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Study Measures Cost of Living in Alaska

Alaska Department of Labor

A new study has come out about the cost of living in Alaska.  KDLG’s Chase Cavanaugh has more on the numbers, and what they mean for Dillingham.

The Alaska Department of Labor and Workforce Development recently released its July issue of Alaska Economic Trends.  The cover story was a study on the state’s cost of living.

Data from the Missouri Economic Research and Information Center shows that Alaska is the fourth most expensive state to live in, just behind Connecticut and New York, with Hawaii at the top. 

Much of the information on overall state cost of living, as well as inflation, comes from the Consumer Price Index.  This measure takes a “basket” of goods and services used by the average family, including food, housing, and transportation, and assigns each a weight as part of the overall budget.

Neil Fried is a Department of Labor economist.  He says the CPI factors into many different pay schemes and contracts.

“A lot of contracts are tied to the CPI, whether they’re labor contracts, there are child support contracts, rental contracts, very specifically tied to the CPI, and Anchorage is the only place where that is measured in state. In fact, Anchorage is probably the smallest city in the country where that is measured, and to a certain extent, the Anchorage CPI becomes the default for the rest of the state because there are no other measures of inflation in Alaska.”

Overall, the Consumer Price Index increased by 3.1% in 2013, compared with 2.2% in 2012.  However, when broken down into individual categories, the numbers differ.  Energy costs dropped by 2.7% last year, whle recreation and food and beverages only increased by .4% and .3% respectively.  The largest increases were in transportation, at 7%, clothing, at 4.78%, and medical, at 3.2%.  However, Fried says that housing’s increase has the largest effect.

“Housing has a weight. Out of 100%, 40% of where we spend our money is tied to housing. Wherever housing moves has a huge impact on the change in the cost of living. Housing, in fact, this last year, increased at the same rate as the overall index, 3.1%, and that’s really no coincidence.”

While the Anchorage CPI is used to measure the cost of living as a whole, its numbers reflect the city of Anchorage, particularly the weights assigned to each category for the entire index value.  Fried says in more rural towns, other categories may have greater importance, such as energy.

“Weights would be different. For example, in 2013, the cost of energy actually declined, and that might have a bigger impact on Dillingham than it would in Anchorage. Obviously the year where we see a big increase in energy costs, that’s gonna have a disproportionate impact on Dillingham relative to urban places, particularly a place like Anchorage and much of the rest of the country where they depend on natural gas for that energy part that’s tied to heating homes.”

While Dillingham and other rural towns lack the precise year to year measurements of Anchorage, it’s possible to measure the impact of specific categories.  For example, the weekly cost of food for an Anchorage family of four is about $164.  In Bethel, that number more than doubles to $337, while Unalaska has food costs of $223, 136% more than Anchorage.  Likewise, while gasoline costs around $3.90 per gallon in Anchorage, it’s around $7.09 in Dillingham, and $10.00 in Arctic Village. 

There was a 2009 report, the Alaska Geographic Differential Study, that examined the costs of living in rural Alaska that year, and compared them directly with Anchorage.  Fried says that while it didn’t track changes year by year, it’s still used to calculate cost of living adjustments for state employees.

“There are state employees throughout the state, and their salaries are adjusted to adjust by the difference in the cost of living. A study was done to do that, it was done a number of years ago. When we look at that data, Dillingham was running at 37% higher than Anchorage, which was the base place.”

The full study can be found in the July Issue of Alaska Ecoomic Trends, which is available at the website of the Alaska Department of Labor.

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