The gap between what Â鶹´«Ã½ residents can afford compared to elsewhere in the U.S. widens every year, not because of high prices, but because of lagging productivity and wage growth, according to a new analysis released March 5, by the University of Â鶹´«Ã½ Economic Research Organization (UHERO).
The state¡¯s economic stagnation, which began in the early 1990s, has never truly ended for residents, according to the authors. Adjusting for Â鶹´«Ã½¡¯s substantially higher cost of living, while national metrics suggested a recovery in the 2000s, the state¡¯s real per capita GDP has been on a permanently lower, underperforming trajectory.
by Steven Bond-Smith and Erich Schwartz, details how Â鶹´«Ã½¡¯s economic boom in the 1980s made it highly vulnerable to the collapse of Japan¡¯s asset bubble. Despite an initial delay in the shock, the downturn exposed local weaknesses such as overreliance on tourism and slow economic diversification.
Slower growth, widening gap
Standard measures, which adjust for national inflation rates, indicate Â鶹´«Ã½ mostly kept pace with the U.S. economy and has only just fallen below the U.S. average in recent years. However, by accounting for local prices, the UHERO analysis tells a different story. When cost-of-living is factored in, the lost decade of the 1990s wasn¡¯t quite as bad as it first appears, as prices grew more slowly in Â鶹´«Ã½ than in the U.S. overall, but the recovery is also muted as prices returned to their long-run relative level.
This results in an average real per capita growth rate since 2005 of a meager 0.7% per year, essentially matching the slow growth rate of the lost decade and its recovery from 1990 to 2005. As such, the lost decade never really ended in Â鶹´«Ã½. This persistently slower growth rate has resulted in a gap with the mainland U.S. that has steadily widened. The primary driver of the widening gap appears to be that the state¡¯s dominant tourism industry plateaued, and other sectors have not emerged to offset this slowdown.
“Â鶹´«Ã½¡¯s ‘lost decade’ has become a lost generation,” the report states.
Economic underperformance, social consequences
This persistent underperformance reframes many of the state¡¯s most pressing issues, including outmigration, housing stress and the difficulty for middle-class families to sustain a standard of living. The findings underscore a need for policies that address the long-term structural weaknesses in the state¡¯s economy rather than focusing solely on the cost of living, which would only provide temporary relief from the widening gap between Â鶹´«Ã½ and the U.S. overall.
The analysis builds on a February 1, 2026 UHERO report, “Beyond the Price of Paradise: Is Â鶹´«Ã½ Being Left Behind?” also authored by Bond-Smith and Schwartz.
UHERO is housed in .