Honolulu Advertiser Second Opinion column by Cliff Slater

December 9, 2002














(1) Details of the SBSC’s rating system.

(2) Government in Hawaii, 1998. A Handbook of Financial Statistics. Tax Foundation of Hawaii.





















(3) Wriston, Walter, B. The Twilight of Sovereignty: How the Information Revolution is Transforming Our World. First Replica Books Edition. October 1997. Originally published by Scribner in 1992. pp. 61-2.




(4) One could define significant diversification as an industry that would be 10% of our economy. We presently have about 500,000 workers in the state.

It's time to look at job creation

Much has been said during recent days about what the Governor-elect should do for Hawaii’s economy. At its core, it is to create good jobs in the private sector.

To create more and better jobs, we have, by definition, to start with encouraging employers; no employers, no employees

To that end, we have to examine what discourages existing employers here from expanding and others elsewhere from locating in Hawaii—and then change what we can.

First, we are getting a bad rap from media and business organizations around the country. We got it the old-fashioned way—we earned it. To change it we have to change the fundamental reasons we are rated so poorly.

For example, the national Small Business Survival Committee recently rated all the states on sixteen objective factors. We show up as 50th on that list—worst in the nation for small business. We must not just reject that result out of hand as though someone has got it in for us. Instead we have to examine the rating’s components.(1)

In doing that we find we are at, or near, the bottom in rates of personal taxes, capital gains taxes, sales taxes, unemployment taxes, taxes on health care, gasoline taxes and electrical utility taxes.

High taxes are a deterrent to new employers and hamper existing ones. According to the Tax Foundation of Hawaii, we have the fourth highest taxes per person in the country.(2) We simply have to find a way to reduce them.

A reduction in tax rates would encourage retirees to stay here and pay Hawaii taxes. As it is, many only live here for 5½ months out of the year to avoid our high tax rates. It will also encourage many airline pilots to pay Hawaii state taxes. Although based here, many maintain apartments in lower-taxed states to avoid our taxes.

Another issue of even greater importance is public education. Employers want literate, numerate employees able to think for themselves. In addition, they want decent public schools for their own children and those of their employees.

Employers will always need to hire some technical or managerial staff from the Mainland and foreign countries. We cannot expect such people to settle for Hawaii public schools. It is tough enough for Mainland people to accept our high cost of living without imposing on them the additional costs of private schooling.

These are substantive issues discouraging new employment that are just not offset by the fact that we are all lovely, friendly, musical people with wonderful weather—business is business.

A major task for Linda Lingle, who will shortly occupy “the bully pulpit,” is to instruct, cajole and drag our people and legislators into the 21st century and into understanding the requirements of employers in this modern information age.

She must get them, not to merely listen to, but to understand what the former Chairman of Citibank means when he says,

“Technology has made us a ‘global’ community in the literal sense of the word. Whether we are ready or not, mankind now has a completely integrated, international financial and information marketplace capable of moving money and ideas to any place on this planet in minutes. Capital will go where it is wanted and stay where it is well treated. It will flee from manipulation or onerous regulation of its value or use, and no government power can restrain it for long. Much to the annoyance of governments.”(3)

No one should envy Linda Lingle’s task in doing this. We have always had trouble facing reality and our leaders for the past twenty years have not encouraged it. She now has to turn this attitude on its head if we are to have the jobs that will allow our kids to come home.

We have continuously declining agricultural jobs, military jobs and our tourism has been flat for ten years. And right now, there is nothing on the horizon that indicates any improvement.

Bear in mind, that to diversify our economy by ten percent we would have to have a new industry (industries) that would generate 50,000 jobs.(4) Where is that going to come from without major change in attitudes?

Of course, we do not have to do anything to encourage employers—only if we want to create new and better jobs.

Cliff Slater is a regular columnist whose footnoted columns are at www.lava.net/cslater