Handouts discourage work? Not in Alaska

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Alex Verkhivker | Mar 28, 2018

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Since 1982, most residents of Alaska have been given an annual dividend payment from the Alaska Permanent Fund, oil-reserve royalties invested in a diversified portfolio since the state’s boom in oil production during the 1970s. Awarded to adults and children with no criminal records, it can amount to more than $8,000 annually for a family of four.

Critics of government handouts say that such payments discourage work, but research by University of Chicago Harris School of Public Policy’s Damon Jones and University of Pennsylvania School of Social Policy and Practice’s Ioana Marinescu finds that in Alaska, the payments haven’t dampened employment—rather, they caused no discernible change in employment and may have actually helped some people join the workforce.

Jones and Marinescu compared Alaska’s employment and socioeconomic statistics to those of Utah, Wyoming, Washington, and Montana, deemed control states for their similarities to Alaska in employment and hours worked. The researchers isolated the effect the cash transfer had on people’s work habits by comparing Alaska to these control states after the policy was implemented.

The research finds no decrease in employment in Alaska after the dividend was introduced. To further test the results and ensure they didn’t reflect something particular to the set of control-group states chosen, the researchers used alternative sets of control states and find similar results. They find no meaningful difference between Alaska and other comparable states in terms of employment from 1982 to 2014.

However, the researchers do find a meaningful difference in part-time work. Alaskans took on 17 percent more part-time work after the dividend was introduced, with much of this increase driven by women. The researchers suggest the cash transfer helped cover household expenses such as transportation and childcare.

“Our results show that adverse labor market effects are limited, and, importantly, a universal and unconditional cash transfer does not significantly reduce aggregate employment,” note Jones and Marinescu.