Wealth by Association? How Social Networks Drive Inequality in Hawaiʻi

April 2024

Created by: Jensen Ahokovi & Dylan Moore (UHero - The Economic Research Organization at the University of Hawaiʻi)

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This article examines the role of social networks in driving economic inequality in Hawai‘i, focusing on the impact of economic connectedness—the proportion of low-income individuals' wealthy friends—on economic mobility. Intended for policymakers, educators, and community leaders, the article highlights how disparities in economic connectedness between private and public schools contribute to inequality. By analyzing social and geographic data, it provides insights and recommendations for enhancing social integration and increasing opportunities for low-income residents, emphasizing strategies such as housing voucher programs and zoning reforms​.

KEY INSIGHTS

• What is the role of social networks in driving economic inequality in Hawaiʻi?

  Economic Connectedness (EC):

  • High EC in Hawaiʻi: Hawaiʻi has an EC score of 1.04, ranking it fourth among U.S. states. This means that low-income individuals in Hawaiʻi have a higher-than-average proportion of high-income friends, which is beneficial for economic mobility.

  • Variation by Region and School Type: Significant disparities exist within Hawaiʻi. For example, private high schools have much higher EC scores (average of 1.58) compared to public high schools (average of 1.04). Similarly, ZIP codes like Laie (1.39) and Aina Haina-Kuli’ou’ou (1.39) have higher EC scores compared to areas like Waianae (0.82).

  Impact on Economic Mobility:

  • Access to Information and Opportunities: High EC provides low-income individuals with better access to job vacancies, training opportunities, and career-related resources. This can significantly enhance their economic mobility.

  • Mentorship and Ambition: Being connected to high-income friends can also provide mentorship opportunities and positively shape ambitions and career trajectories.

  Overcoming Inequality:

  • Housing Voucher Programs: Implementing programs like Small Area Fair Market Rents (SAFMR) can help low-income families move to higher-income neighborhoods, increasing their exposure to high-SES peers and improving EC.

  • Upzoning Policies: Allowing denser housing development can make it easier for low-income families to live in higher-income areas by increasing the housing supply and reducing costs. This policy can promote economic integration and enhance EC.

  Educational Initiatives: Ensuring equitable access to high-quality education and encouraging interactions between students from diverse socioeconomic backgrounds can reduce friending bias and increase EC.

• How economically connected is Hawaiʻi compared to other states?

  High Economic Connectedness: Hawaiʻi ranks fourth among U.S. states with an EC score of 1.04, indicating that low-income residents in Hawaiʻi have a relatively high proportion of high-income friends, which supports economic mobility.

  County-Level Variations: Honolulu County ranks very high, in the top 5% of all U.S. counties, with an EC score of 1.12, while other counties like Hawaiʻi County have lower EC scores.

• What are the primary factors influencing economic connectedness in Hawaiʻi?

  Exposure to High-SES Peers: The presence of high-income individuals within a community or school significantly affects EC. For example, private high schools have higher exposure to high-SES peers compared to public schools.

  Friending Bias: The tendency of individuals to form friendships with others of similar socioeconomic status is less of a factor in Hawaiʻi compared to exposure. Policies that increase exposure to high-SES individuals can thus improve EC.

• What disparities exist within Hawaiʻi regarding economic connectedness?

  Educational Disparities: Private high schools have much higher EC scores compared to public high schools, indicating greater economic integration in private institutions.

  Geographic Disparities: ZIP codes like Laie and Aina Haina-Kuli’ou’ou have higher EC scores, while areas like Waianae and Hawaiian Beaches have significantly lower scores.

• What policies can improve economic integration in Hawaiʻi?

  Housing Voucher Programs: Programs like SAFMR can help low-income families move to higher-income neighborhoods, improving economic integration and EC.

  Upzoning Policies: Allowing the construction of denser housing can increase the housing supply and reduce costs, making it easier for low-income families to live in higher-income areas.

  Educational Initiatives: Promoting interactions between students from diverse socioeconomic backgrounds and providing equitable access to high-quality education can enhance EC.

• How does economic connectedness affect median household income in Hawaiʻi?

  Positive Correlation: There is a significant positive relationship between EC and median household income across Hawaiʻi’s ZIP codes. A higher EC score is associated with higher median household incomes, suggesting that improving EC can contribute to economic growth and mobility.