By Mike Kubzansky and Tracy Williams
Next month, like every October, any man, woman, or child who has lived in Alaska for at least a year will receive a dividend check from the Alaska Permanent Fund of the state’s oil revenues. This “no strings attached” payment can amount to $1,000–2,000 a year per person. At around $8,000 a year for a family of four, it’s not a trivial amount.
That makes the Alaska Permanent Fund dividend a real-world example of a Universal Basic Income, or UBI — a regular, unconditional cash transfer for everyone.
The opportunity to learn from a real-world UBI comes as the idea continues to get a lot of attention, but with remarkably little evidence on the impact UBI might have, especially as a long-term and universal program.
We are not yet convinced that UBI is the best possible solution to income security challenges, but we believe it’s an idea that merits testing. As we wrote previously, UBI builds on a rich empirical evidence base that shows cash transfers have remarkable outcomes for people and communities in emerging markets. Research is starting to also show positive impacts in advanced economies like the United States. But there is still much to learn. That is why we are supporting GiveDirectly’s 12-year UBI trial in Kenya.
It is also why we looked to Alaska, which has been providing unconditional cash payments to residents since 1982. Working with the Economic Security Project (ESP), we commissioned a survey of over 1,000 Alaskans, the most comprehensive review of public attitudes towards the Alaska Permanent Fund program since 1984.
What did we learn? First, we don’t see UBI primarily as income replacement. Instead, we believe UBI-like cash transfers might be an important option for shoring-up safety nets as the economy evolves. Today, automation does pose risks to job safety with machines replacing humans in the workforce, yet unemployment is still relatively low in the United States.
More apparent are other changes in our labor market: inequality is rising, mid-wage jobs are disappearing, and income volatility has become the dominant characteristic of too many American households. The U.S. Financial Diaries research, which followed 235 low- and middle-income families for a year, found income volatility is so damaging that 77% of the families would rather gain “financial stability” than “move up the income ladder.”
The current safety net of assistance programs has often not done enough to enable these families to live dignified, empowered lives. Thus, our goal was to understand how Alaska’s Permanent Fund Dividend (PFD) complements the broader social contract. And the findings showed extremely positive results.
We found that the Alaska Permanent Fund Dividend makes a material difference for Alaskans, with 40% saying it makes “a great deal or quite a bit of difference” in their lives (versus just 8% saying “no difference”). We also found that it makes the greatest difference for those most affected by the changing economy: 50% of those saying the changing economy has affected them a great deal said the dividend makes a major difference in their lives, versus 28% who have felt little or no impact from the changing economy.
The survey also provided insights for other key questions regularly raised about recurring, unconditional cash transfer programs:
- Do people use cash transfers productively?
Yes, 72% of respondents report saving their dividends for essentials, emergencies, or for future needs, such as retirement or education.
- Is there value in cash transfers being universal, versus targeted?
Nine out of 10 respondents are in favor of a “no strings attached,” universal program for every Alaskan, an attitude shared across political affiliations and income levels. This is in stark contrast with targeted welfare programs, which tend to have very little political support and strong preferences for conditionality: for example, 87% of Americans believe welfare recipients should be required to work.
- Do cash transfer programs disincentivize work?
No, it appears in Alaska. Only 1% of respondents believe that the dividend makes them work less. Rather, it may empower people to find more productive work: 11% said the dividends made them more likely to take risks, learn new skills, or start new businesses.
- Will society bear the cost of paying for cash transfer programs?
Yes. Surprisingly, 64% of respondents say that when it comes to funding the program, they would rather raise state taxes than end the dividend to fund government services. This is a significant increase from 1984, when only 29% preferred raising taxes to ending the dividend. These results were also common across political affiliations and income levels.
Modern social contract
The Alaska Permanent Fund is ultimately only one program in a relatively unique corner of the US. More research and trials in multiple settings are still needed. Nonetheless, the view from Alaska carries lessons for how cash transfer programs can help Americans achieve greater economic stability. And Alaska’s example also carries lessons for resource-rich countries, such as oil states in Africa and the Middle East. Recent research has shown that UBI in these contexts can lead to more efficient public expenditure and significantly alleviate poverty.
We hope that research on these important questions can help us understand the best ways to modernize the social contract in the US and other countries, and to adapt to the rapidly changing realities of the workforce and life in the 21st century.
Learn more about the study by reading the executive summary.
Mike Kubzansky (@MikeKubzansky) is a partner and Tracy Williams (@TracyWilliamsDC) is a senior manager at philanthropic investment firm Omidyar Network.