The Friday Alaska Landmine column: WHICH working-age Alaska families are outmigrating?

This week, we look at detailed IRS data to help identify which types of working-age Alaska families are leading the Alaska outmigration

Earlier this month, the state’s Department of Labor and Workforce Development (DOL) issued a press release summarizing its most recent population estimates and indicating where growth and declines are occurring, both regionally and by age groups. Summarizing, DOL concluded:

Alaska has lost residents to net migration for 12 straight years, but in recent years the losses have been small enough for the population to grow overall. Last year, 1,163 more people left Alaska than moved in, but the state gained 3,437 residents through natural increase, or births minus deaths.

The number of Alaskans aged 65 and older increased 4 percent over the year while the working-age population — ages 18 to 64 — declined by 0.4 percent. The number of children from birth to age 17 decreased by 0.3 percent.

Understandably, the state’s media picked up on the estimates, emphasizing their regional impact. In its story, the Juneau Empire emphasized the effect by overall age groups, “Juneau’s younger population dropping fast, older residents increasing rapidly, latest state count shows.” The Juneau bureau of Alaska Public Media did the same, “New state population estimate shows an aging Juneau with fewer young people.”

Conversely, the Peninsula Clarion emphasized Kenai’s regional growth – “State population climbs slightly, Kenai Peninsula continues growth” – as did Mat-Su’s Frontiersman: “Mat-Su’s population, economy rise while much of state stuck in low-growth mode.”

Statewide, the Alaska Beacon highlighted the slight uptick in the state’s overall population resulting from some revisions to prior estimates, “Updated estimate shows Alaska has more people than previously thought.” But even in that story, the Beacon acknowledged the ongoing impact of outmigration.

Under the subheading “But for a 12th consecutive year, the longest streak since World War II, more people moved away than moved to the state,” the Beacon said this about outmigration: “For more than a decade, Alaska has seen more people move out of the state than move into it. From 2016 through 2020, the pace of outmigration was so high that Alaska lost population overall.”

To us, while the regional and overall numbers are significant, the most important part of the story is what’s happening specifically with working-age Alaskans. Even while Alaska has started to rebuild its overall population as the 65+ age group has grown, the raw numbers in the state’s lower age brackets continue to fall.

This month’s Alaska Economic Trends explains the impact of the continued losses on the Alaska workforce overall, specifically those in the working-age bracket.

Alaska’s worker shortage stems from several factors. We have lost more people to migration than we’ve gained for an unprecedented 12 straight years. The current population is getting older, as the large group of people who moved here in the late 1970s and early 1980s with the oil boom continue to reach retirement age.

At the same time, Alaska’s birth rate has fallen for decades — although it remains higher than most states’ — meaning fewer young people are aging into their working years.

These trends have reduced the number of Alaskans in their prime working ages, 18 to 64, by 34,000 people between 2013 and 2023. Demographers anticipate the working-age population will continue to decline through 2030, then tick up slightly before trending downward again starting in 2040.

… In 2023, the most recent year available, Alaska imported proportionally more labor than we had in 20-plus years. That trend is likely to continue as labor remains scarce amid strong short-term job growth.

The same is true in the state’s population center, Anchorage.

Anchorage has also lost more movers than it has gained for an unprecedented 10 straight years. Coupled with an aging population, these forces have reduced Anchorage’s working-age population by 19,000 since its peak in 2013. Such a decline in available labor has a chilling effect on future employment growth.

As Trends explains, the same is true also in Fairbanks and Southeast. “Fairbanks faces the same worker shortage as the rest of the state, and plentiful opportunities elsewhere could make workers even harder to find.” Moreover, “Fairbanks’ population is decreasing, reducing local demand for goods and services.”

In the Southeast, while the “dramatic increase in cruise ship visitors is projected to generate several hundred additional jobs scattered across a variety of Southeast industries in 2025,” many will be filled by non-residents. “The overall nonresident worker percentage in Alaska has been rising, and for visitor-related employers, it was 34 percent in 2023: nearly four percentage points above the 10-year average.”

However, while DOL’s data have done a good job tracking the continuing drop in working-age Alaskans overall, they have not provided significant insights into which segments within that cohort are leaving.

Understanding which segments within the cohort are leaving is important because it helps identify the steps the state should take in response. Developing programs targeting the wrong segments of working-age Alaskans is as useless as not developing any programs at all. Developing programs that inadvertently load additional burdens on those segments already leading the outmigration trend adds even more fuel to the fire.

State-level statistics published by the Internal Revenue Service (IRS), derived from annual federal tax filings, are helpful for that task.

Each year, the IRS reports the number of individuals covered by tax returns by state and, within each state, by various income brackets. Since 2015, the IRS statistics have also broken down the number of returns filed by households headed by individuals 60 years of age and older and, by subtraction, those filed by individuals younger than 60 (the IRS equivalent of “working-age” households).

Here is what the Alaska statistics tell us. Between 2015 and 2022, the latest year for which the statistics are available (released this week), the number of Alaskans covered by federal tax returns fell overall by 5.4%.

Inside that overall number, there is a significant difference by income bracket. While the number of Alaskans in households with adjusted gross income under $100,000 has fallen by nearly 17%, the number of Alaskans in households with adjusted gross income of $100,000 or greater has risen by 21%.

While some of the difference can potentially be explained by some households realizing increased income over the period, not all can. The clear implication is that, against an overall decline, the number of individuals in the upper-income brackets is growing, while those in the middle and lower-income brackets are falling, i.e., experiencing net outmigration.

The breakdown between households headed by individuals 60 and older and those headed by individuals below that age provides even deeper insights. Here is the breakdown by the change in the number of households headed by individuals 60 and older over the same time period as above, 2015 – 2022.

It shows that, over the period, the number of households headed by individuals 60 and older has grown by nearly 20%, with most income brackets showing similar, double-digit growth.

Against that, here is the breakdown over the same period among households headed by individuals below that age, i.e., headed by working-age Alaskans.

That breakdown shows that, over the period, the number of households headed by individuals under 60 has fallen by nearly 10% overall. Consistent with the number of individuals in each income bracket, with one exception (likely the result of a data anomaly), the number of households headed by individuals under 60 in every income bracket below $100,000 has fallen. In contrast, the number of households headed by individuals under 60 in every income bracket of $100,000 and above has grown.

(The reason that the $50-$75,000 segment shows growth is that the IRS data shows a significant and rapid contraction in the size of the households within that bracket in 2022, increasing the number of households in that bracket even as the number of individuals in that bracket fell. The same data for that income bracket in 2021 showed a loss of 2.9%. We would not be surprised to see the 2022 data corrected in subsequent revisions. Even if not, like the others below $100,000, the bracket still shows a significant drop in the number of individuals within it over the period.)

The data shows that the outmigration problem is not generally widespread among all working-age Alaskan households. Instead, it is focused squarely on middle and lower-income working-age households.

Consequently, any proposed “solutions” should also target those households. Broadly focusing on solutions that include all working-age households waste resources. Developing “solutions” that, in fact, increase the burden on middle and lower-income households just makes the problem worse.

The latter approach – increasing the burdens on middle and lower-income Alaska households – is, in fact, what the Legislature has been doing since 2016. As we have explained in previous columns, the Legislature’s current preferred revenue approach – diverting revenue statutorily designated for Permanent Fund Dividends (PFDs) instead to the general fund – disproportionately targets middle and lower-income Alaskan families, significantly reducing their income stream while barely affecting that of upper-income Alaskan families. By reducing their burden, adopting alternative, broad-based revenue approaches would directly benefit middle and lower-income Alaskan families without significantly increasing the burdens on those in the upper tiers.

There may be other appropriate responses. But to be efficient and effective, any proposed solutions should directly target those categories of working-age Alaskan families engaged in outmigration rather than being spread more broadly to categories that demonstrate they don’t require any additional incentives to stay.

To date, the Legislature has been using a revenue approach that does the exact reverse, increasing the burden on those categories of working-age Alaskan families that are engaged in outmigration. If the Legislature truly cares about outmigration, that should stop.