1. 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

2. 2 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.

3. 3 Two newspaper articles in April 2007 1. Hawaii has the largest % of millionaires in terms of Household Income HawaiiU.S. 6.8%4.8% 2. Our Poverty Rate is lower than the U.S. average HawaiiU.S. 9.8%13.3% BUT … this does not reveal the Native Hawaiian case.

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5. 5 Table 1. Income and Poverty: 1979 and 2005 CategoryCommunity19792005 Annual Avg Growth (79-05) Per capita income ($) Native Hawaiian5,66116,9324.3% Statewide7,74025,3264.7% NH as % of State 73.166.9 Poverty rate of individuals (%) Native Hawaiian14.615.0 Statewide9.99.8 Despite higher growth, higher poverty lingers Economic growth is no guarantee of lower poverty level

6. 6 Table 2. Size of Income Groups: 2005 CategoryState TotalNative Hawaiian % Native Hawaiian Population1,238,158246,51519.9 Households430,00757,81813.4 Families305,73545,96515.0 We measure income distribution by these groups

7. 7 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.

8. 8 Figure 2. Lorenz Curve AC B % of Income Recipients % of Income D Lorenz CurveGini Perfect equalityAB 0 Perfect inequalityACB 1 Equal distribution range0.20 – 0.35 Unequal distribution range0.50 – 0.70

9. 9 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.

10. 10 Figure 3. Family Income Distribution: 2005 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.

11. 11 Table 3. Gini Coefficient and Kuznets Ratio: 2005 Gini Coefficient Group Household Income Family Income Personal Income Native Hawaiian0.4160.4150.409 Non-Native Hawaiian0.4170.3780.412 U.S.0.4620.4320.462 Kuznets Ratio Group Household Income Family Income Personal Income Native Hawaiian3.23.43.1 Non-Native Hawaiian3.32.63.0

12. 12 Figure 5. Share of Native Hawaiian Households and Persons by Income Level: 2005 Bars: % of Households by household income level Line Graph: % of persons by per capita level Note 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.

13. 13 Table 4. Average Household Size Average household size (Persons) Difference Household income level Native Hawaiians Non- Hawaiians No income 1.761.690.07 $1 - $10,0002.292.110.18 $25,000 - $34,9992.792.470.32 $100,000 or more4.663.870.79 All households 3.472.770.70 One possible explanation is that Native Hawaiians are more egalitarian and help each other (Ohana spirit) resulting in a narrower income gap at household and family level than individual per-capital income level.

14. 14 Table 5. Income Structure: 2005 Income CategoryNative HawaiiansNon-Native Hawaiians NH as % of Non- NH Int. Div, Rental 355.4 1,681.921.1 Public Assistance 131.9 34.6381.5 Retirement 853.6 1,891.745.1 Self-Employment 826.9 2,361.235.0 Social security 718.9 1,606.144.8 Supple. Security 83.7 86.896.4 Wage and salary 13,699.8 19,303.571.0 All other Income 261.8 448.258.4 TOTAL 16,932.0 27,414.061.8 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).

15. 15 Table 6. Possible Factors of Low Income for Native Hawaiians ItemFactorNative Hawaiian Non-Native Hawaiian 1Young Population (med. age)24.638.5 2Family Size (avg. # of persons)3.93.4 3College Degree of Labor Force (% of workers 25 yrs+)42.257.5 4UH Graduation Major (2005) a. Science & Technology (% of graduates)7.014.1 b. Business Administration (% of graduates)12.117.8 5Management Professional Positions23.032.0 6Business Ownership and Performance (2002 figure) a. Firm/Population Ratio (firms per 100 people)3.210.4 b. Average sales per firm ($1,000)179.9710.8

16. 16 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

17. 17 ASIAN INEQUALITY 1991-2005 [1] CountryPeriod Gini CoefficientsTop 20% / Bottom 20% Initial YearFinal YearGrowth RateInitial YearFinal YearGrowth Rate Nepal1995-200337.6547.32.856.199.475.31 China1993-200440.7447.251.357.5711.373.7 Philippines1994-200342.8943.970.288.349.110.98 Thailand1992-200246.2241.96-0.979.417.72-1.98 Malaysia1993-200441.2240.33-0.27.727.7-0.02 Sri Lanka1995-200234.3640.182.245.346.833.52 Cambodia1993-200431.838.051.635.247.042.68 Vietnam1993-200434.9137.080.555.46.241.31 India1993-200432.8936.220.884.855.521.18 Laos1992-200230.434.681.324.275.42.35 Indonesia1993-200234.3734.3-0.025.25.13-0.15 Bangladesh1991-200528.2734.081.344.065.031.53 Taipei, China1993-200331.3233.850.785.416.051.12 Korea1993-200428.6831.550.874.385.472.02 Pakistan1992-200430.3131.180.244.224.460.46