As Hawaii’s tourism industry rebounds from a pandemic that shut down the industry in 2020, a question continues to stump economists: Where are all the jobs?
Hawaii’s passenger arrivals averaged more that 30,000 per day in July, and August has been just as strong, with 32,500 arrivals on average for the first four days of the month, according to the state Department of Business, Economic Development and Tourism. Although softer than the normal summer crush, that’s still roughly equal to the average arrivals for 2019, before the pandemic, when Hawaii had more than 10 million tourists.
Meanwhile, hotels reported 31,572 jobs in Hawaii midway through 2021, according to the American Hotel and Lodging Association. That’s up from 2020’s low of about 21,000, but still about 12,700 fewer than in 2019, a 29% decline.
And the reason the hotel jobs haven’t caught up with visitor numbers?
“I don’t think anybody knows,” said Matt Insco, an economist with the U.S. Department of Labor’s Bureau of Labor Statistics in San Francisco.
Carl Bonham, executive director of the University of Hawaii Economic Research Organization, was similarly stumped.
Hawaii’s unemployment rate was 7.9% in June, a significant improvement from the 21.9% rate in May 2020, when Hawaii’s economy was largely shut down. But, Bonham says, that rate doesn’t count underemployed people – part-timers who want full-time jobs, for instance, and discouraged workers who bailed out of the workforce altogether.
Counting those, Hawaii’s broader unemployment rate, known as U-6 unemployment, was 18.5% for the second quarter, which translates to about 120,000 workers, Bonham said.
The U-6 unemployment rate, which includes underemployed workers, paints an employment picture far worse than Hawaii’s standard unemployment rate.
Meanwhile, employers report not being able to find people to fill vacant jobs.
“It’s going to be several years before economists understand what happened to the labor market during this episode,” Bonham said.
Unemployment Insurance Assistance Does Not Fully Explain Issue
In the meantime, there are some oft-cited explanations that actually don’t seem to explain what’s going on.
One frequently purported cause for the soft jobs recovery is federal stimulus money, which provides $300 a week of additional unemployment insurance money to jobless workers. Some employers cite the federal money as providing an incentive for people not to work — and something that’s driving what the BLS reports as record hospitality industry job openings, including 1.2 million hotel and restaurant job openings in May.
But a recent study refutes that idea.
To see whether the federal money was keeping workers sidelined, Arindrajit Dube, an economist from the University of Massachusetts-Amherst, looked at employment trends in 22 mainly red states that have opted to cut the federal payments before the September deadline, when the money will run out in other states, including Hawaii.
If the unemployment insurance benefit was keeping people from working, this should have driven more people into the workforce when the benefit went away. But, Dube reported, that didn’t happen.
“Certainly there was no immediate boost to employment during the two to three weeks following the expiration of the pandemic UI benefits,” he reported.
Another possible factor is that, despite Hawaii’s strong visitor numbers, travelers from Asia still haven’t returned. That means no business for employers who cater to that market.
Domestic travel since March has been strong and has actually exceeded 2019 in July and August, according to DBEDT. But Asia travel has been almost non-existent. The result is some businesses that cater to international visitors have been slower to reopen.
Take the Halekulani Hotel. The landmark property in Waikiki has been closed since April and took the opportunity to renovate its guest rooms and oceanfront bar, the House Without a Key. And while it offered continuing medical coverage to all of its nearly 800 workers, the hotel doesn’t plan to reopen until October. And even then not all of the workers will be coming back.
“For those who may not have an immediate return to work opportunity, we are continuing to provide coverage of medical benefits through the end of the year, December 31, 2021,” the company said in a statement.
Changes in hotel policies and procedures also may be contributing to less need for workers. Automation of certain functions, already affecting staffing needs before COVID-19, appear to have accelerated during the pandemic. Features like apps that allow guests to check themselves in have led to a decline in need for desk clerks, for example.
Beyond automation, there’s been a push among hotels to let guests opt out of daily room cleanings, which has worried hotel worker unions who say the change kills jobs for the legions of housekeepers who make up a major part of the workforce at big hotels.
Nonetheless, Honolulu hotel housekeeping jobs rose steadily before the pandemic, peaking at 7,240 as of May 2019 according to the BLS. Then came COVID-19, and the jobs for 2020 plummeted to 5,230, a 28% drop.
The BLS doesn’t have numbers for 2021 yet, but UNITE HERE Local 5, the union that represents hotel housekeepers, said hotels are intentionally putting a lid on the need for housekeepers by discouraging guests from getting rooms cleaned daily.
Kekoa McClellan, a Hawaii spokesman for the American Hotel and Lodging Association, said hoteliers are merely following CDC COVID-19 guidelines by limiting room cleanings, and he said cleaning protocols have created more work for hotels and increased the need for some staff. But the union isn’t buying it.
Gemma Weinstein, UNITE HERE’s Hawaii president, noted that guests can still get their rooms cleaned daily if they ask for it, but what’s changed is that guests now must ask.
Still, the situation isn’t all bad for workers, simply because the workforce, for whatever reason, has gotten smaller.
Retirements and people leaving Hawaii — and its high cost of living — almost certainly are contributing to Hawaii’s worker shortage, Bonham said. In addition, in a recent survey conducted by the Chamber of Commerce Hawaii, employers pointed to another factor keeping workers on the bench: the need for child care during a time when public schools were mostly closed.
Bonham notes that one BLS data source, known as the Job Openings and Labor Turnover, or JOLT data, indicates the employees who are in the workforce seem to be moving around from job to job, presumably seeking positions with better compensation as employers outbid each other to hire a relatively small number of workers.
“Wages are increasing the fastest in the leisure and hospitality industry,” said Insco, the BLS economist in San Francisco.
Although the sample size for Hawaii is miniscule, Bonham said the national trend almost surely applies here.
“Why should businesses be the only ones maximizing their revenue?” Bonham said. “It makes perfect sense.”
What’s driving Hawaii’s hospitality labor dynamics soon might become more clear. Public school reopenings have freed up parents who were once stuck at home with kids forced to learn remotely, which means more people soon could rejoin the workforce. And the federal unemployment insurance boost is scheduled to end in September.
But how much difference these will make is far from clear, Bonham says, especially with the COVID-19 delta variant driving Hawaii’s case counts to record highs.
“I think all of these things matter,” he said. “None of them individually is what’s driving this.”
“Hawaii’s Changing Economy” is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.