Episode 1 – Community & Economy, CHANGE Event Series, Part 1

 

(01:15Steve Petranik: I’m going to start with Rich Wacker. One way to improve Hawaii’s economy is to diversify it. What’s the value in diversifying the local economy? Why should we do it? 

(01:27Rich Wacker: Because we have no choice, right? There are so many things we want to do, right? Even as you look at the new legislative package that’s come out, it requires money, right? And everything that we want to do to improve the state’s going to require more and more investment, so we need to have a strong economy. And when you look at what’s driven our economy over the past couple of decades, it’s been the hospitality industry. We know that there’s a lot of limits on where we can grow with that. There’s been the federal presence in the military, the federal government agencies — federal government budgets aren’t going to keep increasing 

We are competing with a lot of other regions for that, so that’s not going to grow in the same way that it has, so you really look and say, What are the other things that can grow that are here? What are the other things that can grow that can bring money into the state in the same way the tourism and the federal presence does? Wmust grow those areas, otherwise, we’re not going to have the resources to do what we want to do. Secondly, not everybody wants to work in only those areas that we are currently strong in. We have people who end up leaving to go to the mainland if they want to work in some technology industries and other industries, and there’s no reason. We need to create the opportunity for kids to stay, to come back to Hawaii and to come into jobs that pay enough for them to be able to really live here the right way. 

(02:57) Steve Petranik: Those issues were among the questions that the students handed to me, so that’s the why. What about the how? How do we diversify? How can we accomplish it? 

(03:09Rich Wacker: For me, the biggest things you look at are where you have some strength, right? Because you can try a lot of things, but I don’t think anybody thinks were going to be a big exporter of manufactured products, right? Let’s not try that. Let’s go to the areas we have strength. With the Hawaii Business Roundtable and currently, the area that seems to us to be the biggest opportunity is around the research and innovation that’s going on at our universities. That currently brings in $400 or $500 million a year into the state through research funding. When you look around the country at regions that have built really robust innovation economies, it’s building on that strength added at the university level in the community, and really trying to make it be a catalyst for growth in the community.  

For me, that seems to be our best opportunity. There are reasons that were excellent in renewable energy, marine science and a number of other areas that say it’s viable, it’s doable. It’s not a moonshot to grow an economy around those areas and that’s what we need to really drive. 

(04:26) Steve Petranik: Another issue that came up in the student’s question is the cost of housingWhat is the main reason housing is incredibly expensive in Hawaii and so costly to build housing here? Christine, can you start by telling us why that is? 

(04:45Christine Camp: Well, frankly, when you think about the amount of land that’s available for the population here, we have 5% of our available land that is urban for development, so there’s just not enough land and to rezone that land take some time. As you’ve seen with the Ho’opili and Koa Ridgeit could take 10 to 20 years with a lot of expenses in just zoning alone. Being that it takes so long anis such a big risk, land itself becomes very expensive and that’s just the start. Everything gets shipped over here, so there’s a cost that’s significantly higher than other places. Then there’s the permitting — just the process of permitting and all the added layers of exactions that the government wants, because the population frankly thinks that new homebuyers should pay for everything. 

Infrastructure – let the developer pay for it. Well, that means let the new homeowner or the renter pay for that. Property taxes – add it on to the investors, well that means the renters pay for that. In other words, cost of housing is higher because we just kept adding more structural cost on to building housing, which includes increased permitting, increased zoning. And unless we’re willing to change the structural requirements of what housing is to us, how we build housing, the process in which we put our suppliers of housing through, we’re just not going to have more housing. This year has been different, and I’d like to address it. 

(06:26Steve Petranik: Well, why don’t you take it? I want to give everybody a couple questions in this opening round, so tell us what’s different. 

(06:34Christine Camp: This year, it’s different because primarily what’s happening with the CHANGE initiative. The businesses are stepping in. The governor has heard us, the state legislature. The Senate President has agreed with the Omnibus Bill. The House also is accepting itWhen you get the business, the governor and the legislature all aligned trying to solve the structural issue, this is the first time we might see something. Not to fool us into think they were going to make huge changes. But as Russell saidif you get just one person that’s caring about one thing, and we’re adding on to that effort, I see big changes, and this could be the year. 

(07:23Steve Petranik: And we’re fortunate to have this session happening during the legislative session. If you do feel the same way, then talk to your legislators and make sure that your voice is heard in driving the positive change that you want to see in Hawaii. 

Among the people hardest hit by the high cost of housing are ordinary working families. You in the audience may have heard of the acronym ALICE, ALICE families. Now the A-L stands for Assets Limited. These people have little or no savings. I-C stands for Income Constraint. The adults may be working two or three jobs, but they’re not making enough money to live comfortably in Hawaii. They’re barely getting by. Yet the E stands for employed. These are not unemployed people, these are working people, these are working families and they can barely afford to live here. Norm Baker of the Aloha United Way; tell us how many of these ALICE families are in Hawaii, and about some of the struggles they face. 

(08:26Norm Baker: As you said, Asset Limited Income Constrained Employed (ALICE), easy way to describe a part of our population that is actually huge. It’s 37% of the people in our community. It’s folks that are living above the federal poverty level, which for a family of four is around $30,000 but below a survival budget for that family of four which is about $77,000. All of the families that are living in between there are what we call ALICE. Just to be clear, that $77,000 pays for housing, childcare, transportation, food, health care, taxes, nothing else. No savings, no vacations, that’s just a pure survival budget. We have right now, 37% or 205,000 households in our community that live in that situation.  

And you ask about struggles, Steve. You can look at the struggles two different layers, one layer is the family itself, right? Those families, if they’re not making $77,000 have to compensate. So, what do they do? They wind up doubling up in housing, they cut back on health care, they don’t have proper insurance, they don’t seek proper nutrition. Eventually, we’re going to pay a price for that as a society. Another piece of that issue is that, right now in Hawaii, there are 105,000 jobs that are the top seven occupations. Those top seven occupations, even if both partners in that family of four are working, don’t make enough to hit the ALICE threshold. The ALICE threshold requires that family of four to earn about $38 an hour. The families are struggling. 

More importantly though, I think the community is struggling. It’s really important that we understand what happened from the Great Recession through today. During the Great Recession, 28,000 families fell from being self-sufficient to being in ALICE, and while most of us would think that we have recovered from the recession, they haven’t, they’re still there. They’re still in that ALICE group. What happens with the next downturn? Do we take another 28,000 families and push them into ALICE? We can’t afford that. We have to do better for our families. The other thing that I think is really a societal concern is those top seven jobs that I spoke about earlier; those are the jobs that are being automated away. 

When’s the last time you were in the supermarket and they have an automatic checkout or McDonald’s, you push buttons rather than talk to somebody to order your food. As those jobs get automated away, we will have to have to reskill and retrain, right now 105,000 people just to keep them in our economy. If we want to stop the drain back to the mainland, we need to take action right now.  

(11:28Steve Petranik: Karen, you and your nonprofit Child and Family Service are helping a lot of these ALICE families. What are some of the best ways to support these families? 

(11:41Karen Tan: We work with about 16,000 people a year and a lot of them are either already in poverty or they’re very close to povertyWith Hawaii’s cost of living, it’s very real for them. One of the things that we’ve really tried to do is get innovative. We brought a model of care to the islands called Transition to Success, which looks at 19 areas that families deal with on a daily basisfood, housing, education, childcare. And we talk with these families; what are their hopes and dreams? And then, we help to map it out. The idea is, is that most of these families don’t want to be living in that place. They want to do better. But if you imagine families where both parents are working two, three jobs, they’re not thinking about the future. They’re thinking about today. 

They’re thinking about where are they going to be today? How are they going to get their kids into childcare tomorrow? We asked them for a moment to think about five years from now; what are your hopes and dreams? We have seen an incredible impact in this model. We’ve piloted this program on Maui and on Kauai and we’re seeing statistically significant impacts. Out of the 500 families we’ve worked with in this model, we’ve seen an 18% improvement in their housing situation, and that’s 0.01 statistically significant. I’m not good at math, but that tells you that 99% of families can experience the same thing. We’re using models that have been proven to work and then we’re growing them more so that we can really help families. 

(13:20Steve Petranik: Norm, I remember you mentioning that one of the problems with people receiving extra education to get to that next level is that they must take time off from work or they have to take time off from their children, which they don’t have very much time either. So, what is one of the solutions you talked about? 

(13:36Norm Baker: When we were working on the ALICE project, we started off with a few focus groups with ALICE families. And we were really surprised because we thought we could walk in and say, Look, we have skill programs, we have training programs. We can get you into higher paying jobs. And we thought that they would jump at that, and they didn’t. The reason is exactly what you mentioned, Steve. They are working two jobs. They are sometimes working opposite schedules. They don’t see each other. They don’t see their children. They’ve reached a point where time with their children is actually more important than earning more money. There was an acceptance, I think that’s the best word for it. We saw a huge acceptance across the board with this population that, I’m okay where I’m at, but I want better for my kids and better for my kids means I need to be a part of their life. 

(14:30) Interstitials 

(15:27Steve Petranik: Sterling, the State House and Senate Leadership plus the governor have collaborated on a package of legislation. Christine alluded to it earlier. The legislation package is designed to help ordinary working families in Hawaii, which includes an increase in the minimum wage, tax relief for low income people, more childcare for parents. What’s your opinion of this package? 

(15:53) Sterling Higa: It’s a promising start, but just the start. I often say that policy is about the process and not the panacea. None of the measures in these bills are going to solve the problems as you just heard from Karen and Norm like they’re severe. We’re not going to rescue all these families from ALICE. We’re not going to stave off the next recession with these policies. But it is promising to see the senate president, the speaker, the governor, the finance chairs coming together precession to work together and design policies and to work together in concert with the business community, and with nonprofits to make sure that these policies are addressing various needs and not just oneoff measures. 

These are systemic problems and they have systemic causes, so there’s no silver bullet, there’s no magic lever, there’s no panacea. I’m excited that we’ve started this process, but I’m hoping and mindful that it’s not going to be done this session. We need to sustain this momentum and accelerate moving forward session to session, building on these little victories so that we can get the change that we need. 

(17:02) Steve Petranik: Part of the package is childcare. Norm, tell us why childcare is so important. 

(17:12) Norm Baker: One of the things we learned with the ALICE report is that childcare can be the equivalent of housing costs in Hawaii. As a matter of fact, on the Big Island and Kauai, it’s more expensive for childcare than housing. The problem with that is that it’s one of these difficult issues to address. That’s why in this package of bills that you‘re talking about, there is a universal pre-learning, early learning piece of legislation. And you kind of go, Why early learning? What does that have to do with childcare? Well, if all the three and four-yearold children in our community had access to quality preschool, it’s a win-win-win for the community.  

First, the parents are now freed up from childcare costs, which reduces their cost. They can work, which now increases their income. And universally, it’s accepted fact that early education is going to lead to better educational outcomes for these children in the long run. That’s another integral piece of what Sterling was talking about earlier. It’s a package that is comprehensive in its scope and wmust make sure each piece of it makes its way through the legislature. 

(18:35) Steve Petranik: What do you think of the legislative package, Karen 

(18:40) Karen Tan: I think the childcare is a great example. We do provide Head Start for many poverty kids, like severely impoverished kids across the state that’s federally funded and that is the early education Norm refers to. But these ALICE families are not getting access to that, because they don’t qualify based on the thresholds, so I think the legislative package is a good thing. I worry about covering the cost of that because it’s very expensive. That worries me a little bit. But I’m very pleased to see a lot of momentum, a lot of energy and a lot of innovation as we’re trying to resolve this problem. I think it’s good and everything may not work, but we’ll try it and see if it worksand then try something else. 

(19:26) Steve Petranik: Well, I’ve had a chance to ask my questions, and I’m going to move to questions from the audience. If you want to ask a question or you want to participate in the digital discussion, download that Hawaii Business Events app and use the Q&A tab. Thanks to a sponsorship by Damien Memorial School, we have 20 students from different high schools across Oahu who came to this event, they met earlier. They came up with some questions. Unfortunately, they put it in the six-point type, so I had to ask one of my millennial colleagues to read the questions to me.  

(19:38) Rich Wacker: I‘m surprised they didn’t text them to you 

(19:41Steve Petranik: They weren’t given that option but the rest of you can use the app. This is what the young people are worried about: Most of us are planning on going to the mainland to pursue our higher education. However, we plan on coming back and living in Hawaii for the majority of our lives. With the gentrification of communities and the high cost of housing, can we come back in six years and be able to work entry level jobs and still afford housing?  

(20:50Rich Wacker: I think that’s a big challenge, especially depending on what careers they’re going into and the need for us to create opportunities for people to come back into jobs that pay enough because if you’re coming back into the range that Norm was talking about, it’s going to be tough. The median income can’t afford the median house, right? Christine’s absolutely right; it’s a question of supply and demand. We’ve got to find ways to bring the supply up at marginal costs that are affordable for more and more people. We got to create more of the job opportunities where the pay in the companies is highernot because it’s legislated, not because we’ve legislated a higher wage, but because what the companies do creates the value that allows the employees to earn more. Because the companies generate profits and generating income, they’re creating the value that will justify all those wages. That’s why we think it’s in this technology and innovation space that a lot of that growth and diversification needs to come. 

(22:09) Christine Camp: I’d like to add to that comment; I agree with everything you said. But there is a key word, gentrification and change. 

We must accept the fact that there will be redevelopment, unless you want to go out to the green fields and build out there, there will be gentrification of existing communities. Change is inevitable. It’s how we manage it and what it will cost us. It’s about shared sacrifices. On one hand, people are saying they’re going away because they can’t afford it and on the other hand, we’re preventing ourselves from building housing that is affordable. Now, there’s housing in many different contexts, right? There’s housing for the homeless. 

On our way here tonight, we saw homeless across the park. That’s housing in a different context; it’s just shelter. Then you have housing, which is rentals for those who probably will never be able to afford to buy a home and they need to have homes that they can call their home and be able to afford to pay rent. And there are those of us who really believe that we need financial security to build worth net worth for the future, for the next generation. That’s about homeownership. I still believe that there’s an opportunity for us to do that but it’s about shared sacrifices. We can‘t do it if we don’t want our neighborhoods to change. We have to say yes, “our neighborhoods will change. Our neighbors will change in a way that it’s not going to be how we remembered it, but it’s something that would allow our people, our kids, our future generations to be able to afford. Change is inevitable.  

(23:46) Rich Wacker: The reason you’ve got that the rehabilitation of some of the existing areas is important. There’s already core infrastructure there. Going out into the green fields, the infrastructure costs to laymen are so big versus what is more manageable to upgrade infrastructure in existing places to take on more efficient housing, more affordable housing. 

(24:13) Steve Petranik: Sterling, you made that decision. You went to school on the mainland, you decided to come home and accept the flaws that Hawaii has talked about that and talk to these kids and tell you why you chose that, why it was a good decision, why it was a bad decision? 

(24:35) Sterling Higa: It is hard. My girlfriend and I, we have decent paying jobs. We’re young working professionals and I don’t think we could ever own a home. We did the math, we’re not prodigious spenders, we’re saving well, but it’s just financially not going to happen without massive raises in our income. I think, you have to be realistic about it. It might be the case that if you come back right out of your undergrad education, you might not be able to afford a home here. 

The people who have the votes and have the executive suite positions here are the ones who will determine whether there is housing available when they graduate a few years from now, because if they were coming back today, it’s not going to happen. That’s just not the world we’re living in. I would say, have hope, and then put pressure on them because ultimately, right now, they’re responsible and then to you, you’re responsible for them. 

(26:00Christine Camp: May I add to that though? We can be demanding housing and what’s been happening is that it’s demanded of the people who are building housing, right? You are building more housing, you must pay for the infrastructure, pay for our school’s education, pay for new facilities, pay for our parks. That’s on the backs of the people who you want to bring back to buy homes, so just think about that. Think about it, because like you said Sterling, people in this room have that influence. We forget that what’s easy is just putting a Band-Aid on the solution instead of having shared sacrifices. What we’re trying to do is to have it on those people who are coming into my neighborhood, except those people are residents who are renting who just want an opportunity to buy a home. 

(26:51) Steve Petranik: This question is directed at Rich, but I think it could apply to everyone who’s leading an organization. Rich, you run a major organization, you run a big bank in Hawaii, how do you leverage you use your position to help create positive change in our community? And then, the follow up is how do we, as students, do the same? How do we leverage our position? You start off with your position as the leader of one of our major banks (American Savings Bank). 

(27:29Rich Wacker: We try to channel the incredible willpower of our team to make the community better. We’re blessed with the workforce and leadership team that are all aboutnot only performing well as a company but making Hawaii better. We try to really focus our efforts and we’ve tried to work with amazing organizations like Child and Family Services, one of our Kahiau partners, right? We try to not do the check presentation, take the picture. Here’s a little bit of money to 100 different organizations. We really try to pick four or five organizations that we think are the best at what they do and then say, How do we help you.” 

And its money, it’s voluntary, it’s serving on the board, it’s working and bringing our teammates to help try to help Karen and her team to try to solve things. We’ve done financial literacy training for clients in Child and Family Services, we’ve tried job training approaches with them. So it’s really trying to get in and say, more than just at the surface — what can we really do to help you move forward? We have four; Kapiolani, Kupu, and partners in development are our current Kahiau partners. We really try to get in with them. We work with schools, we have what we call our Banfor Education program, right? It’s an amazing thing because we stay close to a small number of schools, we don’t try to spread stuff out but we run a business plan Keiki Co. Business Plan Competition, because that’s in line with our view that entrepreneurship and innovation has to start early, and we have to support the whole continuum.  

We run that and then the kids that went up, they get up to $15,000 for their school to do what the school needs, and we stay with them. Then the next year, we go back to them and we stay in with them on, What can we help you with now? And we bring them in every year and say, What’s next? How do we really work with you? 

So making a real impact on the community is one of the four things that we talked about in our vision. We’re not succeeding, unless we’re doing that. In Hawaii, everybody’s got to be in the game on that. And we make it one of our four priorities.  

(29:55) Steve Petranik: So focusing on certain areas that line with your business. Norm, if there’s a business leader in the audience, and they’re wondering, how can I use my position? How can I use my influence, maybe my team to help drive positive change into it from your perspective? 

(30:16) Norm Baker: I think the secret is that we have to see ourselves as a community rather than a group of people trying to do the best we can with our business. Aloha United Way lives in a very, very unique space. We’re kind of in the middle of a lot of things. We’re connected with businesses. We’re connected with government. We’re connected with nonprofits. We get to see sort of the broad picture. Particularly with legislation, every business has their own sacred cow. If we continue to approach legislation, like this package that we’ve been talking about, and everybody is out there defending their sacred cow, we’re not going to win. What we all have to do is say, If the community is going to succeed, we’re all going to have to give a little, we’re all going to have to win a little, and the whole community is going to move forward, and I think that’s the secret to it. 

[PAU]