The island state has too few homegrown construction workers to handle the coming surge in government projects, so labor must be imported.
The Hawaii construction industry is in the early stages of a boom, which economists predict will be a big boost for the state’s struggling economy this year. But Hawaii doesn’t have the labor force to support that surge in construction, meaning the state will need to import workers, according to a leading economist.
The Senate Ways and Means Committee was briefed Tuesday on the state’s economic outlook, which was mixed. Chief State Economist Eugene Tian warned that places that send most of the tourists here including other states will likely see slower growth in their economies this year.
That likely means fewer tourists coming to Hawaii, and the University of Hawaii Economic Research Organization predicts tourism from Japan likely won’t fully recover to pre-pandemic levels for years to come. Meanwhile, the number of Hawaii home sales has plummeted as interest rates have risen.
The bright spot on the horizon for Hawaii is construction, but it won’t be driven by home building, said UHERO Executive Director Carl Bonham.
There are about $4 billion in government construction contracts planned at Pearl Harbor alone, he said. Federal funding will also flow into the state from the Infrastructure Investment and Jobs Act and the response to the deadly Maui wildfires. And the Honolulu rail project is expected to award a contract for the downtown portion of that project later this year.
UHERO’s projections have real visitor spending declining by about $1 billion this year, “but that’s completely made up for by construction activity,” Bonham said. Construction here totals about $1.5 billion in a normal year, “and now we’re talking about $3 billion or $4 billion going forward,” he said.
But Hawaii won’t be able to supply enough workers to handle all of that construction work, Bonham said.
“Our labor force is declining, our population is continuing to decline, and so we have essentially recovered consistent with the size of our population and our labor force,” Bonham told the committee. “We’ve lost about 20,000 people from, say, 2018 to today. The labor force is down about 15,000 people.”
“You can’t hire people if they’re not there,” Bonham said. Tian projected slight increases in Hawaii’s population over the next two years, but Bonham and UHERO disagree. “Our view for 2023 and 2024 is continued population loss,” Bonham said.
Importing workers means that some of the benefits of federal spending on construction projects will leave the state in the form of wages to workers from other places, he said. But it also offers an opportunity for local workers to seek out training and apprenticeships to switch careers, Bonham said.
“It also means that if we don’t have enough workers, some projects are going to get delayed, and costs are going to be higher. So, it’s kind of a cautionary tale, but also an opportunity,” he said.