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Policy & Regulation

Hawaii Businesses Face Persistent Higher Labor Costs as Union Membership Remains Nation's Highest

·6 min read·👀 Watch

Executive Summary

Despite a slight dip, Hawaii's union membership rate of 26% in 2025 continues to be the highest nationally, signaling sustained pressure on labor costs and benefits for local employers. Businesses should proactively assess their HR strategies and wage structures to mitigate potential impacts.

  • Small Business Operators: Expect continued upward pressure on wages and benefits, potentially impacting profit margins.
  • Tourism Operators: Increased labor costs could translate to higher service prices or strains on operational budgets.
  • Agriculture & Food Producers: Staffing stability and wage negotiations will remain critical.
  • Healthcare Providers: Competitive hiring necessitates robust compensation and benefit packages.
  • Action: Monitor industry wage benchmarks and collective bargaining trends; engage HR resources to review current employment agreements.

Watch & Prepare

Medium Priority

While awareness is key, a 30-day window doesn't immediately change negotiations, but continued high rates necessitate long-term planning regarding labor budgets and HR strategies.

Businesses should continuously monitor labor market trends in Hawaii, specifically tracking: 1. **Union Wage Settlements:** Pay attention to patterns in collective bargaining agreements across major industries (e.g., hospitality, healthcare, public sector) that are finalized in the next 12-18 months. Look for significant increases in wage rates, healthcare contributions, or retirement benefits. 2. **Non-Union Wage Adjustments:** Observe if non-unionized employers in Hawaii are raising wages or benefits to remain competitive, as this indicates broader market pressure. **Trigger for Action:** If you observe a consistent trend of union wage increases exceeding 5% annually, or if your industry experiences a significant new unionization drive, it is time to **Act Now**. This would involve: * Reviewing and potentially updating your internal wage and benefits structure for non-union employees. * Engaging HR and legal counsel to prepare for potential new collective bargaining negotiations or to preemptively address employee concerns. * Incorporating realistic labor cost escalations into your long-term financial projections and pricing strategies.

Who's Affected
Small Business OperatorsTourism OperatorsAgriculture & Food ProducersHealthcare Providers
Ripple Effects
  • →Higher wages and benefits in unionized sectors → Increased cost of doing business → Necessitates higher prices for goods and services → Contributes to a higher cost of living for all residents → Puts upward pressure on wages across all sectors → Further increases operating costs for businesses → Potential impact on tourism competitiveness if prices rise significantly.
Close-up of a clipboard showcasing a pricing formula with a pen on the desk.
Photo by Leeloo The First

Hawaii Businesses Face Persistent Higher Labor Costs as Union Membership Remains Nation's Highest

While union membership in Hawaii saw a slight decline in 2025, the state continues to lead the nation by a significant margin, with 26% of wage and salary workers represented by collective bargaining units. This persistent high rate, reported by the U.S. Bureau of Labor Statistics, underscores an ongoing labor dynamics for businesses operating in Hawaii, potentially leading to higher overall compensation costs and influencing negotiation strategies across various sectors.

The Change

According to the U.S. Bureau of Labor Statistics data released in February 2026, Hawaii's union membership rate for 2025 stood at 26%. This figure, while a marginal decrease from previous years, still places Hawaii substantially above the national average of 10.0%. This sustained high level of unionization is a reflection of historical labor relations and persistent organizing efforts within the state. The data indicates that collective bargaining remains a dominant force shaping employment conditions for a significant portion of Hawaii's workforce.

Who's Affected

This persistent condition of high unionization directly impacts several key sectors central to Hawaii's economy:

  • Small Business Operators (e.g., restaurants, retail, services): These businesses often operate on tighter margins and may find it challenging to absorb the wage and benefit increases typically associated with union contracts. Expect continued pressure on staffing costs, potentially requiring adjustments to pricing strategies or operational efficiencies. The hiring landscape will remain competitive, with unionized environments often setting benchmarks for non-unionized roles as well.
  • Tourism Operators (e.g., hotels, tour companies): The hospitality sector, a major employer in Hawaii, is heavily influenced by union presence. High union membership can translate to higher labor costs for hotels, airlines, and tour operators, impacting service pricing and profitability. Negotiating for competitive labor packages while managing operational costs will be a continuous challenge.
  • Agriculture & Food Producers: Labor availability and cost are critical factors for Hawaii's agricultural sector. Higher union wages and benefits can increase operational expenses for farms and food producers, potentially affecting the cost of locally sourced goods for consumers and other businesses. Securing and retaining agricultural labor may become more complex and costly.
  • Healthcare Providers: The healthcare industry in Hawaii is also significantly impacted. Hospitals, clinics, and private practices face intense competition for skilled professionals. Union contracts often dictate specific staffing levels, wage scales, and benefit packages, influencing recruitment and retention efforts, as well as overall operating budgets. This can indirectly affect the cost of healthcare services for residents and visitors.

Second-Order Effects

Hawaii's unique island economy amplifies the effects of high unionization. Increased labor costs for unionized sectors can create a ripple effect:

  • Higher wages/benefits in unionized sectors → Increased cost of doing business → Necessitates higher prices for goods and services → Contributes to a higher cost of living for all residents → Puts upward pressure on wages across all sectors (union and non-union) in an effort to compete for labor → Further increases operating costs for businesses → Potential impact on tourism competitiveness if prices rise significantly.

This cycle can exacerbate existing affordability challenges and strain small businesses to their limits.

What to Do

Given that union membership rates are unlikely to change drastically in the short term, the focus for businesses should be on strategic planning and proactive management.

  • Small Business Operators: Continue to monitor industry wage data and union contract settlements. Review your existing compensation and benefits packages to ensure they remain competitive, even if you are not unionized, to attract and retain talent. Automate processes where feasible to offset rising labor costs.
  • Tourism Operators: Engage in scenario planning for potential labor cost increases during contract negotiations. Explore opportunities for efficiency gains in service delivery and operational management. Consider how higher labor costs might be factored into future pricing strategies for accommodations and services.
  • Agriculture & Food Producers: Invest in labor-saving technologies and training programs to enhance productivity. Build strong relationships with your workforce to foster loyalty and reduce turnover, which can be costly in terms of recruitment and training.
  • Healthcare Providers: Benchmark your compensation and benefits against both unionized and non-unionized healthcare employers in the region. Focus on creating a positive work environment and offering professional development opportunities to enhance employee retention beyond just salary.

Action Details

Action Level: WATCH

Businesses should continuously monitor labor market trends in Hawaii, specifically tracking:

  1. Union Wage Settlements: Pay attention to patterns in collective bargaining agreements across major industries (e.g., hospitality, healthcare, public sector) that are finalized in the next 12-18 months. Look for significant increases in wage rates, healthcare contributions, or retirement benefits.
  2. Non-Union Wage Adjustments: Observe if non-unionized employers in Hawaii are raising wages or benefits to remain competitive, as this indicates broader market pressure.

Trigger for Action: If you observe a consistent trend of union wage increases exceeding 5% annually, or if your industry experiences a significant new unionization drive, it is time to Act Now. This would involve:

  • Reviewing and potentially updating your internal wage and benefits structure for non-union employees.
  • Engaging HR and legal counsel to prepare for potential new collective bargaining negotiations or to preemptively address employee concerns.
  • Incorporating realistic labor cost escalations into your long-term financial projections and pricing strategies.

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