The Friday Alaska Landmine column: What’s (really) going on with working-age Alaska families

Some in the #akleg are treating the decline in working-age #AKfams like a 5-alarm fire, but they are ignoring a cause and, in doing so, could easily make it even worse

Over the past couple of weeks, there has been a growing focus on the falling size of Alaska’s working-age population. It began with a report issued by the state’s Department of Labor & Workforce Development (DOL) published on January 9th, which noted that from July 2022 to July 2023, Alaskans in “the 18-to-64-year-old group declined by 0.2 percent.”

From there, Anchorage Daily News reporter Alex DeMarban picked up the ball with a piece on the issue under the headline “Alaska’s working-age population continues its long decline, a headwind for the economy.” And, from there, a few days later, the Alaska Beacon’s James Brooks followed up with the impact of the issue at the Legislature with a piece under the headline, “Alaska’s working population loss casts long shadow over legislative session.” Most recently, Anchorage television station KTUU continued the string with a report under the headline, “Struggling to attract Outside job seekers, Alaska’s working-age population suffers.”

As reported by Brooks, as the issue is working through the Legislature, a number of legislators are working hard to use the trend to support their own personal or caucus legislative priorities.

Rep. George Rauscher, R-Sutton and a member of the House majority coalition, suggested that high electricity prices are contributing to a high cost of living, and Speaker of the House Cathy Tilton, R-Wasilla, said “the No. 1 priority here for our caucus will be to figure out how we reduce the cost of energy all across Alaska.”

Senate President Gary Stevens, R-Kodiak, said increased education funding is the No. 1 priority of the Senate’s bipartisan majority. More funding will result in better schools, he and others suggested. “We have put education at the very top,” he said. …

[Senate Majority Leader Cathy] Giessel [R-Anchorage] said the lack of a pension program for state employees is deterring people from moving to the state to take state jobs …

But somewhat oddly, given the importance of the question, none of the stories – or legislators – have appeared to stop to ask “which” portion of Alaska’s working-age population is in decline. While the original DOL story did break the state’s population decline down by age – “Alaska’s 65-and-older population grew 3 percent, and the 18-to-64-year-old group declined by 0.2 percent.” – it did not look more deeply into where the decline was occurring within the “working-age” group.

State-level data compiled by the Internal Revenue Service (IRS) helps with that. Since 2015 – coincidentally, the last year the state distributed the Permanent Fund Dividend (PFD) in accordance with statute – the IRS has published statistics showing the number of returns filed by income level, broken down between those filed by the “elderly” (where the “primary taxpayer” is age 60 or older) and, by subtraction from the overall number of returns filed, those below age 60.

It shows a sharp distinction. Over the period between 2015, when the IRS first published the statistics, and 2020, the latest year for which state-level IRS data is available, the number of Alaska returns filed by those under age 60 has declined for those with an adjusted gross income of under $200,000 per year, but increased, by comparison dramatically, for those with incomes at that level and above.

We chart the results here by the income levels used in the IRS reports. Red bars indicate those income levels where the number of returns is in decline. The blue bars are those income levels where the number of returns has grown over the period. The gray bars are subtotals of various aggregated categories.

Overall, returns filed by those under 60 have declined by 4.8%. Of the various subcategories within that, those filed by households with less than $25,000 in adjusted gross income have declined most over the period, by 15.2%. Those with adjusted gross incomes between $25,000 and $100,000 have declined overall by 3.8%, and those with adjusted gross incomes between $100,000 and $200,000 have declined by 1.7%.

On the other hand, returns filed by those under 60 with adjusted gross income higher than $200,000 have jumped dramatically over the five-year period by 16.5%. Within that, returns filed by those under 60 with adjusted gross income between $500,000 and $1,000,000 have jumped even higher, at 20.6%, with those with adjusted gross income between $200,000 and $500,000 right behind at 18.8%.

Picking up on the subject of our column last week – “Alaska’s fiscal system is #1 … in terms of regressivity” – these results overlay interestingly with the impact of Alaska’s fiscal system.

As some readers may recall, here is the impact of that.

Under Alaska’s hugely regressive fiscal system, the level of “government take” – to borrow a phrase from the oil industry – increases dramatically as income levels drop. For example, while the level of “government take” for those in the Top 1% (those with incomes over $705,000, with an average income, after adjusting for a statutory PFD, of $1,692,267) is just 3.1% of income, the level increases by more than seven times to 22.7% for those in the Low 20% income bracket (those with incomes less than roughly $30,000 and with an average income, after adjusting for a statutory PFD, of $19,379).

Overlaying that on top of the analysis of where the loss of Alaska’s working-age population is occurring results in this:

The red line follows the change in the number of returns filed by income bracket from 2015 – 2020; the dark blue line follows the level of “government take” under Alaska’s current fiscal system by the same income brackets.

While we appreciate that correlation does not necessarily mean causation – sometimes the correlation identifies a contributing factor – the results are still highly significant. Alaska is losing working-age households, measured by the number of returns, in the very same income brackets where the level of “government take” is rising above 5%. Alaska is gaining working-age households, again measured by the number of returns, in the very same income brackets where the level of “government take” is below 5%.

We understand that politicians always want to play the hero and that, as James Brooks reports, the first instinct of many in the Legislature as they have focused on the issue has been to think of ways the government could respond with additional state spending focused on “energy costs,” “education,” “defined benefits,” and no doubt, others yet to come.

But if they pay for those by increasing the level of regressive “government take” (i.e., through additional cuts in the PFD), the data suggests they will just be making the problem worse. More regressive levels of “government take” may very well lead to even greater drops in the number of working-age Alaska families.

We are reminded of former Senator Natasha von Imhof’s one-time claim that if Alaska adopted taxes, “people with money will leave.” The data suggests that, as the level of “government take” from middle and lower-income households has increased (largely to avoid taxes on the “people with money”), it’s those households that have led the decline. The number of households in the upper-income brackets – to paraphrase von Imhof, the “people with money” – has not only stayed stable, they have grown.

Government may have a role in addressing Alaska’s “working-age” challenge, but the response shouldn’t come at the additional expense of those in those income brackets already in decline. At a minimum, it should be balanced across all of the income brackets, if not directed instead largely toward those who have thus far almost entirely escaped from helping pay for the ongoing increase in government spending (including von Imhof).