Hawaii Economy: Tourism, Military, and Cost of Living

Hawaii is a smaller state economy, usually ranked in the lower third of U.S. states by GDP — the dollar value of everything a place makes and sells in a year. The Hawaii economy is unusually concentrated in tourism, federal defense spending, and real estate, with one of the highest costs of living in the country.

This is a plain-English tour. For the national picture, see The State of the U.S. Economy and the Economy hub.

How big is the Hawaii economy?

For example, recent state GDP for Hawaii has run around $100 billion, according to the Bureau of Economic Analysis. Population is roughly 1.4 million, per the U.S. Census Bureau. Honolulu on Oahu accounts for the majority of the state's economic activity, with smaller economies on Maui, Hawaii Island, and Kauai.

The biggest industries

Hawaii's industry mix is unusually narrow. The main pillars are:

• Tourism and hospitality — visitor spending across the islands is one of the largest single revenue streams in the state economy. Waikiki, Maui resorts, and Kona drive most of the activity.
• Federal defense — Pearl Harbor, Hickam Air Force Base, the Pacific Missile Range Facility on Kauai, and a large Marine Corps and Army presence make Hawaii one of the most defense-spending-dense states.
• Real estate and construction — limited buildable land and continued in-migration support a constant base of high-priced residential and resort construction.
• Healthcare — large hospital systems on Oahu and the neighbor islands are major employers, especially serving an aging population.
• Agriculture — once dominated by sugar and pineapple plantations, Hawaiian agriculture has shifted to coffee, macadamia nuts, seed crops, aquaculture, and diversified produce.
• Education and government — the University of Hawaii system and state and county government together is a large employer category.

Jobs and wages

Hawaii labor data is published by the Hawaii Department of Labor and Industrial Relations, with national-level numbers from the Bureau of Labor Statistics. For example, the Hawaii unemployment rate has historically swung sharply with the visitor cycle, falling well below the national average in good tourism years and spiking during the 2020 travel collapse.

The Hawaii minimum wage is being phased up to $18.00 per hour by 2028 under a 2022 law. Even at higher wages, the state's high cost of living means many workers hold multiple jobs.

Taxes in Hawaii

Hawaii has a graduated state income tax with one of the highest top rates in the country, kicking in at upper income levels.

The state general excise tax functions like a sales tax and is levied at 4% statewide, with a 0.5% county surcharge in Honolulu and a few other counties. Because the GET applies to almost every transaction, including services and rent, the effective burden is higher than a comparable retail sales tax. State tax forms and rules live at the Hawaii Department of Taxation. You can read more about how sales tax works in our glossary.

Cost of living

Cost of living in Hawaii is the highest of any U.S. state by most measures. Housing, groceries, and utilities all run well above the national average, and shipping costs add to almost every consumer good. The federal government tracks region-specific Consumer Price Index data through the BLS West region, and HUD publishes Fair Market Rents for every county at HUD User.

Tourism, the visitor economy, and Maui's recovery

Tourism dominates almost every part of the state economy, from airport operations to retail to the construction of new hotels. Visitor counts and per-visitor spending are tracked closely. The 2023 Lahaina wildfires devastated a major Maui tourism hub, and the long rebuilding effort has reshaped how the state thinks about tourism intensity, water, and fire risk.

The federal footprint

Federal civilian and military spending is one of the largest sources of stable income in the state economy. Pearl Harbor naval shipyard is one of the largest single industrial employers in the islands; the Indo-Pacific Command headquarters at Camp H.M. Smith coordinates U.S. military operations across a huge slice of the world.

The cost-of-living squeeze

Honolulu is consistently one of the most expensive U.S. metros for housing relative to local wages. The state has been working through a long-running shortage of affordable housing, with state and county programs trying to add inventory in a small, geographically constrained market. Net out-migration of working-age residents to the U.S. mainland has been a recurring policy concern.

How does the Hawaii economy fit into the national picture?

Hawaii is one of the most tourism-dependent and most federal-defense-dependent state economies at the same time. Its industry mix is unusually narrow, and its geographic isolation makes shipping costs, energy prices, and air travel central to almost every economic question.

A note on the numbers

Numbers in this article change every quarter — always check the latest from BEA, BLS, and the Hawaii Department of Taxation for the most current data.