The minimum income needed to pay for basic essentials as a family of four in Hawaii has ballooned to $104,052 a year, according to a report released Wednesday by the nonprofit Aloha United Way.

The rapid rise in Hawaii’s cost of living — an 18% jump in the basic survival budget for families and a 26% increase for individuals between 2019 and 2021 — is dramatic, even to researchers who had anticipated seeing an increase.

“I think for all of us it was more significant than we had even imagined,” said Suzanne Skjold, chief operating officer of Aloha United Way.

The report released Wednesday is part of an effort to track the needs of people living in poverty but also those who are overlooked by federal poverty statistics but are still living paycheck-to-paycheck — a group referred to by the acronym ALICE: asset limited, income constrained, and employed.

Around 41% of Hawaii residents fall below the ALICE threshold, with 12% living under the federal poverty line — the highest percentage in more than a decade.

The Food Basket, a food bank on the Big Island, has seen an increase in the number of working families in need of food assistance in the last year, said Kristin Frost Albrecht, the organization’s executive director. 

“We’re seeing a lot of working class families, a lot of families making two incomes, that still can’t make it through the end of the month,” Frost Albrecht said. 

The rising cost of food is also cutting into middle class families, she said, and eroding what used to be a more common belief: that if a family had two good paying jobs they were going to make it. 

“I don’t think that’s the case anymore,” she said.

Inflation Is Making Things Worse

That six-figure income requirement calculation is for a family with at least one young child in need of day care, a significant cost that families with older children may not face.

The survival budget includes basics like child care, rent, food, medical bills and utilities. It does not calculate anything for retirement, rainy day savings or entertainment. It also calculates a fairly low rent  – $1,645 a month for a two bedroom apartment, far below the average market rate in Honolulu.

And then there’s inflation. The report is based on 2021 data, which means that the situation is likely even worse today.

According to the Bureau of Labor Statistics, $104,052 in April of 2021 had the same buying power as $118,570 in April of 2023. 

The report is also reflective of how hard it can be for families to recover from widespread economic challenges. The percentage of Hawaii residents with incomes below the ALICE threshold rose during Great Recession and has never returned to pre-2008 numbers.

Prior to the pandemic, The Food Basket was serving about 14,000 people a month on the Big Island. The organization is now helping around 50,000 people a month — roughly 1 in 4 residents on the island. That’s far lower than the 85,000 people it serviced at the height of the pandemic, but it also illustrates how many more households are struggling today than were just a few years ago.

‘A Way Forward’

The good news in the report is that federal and state tax credits can have a significant impact on a family’s bottom line. If a family of four is eligible to claim all available tax credits for working families — including the federal dependent care tax credit — the minimum income they need to survive drops to $85,812 a year. 

The federal Child and Dependent Care Tax Credit was expanded in the 2021 tax year and can provide a significant boost. Families can be reimbursed for up to $4,000 in eligible child care expenses for a single child and $8,000 for two children. For a two-parent family to qualify, both parents have to be working — or incurring expenses while actively looking for work.

In Hawaii, lawmakers approved several tax measures this year, including one doubling the state’s earned income tax credit for working families. The new tax breaks are not included in the current ALICE report.

The ALICE report is significant because it shows the direct impact that tax credits can have on families and offers a path forward, Skjold said.

“These are the kinds of policies that really are going to help our families continue to be able to afford to live in Hawaii,” she said.

“Struggling To Get By” is part of our series on “Hawaii’s Changing Economy” which is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.