Publication date:
August 30, 2024
Alaska Permanent Fund Provides Economic Benefits Similar to Universal Basic Income
Alaska's Permanent Fund, funded by oil revenues, distributes annual dividends to residents, providing economic benefits comparable to universal basic income programs.
Energy Economics
The Alaska Permanent Fund, established in 1976, allocates at least 25% of the state's annual oil revenue to provide dividends to residents. While not technically a universal basic income (UBI) program, it offers similar economic benefits and has been the subject of numerous studies examining its impacts.
Residents who lived in Alaska for the entire previous year are eligible for the current year's dividends, with payments typically distributed in October. In 2023, eligible Alaskans received $1,312 each. As of June 30, the fund's total value stood at $80.3 billion.
Research has shown that the Permanent Fund Dividend has helped reduce poverty rates in Alaska. A study published in Poverty & Public Policy found that from 1990 to 2019, poverty rates declined by 2.1 to 4.2 percentage points. The impact was particularly significant for Indigenous Alaskans in rural areas, where poverty rates dropped from 28% to 22%.
Contrary to concerns that such programs might discourage work, studies have found minimal negative impacts on employment. A 2018 paper in the American Economic Journal: Economic Policy determined that the dividend had no significant effect on overall employment rates and actually increased part-time work frequency. Another study found that a $1,000 increase in the dividend led to a 1.7% greater probability of employment for men, though it slightly reduced employment for women.
Other positive effects associated with the fund include increased fertility rates, improved health outcomes, and reduced instances of child neglect and abuse. The dividends have also been shown to boost local economies, with residents spending more on goods and services in the month they receive payments.
However, the program is not without challenges. Income inequality in Alaska has grown both in the short and long term, possibly due to higher-income groups saving and investing more of their dividends. Additionally, as oil revenues decline, the dividend program increasingly competes with other state government spending priorities.
Despite these issues, the Permanent Fund Dividend remains extremely popular in Alaska, with politicians across the political spectrum campaigning as defenders of the program. Its unique model continues to provide valuable insights for policymakers and researchers studying the potential impacts of broader universal basic income initiatives.
Residents who lived in Alaska for the entire previous year are eligible for the current year's dividends, with payments typically distributed in October. In 2023, eligible Alaskans received $1,312 each. As of June 30, the fund's total value stood at $80.3 billion.
Research has shown that the Permanent Fund Dividend has helped reduce poverty rates in Alaska. A study published in Poverty & Public Policy found that from 1990 to 2019, poverty rates declined by 2.1 to 4.2 percentage points. The impact was particularly significant for Indigenous Alaskans in rural areas, where poverty rates dropped from 28% to 22%.
Contrary to concerns that such programs might discourage work, studies have found minimal negative impacts on employment. A 2018 paper in the American Economic Journal: Economic Policy determined that the dividend had no significant effect on overall employment rates and actually increased part-time work frequency. Another study found that a $1,000 increase in the dividend led to a 1.7% greater probability of employment for men, though it slightly reduced employment for women.
Other positive effects associated with the fund include increased fertility rates, improved health outcomes, and reduced instances of child neglect and abuse. The dividends have also been shown to boost local economies, with residents spending more on goods and services in the month they receive payments.
However, the program is not without challenges. Income inequality in Alaska has grown both in the short and long term, possibly due to higher-income groups saving and investing more of their dividends. Additionally, as oil revenues decline, the dividend program increasingly competes with other state government spending priorities.
Despite these issues, the Permanent Fund Dividend remains extremely popular in Alaska, with politicians across the political spectrum campaigning as defenders of the program. Its unique model continues to provide valuable insights for policymakers and researchers studying the potential impacts of broader universal basic income initiatives.
