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Warning: PFD could be hazardous to health

Gregg Erickson

Did you know that the arrival of the Alaska Permanent Fund dividend increases the death rate? That's right, the PFD could be implicated in your premature death later this month. The odds that your personal PFD dice roll will come up snake eyes are less than one in 10,000, but new research leaves little doubt that in the month following the direct deposit of Alaskans' PFDs, the number of city-dwelling Alaskans dying will increase by about 13 percent. Applied to the entire state, that's roughly 27 extra deaths. There is little doubt that the PFD is the cause.

No Alaskan discovered this remarkable phenomenon. It was two outsiders: a professor at Notre Dame and a young economist at the University of Maryland. They examined PFD payments from 2000 through 2006. For each year, they created separate weekly counts of deaths in Alaska and the rest of the United States for the weeks that include the dividend payments and for several weeks afterward. After eliminating confounding influences, such as increased Alaska drowning and deaths from aircraft accidents (likely associated with hunting seasons), they found significantly higher Alaska death rates linked to the PFD distribution.

Why does the PFD increase the death rate? One explanation -- called the full-wallets theory -- is that the cash payments increase drug and alcohol abuse. Studies of deaths among welfare recipients provide some support for this theory.

Had the full-wallets theory proved out, it would have gifted a potent moral argument to the many Alaska politicians and chamber of commerce types who believe dividend money would be better to support government and thereby reduce taxes on businesses and the wealthy. But the researchers found that eliminating drug and alcohol-related deaths from their data produced only a small reduction on the deaths attributable to the PFD.

The leading theory, the authors say, is that the dividend increases consumption and economic activity: "While the potential relationship between consumption and mortality is obvious in cases like traffic fatalities -- since increased travel increases the likelihood of an accident -- other causes of death also have well-documented links to consumption. For example, many triggers for heart attacks and strokes are activity related. ... If an income payment increases economic activity, one may expect a higher incidence of heart attacks to follow."

But this raises a puzzling question. Higher incomes generally mean lower death rates. Adjusting for age, about 3 percent of Americans with annual incomes between $10,000 and $11,000 will be dead in five years, while only about 1.25 percent of those with annual incomes of $80,000 to $81,000 will die in the same period. How, the economists wonder, could the PFD have such a negative effect on survival when the general health effect of increased income is so positive?

One possible explanation, say the researchers, is that the rise in deaths represents "short-term mortality displacement," where the deaths of the frail are hastened by a few days, a phenomenon they refer to as "harvesting." And some fraction of people facing death may decide to tough it out, staying alive until they get that last PFD.

Whatever one's feelings about the Permanent Fund dividend, it offers us the opportunity of a unique social experiment. Unfortunately, Alaska researchers such as those at the University of Alaska's Institute for Social and Economic Research have left it to Outside scholars to ferret out the subtle impacts of the program. I argued in a 1997 column that the dividend acts as a birth incentive. Researchers studying similar subsidies in Canada and elsewhere found such payments significantly increased fertility. I see no reason to expect that Alaska's PFDs don't have the same effect, particularly in rural Alaska and among low-income Alaskans, where fertility rates are already high.

If the PFD causes the average birth rate to increase by 6 percent, a plausible figure, then about 600 of Alaska's 10,000 to 11,000 yearly births are attributable to the dividend. Over the 27 years since the dividend began, that is an extra 16,000 children.

Another poorly understood issue is the effect of the PFD on wages. There are stories of employees in rural Alaska quitting in October when they get their PFD, forcing local businesses to raise wages to attract replacements. Yet other stories suggest Alaska companies recruiting Outside for skilled staff can offer lower salaries because families moving to Alaska can count on the dividend. Would eliminating the PFD force those companies to pay more to attract qualified people? Again, no one in Alaska seems interested. Hopefully, more Outside experts will help us out.

Juneau economic consultant Gregg Erickson is editor-at-large of the Alaska Budget Report.

For a free copy of the research paper, "The Short-Term Mortality Consequences of Income Receipt," by William N. Evans and Timothy J. Moore, e-mail Erickson at gerickso@alaska.com. The paper can also be downloaded for a $5 fee from the National Bureau of Ecaonomic Research at papers.nber.org/papers/w15311.


GREGG ERICKSON
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