Hawaii is confronting a serious economic and demographic challenge: many of its young, highly educated residents are leaving the islands in search of better-paying jobs and more affordable lives on the U.S. mainland. Now, state officials, entrepreneurs and universities are betting that a new generation of technology and manufacturing companies could help diversify an economy long dominated by tourism and create reasons for talented workers to stay.
The problem has become increasingly urgent. Hawaii lost a larger share of its population last year than almost every other state, and young adults are disproportionately represented among those departing. Although people between 18 and 34 account for roughly one-fifth of Hawaii’s population, they represent more than 40% of residents who leave. More than half of Hawaii-born college graduates now live on the mainland.
Economics are a major reason. Hawaii has some of America’s highest housing and living costs while offering comparatively limited opportunities in high-paying industries. Tourism remains fundamental to the state, but its economic power has weakened. Inflation-adjusted tourism spending peaked decades ago, and visitor numbers still have not fully recovered to pre-pandemic levels. June arrivals were about 9% below June 2019 levels, with international tourism down roughly 50% over that period.
State leaders increasingly believe Hawaii must develop industries capable of producing higher salaries and exporting products, technology and expertise beyond the islands. The emerging strategy focuses heavily on aerospace, ocean technology, advanced manufacturing, robotics and energy-related businesses. Hawaii’s technology sector already supported about 32,540 jobs in 2024 and grew faster than the state’s overall civilian economy during the previous decade.
One example is Normal Corp., an engineering startup developing energy-efficient heating and cooling systems. Based in Kailua, the company has recruited young engineers and recent graduates to design circuit boards, machinery and other hardware locally. Its growth illustrates the type of company officials hope could demonstrate that ambitious technology careers do not necessarily require leaving Hawaii.
Aerospace represents another opportunity. Students and engineers at the University of Hawaii are already developing satellite hardware, orbital systems and equipment intended for missions beyond Earth. Officials are also discussing potential launch operations with California-based Fenix Space. Hawaii’s geographic position in the Pacific and relative proximity to the equator could provide advantages for certain space activities.
Ocean technology offers similar possibilities. Hawaii companies are working on projects involving maritime engineering, flood-detection sensors, seaweed, commercial shellfish, coastal research and ship maintenance. Supporters argue that the state should concentrate on industries where its geography, scientific institutions and location between the United States and Asia provide natural competitive advantages.
The government is trying to help create the necessary ecosystem. The Hawaii Technology Development Corporation is leasing more than $1 million worth of manufacturing space at Kapaa Industrial Park, with plans to sublease facilities to startups that may be unable to afford long-term industrial leases independently.
But Hawaii has tried—and failed—to manufacture a technology boom before. Beginning in 2001, the state offered extremely generous tax incentives to technology investors. The program ultimately provided nearly $1 billion in tax credits, yet a subsequent audit concluded that it produced relatively little lasting economic benefit. That history has made some officials and entrepreneurs cautious about excessive government intervention.
Building successful companies on remote islands also presents practical obstacles. Businesses face expensive real estate, shipping costs, limited local capital and a relatively small labor pool. Some promising companies remain financially fragile, demonstrating how difficult it is to turn technological innovation into sustainable businesses.
Still, entrepreneurs believe Hawaii may not need hundreds of successful technology companies to change its trajectory. A handful of major successes could create high-paying jobs, generate wealth for founders and employees, attract venture capital and produce experienced entrepreneurs capable of financing the next generation of startups.
That possibility is at the heart of Hawaii’s economic experiment. The state is attempting to evolve beyond an economy overwhelmingly associated with beaches, hotels and tourism without abandoning the industries that made it prosperous. If aerospace, ocean technology, robotics and advanced manufacturing gain momentum, Hawaii could offer young residents something many currently believe they must leave the islands to find: a serious technology career with competitive wages at home.
