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Why Alaska is the most equal of the states

  • Author: Charles Wohlforth
    | Opinion
  • Updated: January 9, 2017
  • Published January 9, 2017

Traveling outside Alaska over the holidays reminded me how differently our economy and society work here.

Growing up in Alaska, I thought social class was something from old novels about England. But America's high barriers of class, money and race grow more impermeable each year.

We're justly proud of Alaska's uniquely equal society. It's one piece of the Alaska myth that is actually true (unlike the belief in Alaska's independence).

New statistics from the Census Bureau's American Community Survey confirm that Alaskans are more equal economically than residents of the other states. The numbers covering 2015 show Utah slipped past us as the state with the least income inequality but the difference was not statistically significant.

Nationally, the statistics showed that income inequality grew worse, as it has for a couple of decades.

Equality matters. The Founding Fathers knew it as a prerequisite for democracy. Money is power. In the founders' day, wealth went with aristocracy. In ours, it buys similar privileges in the political, legal, economic, health and educational systems.

This power keeps strengthening, and not only because of the "rigged system" that Sen. Bernie Sanders and other populist politicians rightly point out. Technology is also adding to the power of wealth.

Karl Marx had the wrong prescription but he was right that owning the means of production is the key to wealth in an industrial society. Simply being rich makes you richer. It's as simple as inheriting a well-diversified portfolio of stocks.

Unions and progressive voters in the early 20th century countered the power of capital with the power of labor. Their struggle brought a fairer split of industrial wealth, ending the gilded age and creating America's middle class — and ultimately discrediting communism.

The new gilded age puts the old one to shame. Today's billionaires are far more numerous and the size of their wealth unimaginably huge.

Labor has lost its leverage to fight back. Automation has replaced millions of workers, taking far more manufacturing jobs than foreign outsourcing. With self-driving cars, automated check-out stands and restaurants with tablets instead of waiters, robots are taking service jobs too.

The owners of automation and those smart enough to create new products will get richer. Those without high-level skills will keep getting poorer.

Academics are talking about a future in which masses of unneeded workers receive minimum income payments from the government to keep them alive and maintain social peace.

They use Alaska as a model.

The Alaska Permanent Fund dividend is one of the world's best examples of a basic income guarantee. Alaska Native corporation dividends also create an income floor for many Alaskans.

That's a big reason for our income equality. The poor get a little more help here.

The Permanent Fund dividend reduces the number of Alaskans under the poverty line by about a fourth, according to a recent study by economists Matthew Berman and Random Reamey of the University of Alaska Institute of Social and Economic Research.

They wrote that the Census Bureau misses much of that effect, meaning our income equality is even greater than federal numbers say.

Economist Mouhcine Guettabi, also at ISER, said pay scales for mid-level earners are more equal here too.

Our blue collar jobs pay much better than similar jobs elsewhere, in fields such as resource harvest and extraction, he said. We import many professional workers but the wage premium for them is not as large as it is for our often-remote blue collar work, bringing the two classes closer together, Guettabi said.

At the top end of the scale, Alaska has no billionaires. In Forbes' review last year of the richest person in each state, our richest men, real estate developers Jon Rubini and Leonard Hyde, came in last.

Guettabi and I traded several possible reasons for the lack of super-rich Alaskans.

Our economy is small and young, with little opportunity or time for fortunes to have been made. Our lucrative industries — including petroleum and mining — require massive investments that can come only from world capitalists.

Before Alaska connected to national markets, families such as the Rasmusons and Gottsteins made their fortunes with home-grown companies. But they sold to Outside owners and today the geographic protection from competition is gone. Outside chains keep Alaska's small businesses small, or kill them.

Most important, in my opinion, is that Alaska lacks the major billionaire-generating industries of recent decades, tech and finance. The riches that once went to the founders of industrial companies now go to the cleverest computer geeks and most aggressive and lucky Wall Street deal-makers.

When robots do the work, controlling the robots, through tech or finance, is the fastest way to create wealth. Education gets you there. In the new gilded age, education is more important than industry or even capital.

Tony Knowles was the first Alaska leader who got this. I interviewed him in 1981 when he was running for his first term as mayor of Anchorage. He said the key to the city's economic future was quality of life and education, allowing us to attract talented workers for a role as a center of trade. Now it's obvious he was right.

Unfortunately, through a couple of generations of mostly Republican leadership, Alaska invested instead in concrete and earth-moving, hoping infrastructure projects would give us 20th century industry. We neglected higher education. Now we're out of money and we've got what we've got.

But that's another story. I'll write more about where we are going economically in future columns.

For now, I would celebrate our equality.

Elsewhere in the United States, the path to a great education is growing ever narrower. The wealthy send their children to extraordinary private schools that offer a wide road from crib to Wall Street. The poor often live in scary neighborhoods with bad schools and fear of the police.

But in Alaska, we have a well-integrated school system that serves everyone. We live together in diverse communities. We don't have kings of wealth.

While the country is fracturing, we are all Alaskans.

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