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Alaska universal basic income doesn’t increase unemployment

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alaska pfd
Governor Bill Walker was
the first to reduce Alaska’s universal basic income program,
which was a highly unpopular move.

Alaska Governor Bill Walker/Vimeo

  • The
    Alaska Permanent Fund
    is tied to oil revenues and worth $65
    billion. It has made an annual check of $1,000 to $2,000
    available to virtually every citizen since 1982.
  • The fear that giving people regular, no-strings-attached
    payments might discourage them from working is common among
    opponents of similar programs.
  • But research from a University of Chicago professor and
    University of Pennsylvania professor found that this universal
    basic income program increases part-time employment, creating a
    neutral effect on employment numbers.
  • This article is part of Business Insider’s ongoing series on
    Better
    Capitalism
    .

The Alaska Permanent Fund Dividend is the only large-scale
universal basic income program in the United States, and securing
its long-term survival is
a major issue in this year’s gubernatorial race
.

The vast majority of Alaska’s roughly 740,000 citizens support
the dividend, which gives virtually every citizen
an annual check of about $1,000 to $2,000
(that’s $4,000 to
$8,000 for a family of four), and both political parties in the
state are in favor.

A year ahead of the Trans-Alaska Pipeline System’s completion in
1977, Republican governor Jay Hammond decided to constitutionally
link at least 25% of the incoming oil money to a permanent fund,
to ensure the young state’s long-term success.

The state created the Alaska Permanent Fund Corporation a few
years later to manage and grow this money, and in 1982, the state
decided to begin distributing a portion of the fund’s annual
earnings to any eligible person who applied for it. The fund
today is worth around $65 billion.

Critics worry that the payments discourage employment, but a new
paper finds that’s not quite right

Alaskans’ feelings about this universal cash transfer are
supported by the findings of a working paper
published in February
that was written by University of
Chicago Harris School of Public Policy professor Damon Jones and
University of Pennsylvania School of Public Policy and Practice
professor Ioana Marinescu — the annual dividend does not realize
fears that such a program would lead people to quit their jobs,
lowering employment.

An additional $8,000 for a family is certainly not going to
replace a livable income, but, as Jones and Marinescu noted in
their paper, studies around a
cash assistance experiment in the 1970s
, lottery winnings,
and a permanent fund dividend for the Eastern Band of Cherokee
Indians reduced earned income, and critics of any universal basic
income programs have pointed to such findings as proof that
anything on a larger scale would be a disaster. But Jones and
Marinescu found instead that the larger scale of the program is
what allows it to work, and not dissuade people out of the work
force.

More specifically, Jones and Marinescu determined that part-time
employment increased by 17% only in the non-tradable sector (jobs
whose output isn’t traded internationally), and that overall
employment wasn’t affected because more spending money results in
more demand, and thus more jobs.

To use an illustrative but hypothetical example, someone who uses
her dividend to help with car payments can cut back on her hours
working as a cashier at a local grocery store. But because more
people are spending more, the store will look to replace that
worker who started working less. Meanwhile, the distribution of
the dividend won’t affect the international demand for oil and
the jobs connected to it.

Alaska does have high unemployment, but it’s unrelated to the
payments

On that last point, it’s worth noting Alaska has the highest
unemployment in America (around 7%), but that’s because of a
state-wide recession that saw the loss of thousands of oil and
construction jobs that have nothing to do with the dividend,
which has long kept the state’s income inequality among the
lowest in the country. Current governor Bill Walker cut the
dividend the last few years to allocate more earnings to the
state in response to the tough climate, making him the first
governor to do so.

This year’s check was for $1,600, but the Associated Press
reported
it would have otherwise been $2,980
, a difference of $5,520
for a family of four. The major unpopularity of the decision was
one of the reasons why, in October, Walker stepped out of his bid
for re-election.

Alaskans of all walks of life and political leanings have fully
integrated the dividend into their lives, and it’s worked for
them. And while its universality results in an expectation that
the government then has to manage, it is also why the program has
no net effect on employment, which a more targeted cash transfer
program could.

It’s not impossible that a similar program could work outside
Alaska

A natural question then, is whether such a program could work in
other parts of the US, or even the entire country. Jones told
Business Insider that it’s important to understand that not only
does Alaska have the benefit of massive oil reserves to fund its
program, but it has chosen to allocate money away from other
projects, such as infrastructure spending. The latter point is
why the candidates for governor are now considering amendments to
the state constitution that would protect the dividend and
further define where the permanent fund’s earnings go.

“There still is indirectly a cost for paying this and not using
it for something else, so it’s not free,” Jones said. “I don’t
think it’s impossible for other states to do it,” he said, but
this would require the cash transfer to be universal and based on
a reallocation of resources that would allow it to be
self-sustainable. It’s a basic but important point. “Someone has
to receive less of something else, in order for you to have a
basic income.”

Jones said that he is interested in future research around the
permanent fund in relation to how people spend their money after
receiving it, but is confident that a universal basic income on
the scale of Alaska’s would not have a negative impact on
employment. “I think that it was very helpful to do this study to
clear up some of my own thinking about it,” he said.

Are you an Alaska resident who has received dividend payments
from the Alaska Permanent Fund? Reach out to this reporter at
[email protected]

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