Energy Costs and Rural Alaska Out-Migration

Abstract

This report contains results of a formal statistical analysis of the association of high prices for home heating fuel with out-migration from rural Alaska communities, using data from Alaska Permanent Fund Dividend applications from 2003 to 2015. Although anecdotal reports have described hardships caused by the rising cost of fuel, this study is the first to subject the hypothesis of fuel-related out-migration to rigorous statistical testing. This study addressed five main research questions: 1. What is the evidence that out-migration from rural Alaska communities was associated with fuel prices? 2. How sensitive are out-migration rates to fuel prices? 3. Does the effect of high prices on out-migration in communities with the chronically high fuel prices differ from the effect across all communities of high-cost years? 4. How do effects of fuel prices on out-migration differ for regional hubs and smaller villages? 5. How does the magnitude of the effect of fuel prices compare to that of other drivers of mobility, such as employment and income? The study region was defined as the area of western and northern Alaska with neither road nor year-round water access. We divided this region into local areas consisting of the nine Census Areas/Boroughs in the region with the regional hub communities of Dillingham, Bethel, Nome, Barrow/Utqiagvik, and Kotzebue separated from smaller villages in their respective Census Areas/Boroughs. The statistical analysis examined five binary variables representing different types of potential moves that an individual could make outside the local area of residence: 1. Leave rural Alaska (yes or no, all residents of the rural region); 2. Leave the local area (yes or no, all residents of the rural region); 3. If leave the local area, leave rural Alaska: (yes or no, residents leaving local area); 4. If leave a village, leave rural Alaska: (yes or no, residents leaving local area who started in a smaller village and not a regional hub); 5. Leave rural Alaska (yes or no, regional hub residents only) Logistic regression equations were estimated for residents 18 years old to associate each of the five binary variables with fuel prices, controlling for age, gender, employment status and earnings, as well as several characteristics of the community of residence. Teachers, oil workers, mining workers, and pilots were excluded from the analysis. Alaska Department of Labor staff used the applicant’s Social Security Number to link individual Permanent Fund Dividend (PFD) applications across successive years and to 2 state employment security records. Data from PFD applications included age and gender, as well as place of residence. Employment records included earnings by occupation and industry. Retail fuel price surveys conducted by the Alaska Housing Finance Corporation and the Alaska Division of Community and Regional Community Affairs provided price data for home heating fuels. Fuel prices for communities not included in the surveys were estimated from wholesale diesel fuel prices published in Power Cost Equalization program reports. Additional community level data on labor force size, employment, and earnings supplemented data from individual records. Earnings and fuel prices were adjusted to 2015 dollar values using the Anchorage Consumer Price Index. The study found that high fuel prices were associated with more rural Alaska residents moving to urban Alaska, but the size of the effect was relatively small: less than 40 adults each year for each $1 rise in fuel prices. Observed increases in moves to urban Alaska triggered by higher fuel prices came entirely from regional hubs rather than from smaller villages. Although rural Alaska residents were more likely to move from both villages and regional hubs when fuel prices rose, higher fuel prices diverted more village movers to hubs instead of urban areas, so there was a negligible net effect from villages to urban Alaska. Other factors besides fuel prices that change over time also affect migration decisions. The study found that local labor market conditions, as well as the individual’s employment status and earnings had much stronger effects on out-migration than fuel prices.