The Alaska Permanent Fund Dividend (PFD), the yearly distribution of unconditional cash to all Alaska residents, is providing researchers with a one-of-a-kind source of information on the effect of a universal basic income (UBI) on socioeconomic well-being. The latest study shows that a $1,000 PFD reduces the probability of an Alaskan child being obese by the age of three by as much as 4.5 percentage points. That translates to about a 22 percent reduction in obesity.
Income inequality and technology-related job loss are among the concerns driving a growing interest in a UBI, but there are few studies that help with an understanding of the its effect. For the past 37 years, Alaska residents, without regard to income, citizenship or age, have received the PFD. Averaging $1,600 per person, it is based on the earnings of the Alaska Permanent Fund, established in 1976 to save a portion of oil royalties. As of April, the fund has assets of $65 billion.
The PFD is the closest example of a UBI worldwide. Recent research on it investigates the effect of income on employment, consumption, crime and health.
The effect of income on health has long been an important area of research, including the recent increased focus on how it influences childhood development. Recent research finds that children who grew up in families below the federal poverty line had gray matter volumes 8 to 10 percent below normal development. And the gap was still present at age 22.
Childhood obesity is also affected by income. Since 1980, childhood obesity has more than doubled (from 5 percent to 12.4 percent). This increase is associated with considerable costs: the incremental lifetime direct medical cost of a 10-year-old child who is obese is $12,660 to $19,630 more than a 10-year-old child with normal weight.
In our report Universal Cash Transfers Reduce Childhood Obesity Rates, my co-authors and I used two surveys regarding children born between January 2009 and December 2011: one conducted with recent mothers—for the Pregnancy Risk Assessment Monitoring System—and a follow-up at three years called the Alaska Childhood Understanding Behaviors Survey, a program designed to find out more about the health and early childhood experiences of young children in the state. An adult resident of Alaska may apply for a newborn to receive a PFD if the child is born before December 31 of the qualifying year. Because of this rule, a child born on December 31 will receive one more PFD than a child born a day later, on January 1.
Middle-income households ($25,000-$75,000) are particularly responsive, while there is no detectable response from high- and low-income households. Middle-income households accounted for 40 percent of the sample size, with $45,000 being the average income. Although the PFD has averaged approximately $1,600 per person, it has varied considerably, with a high of $3,200 in 2008 and a low of $900 in 2012. As a result, monetary amounts received will differ across children.
We used both of these forms of variation in PFD-related income As noted above, we found that an additional $1,000 decreased the probability of a three-year-old being obese, equating to a 22.4 percent reduction of obese three-year-old Alaskans. Applying the current obesity rate for such children to an average birth cohort of 11,000, this result suggests the PFD reduced obesity in 500 Alaskan children.
Previous research has shown that obese children incur an average of nearly $1,400 more in medical costs per year than children who are not obese. If the 500 cases of obesity averted by age three remain nonobese through age 17, $10.3 million will be saved—equating to $920 per person. If, on the other hand, some of the averted cases become obese later in life, then the savings would be reduced to $2.3 million, or $210 per person. These findings suggest that a $1 PFD results in a 21- to 93-cent reduction in medical costs by the age of 17.
These results make it clear that universal income has the possibility of improving children’s health, which can have long-lasting monetary and nonmonetary benefits. It is also encouraging that these health improvements are a result of a nontargeted obesity intervention. It is therefore possible that universal and unconditional cash transfers have far-ranging benefits to society that go beyond those intended by a UBI program.