Hawai'i workers earned $4,100 less per year than the average U.S. employee and the pay gap is getting worse, according to a new study.

The U.S Bureau of Labor Statistics said yesterday employees in Hawai'i earned an average of $704 a week, or $36,608 a year.

That was was well below the national average of $784 a week, or $40,768 a year, and placed Hawai'i 26th out of 50 states and the District of Columbia.

"We have a reputation here for being underpaid, and we feel that in all areas from entry-level jobs all the way up to professionals like doctors," said Leroy Laney, professor of economics and finance at Hawai'i Pacific University.

The pay gap is disconcerting given that Hawai'i residents pay the nation's highest rent, highest gasoline prices, highest electricity rates, and home prices are far above the national average.

The pay gap with the Mainland has endured even though the state's economy has been growing for a decade. Hawai'i had the lowest unemployment rate in the nation for much of last year.

"There's always been a pay discount here," said Sumner La Croix, a University of Hawai'i economics professor. "If you are going to live in Hawai'i, you are going to pay a premium for housing and there's going to be a wage discount."

GAP GETTING BIGGER

The bureau's study, based on Census data gathered during the second quarter of 2006, confirms long-standing complaints of the pay gap between Hawai'i and the Mainland. In fact, the study shows the gap has widened.

At the end of the second quarter of 2005, Mainland workers earned about 9.8 percent more than the average local employee. Last year, the gap grew to 11.4 percent, according to the bureau.

Average wages in the District of Columbia, which is No. 1 in the U.S., were $1,300 a week, or nearly 85 percent above Hawai'i's, according to the bureau.

Connecticut had the second highest wages at $971 a week, followed by Massachusetts, where weekly paychecks averaged $963.

Waikiki resident Jeff Muse said he experienced the pay gap firsthand when he moved to Hawai'i in January 2006.

Muse, 25, was hired by a construction company within a week of relocating here, but the job paid a couple of dollars an hour less than what he would have earned for the same post on the Mainland.

Muse said the lower pay was exacerbated by the high cost of living here.

'A TIGHT BUDGET'

Hawai'i had the third highest monthly mortgage payments, behind California and New Jersey in 2005, according to a recent Census study.

"When it comes down to it, you're going to get less than what you'll make for the same job on the Mainland," said Muse, who now works at a hot dog kiosk in Waikiki. "You end up living on a tight budget."

UH economist La Croix believes that the Mainland-Hawai'i pay gap will eventually narrow.

The state's tight labor market, where the jobless rate remained below 3 percent for most of 2006, means that employers will have to pay higher wages to retain their workers, he said.

What's more, the state increased Hawai'i's minimum wage from $6.75 an hour to $7.25 an hour starting this month, which likely will increase overall pay in the state.

"The gap can't get too far because people will start to leave for the Mainland," La Croix said.

Jelly's, a book and music store in 'Aiea, said it's already paying a premium to attract and retain its employees.

The store, which employs 12 people, said the starting pay for new workers is about $7.75 an hour, which is 50 cents an hour more than the minimum wage. More-experienced workers are paid more, said Frank Bacon, store manager.

Since the average fast-food worker is going to earn $7.25 an hour, the store has to pay more since the work is more specialized, he said.

"You better pay them or else they're going to go somewhere else," Bacon said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.