices Are A Rising ‘Hidden Tax’

It’s a question economists are asking not just in Hawaii. The U.S. CPI for August rose 5.3% compared with the same month in 2020. Over the summer, The Wall Street Journal quoted economists predicting a long run of higher prices. It’s partly because of the same things that have led to higher grocery prices in Hawaii: supply chain bottlenecks, higher prices for things like packaging and higher demand as more people opt to eat at home.

But the price increases go beyond food. Consider gasoline prices, for instance. The price of gasoline statewide has gone up 25% in the past year, to $4.071 from $3.248 a year ago, according to AAA. That’s still below the highest price Hawaii has faced, said Marie Montgomery, a spokeswoman for AAA based in Costa Mesa, California. The record was just under $4.62 per gallon in April 2012.

Still, the rising gasoline price pervades the economy, increasing costs not just for commuters and people driving kids to school but also for commercial deliveries.

“It’s almost like a hidden tax,” she said.

Also driving Hawaii’s rising CPI is increasing housing costs. The CPI looks at prices for a wide range of goods and services, including not just housing and gasoline, but also recreational activities, education, food and other living expenses.

Within this big basket of goods and services, there were some things that increased in price a lot more than housing. Used cars, for instance, jumped up more than 40% in July 2021, the most recent month available, compared to the same month in 2020.

By comparison, costs for shelter in August in Honolulu were 3.9% higher than the same month a year ago.

The issue is that people here generally spend more of their monthly household income on housing than just about anything else, so the Bureau of Labor Statistics gives more weight to housing costs when calculating CPI, said Matthew Insco, an economist with the bureau’s San Francisco office.

As a consequence, Insco said, “A smaller rise in the cost of housing can have a bigger impact on the overall number.”

By some measures, some segments of Hawaii’s housing market are rising faster than the 4% the BLS reports overall. For example, in an economic forecast published today, the UH Economic Research Organization looked at apartment prices on Craigslist, and its finding is dramatic.

“The median asking rent on Oahu has climbed to $2,100, up from $1,700 a year ago,” UHERO reports. “This comes at a time when the federal eviction moratorium is now a thing of the past, threatening some tenants with possible eviction.”

Even if they’re not struggling so badly that they face eviction, many families are nonetheless having a hard time.

According to UHERO, U.S. census surveys indicate that at the beginning of each month, some 10% to 14% of households, or 18,000 to 24,000 total, are late on rent. By month’s end that figure is substantially lower — roughly 6% to 9%, or 11,000 to 16,000 households — as some renters end up putting together enough to cover the rent.

UHERO notes that such numbers may have broader implications for the housing market, especially if more renters get behind on payments.

“Landlords with single-family properties and substantial unpaid back rents have a clear incentive to sell their homes into the resale market,” UHERO reports. “In a state where no new unsubsidized rental housing is produced, this loss of stock may exacerbate the housing affordability problem.”

Help Is On The Way, Eventually

Hawaii’s high cost of living, including housing costs, might have been exacerbated by the Covid-19 pandemic, but they’re hardly new. The Hawaii Community Foundation has been working to address issues like living wages, the cost of living and housing.

Christine van Bergeijk, the foundation’s senior vice president and chief strategy officer, describes these as “all the things that make Hawaii less possible, especially for younger folks.”

Among other things, the foundation is making a concerted effort to address housing with a pilot project aimed at Maui, where van Bergeijk said the housing crisis is especially acute. More than 50% of families on Maui are “housing-cost burdened,” meaning they spend more than 30% of their monthly income on housing, she said.

One strategy involves helping get people out of the volatile rental market and into homes by helping them prepare with credit and personal finance counseling, she said.

“We want people ready to go when an opportunity comes up,” she said.

Micah Kane, the foundation’s chief executive, said the House Maui initiative includes more than helping families be ready to buy homes. It also involves working to make sure county infrastructure investments create opportunities for the development of housing, including market rate housing, units built to be sold below the market rate and affordable rentals.

“It’s a continuum of housing that we’re advocating for,” he said.

Kane acknowledged it could take five to seven years for the Maui housing initiative to get much traction.

In the meantime, Hawaii residents face a sobering reality: people are actually starting to earn a bit more, which seems a good sign, but the cost of living is starting to rise faster than the wages, UHERO reports in its forecast for Hawaii’s economy.

“During the late stages of the pre-COVID-19 expansion, wages measured at current prices had outstripped inflation, with the former rising by about 3% per year, significantly higher than inflation, which was running closer to 2%,” UHERO reports. “The gains were particularly large for lower-income workers and actually accelerated during the first year of the pandemic.”

But all of that has changed as inflation has spiked, UHERO reports.

“It remains to be seen whether inflation will recede enough over the next year to return real (inflation-adjusted) wages to positive growth,” UHERO said.

A big question is whether the Federal Reserve will step in anytime soon by raising interest rates, a move that would slow economic growth and tamp down inflation by making it harder for individuals and firms to borrow money. So far there’s no sign the Fed will act soon, UHERO reports.

“The Federal Reserve is watching price movements closely, and the Federal Open Market Committee is signaling that it believes prices are now more consistent with its goal of an inflation rate that averages 2% over the long run,” UHERO said.

For people like Dunn, all of this is somewhat academic.

Dunn said she and her partner aren’t struggling to make ends meet, thanks in part to having a dual-income household. But she said she might need to look elsewhere to find opportunities for professional growth and development.

As for compensation, she says, her remote jobs “just blow everything in Hawaii out of the water.”