There are a few main reasons why it costs so much to live in the Aloha State, but the Jones Act isn’t one of them.
That’s the conclusion of a recent study by economists from Boston-based Reeve & Associates (reported in detail in last month’s LOG). Co-author John Reeve amplified the findings in a follow-up column published by the Honolulu Star newspaper in August.
“Hawaii does have a high cost of living – but the Jones Act is not to blame,” Reeve wrote. “Government data shows that the cost of housing, utilities, and medical services are the primary culprits. A dedicated fleet of American ships, reliably delivering the goods that the people of Hawaii depend on, ensures supply never falls below demand. An examination of the facts illustrates that the only cost of the Jones Act might be one without it.”
The Jones Act, American law for a century, ensures that cargo moving from one U.S. port to another is carried aboard vessels that are built, crewed, owned and flagged American. America’s freight cabotage law helps support more than 653,000 U.S. jobs while enhancing national, economic and homeland security. A separate study found that 91 countries around the world maintain some form of cabotage law.
When Reeve & Associates released its comprehensive report this summer, the findings left no doubt that American-flag ocean transportation doesn’t drive up the costs of consumer items.
“An April 2020 survey of prices of 200 consumer goods covering groceries, household goods, apparel, building materials, and automobiles, found no substantial difference in costs between major stores in Hawaii and California,” Reeve pointed out. “The prices were reported online by major retailers operating in both Honolulu and Los Angeles such as Costco, Target and Walmart as well as Kelley Blue Book data on automobile prices. The survey was done online to ensure ‘apples to apples’ comparisons of exactly the same items as sold in both Honolulu and Los Angeles stores on the same date. The data shows that the average of the prices of the five different categories was 0.5% higher in Honolulu than in Los Angeles – virtually nil.”
By contrast, government data shows that the costs of housing, utilities, and medical services primarily account for Hawaii’s high cost of living, the study found. The state consistently is ranked among the most expensive in which to reside.
As for the Jones Act itself, Reeve pointed out it was enacted “because Congress recognized that our national security was dependent on a U.S. Merchant Marine consisting of vessels and skilled seafarers that could be relied upon to move military equipment and personnel overseas in time of war. This policy has been proven right time and again, in World War II, Korea, Vietnam, and the more recent engagements in the Middle East. But national security benefits are not all that it ensures. Just two weeks ago, we witnessed the reliability and dependability of the dedicated Jones Act carriers that quickly adapted operations to ensure a reliable lifeline of goods to Hawaii was maintained in the midst of an approaching hurricane.
“Critics of the Jones Act claim that the higher cost of U.S.-built ships and U.S. crews compared to foreign counterparts are major contributors to Hawaii’s high cost of living despite the fact that the cost of ships and their crews account for only a small fraction of the cost of moving goods between the mainland and Hawaii,” he continued. “But what critics fail to mention is that foreign carriers are not subject to the same labor, environmental and safety standards, or subject to U.S. taxes. According to the U.S. Department of Transportation, these additional requirements would likely erase any cost advantage a foreign vessel operator might have if replacing U.S. carriers in serving Hawaii.”
He also said it is “questionable” whether a foreign-flag ship operator “would provide the same quality of service provided by the current Jones Act operators in terms of port coverage, direct sailings, fast transit times, and dedicated and customized equipment. Current U.S. providers of regularly scheduled services to Hawaii from the mainland have invested over $2 billion in recent years in highly fuel efficient and environmentally friendly vessels and in marine terminal upgrades designed to serve Hawaii for at least the next 30 years, all while their ocean freight rates are essentially at the same level as they were a decade ago.”
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