Unpacking Hawai‘i’s income distribution – UHERO
by Vanessa Pepino and Peter Fuleky, UHERO, Oct 27, 2026
Hawai‘i is one of the most expensive states in the country, yet also more equal than most states in how income is distributed. That’s not a contradiction — those are simply different measures of economic well-being. However, this reveals distinct dimensions of these metrics: the gap between Hawai‘i’s high and low earners may be narrow, but high living costs leave most people’s income stretched thin.
To understand the distribution of personal income, we turn to Distribution of State Personal Income statistics from the Bureau of Economic Analysis (BEA).[1]
Inequality in Hawai‘i is less severe than in most US states
The Gini coefficient is a standard inequality measure ranging from 0 to 1, with higher values reflecting greater inequality. It is used to compare inequality across geographies and over time.
Nationally, inequality has changed little over the past decade. The most unequal states over this period have been Wyoming, Connecticut, Texas, and New York — along with California, which ranked most unequal in 2012 but has since drifted to sixth. At the other end, Maine, West Virginia, Vermont, Delaware, and Iowa have consistently ranked among the most equal (see Figure 1).
In Hawai‘i income tends to be more evenly distributed than in the US overall (see Figure 2). In 2024, Hawai‘i’s Gini coefficient was 0.41, below the national level of 0.45 — and similar to Idaho, Arizona, and Alaska. A previous UHERO blog explains why: Hawai‘i’s wage structure compresses the income distribution, with higher pay for low- and middle-income workers and comparatively lower compensation for top earners.
The Gini coefficient is heavily influenced by the extremes – the very wealthy and very poor. The 80/20 ratio takes a different approach, comparing the income at the 80th percentile (the minimum income in the top quintile) to the one at the 20th percentile (the maximum income in the lowest quintile). This removes the top and bottom incomes and allows us to focus on the middle of the distribution.
In Hawai‘i, a household at the 80th percentile earns roughly three times what one at the 20th percentile does. That gap has narrowed overall over the past decade, from 3.2 in 2012 to 2.8 in 2024, reaching its tightest point during 2020–2022 when federal pandemic support raised incomes in the bottom quartile relatively more than at the top of the distribution (see Figure 3).
The shrinking of the gap is similar across states. Arizona started at nearly the same level as Hawai‘i in 2012 (3.1) and fell further, to 2.6 by 2024 — now below the national level. California has had the largest gap, starting at 3.4 in 2012 and narrowing to 3.0 in 2024. Some states are closing the gap faster than the nation, some slower. Hawai‘i is one of the states in the former group.
Hawai‘i’s 80/20 ratio presents a less flattering picture than its Gini coefficient — showing the state slightly more unequal than the rest of the country over most of the past decade. That seems inconsistent until you remember what the 80/20 ratio represents: by design, it ignores the extremes and compares only the incomes at the respective thresholds. Being above the national 80/20 measure means that the gap between upper-middle-income and lower-middle-income households is wider in Hawai‘i than in the US overall. Hawai‘i’s upper-middle-income households (80th percentile) earn slightly more than their mainland counterparts, which raises the 80/20 ratio. Its very top earners (95th percentile) earn less than their mainland counterparts, which lowers the Gini but has no effect on the 80/20 ratio (UHERO, 2025). The result is a Gini coefficient held down by the absence of extremely high incomes, and an 80/20 ratio held up by a relatively well-paid upper middle.
This pattern can also be seen by looking at each state’s income profile — the income thresholds at the relevant quintiles (see Figure 4). The flatter the profile the closer the income levels are to each other. The slope of Hawai‘i’s curve between the 80th and 20th percentiles is steeper than Arizona’s but flatter than California’s, and it tracks California almost exactly through the 60th percentile before the two diverge. In other words, middle-income earnings in Hawai‘i are less compressed than Arizona’s, but Hawai‘i lacks the steep climb at higher income levels that California shows.
Hawai‘i’s unique industrial and labor landscape is central to this pattern. Lacking the major tech and finance hubs that drive elite, top-tier salaries in mainland metros, the state naturally maintains a lower Gini coefficient. Instead, Hawai‘i’s economy relies heavily on service-oriented sectors—tourism, hospitality, retail, and food service—alongside a sizable public-sector workforce (UHERO, 2025). Hawai‘i’s minimum wage has risen in steps for the past five years (DBEDT, 2024; FRED, 2026) in a labor market already characterized by relatively high rates of unionization. Pandemic-related transfer payments (Center for Economic and Policy Research, 2025) and tax credits also provided income support during this period. Nationally, tight post-pandemic labor markets raised real wages for low-wage workers and compressed the wage distribution (Autor, Dube & McGrew, 2024). Hawaii’s narrowing 80/20 gap reflects this broader trend, and is driven by a rising wage floor at the bottom of the distribution, strong unionization and other policy interventions.
High costs absorb income gains
Standard inequality metrics evaluate the relative spread of income, not local purchasing power. None of these distributional measures – Gini coefficient or percentile ratios – account for something that matters just as much: how far a dollar actually goes.
Start with what households actually keep. If personal income measures what Hawai‘i households earn, disposable personal income measures what is left after taxes. It is important to remember that the BEA’s definition of personal income is broader than just wages; it includes other non-cash sources, such as imputed rental income and government benefits (see definitions in Footnote 1). In 2024, median household income was $148,757 and median disposable household income was $138,676. Hawai‘i ranks 5th and 4th in the nation based on these measures.
Then comes a harsher reality. Hawai‘i is the second most expensive state in the country, behind only California, with living costs about 10% above the national average (BEA, 2026). Regional Price Parities (RPPs)—which measure price level differences across states—show that Hawai‘i’s overall prices have been consistently among the highest in the nation (see Figure 5). While Hawai‘i’s cost burden relative to other states has remained relatively stable, that burden does not land evenly.
Wealthier households direct a larger share of spending toward travel, entertainment, and other discretionary categories (BLS, 2022), while lower-income households spend the bulk of their income on essentials — housing, food, utilities. Based on 2024 figures reported by ALICE (2026), an estimated 44% of Hawai‘i households cannot afford basic daily necessities.
Hawai‘i’s consistent placement in the upper right quadrant of Figure 6 illustrates a story of complex economic dynamics: high incomes, elevated prices, and slowly narrowing income disparity. Anchored far to the right on the x-axis with a high RPP, it is one of the most expensive states in the nation. Its vertical position on the y-axis shows a persistent yet slowly improving gap between the income tiers. While Hawai‘i appears to be among the wealthier states due to high real median personal income, this is severely undercut by the steep cost of living that unevenly strains households across the income spectrum.
That tension is the strongest at the bottom of the income distribution. By the Census Bureau’s Official Poverty Measure (OPM), Hawai‘i’s poverty rate is below the national average. But that measure uses a single nationwide income threshold, adjusted only for family size and composition, regardless of where a family lives. The Supplemental Poverty Measure (SPM) by the Census Bureau and Bureau of Labor Statistics correct for this by adjusting thresholds for local housing costs, adding benefits like food and housing assistance to income, and subtracting taxes and necessary expenses like medical costs. Once these factors are included, Hawai‘i’s poverty rate rises from 9% to 11% (three-year average, 2022–2024; see Figure 7). The high prices that erode the value of Hawai‘i’s strong median income also push more households into poverty than the official figures suggest.
The bottom line: Beyond distribution
By both of BEA’s standard measures of how income is shared — the Gini coefficient and the 80/20 ratio — incomes in Hawai‘i are more equal than in the rest of the country, or about the same. Those metrics say nothing about whether that income is enough.
In Hawai‘i, income is distributed more evenly than in most states, yet it still falls short for a large share of residents. The more telling benchmark is not how residents’ incomes compare with one another, but how they compare with the cost of rent, groceries, utilities, and health care. Those costs take a far bigger bite at the bottom of the income ladder than at the top. While the narrowing of the gap between high and low earners is an encouraging development for Hawai‘i, it is not the same as a better standard of living. Closing the gap between earnings and living costs is the harder task still ahead.
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[1] This analysis uses BEA’s personal income, the total income received by individuals. It includes wages and salaries, business and property income, and government transfers. It includes non-cash components and imputed income such as the rental value of a home you own, in-kind transfers like Medicaid and Medicare, and employer contributions to health and pension plans, but excludes capital gains (BEA, 2017; BEA, 2026). Disposable personal income (DPI) is personal income minus federal, state, and local taxes: the money actually available to spend or save. Meanwhile, this differs from household income, a measure that counts only cash — excluding the imputed income, in-kind transfers, and employer contributions captured above (BEA, 2023; Census, 2025).
Each detailed component of state personal income is then allocated to households using CPS microdata, which BEA first corrects for underreporting at the top of the distribution using IRS data (BEA, 2021). Before calculating the inequality measures every household’s total is “equivalized” — divided by the square root of household size — so that households of different sizes can be compared fairly. This allows a fair comparison of living standards, for example, between an individual making $75,000 versus a family of four earning the same amount. The mean and median income reported by BEA are not equivalized, and are therefore affected by household size. We focus on the median rather than the mean, since a small number of high earners skews the average upward and misrepresents what a typical household earns and brings home.