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20 years of Agriculture in Hawaii: Very Small and Shrinking

Posted September 21, 2012 | Categories: Hawaii's Economy, Blog

 

Adapted from the "Wealth and Health of Nations" re-creation by
Source: UHERO

Instructions:
Mouseover the year to move forward and backwards through time.
Mouseover the circles and wait for the tool tip to see the sector name.

This chart shows a sector-by-sector overview of the Hawaii economy between 1990 and 2010 with an emphasis on the agricultural sector. The chart uses employment and labor earnings as a framework to assess the agriculture sector's "impact" on the Hawaii economy.

The main conclusion we draw from this data is that the agriculture sector in Hawaii has a very small impact on the overall state economy when viewed through this labor earnings framework. Agriculture provides employment for a very small number of people and the people who work in agriculture earn less than workers in any other sector. As a result, the portion of total state earnings generated from agriculture is very small and shrinking.

 

Employment

The vertical axis displays a very broad measure of employment in each sector using data from the U.S. Department of Commerce Bureau of Economic Analysis (BEA) . This series includes hired labor as well as proprietors (the self-employed and individuals working in partnerships). Note that this measure of employment does not include unpaid family workers or volunteers, only hired labor and proprietors.

We can see that between 1990 and 2010 employment in Hawaii's agriculture sector has fallen both in absolute numbers and in the proportion employed in agriculture. In 1990, the agriculture industry employed roughly 14,600 individuals, representing 2% of the state's overall employment. By 1995, almost 20% of all farm jobs had been cut, agriculture employment fell to 11,800. For the next 15 years farm employment fluctuated around the 12,000 level. In 2010, roughly 12,200 individuals were employed in the farm sector, only 1.5% of total state employment.

 

Labor Earnings per Job

The horizontal axis displays inflation adjusted labor earnings per job. a measure of the average compensation paid out to each worker in each industry. This is in contrast to the more common gross domestic product per worker measures that quantify the value of the goods and services that each worker produces. Labor earnings is a broad based measure of compensation that consists of three components:
1. Wage and salary disbursements: This includes gross monetary compensation paid out to hired labor such as wages, salaries, bonuses, and tips. Wage and salary disbursements are all measured before any deductions such as for income taxes, payroll taxes, or union dues.
2. Supplements to wages and salaries: This component includes employer contributions to employee pension and insurance funds; things like 401k matching or the employer portion of an employee's health insurance premium. This component also includes employer contribution to government social insurance programs; this is the employer's portion of Social Security, Medicare, and Unemployment Insurance payroll taxes.
3. Proprietors' income: This component measures the net income collected by sole proprietors and partnerships after all other expenses have been paid.

To compare average compensation between industries and over time, we perform two simple transformations on the labor earnings data. First, we adjust for inflation using the Honolulu CPI to convert from nominal dollars into 2010 dollars. Second, we divide labor earnings by total employment in each sector.

In the agriculture sector, real labor earnings per job have fallen over the last 20 years. In 1990, average labor earnings per person in the agriculture sector were $35,600 per year after adjusting for inflation. In 2010, this same figure was down to $25,700, and was the lowest of any industry. They key take away is that, from a monetary compensation standpoint, the average agricultural worker is significantly worse off than the average agricultural worker 20 years ago—both in absolute dollar terms and relative to the rest of the workforce. And, labor earnings are measured before deductions for taxes and include non-cash supplements; actual take home pay is significantly lower!

 

Labor Earnings as a Framework for "Impact"

When we take an industry's average labor earnings together with its employment, we can get an idea of its impact on the local economy from a labor perspective. In the chart, there are two visual indications of a sector's impact on the local economy. The first is the position of the sector relative to the axes on the chart. Sectors higher on the vertical axis employ more people, sectors further to the right have more generous compensation; moving away from the origin in either direction indicates greater impact. The second measure is the size of each bubble  reflecting that sector's contribution to total labor earnings for the State. The larger the bubble, the  larger the impact. There are a number of ways to measure a sector's relative importance.  We could look at the number of jobs, or output, or export capacity, etc.; here we are using labor earnings. We take Hawaii's total labor income (both employees and proprietors) and calculate each industry's share.

From a labor earnings perspective, agriculture has a low impact on the local economy and it has contracted over the last 20 years. In 1990, the agriculture industry employed 14,600 people and provided average compensation of $35,600 per worker adjusted for inflation for a total of around $5.2 million paid out in total labor earnings. This $5.2 million represented 1.5% of the state's overall labor earnings in 1990. In 2010, the agriculture industry employed 12,200 people and provided average compensation of $25,700 for a total of close to $3.1 million in total compensation; representing only 0.8% of overall labor earnings. Comparing to other sectors, the agriculture sector had the smallest contribution to overall labor earnings in 2010. The second smallest sector, private education services, provided roughly $6.5 million in total income; more than double that of agriculture.

-- Jimmy Jones

Visualization and Research Support: Inna Cintina and Ben Trevino

 


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