Income Distribution and Poverty Alleviation for the Native Hawaiian Community

Seiji Naya

Presentation at the 2nd Annual Hawaiian Business Conference Hawaii Convention

Center

May 22-23, 2007

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DISCUSSION TOPICS

1. Poverty and Growth --- large poverty rate for Native Hawaiians

2. Is income distribution so bad that the rich get the lion’s share of income, leaving little to the Native Hawaiians?

Findings show the answer is “not too bad but should be improved”

3. This analysis examines the components of income and considers factors related to poverty

4. Recommendations to help with business development for Native Hawaiians

!!! Apology for some technical terms in my presentation.

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Two newspaper articles in April 2007

1. Hawaii has the largest % of millionaires in terms of Household Income

Hawaii U.S.

6.8% 4.8%

2. Our Poverty Rate is lower than the U.S. average

Hawaii U.S.

9.8% 13.3%

BUT … this does not reveal the Native Hawaiian case.

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Figure 1. Percent of Population Under Poverty(The poverty rate for Native Hawaiians is substantially higher than

Hawaii's average)

9.9 9.8

14.615.0

13.312.4

0

2

4

6

8

10

12

14

16

1979 2005

Per

cen

t

U.S. Hawaii-All races Hawaii-Native Hawaiians

Source: U.S. Census Bureau, Decennial Census; 2005 American Community Survey.

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Table 1. Income and Poverty: 1979 and 2005

Category Community 1979 2005

Annual Avg Growth

(79-05)

Per capita income ($)

Native Hawaiian 5,661 16,932 4.3%

Statewide 7,740 25,326 4.7%

NH as % of State

73.1 66.9

Poverty rate of individuals (%)

Native Hawaiian 14.6 15.0

Statewide 9.9 9.8

•Despite higher growth, higher poverty lingers•Economic growth is no guarantee of lower poverty level

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Table 2. Size of Income Groups: 2005

Category State Total Native Hawaiian

% Native Hawaiian

Population 1,238,158 246,515 19.9

Households 430,007 57,818 13.4

Families 305,735 45,965 15.0

•We measure income distribution by these groups

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Income Distribution Measures

Two most commonly used measures of income distribution:

1. Size Distribution of Income from which we derive:

a. The Lorenz Curve: divides income recipients into different groups according to ascending levels and determines the % of that income received by each group

b. Gini Coefficient: measures equality or inequality of Income Distribution

2. Kuznets Ratio: Ratio of top high-income 20% to the bottom 40%. The higher the ratio, the more going to the rich and less to the poor.

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Figure 2. Lorenz Curve

A C

B

% of Income Recipients

% of Income

D

Lorenz Curve Gini

Perfect equality AB 0

Perfect inequality ACB 1

Equal distribution range 0.20 – 0.35Unequal distribution range 0.50 – 0.70

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Figure 4. Size Distribution of Per Capita Personal Income: 2005

In each of all five higher-income categories, shares of Native Hawaiians are lower. It is cIear that the number of Native Hawaiians earning higher income(e.g. 5.1% for $50,000 and more vs. 10.1% for Non-Native Hawaiians) is much smaller, but earning low income is much larger, explaining why poverty is much higher.

0.3

32.3

14.5

28.8

12.6

6.4

4.3

0.6 0.20.6

18.016.9

28.0

15.3

11.2

6.4

2.0 1.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

No income $1 -$10,000

$10,000 -$14,999

$15,000 -$24,999

$25,000 -$34,999

$35,000 -$49,999

$50,000 -$74,999

$75,000 -$99,999

$100,000or more

Per Capita Income Level

Pe

rc

en

t

Native Hawaiian

Non-Native Hawaiian

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Figure 3. Family Income Distribution: 2005

0

10

20

30

40

50

60

70

80

90

100

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

% of Families

% o

f F

am

ily

In

co

me

Native Hawaiian

Non-Native Hawaiian

Line of Equality

The lines are almost identical. But the Gini Coefficient for Native Hawaiians (0.43) is slightly higher than that for Non-Native Hawaiians (0.38), the later is a little closer to the diagonal line.

Income distribution is relatively equal but, in the case of Native Hawaiians, income is so much lower.

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Table 3. Gini Coefficient and Kuznets Ratio: 2005

  Gini Coefficient

GroupHousehold

IncomeFamily Income

Personal Income

Native Hawaiian 0.416 0.415 0.409

Non-Native Hawaiian 0.417 0.378 0.412

U.S. 0.462 0.432 0.462

  Kuznets Ratio

GroupHousehold

IncomeFamily Income

Personal Income

Native Hawaiian 3.2 3.4 3.1

Non-Native Hawaiian 3.3 2.6 3.0

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Figure 5. Share of Native Hawaiian Households and Persons by Income Level: 2005

9.5

20.3

15.714.1 14.5

16.0

13.7 14.0

11.410.9

26.6

14.8

17.2

14.3

10.3

11.9

5.8

2.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

No income $1 - $10,000 $10,000 -$14,999

$15,000 -$24,999

$25,000 -$34,999

$35,000 -$49,999

$50,000 -$74,999

$75,000 -$99,999

$100,000 ormore

Inc ome L evel

Pe

rce

nt

% of hous eholds by hous ehold income level

% of pers ons by per capita income level

S ource: D ata tabulated from U.S . C ens us B ureau, 2005 American C ommunity S urvey, P ublic Us e Microdata.

Bars: % of Households by household income levelLine Graph: % of persons by per capita levelNote the difference in the pattern of the two. The bar graph (household income) shows a less-pronounced fall compared to the line graph (per capita), i.e. Native Hawaiians do better at household level income than per capita income.

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Table 4. Average Household Size

   Average household size

(Persons)

DifferenceHousehold income

levelNative Hawaiians

Non-Hawaiians

No income   1.76 1.69 0.07

$1 - $10,000 2.29 2.11 0.18

$25,000 - $34,999 2.79 2.47 0.32

$100,000 or more 4.66 3.87 0.79

       

All households   3.47 2.77 0.70

One possible explanation is that Native Hawaiians are more egalitarian and help each other (Ohana spirit) resulting in a narrower income gap at householdand family level than individual per-capital income level.

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Table 5. Income Structure: 2005

Income Category Native Hawaiians Non-Native HawaiiansNH as % of Non-

NH

Int. Div, Rental 355.4 1,681.9 21.1

Public Assistance 131.9 34.6 381.5

Retirement 853.6 1,891.7 45.1

Self-Employment 826.9 2,361.2 35.0

Social security 718.9 1,606.1 44.8

Supple. Security 83.7 86.8 96.4

Wage and salary 13,699.8 19,303.5 71.0

All other Income 261.8 448.2 58.4

TOTAL 16,932.0 27,414.0 61.8

Native Hawaiians are low in all the categories except public assistance income. Especially low: interest, dividends, rental income, and self-employment income (21% and 35% of Non-Native Hawaiians, respectively).

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Table 6. Possible Factors of Low Income for Native Hawaiians

Item Factor Native HawaiianNon-Native Hawaiian

1 Young Population (med. age) 24.6 38.5

2 Family Size (avg. # of persons) 3.9 3.4

3 College Degree of Labor Force (% of workers 25 yrs+) 42.2 57.5

4 UH Graduation Major (2005)    

  a. Science & Technology (% of graduates) 7.0 14.1

  b. Business Administration (% of graduates) 12.1 17.8

5 Management Professional Positions 23.0 32.0

6 Business Ownership and Performance (2002 figure)    

  a. Firm/Population Ratio (firms per 100 people) 3.2 10.4

  b. Average sales per firm ($1,000) 179.9 710.8

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Grameen Bank approach of community-based micro-loans may be one solution

Idea conceived by Mr. Yunus, recipient of Nobel Peace Prize (2006)

Promoted by World Bank and Asian Development Bank

Mutual responsibilities of 4-5 person group Peer-to-peer monitoring The Bank organizes training and technical assistance

programs for borrowers Recommendation that OHA consider this approach in

conjunction with private banks or by itself

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ASIAN INEQUALITY 1991-2005 [1]

Country Period

Gini Coefficients Top 20% / Bottom 20%

Initial Year Final Year Growth Rate Initial Year Final Year Growth Rate

Nepal 1995-2003 37.65 47.3 2.85 6.19 9.47 5.31

China 1993-2004 40.74 47.25 1.35 7.57 11.37 3.7

Philippines 1994-2003 42.89 43.97 0.28 8.34 9.11 0.98

Thailand 1992-2002 46.22 41.96 -0.97 9.41 7.72 -1.98

Malaysia 1993-2004 41.22 40.33 -0.2 7.72 7.7 -0.02

Sri Lanka 1995-2002 34.36 40.18 2.24 5.34 6.83 3.52

Cambodia 1993-2004 31.8 38.05 1.63 5.24 7.04 2.68

Vietnam 1993-2004 34.91 37.08 0.55 5.4 6.24 1.31

India 1993-2004 32.89 36.22 0.88 4.85 5.52 1.18

Laos 1992-2002 30.4 34.68 1.32 4.27 5.4 2.35

Indonesia 1993-2002 34.37 34.3 -0.02 5.2 5.13 -0.15

Bangladesh 1991-2005 28.27 34.08 1.34 4.06 5.03 1.53

Taipei, China 1993-2003 31.32 33.85 0.78 5.41 6.05 1.12

Korea 1993-2004 28.68 31.55 0.87 4.38 5.47 2.02

Pakistan 1992-2004 30.31 31.18 0.24 4.22 4.46 0.46