ALASKA PRICES AND COSTS

Transcription

1 ALASKA PRICES AND COSTS SECTOR REPORT prepared by Dona K. Lehr INSTITUTE OF SOCIAL AND ECONOMIC RESEARCH UNIVERSITY OF AIASKA ANCHORAGE prepared for AIASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY and AIASKA DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT December 1989 This pubiicaji,on ii printed on ncyc/ed paper.

2 This report has been prepared as a part of a study of sectors of the Alaskan economy conducted for the Alaska Industrial Development and Export Authority and the Alaska Department of Commerce and Economic Development. The opinions in this report are those of the authors and do not represent the official views of the State of Alaska. 11

3 TABLE OF CONTENTS Executive Summary S-1 I. Introduction II. Measurement of the Cost of Living A Consumer Price Index--Anchorage Costs Over Time... 2 B. Anchorage Prices Compared with U.S. Average... 6 III. Commodity Prices/ Costs--Intra-State Price Comparisons... 8 A. Cost of Food... 9 B. Cost of Fuel IV. Personal Taxes A. Alaska State Taxes: Inter-state Comparison B. Alaska Local Taxes: Intra-state Comparison C. State and Local Taxes: Relative Tax Burdens V. Business Costs A. :Labor Costs B. Construction Costs C. Other Business Costs VI. Conclusions and Data Shortfalls Endnotes Bibliography lll

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5 LIST OF FIGURES 1. Consumer Price Indexes, Anchorage, Alaska Anchorage Consumer Price Index--Urban Wage Earners and Clerical Workers--Selected Components Anchorage Consumer Price Index--Urban Wage Earners and Clerical Workers--Housing Components Anchorage Consumer Price Index--Urban Wage Earners and Clerical Workers--Rapidly Rising Components Consumer Price Indexes--All Urban Consumers Cost of Living Differential Food Costs--Alaska Cities Ratio of Alaska Food Costs to U.S. Average Food Costs--Alaska Communities Ratio of Alaska Food Costs to U.S. Average Ratio of Selected Alaska Communities Food Costs to Anchorage Costs Cost of Heating Oil, Anchorage, Fairbanks, Juneau Cost of Heating Oil, Dillingham, Nome, Bethel Cost of Unleaded Gasoline, Range among Selected Alaska Communities Property Tax Rates, Alaska Municipalities Ratio of Alaska Payroll per Employee to U.S. Average Ratio of Alaska Payroll per Employee to U.S. Average Transportation Industry Ratio of Alaska Payroll per Employee to U.S. Average Communication and Public Utilities Ratio of Alaska Payroll per Employee to U.S. Average, Trade Ratio of Alaska Payroll per Employee to U.S. Average Finance, Insurance and Real Estate Ratio of Alaska Payroll per Employee to U.S. Average, Service Ratio of Alaska/ Seattle Real Wages Office and Technical Workers Ratio of Alaska/ Seattle Real Wages, Plant Workers Construction Cost Ratios, Means and Dodge Indexes for Anchorage, Alaska Construction Cost Differential, Comparative Local Cost Indexes, R.S. Means Company Class "A" Office Space, Average Annual Rental Costs, Anchorage v

6 LIST OF TABLES 1. U.S. City Average and Anchorage Consumer Price Indexes, Urban Wage Earners In-State Cost of Living Differentials, Cost of Food in Alaska Communities--Survey Data Property Taxes--Alaska Communities Local Sales Tax Rates Relative Tax Burdens Ratio of Alaska to U.S. Average Payroll per Employee Average Weekly Payroll per Employee--Alaska A. Wage Rate Comparisons--Alaska and Seattle-Everett Area B. Plant Workers Wage Rate Comparisons--Alaska and Seattle-Everett Area Average Non-Union Wages--Alaska Wage Survey Dodge Construction Cost Factor, 1987 Locality Adjustments Means Location Factors, 1989, for Square Foot Cost Adjustments U.S. Air Force Cost Factors Annual Rent Class "A" Office Space, Anchorage Average Electric Power Costs, by Region Costs per Kilowatt Hour for Electricity, Selected Alaska Communities Typical Commercial Billings, Selected Utilities Refuse Collection Charges, Selected Alaska Communities Average Telephone Rates, Single Party Service Monthly Water and Wastewater Rates, Selected Communities Vl

7 SECTOR REPORT ALASKA PRICES AND COSTS Executive Summary Costs of living and doing business are vital ingredients in economic decisions. There is continuing interest in how Alaska costs compare with those outside of the state, how these comparisons have changed over time, and how prices vary from place to place within Alaska. Although these questions are straightforward, the scarcity of comprehensive price data means that the answers are not. The most detailed information available is for Anchorage, where price trends over time are measured by the federally generated Consumer Price Indexes. The application of the price trends to U.S. Department of Commerce family budget series indicates a gradual decline in the differential between Anchorage prices and the U.S. City Average, from approximately 26 percent in 1980 to 15 percent in Most of this drop has occurred since the onset of the Alaska recession and the concomitant fall in housing prices. The recessionary impact on housing costs as computed in the CPI has held the increase in the Anchorage Consumer Price Index below that of the U.S. City Average, thus reducing the cost-of-living differential. Although formal price indexes are not compiled for other Alaska communities, data collected on food and fuel costs by the University of Alaska Extension Service give a limited basis for cost comparisons. Over the last several years, there appears to be a gradual convergence of prices for these particular commodities in several communities as well as some lessening of the differentials between Anchorage's (lower) prices and the higher prices found in regional rural centers (Bethel, Dillingham, and Nome). Personal taxes are an element of the cost of living in which Alaskans appear to have a particular advantage. The State of Alaska currently levies no major personal taxes, and local property and sales taxes are moderate compared with cities outside the state. For several years Anchorage has had the distinction of having the lowest personal tax burden (combined state and local taxes) as estimated for a group of 51 cities comprised of the largest city in each state plus the District of Columbia. Wages are a primary component of the cost of doing business in Alaska, as elsewhere. The data are generally consistent with the perception that the wage differentials between Alaska and the rest of the United States are declining. For example, the ratio of Alaska weekly payroll per worker to the U.S. Average has declined in several industries- construction, manufacturing, transportation, communications, utilities, wholesale and retail trade, finance, and services. Not only has the Alaska to U.S. Average differential declined but also several of these sectors exhibit substantial declines in average payroll per worker. PETROLEUM SECTOR REPORT, ISER, AIDEA S-1

8 There are serious shortfalls in the data on construction and transportation costs. Although payroll per employee in the transportation industry has been declining, there is not a good secondary series which shows the impact this has had on cost of shipping goods and materials. Similarly, relative payroll per employee in construction has declined, though it remains significantly higher in Alaska than the U.S. Average (72 percent higher in 1987). The detailed Alaska Wage Rate survey by the Alaska Department of Labor does not consistently show declining average wage rates for construction occupations such as carpenters and electricians between 1987 and In fact, statewide average non-union wage rates for these occupations were higher in 1988 than in Generalized construction cost indexes produced by the R.S. Means Co. and Dodge Cost Systems show Anchorage construction costs 30 percent to 40 percent above multi-city averages. However, these indexes are proprietary, and the details of their methodology are unavailable for review. This report summarizes secondary data on prices and costs in Alaska. The information available from secondary sources is indicative of relative costs in Alaska, most clearly for Anchorage. For purposes of individual businesses seeking to compare more specific costs of factor inputs in particular Alaska locations, primary data will be required. PETROLEUM SECTOR REPORT, ISER, AIDEA S-2

9 SECTOR REPORT ALASKA PRICES AND COSTS I. Introduction Costs and prices are a crucial element of the economic equation, whether we are looking at individual economic wellbeing or business decision making and profitability. The "cost of living" and the "cost of doing business" in Alaska have long been topics of intense discussion. Part of the debate results from the participation of individuals on both sides of the market. That is, high prices can appear positive when you're doing the selling (the one receiving the price--especially in the form of high wages) and detrimental when you're doing the buying (paying the high price--buying the labor or other inputs, or purchasing the final output). The challenge for the individual or business has been to make sure they were on the right side of this balance--with higher incomes at least offsetting the higher costs. These higher costs have been attributed to several factors: transportation costs resulting from long distances and dispersed markets; small size of the market contributing to low economies of scale and lack of competition; harsh climatic conditions resulting in shorter construction seasons and need for more expensive building materials and techniques; the requirement for "premium pay" to lure qualified workers to isolated areas. The relative importance of these factors has not been systematically analyzed, nor is it assessed here. Rather, our task is to summarize secondary data which characterize the cost of living in Alaska vis-a-vis other places in the United States. Substantial price differentials also exist among Alaska communities. The reasons for these difference are quite similar to those which help explain the inter-state differences- that is, transportation costs, size of the market (limited competition), inventory costs (exacerbated in some cases by seasonal transportation constraints), and so on. We summarize secondary time series data which give an indication of price differences among places within the state (intra-st~te comparisons). Next we describe limited secondary data on costs which in particular affect Alaska businesses. Finally, we discuss the types of data which would be necessary to more completely measure relative costs and prices in Alaska. The separate sector reports for forestry, mining, petroleum, and tourism contain more specific discussion of business costs in those industries. Since this report was prepared in conjunction with the development of the Alaska Economic Database, which contains time series information on the Alaska economy, the emphasis here is on time trends as opposed to cross-sectional data. The available data is a mix of inter- and intra-state information. The overall picture is sketchy at best. Data shortfalls are noted throughout the report and reiterated in the conclusions. ALASKA PRICES AND COSTS, ISER, AIDEA 1

10 II. Measurement of the Cost of Living There are no perfect generalized measures of how prices affect individuals and businesses. The prices which matter to each entity are the prices of those goods and services which it buys and/ or sells. The cost of this basket of goods, and changes in the price of this basket over time comprise the cost of living. If we were to accurately gauge cost of living there is a great deal which we would need to know. For example, we would need to understand expenditure patterns (items and weightings), the prices of the items purchased over time, how the composition of these expenditures changed over time, and the extent to which changing prices influenced the spending patterns. In other words, what basket of goods and services does an individual buy (or a composite "individual" representing a particular group); what are the prices of the items in this basket, how do these prices change; how does the individual adjust to these changes; and what are the implications for the standard of living. Quite obviously, this depth and breadth of information is unavailable. There are common measurement and index number problems which hamper the measurement of the cost of living anywhere. However, the Alaska situation is even more problematic. The Consumer Price Index -- the broadly defined measurement of price changes over time produced by the federal government -- is applied only to Anchorage. 1 Whereas there is some concern regarding the "fit" of the standard basket to Anchorage consumption patterns, it is clear that rural consumption patterns vary further from the urban norm. So although we would like to be able to look both at inter-state and intrastate cost of living comparisons, our ability to do so is severely limited. A. Consumer Price Index--Anchorage Costs Over Time The U. S. Bureau of Labor Statistics bases their calculation of the Consumer Price Indexes and the Producer Price Indexes on the definition and tracking of the prices of standard baskets of goods. These market baskets, which seek to give a fair representation of purchases by particular groupings, are used to produce indexes which measure changes in prices over time. The producer price index is not specific to Alaska, however the two versions of the Consumer Price Index, CPI-U (All Urban Consumers) and CPI-W (Urban Wage Earners and Clerical Workers) are produced for Anchorage, currently on a semiannual basis. Figure 1 tracks these two indexes from 1978 through the first half of ALASKA PRICES AND COSTS, ISER, AIDEA 2

11 FIGURE 1: Consumer Price Indexes Anchorage, Alaska Index =100 CPI-W All Items - CPI-U All Items Source: U.S. Bureau of Labor Statistics. CPI-W: Urban Wage Earners and Clerical Workers. CPI-U: All Urban Consumers. Since the paths are nearly indistinguishable, we will generally present the index for Urban Wage Earners and Clerical Workers (CPI-W) which has been produced over a longer number of years for Anchorage. 2 Figures 2 through 4 present additional detail by major expenditure categories as compared with the overall index. The items shown on Figure 2--Apparel and Upkeep, Entertainment, Food and Beverages, Transportation -- comprise approximately 52 percent of the All Items index. These categories have moved fairly closely with the overall index. ALASKA PRICES AND COSTS, ISER, AIDEA 3

12 FIGURE 2: Anchorage Consumer Price Index - Urban Wage Earners & Clerical Workers -- Selected Components Apparel & Upkeep -- Entertainment - Food & Beverages = CPI-W All Items -- - Transportation , / / / / ' l-+--+-l-+--+-l-+--+-l--l--+--l--l----t-l--l----t-l--l----t t-ih---t-1h--t-t--t--t-r-t Source: U.S. Bureau of Labor Statistics. Figure 3 shows housing costs and residential rent--a subcategory of the housing component. (Residential rent comprises approximately 19 percent of the housing component and 7.4 percent of the full index.) Housing costs have clearly diverged from the All Items index during the recent recession. Housing costs (including shelter, fuel and other utilities, and household furnishing and operations) comprise 38 percent of the All Items index for Anchorage. This has been the primary component which has held down inflation in Anchorage during the last three years. However, the CPI measures changes in current prices. In terms of housing, these price declines apply to renters and new buyers, and not to existing owners, whose mortgage payments do not decline with falling residential real estate values. 3 ALASKA PRICES AND COSTS, ISER, AIDEA 4

13 FIGURE 3: Anchorage Consumer Price Index - Urban Wage Earners and Clerical Workers -- Housing Components Index: = Housing -- Residential Rent - CPI-W All Items Source: U. S. Bureau of Labor Statistics. Figure 4 shows those major components for which prices have risen markedly faster than the overall index. Medical care comprises 4.9 percent of the full index while Other Goods and Services (which includes personal care) is 5.2 percent of the total. Thus although these categories have risen at a much higher rate than the full index, they represent a relatively small portion of the total index weighting. FIGURE 4: Anchorage Consumer Price Index - Urban Wage Earners and Clerical Workers -- Rapidly Rising Components Index = CPI-W All Items -- Medical Care Other Goods Source: U.S. Bureau of Labor Statistics ALASKA PRICES AND COSTS, ISER, AIDEA 5

14 B. Anchorage Prices Compared with U.S. Average The CPI can also give an indication of the relative rates of change in prices in Anchorage vis-a-vis other places in the U.S. or to an average for the U.S. as a whole. Figure 5 shows the All Items Anchorage Consumer Price Index for All Urban Consumers (CPI-U), the U.S. Average CPI-U, and the Anchorage Index for All Items except Shelter Costs. The two overall indexes diverge in the late 1980's. However, the Anchorage index adjusted for shelter costs tracks closely with the U.S. Average CPI-U over the entire period. This reflects the impact of the recession on the Anchorage housing components as discussed above. FIGURE 5: Consumer Price Indexes--All Urban Consumers Anchorage, Alaska and U.S. City Average Index = Anchorage U.S. Average - Anch. All Items less Shelter Source: U.S. Bureau of Labor Statistics. Annual Averages expect First Six Months, Table 1 shows that measured since the re-basing of the indexes on a average, most components of the index for Anchorage have risen more than the U.S. Average. ALASKA PRICES AND COSTS, ISER, AIDEA 6

15 TABLE 1: U.S. City Average and Anchorage Consumer Price Indexes Urban Wage Earners Average First Half of 1989 ( = 100) All Items Food Housing Apparel & Upkeep Transportation Medical Care Entertainment Other Goods & Svcs. All Items Less Shelter Anchorage U.S. City Average Source: U.S. Bureau of Labor Statistics. The CPI does not provide a comparison of the actual costs of living (the cost of purchasing the market basket) at a point in time in Alaska versus other places. Such comparisons were possible using annual family budgets for Anchorage and other cities published by the U.S. Bureau of Labor Statistics. However, 1981 was the last year these budgets were produced. Absent this data, we can apply the Anchorage Consumer Price Index to the 1981 Anchorage annual budget and the U.S. Average CPI to the 1981 U. S. Average annual budget, and infer the changes in relative costs of living. Figure 6 shows the results. There are some pitfalls with this methodology since the budgets and price indexes are not based on identical market baskets and the price index weightings have changed over time. As we extend this procedure, the more problematic it becomes as the 1981 budget slips further out of date, and becomes less representative of the market basket actually purchased by Anchorage consumers. % Anchorage Costs Over US Average FIGURE 6: Cost of Living Differential 40% 37% 37% 37% 35% 30% 25% 20% 15% 10% 5% 0% Soun:e: MAP Data Base, Institute of Social and Economic Research. ALASKA PRICES AND COSTS, ISER, AIDEA 7

16 In 1979 the budget comparison approach yielded a 35 percent differential of Anchorage prices relative to the U.S. Average. This differential had declined to 27 percent by 1981 (the last year of publication of budget figures), and using the procedure described above for adjusting the 1981 budget using the appropriate CPI's, this differential had further declined to approximately 15 percent in As discussed above, much of this decline is attributable to Alaska's recent recession, and particularly the impact of recession on the cost of housing as measured in the CPI. The American Chamber of Commerce Researchers Association publishes an Intercity Cost of Living Index on a quarterly basis. Although the data for Anchorage date back to 1985, the index cannot be used as a time series and therefore is not included in the Alaska Economic Database. Participation in the survey is voluntary and Anchorage, for example, did not participate in the first quarter of 1986, nor the last three quarters of For each time period the index is normalized to an All Cities Average based upon the cities participating that period. Thus, fluctuations reflect not only changes in relative prices, but also changes in the composition or coverage of the data; i.e., the relative index base (the All Cities Mean) changes every quarter. Despite these and other problems with the ACCRA Index, it generally supports the findings noted above regarding the lessening of the Anchorage-U.S. City Average cost of living differential. 4 III. Commodity Prices/Costs--Intra-State Price Comparisons Since the Consumer Price Index is produced only for Anchorage it does not shed a great deal of light on what is happening to prices elsewhere in the state or to cost differentials among various Alaska locations. Since Anchorage serves as a service and supply center for many areas of the state, some inferences can be drawn regarding the flow through impacts of changes in Anchorage costs. That is, as the differential between Anchorage and the U.S. average becomes smaller, differences in costs in communities which use Anchorage as a supply center may also reflect a declining differential, if this effect is not offset by other factors such as changes in transportation costs or the absence of competition. Several studies have been undertaken over the last decade to determine cost differentials within Alaska at a point in time. The Community Information Center (now called the Community Research Center) of the Fairbanks North Star Borough has conducted surveys comparing the cost of living in Fairbanks and Anchorage. Their 1978 survey concluded that the overall Fairbanks/ Anchorage differential was in the range of 5% to 7%. 5 In 1980, the CIR documented an 8% differential (or a 6% differential if the 5% Fairbanks sales tax was excluded from the calculations). 6 The Alaska Geographic Differential Study, 1985, prepared by the McDowell Grou~ for the State of Alaska, was a more broadly based look at cost differences across the state. The purpose of this study, which covered 19 election districts plus Seattle, was to update the geographic pay differentials whereby salary schedules for state employees vary by location. A "reverse pricing" methodology was used where consumption patterns for each area were analyzed and used to design and weight a market basket for each district. Then each market basket was priced in its own district and again in Anchorage -- the base ALASKA PRICES AND COSTS, ISER, AIDEA 8

17 district. With Anchorage cost of living set equal to 1.00, the largest differential was computed for the Barrow / Kotzebue district at The lowest in-state comparative cost was.94 for Palmer/ Wasilla. Perhaps the most striking finding was a cost differential of only 3% for the Fairbanks/ Fort Yukon district compared to Anchorage (1.03). Table 2 gives the summary results by district. Although the study authors recommended periodic updates, this has not occurred. TABLE 2: In-State Cost of Living Differentials, District Ketchikan/ Prince of Wales Petersburg/Wrangell Sitka Juneau Icy Strait/ Lynn Canal Cordova/ Valdez Palmer / Wasilla Anchorage (Base District) Seward Kenai/ Cook Inlet Kodiak Aleutian Islands Bristol Bay Bethel Yukon/ Kuskokwim Fairbanks/ Fort Yukon Barrow / Kotzebue Nome Wade Hampton Seattle Cost of Living Differential Source: Alaska Geographic Differential Study 1985, The McDowell Group, for the State of Alaska, April In August 1989, the Community Research Center of the Fairbanks North Star Borough conducted a survey similar to their earlier work designed to compare the cost of living in Fairbanks and Anchorage. The preliminary analysis discussed in their quarterly publication, Fairbanks Community Research Quarter, Fall 1989, estimates and overall cost of living differential of 3.6 percent higher in Fairbanks over Anchorage. Detailed analysis of the survey results will be forthcoming in later reports by the Research Center. A. Cost of Food There is limited data available on price trends in locations around the state. One such source in the Food Price Survey which is produced by the University of Alaska Extension Service in cooperation with the U.S. Department of Agriculture. The table and figures below summarize selected data from this source. Table 3 shows the cost in dollars ALASKA PRICES AND COSTS, ISER, AIDEA 9

18 per week of a "Low Budget Food Plan" as defined by the U.S. Department of Agriculture for a family of four which includes elementary school aged children. Although this food plan may not reflect the actual market basket of Alaska families, it does serve as a basis for tracking food costs over time, and for comparing these costs among locations. Year Qtr & TABLE 3: Cost of Food in Alaska Communities -- Survey Data LowBu~et P Ian: F amily of 4 with E lementary Sch Ch'! 1 drcn U.S. Av. Anch. Fbx Juneau Dillinghm Nome Bethel (S) (S) (S) (S) ($) (S) ($) &S &S &S &S &S &S &S &S &S U.S. Average is not directly comparable since market basket and pricing are not the same as those used in the Alaska survey. Source: Quarterly Survey of Food Prices, Univ. of Alaska Extension Service and the U.S. Department of Agriculture. ALASKA PRICES AND COSTS, ISER, AIDEA 10

19 Figure 7 shows the costs among urban commumtles were quite dispersed in the early 1980's, with Anchorage costs lower than those in Fairbanks and Juneau. Over the period however the costs tended to converge not only within Alaska but with the U.S. Average cost. Direct comparison with the U. S. Average is inappropriate since the Alaska market basket is much smaller (and thus more variable). Further, the Alaska survey substitutes canned items which are more widely (and cheaply) available for some fresh and frozen items, such as fruit. However the comparison does give an indication of the direction of the change in the cost differential over time. In Figure 8 the food cost data is converted into a ratio, with the U.S. Average Cost equaling 1.00 and Anchorage, Fairbanks and Juneau costs as the amount in excess of the U.S. Average. For example in early 1981 Anchorage costs were 1.14 times the U.S. average (14 percent above), but this difference had declined to less than 1 percent above the U.S Average in FIGURE 7: Food Costs - Alaska Cities Dollars Per Week - U.S. Av. -- Anch. - Fbx - - Juneau r----,-----~~ / H'---'-----'---"--'--=--'---'..>, :--...= :::::''-:.:,,. _,..c...,.l.. ""' ~,,;:::>',;;. ""' -..._,,..,,~_.,..,.._,.,..,.,... ~ ~... / '"'., ~/ r, / ,.,,,..---' fv"'---- :.,~,,1~7--_.: ;_;~~=='7""'======--~------~ =---~===::::= l ~ Low Budget Food Plan Family of Four with Elementary School Children Source: Quarterly Survey, University of Alaska Extension Service and U.S. Department of Agriculture. FIGURE 8: Ratio of Alaska Food Costs to U. S. Average Ratio: U.S. Av. = 1 - Anchorage - Fairbanks - Juneau Source: Quarterly Survey, University of Alaska Extension Service and U.S. Department of Agriculture; computed from Low Budget Food Plan, Family of Four with Elementary School Children. AIASKA PRICES AND COSTS, ISER, AIDEA 11

20 Figure 9 and 10 show a somewhat similar pattern for the rural commumues of Dillingham, Nome, and Bethel. However, for these communities the food costs, although they appear to have declined relative to the U.S. Average are still 60 percent to 70 percent above that average. FIGURE 9: Food Costs -Alaska Communities Dollars Per Week I - Dillingham -- Nome - Bethel t t------~-'-' w 11 ~----+-l-~'_'-.:...-.c.. ' /L./.-"~\l,--_,.;...'_,_.,/.~_:..'------'/" ".-=_:.. ~::~~ :=/=-,=,,,=/=/=',=============== =-=~':\=j=/==\=~~: ~:--:-= -~=-=-=-=j~:\ : :-SZ:::= :_...=>-="'-;;T=~== =\>=:'=' =\=':=/= ~ ==-=~ =.~:.':&: -~=-~=== ~=- = / t t >-----< t Low Budget Food Plan - Family of Four Source: Quarterly Survey, University of Alaska Extension Service and Department of Agriculture.... = = FIGURE 10: Ratio of Alaska Food Costs to U.S. Average Ratio: US. Av.= 1 +Dillingham ~ /'.. - \.. _ I!" \ - -Nome -Bethel Low Budget Food Plan - Family of Four Source: Quarterly survey, University of Alaska Extension Service and Department of Agriculture ALASKA PRICES AND COSTS, ISER, AIDEA 12

21 When viewed as a ratio compared to Anchorage prices (Figure 11 ), the convergence among the communities is evident, and since the rnid-1980's there appears a relatively stable differential between the cost in Anchorage and the cost in these communities. (The data for the early 1980's is somewhat sketchy and reflects a somewhat erratic pattern from quarter to quarter, particularly for Nome.) FIGURE 11: Ratio of Selected Alaska Communities Food Costs to Anchorage Costs Ratio: Anchorage= Dillingham ~Nome 0Bethel ~--~---~ ~-...-~ ~--+-~ Low Budget Food Plan - Family of Four Source: University of Alaska Extension Service and U.S. Department of Agriculture, Food Price Surveys. ALASKA PRICES AND COSTS, ISER, AIDEA 13

22 B. Cost of Fuel Other commodities included in the University of Alaska Extension Service quarterly survey are heating oil and gasoline. Since these items are often supplied to rural communities in 55 gallon barrels, that is the quantity that is priced in the survey in order to assure comparability between urban and rural locations. As is seen is Figures 12 and 13 the price of heating oil has been erratic over the period, with prices in rural areas generally higher than in the more urban communities (Anchorage, Fairbanks, and Juneau). FIGURE 12: Cost of Heating Oil $/ gal. - Anchorage - Fairbanks - Juneau Source: Quarterly Survey, University of Alaska Extension Service and U.S. Department of Agriculture. Based on purchase of 55 gallon quantity. FIGURE 13: Cost of Heating Oil $/gal. 0 Dillingham - Nome - Bethel /o / Source: Quarterly Survey, University of Alaska Extension Service and U.S. Department of Agriculture. Based on purchase quantity of 55 gallons. ALASKA PRICES AND COSTS, ISER, AIDEA 14

23 Between 1980 and 1987 Nome had the highest prices of the three rural communities, however beginning in mid-1987 the cost of heating fuel in Dillingham as reflected in this survey exceeded the cost in Nome. For the ten observations (quarterly surveys) in 1987 and mid-1989, Dillingham averaged 50 percent higher than Anchorage costs of heating fuel, Nome 38 percent higher, and Bethel (9 observations) 32 percent higher than Anchorage. A similar urban/rural pattern emerges for the cost of unleaded gasoline (Figure 14). The lowest prices were found most often in Anchorage and Fairbanks, while the highest price among these communities was most often recorded in Nome. Utility prices also vary significantly among Alaska communities. Although important to individual consumers, utility costs are also an important business input and so are discussed in Section V. C. of this report. FIGURE 14: Cost of Unleaded Gasoline Range among Alaska Communities $/gal. I Anch. D Fbx + Nome 0 Bethel Source: Quarterly Survey, University of Alaska Extension Service and U. S. Department of Agriculture. Based on purchase quantity of 55 gallons. ALASKA PRICES AND COSTS, ISER, AIDEA 15

24 IV. Personal Taxes Taxes paid by individuals are also a component of the cost of living. Depending on the base against which taxes are levied (e.g., sales, property, income), the tax may appear as part of the "price" of a good or as separate expenditure item. The CPI market basket does not include taxes. Here we briefly discuss Alaska tax levels vis-a-vis taxes outside the state, as well as presenting some information on property and sales taxes in various Alaska communities. A. Alaska State Taxes: Inter-state Comparison The State of Alaska does not currently levy the broad based personal taxes which are found in most states. There is no state personal income tax, sales tax, or residential or personal property tax. The state does levy excise taxes on motor fuel, alcoholic beverages, and cigarettes; along with certain licenses and fees (e.g., automobile registration, sports hunting and fishing licenses, recreational facility use fees). Only four other states have no general sales tax--montana, New Hampshire, Oregon and Delaware. Other states without income taxes are Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Alaska is the only state which has neither an income tax or sales tax. As result, state personal taxes in Alaska are very low compared with other states. This result is strengthened when we consider the per capita payment made to residents by the state through the Permanent Fund Dividend program. This annual payment which can be viewed as a "negative tax" would, for most individuals, far exceed the total state excise and license taxes paid. B. Alaska Local Taxes: Intra-state Comparison Alaska municipal governments have been one of the major rec1p1ents of state funding during the oil boom years, through both capital grants and operating revenues (notably the State Revenue Sharing Program and the Municipal Assistance Program). 8 Local governments also impose the traditional taxes -- real and personal property taxation and sales taxes. Table 4 shows local property tax rates in mills for several major Alaska communities. A mill is a hundredth of a percent, and in property taxation is applied against assessed value of property. This is equivalent to dollars of tax per thousand dollars of assessed valuation. The rates among communities are comparable since state law requires that local assessment procedures reflect 100 percent of fair market value. ALASKA PRICES AND COSTS, ISER, AIDEA 16

25 TABLE 4: Property Taxes Alaska Communities (mills = dollars of tax per $1000 of assessed value) Anchorage Fairbanks Juneau Seward Homer Ketchikan Palmer Wasilla Kodiak Source: "Alaska Taxable," A laska Department of Community and Regional Affaris. Figure 15 shows the trends in local tax rates over the last several years. Mill rates declined as oil revenues (and commensurate state funding of local functions) increased, and rates rose as state revenues (and state funding) fell. The rates increased for two reasons. First, as mentioned above, municipalities sought to replace falling state revenues from local sources, with property taxes being the primary local source. Secondly, one of the key components of the Alaska recession has been falling value of resident and commercial real estate--the tax base against which the mill rate is applied. As a result mill rates had to increase substantially to simply offset the declining tax base, even before any additional revenue could be generated from this source. ALASKA PRICES AND COSTS, ISER, AIDEA 17

26 $of tax /$1000 of Assessed Value FIGURE 15: Property Tax Rates Alaska Municipalities - Anchorage -- Fairbanks - Juneau n Source: "Alaska Taxable,' (various years), Alaska Department of Community and Regional Affairs. Several major municipalities also levy retail sales taxes, although Anchorage and Fairbanks, the state's two largest cities, currently do not. Sales tax rates have been fairly. stable over the last decade, although (as can be seen in Table 5) some cities eliminated or lowered their sales taxes in the high state revenue years (the early 1980's). TABLE 5: Local Sales Tax Rates (%of retail sales) Munic. Fairbanks Juneau Seward Homer Ketchikan Palmer Wasilla Kodiak An ch. N.S.Bor. City/Bor. Home Rule 1st Class Home Rule Home Rule 1st Class Home Rule n Source: 'Alaska Taxable," Alaska Department of Community and Regional Affairs. ALASKA PRICES AND COSTS, ISER, AIDEA 18

27 C. State and Local Taxes: Relative Tax Burdens (Anchorage vis-a-vis Other Cities) The Government of the District of Columbia has developed comparative data regarding the burden of state and local personal taxes in the largest city in each state plus the District. For several years running, Anchorage has taken the honors as the city with the lowest personal tax burden of all these cities. This sterns from the virtual absence of state taxes, coupled with moderate local property taxes. In 1988 Anchorage ranked 26 out of 51 in terms of property tax rates adjusted for varying relationships between market and assessed values. The effective rate for Anchorage was the median rate and approximately 90 percent of the unweighted average of 51 observations. Table 6 summarizes these tax burden comparisons for recent years. Taxes are a component of the cost of living which is not included in the consumer price indexes (although it was included in the BLS Family Budget series). The Washington D. C. study estimates that in 1988 the average tax burden represented by major state and local taxes (income, property, sales, and auto) for families of four with incomes of $50,000, was 8.5 percent of income. For Anchorage, the burden estimate was 3.5 percent. 9 Further, these burden estimates do not consider the offsetting effects of the Permanent Fund Dividend payments, which for a family of four, would (at present levels) more than cover all major state and local taxes. At the present time, Alaskan clearly get to keep a larger proportion of their pre-tax income than do residents of other states. Some of this cost of living advantage will dissipate to the extent that the state and local governments raise taxes to offset declining oil revenues. TABLE 6: Relative Tax Burdens F am1.!r_ of Four - Income ~0000. EJ'..ear Anchor~, AK Seattle, WA Portland, OR Avera~ Burdens J Anchorage $Burden Rank $Burden Rank S Burden Rank Mean Median l % of Mean % % 1983 N/ A N/ A N/ A N/A N/ A N/ A N/ A N/ A N/ A % % % % % Source: Government of the District of Columbia, Department of Finance and Revenue. 'Tax Rates and Tax Burdens in the District of Columbian; A Nationwide Comparison data not available. ALASKA PRICES AND COSTS, ISER, AIDEA 19

28 V. Business Costs The primary elements of costs discussed thus far apply most directly to individuals. However, these cost of living factors also enter into the cost of doing business, directly and indirectly. For example, overall cost of living influences salaries as well as the ability to attract and retain employees. Further, businesses buy many of the same items covered by the consumer price indexes. Analogous to measurement of consumer cost of living, the prices and quantities of the various inputs to the production process of a business comprise its market basket. Here again there is a great deal of variance in the composition of purchases among types of businesses and even among businesses producing the same product or service. The composition of these baskets of inputs are primarily determined by the prices and availability of inputs, technology, and the substitutability among factors in the production process. There is no accepted composite measure or index of the cost of doing business in Alaska. In an effort to shed some light on business costs, we present available data on the costs of factor inputs. Included are labor costs, utilities, building and transportation. In some of these areas the data are, unfortunately, quite sparse. A. Labor Costs Labor is a major input and important determinant of the cost of doing business in Alaska and elsewhere. We can derive some measure of the importance of payroll as a business cost from Bureau of Census data. The 1987 Census of Service Industries for Alaska reported that for federally taxable services, payroll was 38.3 percent of receipts, and for tax exempt businesses (which include such things as health services, day care centers, legal aid, research, and social services) payroll was nearly 48 percent of expenses. In wholesale trade, annual payroll was 47.3 percent of operating expenses (which include overhead, but in this case exclude cost of goods sold). 10 Payroll in wholesale trade for 1987 was 7.62 percent of total sales; while for retail sales, payroll was 13.4 percent of sales. These figures reflect the direct labor requirement. Obviously, other types of purchases by these businesses (e.g., materials, business services, utilities) contain a labor component as well. We have approached the labor cost question using three sets of secondary data. At the most general level we have compared Bureau of Labor Statistics data on payroll per employee by industry for the U.S. as a whole with those for Alaska. These data are developed by state and federal agencies from quarterly tax reports which are required from employers with employees covered by unemployment insurance laws. 11 Secondly, we compared average hourly wages for several classes of office workers and plant workers in Alaska with those in the Seattle, Washington area. The third group of wage data we reviewed is the Alaska Department of Labor Survey of Alaska Wage Rates. This survey contains regional information, and thus provides a basis for within-state comparisons. However, an important improvement in methodology was made in the development of the data in As a result, the data for earlier years is not comparable, and so a time series is not available. We have included the two years of data in the Cost/Price data set of the ALASKA PRICES AND COSTS, ISER, AIDEA 20

29 Alaska Economic Database for general interest and to serve as a template in which to add the information in upcoming years. 1. Average Payroll per Employee by Industry The Alaska Department of Labor, Research and Analysis Section publishes extensive employment data. A major source of this data is the quarterly reports filed by employers who are subject to the State unemployment insurance law. This coverage is quite broad and, moreover, is consistent with the federal Bureau of Labor Statistics standards and practices throughout the U.S. 12 Table 7 shows the ratios of Alaska payroll per employee to U.S. average payroll by industry. These ratios are based on nominal payrolls and have not been adjusted for differences in costs of living. The industry breakdown is by selected Standard Industrial Classification (SIC) codes for which Alaska and U.S. data were available. TABLE 7: RATIO OF ALASKA TO U.S. AVERAGE PAYROLL PER EMPLOYEE MINING ( ) OIL & GAS EXTRACTION (1300) CONSfRUCTION ( ) MANUFACI'URING ( ) PAPER & ALLIED PRODUCT'S (2600) PETROLEUM REFINING (2900) TRANSPORTATION ( ) TRUCKING AND WAREHOUSING (4200) WATER TRANSPORTATION (4400) AIR TRANSPORTATION (4500) COMUNICATION (4800) ELECTRIC, GAS, & SANITARY SERVICES ( WHOLESALE TRADE ( ) RETAIL TRADE ( ) FINANCE, INS., REAL ESf (~799) SERVICES ( ) BUSINESS SERVICES (7300) Source: U.S. Bureau of Labor Statistics; Alaska Department of Labor. Note: Standard Industrial Classification Codes in parentheses. ALASKA PRICES AND COSTS, ISER, AIDEA 21

30 The downward trend in these ratios over time is indicative of the reduction in the wage differentials between Alaska and the rest of the country. Of the industries shown, the most extreme differentials appear in mining (which is dominated by oil and gas extraction), and construction. The construction wage differential has, however, declined steadily over the period, from 2.37 in 1981 to 1.72 in 1987 (see Figure 16). FIGURE 16: Ratio of Alaska Payroll per Employee to U. S. Average Alaska: U.S. Av. Construction Industry (SIC ) Payroll (ratio) < ~ ~ ~ Source: Derived from data in Bureau of Labor Statistics, EMPLOYMENT AND WAGES ANNUAL AVERAGES, and Alaska Department of Labor, STATISTICAL QUARTERLY, various issues. Declines in the transportation industry have been dramatic, particularly in Trucking and Warehousing (SIC 4200) shown in Figure 17. To the extent that these lower wage differentials are reflected in lower relative prices for trucking and warehousing services, this would serve to lower input costs to other industries as well. These relative payroll figures represent some of the very limited information available concerning costs in the transportation industry. TRANSPORTATION ( ) FIGURE 17: Ratio of Alaska Payroll per Employee to U.S. Average -- Transportation Industry 0 Trucking and Warehousing (4200) X Water Transportation (4400) Ll Air Transportation (4500) Ratio ~:~x~~ 1.6~~====><====~~=======~====~-=::::::::~... - ~== = x =~~~ 1L,S:.========2S:.======~-1~~~~~s---~==:::::::::~<; ;~-----7( Source: Derived from data in Bureau of Labor Statistics, EMPLOYMENT AND WAGES ANNUAL AVERAGES, and AK. Dept. of Labor, STATISTICAL QUARTERLY, various issues. ALASKA PRICES AND COSTS, ISER, AIDEA 22

31 Communications, utilities, wholesale trade, and FIRE (finance, insurance and real estate) also show substantial declines. (Figures ) FIGURE 18: Ratio of Alaska Payroll per Employee to U.S. Average -- Communication and Public Utilities Communication (4800) + Electric, Gas, & Sanitary Svc. (4900) Ratio ~ ' ~::r===~===~~; ;... ~ - -~-- -=- = -~=======~:::::::::::::::::::.::~===~~~ 1 >-----~----~----~----~----~---~ Source: Derived from Bureau of Labor Statistics EMPLOYMENf AND WAGES ANNUAL AVERAGES; and Alaska Dept. of Labor, STATISTICAL QUARTERLY, various issues. FIGURE 19: Ratio of Alaska Payroll per Employee to U.S. Average -- Trade Ll WHOLESALE TRADE ( ) RETAIL TRADE ( ) Ratio ~ ~ !-----~----~----~---~----~---~ Source: Derived from Bureau of Labor Statistics EMPLOYMENf AND WAGES ANNUAL AVERAGES, and AK Dept. of Labor, STATISTICAL QUARTERLY, various issues. Ratio FIGURE 20: Ratio of Alaska Payroll per Employee to U.S. Average -- Finance, Insurance & Real Estate ( ) Source: Derived from Bureau of Labor Statistics EMPLOYMENf AND WAGES ANNUAL AVERAGES; and Alaska Depanment of Labor, STATISTICAL QUARTERLY ALASKA PRICES AND COSTS, ISER, AIDEA 23

32 Figure 21 shows declining payroll differentials in services. As noted above, payroll is a particularly important cost in this industry. One component of services of importance to business costs is business services (SIC 7300) which includes business inputs such as advertising, consumer credit reporting services, mailing, reproduction, commercial art, secretarial services, equipment rental, employment agencies, data processing, computer rental, and telephone answer services. Payroll comprised 44.2 percent of business service receipts in 1987, and as can be seen, relative payroll per employee has declined substantially over the last several years. FIGURE 21: Ratio of Alaska Payroll per Employee to U.S. Average -- Services Ratio 0 SERVICES ( ) ~ Business Svcs. (7300) ====~~ Source: Derived from data in Bureau of Labor Statistics, EMPLOYMENT AND WAGES ANNUAL AVERAGES, and AK. Dept. of Labor, Sf A TISTICAL QUARTERLY, various issues. In several industries not only is there a decline the wage differential, but also an actual decline in average payroll costs per worker in current dollars. Table 8 below shows average weekly payroll by industry for several of these. TABLES: Average Weekly Payroll per Employee - Alaska Industiy_(SIC Code) CONSTRUCTION ( ) TRANSPORTATION ( ) Trucking and Warehousing (4200) Water Transportation (4400) TI COMUNICATION (4800) ELECTRIC, GAS, & SANITARY m SERVICES (4900) WHOLESALE TRADE ( ) RETAIL TRADE ( ) SERVICES ( ) Business Services (7300) Source: U.S. Bureau of Labor Statistics; Alaska Department of Labor. Note: Standard Industrial Classification Codes in parentheses. ALASKA PRICES AND COSTS, ISER, AIDEA 24

33 It must be noted in reviewing these numbers that payroll per employee in this context includes all remuneration paid to workers divided by the number of employees for the pay period. Thus, the data reflect an average payment per job, which is not the same as earnings per employee or actual wage rates. Changes in the distribution of jobs within an industry, or changes in the amount of overtime or part time work can obscure changes in wages per se. In contrast, the discussion below pertains to actual wage rates for specific types of jobs. 2. Wage Rate Comparisons: Alaska and Seattle The Bureau of Labor Statistics conducts annual wage surveys for seventy areas throughout the United states. These surveys cover specific jobs and provide straight time wage rates that can be compared among areas and over time. A major purpose of the area wage survey program is to provide information on the level and movement of wages in various labor markets. The surveys cover firms with 50 or more employees in the following sectors: manufacturing; transportation, communications, and other public utilities; wholesale trade; retail trade; finance, insurance and real estate; and services. Government, construction, mining and agriculture are not covered. In the 1988 Alaska survey, 349 establishments fell within the scope of the survey. Of these, 110 establishments (32 percent of those within this scope), and 30,987 workers ( 49 percent) were studied. Tables 9A and 9B present mean hourly wage rates for selected office, professional/technical, and plant jobs in the Seattle, Washington area and Alaska. (Plant jobs are divided into two broad categories: Maintenance, Toolroom and Powerplant; and Materials Movement and Custodial.) Also shown are these hourly wages adjusted for inflation using the Seattle and Anchorage Consumer Price Indexes (All Items) for Urban Wage Earners and Clerical Workers (CPI-W); and the ratios of Alaska to Seattle wages over time. Figures 22 and 23 show the ratios of the inflation adjusted wages over time for these jobs. Although in most cases the ratios are smaller at the end of the twelve year period (reflecting a smaller differential between Alaska and Seattle wages), there are no clear and consistent trends in the data. For the five office jobs, the unweighted average of Alaska wages is 14 percent above Seattle in 1988, with a range from 23 percent above (key entry operator) to 5 percent below (computer operator). For the four plant worker jobs for which 1988 data were available, wages in Alaska ranged from 62 percent above Seattle (maintenance mechanic) to 8 percent below for truckdrivers. Alaska real wages for carpenters and forklift operators were about 10 percent above Seattle. The current recession would be expected to exert downward pressure on wage levels, however there are many other factors (such as the degree of unionization, government wage and hiring policies) which may come into play in determining wages. As noted, this survey covers firms with fifty or more employees. If smaller firms had been included, the results might have been different. Further, the construction industry, which has been badly hit by the recession, is excluded from the survey. ALASKA PRICES AND COSTS, ISER, AIDEA 25

34 TABLE 9A: Wage Rate Comparisons Alaska and Seattle Everett Area Office Workers Secretary (Alaska and Seattle-Everett) Professional and Technical Computer Operator Alaska Seattle Alaska Seattle AK/Sea AK/Sea Alaska Seattle Alaska Seattle AK/Sea AK/Sea ($/hr) ($/hr) $/hr real $/hr real (real) (nominal) ($/hr) ($/hr) $/hr real $/hr real (real) (nominal) 19TI o? % % Office Workers Key Entry Operator Office Workers Switchboard Operator Alaska Seattle Alaska Seattle AK/Sea AK/Sea Alaska Seattle Alaska Seattle AK/Sea AK/Sea ($/hr) ($/hr) $/hr real $/hr real (real) (nominal) ($/hr) ($/hr) $/hr real $/hr real (real) (nominal) n Office Workers File Clerk Consumer Price Index = 100 Alaska Seattle Alaska Seattle AK/Sea AK/Sea All Items: Wage Earners and Clerical Workers ($/hr) ($/hr) $/hr real $/hr real (real) (nominal) Seattle Anchorage TI % Source: Bureau of Labor Statistics Area Wage Surveys for Alaska and Seattle (19TI-1988). Seattle-Everett Wages adjusted using CPI-W Seattle, =100. Alaska Wages adjusted using CPI-W Anchorage, = ALASKA PRICES AND COSTS, ISER, AIDEA 26

35 TABLE 98: Plant Workers Wage Rate Comparisons - Alaska and Seattle Everett Area Maintenance,Toolroom & Powerplant - Main!. Carpenters Maintenance,Toolroom & Powerplant Maint. Electrician Alaska Seattle Alaska Seattle AK/Sea AK/Sea Alaska Seattle Alaska Seattle AK/ Sea AK/ Sea ($/hr) ($/hr) $/hr real $/hr real (real) (nominal) ($/ hr) ($/hr) S/hr real $/hr real (real) (nominal) 19n #N/ A #N/ A #N/ A #N/ A #N/ A #N/A #N/ A #N/ A #N/ A #N/ A #N/A #N/ A #N/ A #N/A #N/ A #N/ A #N_l_A #N/A #N/ A #Nj_A Maint.,Toolroom & Pwrplt Maint. Mechanics (Machinery) Material Movement & Custodial - Truckdrivers, Med. Truck Alaska Seattle Alaska Seattle AK/ Sea AK/Sea Alaska Seattle Alaska Seattle AK/Sea AK/ Sea ($/hr) ($/hr) $/hr real S/hr real (real) (nominal) ($/hr) ($/hr) $/hr real $/hr real (real) (nominal) n L n Material Movement & Custodial Forklift Operators Consumer Price Index = 100 Alaska Seattle Alaska Seattle AK/ Sea AK/ Sea All Items: Wage Earners and Clerical Workers ($/hr) ($/hr) ~hr real $/hr real (real) (nominal) Seattle Anchorage 19n Source: Bureau of Labor Statistics Area Wage Surveys for Alaska and Seattle (19n-1988). Seattle-Everett Wages adjusted using CPI-W Seattle, =100. Alaska Wages adjusted using CPI-W Anchorage, = 100. #NA = Not Available ALASKA PRICES AND COSTS, ISER, AIDEA 27

36 FIGURE 22: Ratio of Alaska/Seattle Real Wages Office and Technical Workers Ratio Secretary D Computer Op. Key Entry Op. 0 Switchboard Op. File Clerk 0.8 -' Source: Bureau of Labor Statistics, Area Wage Surveys, various years. Adjusted using Consumer Price Index for Seattle and Anchorage. See notes to Table 9A. FIGURE 23: Ratio of Alaska/Seattle Real Wages Plant Workers Ratio Carpenters D Electricians + Mechanics 0 Truckdrivers Forklift Op Source: Bureau of Labor Statistics, Area Wage Surveys, Various Years. Adjusted using Consumer Price Index, Seattle and Anchorage. See notes for Table 9B. ALASKA PRICES AND COSTS, ISER, AIDEA 28

37 3. Alaska Wages by Occupation The third set of wage data examined is the Alaska Wage Rate Survey conducted by the Alaska Department of Labor. These data are important in providing regional information by occupation. Although the survey has been conducted annually since 1975, 1987 was the first year a weighted average method of calculating wage rates was used. Therefore, it will be some time before a comparable time series will be available. Table 10 presents examples of occupations for each of seven major categories: managers and administrators; professional, paraprofessional and technical; sales; clerical and administrative support; services; and, production/ construction/ operating/ materials handling. For each occupation, the statewide average and regional average wage rates for 1987 and 1988 are shown. The regional information is arranged in ascending order based on 1988 rates. The averages shown are for non-union wages. The specific occupations shown in the table were selected in an attempt to find jobs which were common across the six areas of the state. There is little consistency in the ranking of wage rates among regions. Rather, a balance occurs, with wages in each area sometimes being above and sometimes below the statewide average. The two exceptions are the Gulf Coast area, where wages were below the statewide average in 18 of the 20 occupations shown; and the Northern region where wages were above the statewide average in 15 of the 19 occupations for which information was available. ALASKA PRICES AND COSTS, ISER, AIDEA 29

38 TABLE 10: Average Non-Union Wages - Alaska Wage Survey Man~ers and Administrators Food Service & Lodging Managers Merchandise Managers Statewide Statewide Interior Northern Southwest Southeast Gulf Coast Gulf Coas Southeast Southwest Northern Anch/Mat Anc1!L_Mat Interior Professional, Paraprofessional and Technical Accountants & Auditors Electrical & Electronic Engineering Techs Social Workers Statewide Statewide Statewide Southeast Interior Southeast Gulf Coa Southeast Gulf Coas Anch/Ma Gulf Coas Anch/ Mat Interior Anch/ Mat Interior Southwes Northern Southwest Northern Southwest Northern Sales Clerical and Admin. Support Cashiers Salespersons: Retail Billing, Cost, & Ra te Ocrks Statewide Statewide Statewide Anch/Ma Northern Anch/ Mat Southwes Southwest 7.39 GulfCoas Gulf Coa Anch/ Mat Southeast Interior Gulf Coas Interior Southeast Southeast Southwest Northern Interior Northern Clerical and Admin. Support Clerical Supervisors & Office Managers Hotel Desk Clerks Stock Oerks:StockrmfWarehse/ Storage Yd Statewide Statewide Statewide JO.JO GulfCoa Southeast Southwest Southeast Gulf Coas Gulf Coas Southwes Anch/ MatSu 7.48 Southeast Interior Northern Anch/ Mat Anch/Ma Interior Interior Northern Southwest Northern Service Bakers: Bread & Pastry Bartenders Dishwashers Statewide Statewide Statewide Interior 6.85 Gulf Coas Interior GulfCoa Interior Gulf Coas Anch/ Ma Anch/ Mat Southeast Southeast Southwest 7.90 Southwest 5.50 Northern Southeast Northern Southwest Northern AnchJMat ALASKA PRICES AND COSTS, ISER, AIDEA 30

39 TABLE 10 (Cont.): Average Non-Union Wages - Alaska Wage Survey Service (continued) Food Preparation Workers Waiters & Waitresses Statewide 8.0'} 8.18 Sta1ewide Anch/Mat Interior Southwest GulfCoas Interior Anch/Mat GulfCoas Southeast Northern Southwest Southeast Northern Production/Construction/Operating/Material Handling Carpenters Electricians Helpers, Laborers, & Material Movers: Hand Statewide Statewide Statewide Southeast Northern Gulf Coas Northern Gulf Coas Interior GulfCoa Anch/Mat Southeast Interior Southeast Southwest Southwes Interior Anch/Mat Anch_L_Ma Southwest Northern Production/ Construction/ Operating/Material Handling (cont.) Mechanics: Automotive Statewide Gulf Coas Anch/Mat Southeast Southwest Interior Northern Source: Alaska Department of Labor, ALASKA WAGE RATES 1987 and ALASKA PRICES AND COSTS, ISER, AIDEA 31

40 B. Construction Costs Historically, costs of building have been high in Alaska. As noted in the discussion of wages, the payroll per employee (which serves as a proxy for wage levels) in the construction industry compared to the U. S. average has declined significantly in recent years. Average construction payroll per employee in Alaska was still 72 percent above the U.S. average in There is little current secondary data pertaining to Alaska construction costs. The Alaska Department of Transportation and Public Facilities has discontinued their index of regional cost differentials for public works projects. Major sources of comparisons are the Dodge Building Price Indexes (which is not expected to be published in the future) and the Means Pricing Guides. The table below gives some Dodge Cost Systems area comparisons for The methodological description provided by Dodge notes that the labor data has a strong union base, since union scale wages are more readily available than are non-union rates. As a result, the labor component may not fully reflect declining wages in the construction industry. TABLE 11: Dodge Construction Cost Factor Locality Adjustments* Location Labor Materials General 20 City Average Anchorage Portland Seattle New York City Los Angeles San Francisco Dallas Boston Source: 1988 Dodge Building Cost Indexes for U.S. & Canadian Cities, Dodge Cost Systems, McGraw-Hill Information Systems Company. This information cannot be reproduced without written permission from McGraw-Hill Information Systems Company. The index estimates the local variation from the 20-City average prices which include local materials and equipment prices, labor wage scales which include fringe benefits except travel allowances and transportation costs. ALASKA PRICES AND COSTS, ISER, AIDEA 32

41 A similar index is produced by R. S. Means Company, Inc., Construction Consultants and Publishers. Table 12 below gives the Means Location Factors for January Location 30-City Average Anchorage Fairbanks Juneau Ketchikan Portland Seattle Los Angeles San Francisco Dallas TABLE 12: Means Location Factors For Square Foot Cost Adjustments Type of Construction Residential Commercial Source: Means Square Foot Costs, 1989, RS.Means Company,lnc. This information cannot be reproduced without prior permission from the publisher. Figure 24 shows the growth in general construction costs as estimated in the Dodge and Means Cost Indexes, compared with the Consumer Price Index (CPI-W) from 1977 to We have converted the three indexes to a 1977 base year. The Means Index shows construction costs rising faster than the general cost of living, while the Dodge Index indicates a slower increase, with an average growth of 4.1 percent per year over the ten year period. Neither publication includes sufficient methodological detail to explain this difference. FIGURE 24: Construction Cost Ratios Means and Dodge Indexes for Anchorage Alaska Ratio: 1977 = 1.00 )K Anchorage CPl-W + Dodge Cost Index l::,. Means Cost Index ~ : :: ~~~::~:: H :~~.. ~:1~~ :: : ::::::~. 1: ~ ~:;:: = ~ n-===-= I Source: 1988 Dodge Building Cost Indexes for U.S. & Canadian Cities, McGraw-Hill Information Systems Company; Means Square Foot Costs, 1989, 10th Annual Edition, R.S. Means Co., Inc.; Consumer Price Index, Urban Wage Earners, Bureau of Labor Statistics. ALASKA PRICES AND COSTS, ISER, AIDEA 33

42 Figure 25 shows the differential between the Means Anchorage Index and the Means 30-City Average between 1975 and 1989; and differential between Anchorage and Seattle. The differential between Anchorage and Seattle was about 26 percent in 1975, fell in the early 1980's and then increased to 30 percent in 1985 and has been declining since, reaching 27 percent in At the beginning of the period the Seattle index was slightly below the 30-City Average, but by 1989 was 2 percent above that Average. The Anchorage Index was 24 percent above the 30-City Average in 1975, rose to a peak of 43 percent above in 1980 and was 29 percent above in FIGURE 25: Construction Cost Differential Comparative Local Cost Indexes--R.S. Means Company Ratio Anch:30 City Differential D Anch:Seattle Differential rn _:::: ::.:. :::::. ::. :. :::. :.: : :.:::: :::.: ::. : :. :. :::.: : : 1.20 j'"'""""' '"''''''"''""""''"""'''"""'"'"' Source: Calculated from "Local Cost Indexes" contained in MEANS SQUARE FOOT COSTS, 1989 EDillON, R. S. Means Company. The dip in costs differentials in the early 1980's is counter-intuitive, since that was a time of high construction activity in Alaska. The payroll per employee in the construction and transportation industries in Alaska showed some decline relative to the U.S. payroll per employee in these industries, but not so dramatically as the changes reflected in the Means Index. Some of the difference may result from changes in the union versus non-union composition of the industry which is not reflected in the wage portion of the Means Index, or in a declining transportation component in the cost of materials. Since the Means and Dodge data are proprietary, they could not be included in the Alaska Economic Database and further analysis of the index methodologies needed to explain this anomaly was thus beyond the scope of this project. ALASKA PRICES AND COSTS, ISER, AIDEA 34

43 A further set of area differentials is used by the U.S. Air Force in costing its construction program. Table 13 shows selected area cost factors which were applied to the Fiscal Year 1988 to 1992 Military Construction Program. TABLE 13: U.S. AIR FORCE COST FACTORS U.S. City Location Average= 1.00 Anchorage= 1.00 Alaska Aleutian Islands Anchorage Delta Junction Fairbanks Galena Clear AFS Eielson AFB Elmendorf AFB Oregon 1.03 Washington 1.16 New York City 1.28 Los Angeles 1.20 San Francisco 1.21 U.S. City Average is based on 144 cities (3 cities in 48 states). Source: Military Construction Program Economic Analysis Manual, June 1987, The United States Air Force. No methodology is available to evaluate these numbers, which appear to be particularly high for Alaska. The highest ratio outside of Alaska was 1.45 for Wheeler AFB, Hawaii. Another approach to business facility costs is to look at rental values. Here again the data are scarce. Table 14 and Figure 26 show rental and building operation costs for Class A office space in Anchorage. The effect of the recession is reflected in the falling rentals. This pattern has been somewhat offset by the so-called "flight to quality" as surviving businesses have taken advantage of vacancies and falling rents to upgrade their business space. ALASKA PRICES AND COSTS, ISER, AIDEA 35

44 TABLE 14: Annual Rent Class "A" Office Space Anchorage (Dollars Per Square Foot) Mid- Rent Low High Mid Expenses & Exps Jul $12.00 $15.60 $13.80 $3.80 $ May $12.% $16.80 $14.88 $4.27 $ Jul $12.% $19.80 $16.38 $3.98 $ Jan $15.00 $17.40 $16.20 $4.58 $ Jan $16.80 $19.80 $18.30 $5.17 $ Oct $16.20 $19.80 $18.00 $5.46 $ (data unavailable) Jan $18.60 $21.60 $20.10 $5.50 $ Apr $19.80 $21.60 $20.70 $5.50 $ Feb $24.00 $30.00 $27.00 $5.84 $ Jul $24.00 $33.00 $28.50 $5.90 $ Sep $27.00 $31.20 $29.10 $5.98 $ Jun $27.00 $30.00 $28.50 $6.50 $ Jan $27.00 $28.80 $27.90 $6.87 $ Jul $27.00 $30.00 $28.50 $6.59 $ Nov $24.00 $30.00 $27.00 $6.50 $ Oct $16.80 $24.00 $20.40 $7.13 $ Apr $16.80 $22.80 $19.80 $7.50 $ Feb $15.00 $21.60 $18.30 $7.00 $ Oct $14.40 $22.80 $18.60 $7.50 $26.10 Source: Ronald W. Bunn, MAI, Mundy-Day-Bunn, Anchorage, AK. FIGURE 26: Class "A" - Office Space Average Annual Rental Costs -Anchorage $Per Sq. Foot Rent Mid-Pt <)Expenses )K Rent+ Expenses $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $ Source: Ronald W. Bunn, MAI, Mundy-Day-Bunn, Anchorage, AK. ALASKA PRICES AND COSTS, ISER, AIDEA 36

45 C. Other Business Costs 1. Utilities Available secondary data on costs of electric power and other utilities are limited. It is a relatively simple matter for a business to ascertain utility prices in a given area at a given time, of the type and quantity relevant to that business. It is somewhat more difficult to obtain and present this information in a useful and consistent form over time (trends in prices and availability) and over space (comparative data for the U.S. and around Alaska). We have taken the following approach: (1) we include electricity cost by region over time in the data base; (2) present, in tables below, sample rates and comparisons for some other types of utilities; and (3) suggest sources where additional information can be obtained. a. Electric Power Table 15 presents a partial view of electricity costs in various regions of Alaska. The average "cost" by region is derived by dividing revenues received from sales by the number of kilowatt hours of output sold. The resultant revenue per kilowatt hour is a proxy for the underlying cost structure, but is not equivalent to the average rates actually paid. In certain rural areas of the state, a portion of utility revenues come from state subsidies under the Power Cost Equalization Program. These subsidies place a wedge between consumer payments and utility revenues TABLE 15: Average Electric Power Costs, by Region Commercial and Residential Residential Statewide Southeast Southcentrl Yukon Arctic/NW Southwest (cents/kwh) (cents/kwh) (cents/kwh) (cents/kwh) (cents/kwh) (cents/kwh) Commercial Statewide Southeast Southcentrl Yukon Arctic/NW Southwest (cents/kwh) (cents/kwh) (cents/kwh) (cents/kwh) (cents/kwh) (cents/kwh) Source: Alaska Power Authority, AIASKA ELECTRIC POWER SfATISTICS, various issues. AIASKA PRICES AND COSTS, ISER, AIDEA 37

46 Table 16 gives kilowatt hour rates for communities (for purchase of 500 kilowatt hours) with and without the Power Cost Equalization Program for several communities. The program applies to only the first 750 kilowatt hours used per month. Thus, although commercial and industrial users are eligible, the Power Cost equalization Program is primarily intended to lower costs for residential users. Table 15 (above) does not include the Power Cost Equalization impact. Further, the average cost per kilowatt hour as shown in Table 15 disguises the intra-regional ranges which are quite broad. For example, the Southcentral Region (dominated by Anchorage) has commercial revenues per kilowatt hour in 1987 which range from 6.1 cents (Anchorage-Chugach Electric) to Ouzinkie with 40.6 cents. 14 TABLE 16: Costs Per Kilowatt Hour for Electricity Selected Alaska Communities - June 1988 Based on 500 Kilowatt Hours Cents/ kwh Cents/ kwh Cents/ kwh w/ o PCE* PCE* Paymt with PCE* Anchorage Juneau Fairbanks Homer Ft. Yukon Bethel AVEC Vlgs Barrow Bettles Valdez Glenallen Klawock Kotzebue Teller Iliamna PCB-The Power Cost Equalization Program, administered by the Alaska Public Utilities Commission, pays a portion of electricity bills-up to 750 kwh per month -to qualifying utilities. Source: Alaska Public Utilities Comm., 1988 Annual Report to the Alaska Legislature. ALASKA PRICES AND COSTS, ISER, AIDEA 38

47 The table below gives examples of typical billings for commercial users for selected Alaska utilities and utilities outside of the state. TABLE 17: Typical Commercial Billings Selected Utilities Utility Anchorage Municipal Light & Power Chugach Electric Assoc. Homer Electric Assoc. Seward (City of) Fairbanks Fairbanks Municipal Util. GVEA Palmer (Matanuska Elec. Assoc.) New York, Consol. Edison Co. Florida Power & Light Co. Georgia Power Co. Houston Lighting & Power Co. L.A. Dept. of Water & Pwr Portland General Electric Co. Sacramento Municipal Util. Dist. 1,500 kwh 12kW $ ,000 kwh 40kW $ Compiled by Anchorage Municipal Light and Power, for Municipality of Anchorage Fiscal Trends Report, October, Cost shown includes demand charge for 12kW and 40kW respectively. b. Other Utilities Other utilities (water, sewer, telephone, solid waste disposal, refuse, gas) vary across the state. We were not able to locate secondary sources which report rates in a consistent fashion to provide for inclusion the cost data base. The Alaska Public Utilities Commission has presented sample rates for regulated utilities in their Annual Report to the Alaska Legislature; the Alaska Power Authority publishes average costs of electricity by community; the Municipality of Anchorage, Fiscal Trends Report summarizes Anchorage municipal utility rates and some comparative information; and Fairbanks Community Research Quarterly publishes rates for Fairbanks and surrounding communities. The tables below give some sample rates for various types of utilities. ALASKA PRICES AND COSTS, ISER, AIDEA 39

48 TABLE 18: Refuse Collection Charges Selected Alaska Communities Utility Anchorage, MOA Refuse Collection Anchorage, Anchorage Refuse Eagle River Refuse Juneau, Channel Sanitation Kenai, Peninsula Sanitation Wasilla Refuse Girdwood, Peninsula Sanitation Residential Monthly Commercial Monthly Compiled by Solid Waste Services, Municipality of Anchorage, Summer TABLE 19: Average Telephone Rates Single Party Local Service* Monthly Rate Average for Cities w / Population 125, ,000 Anchorage Juneau Fairbanks Eagle River Delta Junction Buffalo, NY Seattle, WA Honolulu, HI Push Button Dialing. These rates do not include additional charges for unlimited calling (where such charges apply), or customer premise equipment charges. Compiled by Anchorage Telephone Utility, Summer ALASKA PRICES AND COSTS, ISER, AIDEA 40

49 TABLE 20: Monthly Water and Wastewater Rates Selected Communities (8000 Gallons per Month) Location Water Rate Wastewater Rate Anchorage $ $18.85 Fairbanks Municipal Util College Utilities Valley Water Juneau Boise, ID Middlesex, NJ Spokane, WA Lafayette, IN York, PA Rates as of 9/ 88. Compiled by Anchorage Water Utility. ALASKA PRICES AND COSTS, ISER, AIDEA 41

50 c. Business Taxes Local and state taxes on businesses can also be an important cost of doing business. We were unable to locate an inter-state comparison of general Alaska business taxes (petroleum tax studies have been done) with taxes in other states. However, a few general comments can be made. State law requires that property taxes on business properties must be at the same rate as those on personal property and residential real estate. The state further limits the overall mill rate which can be applied. As mentioned in the discussion of personal taxes, the Anchorage local property rate for 1988 was at the median of the 51 major out-of-state cities surveyed. There is no state property tax except on petroleum properties, therefore unincorporated areas of the state have an even lower tax cost. The state of Alaska has a business license fee of $50 for a two year license. The state also levies a corporate income tax on net taxable income, as do 43 other states. Alaska's tax is based on the federal corporate tax structure, with a minimum rate of 1 percent (on net taxable income up to $10,000) which increases in 1 percent increments (against $10,000 increments of net income) to 9 percent (on net income over $80,000) and then to a maximum rate of 9.4 percent ($4500 base tax, plus 9.4 percent of all net taxable income over $90,000). Since rates, allowable deductions and exemptions, definitions of gross income, carry forward, depreciations rules and so on vary from state to state, the most appropriate way to compare corporate taxes is to develop prototypes (income and expenses) for businesses of various kinds and apply existing tax requirements in various states to these "businesses." The resultant tax bills can then be compared among states. Such an exercise is beyond the scope of this project, and we were unable to locate a study of this type done elsewhere which included Alaska. When comparisons of taxes across states are made using aggregate measures such as per capita tax collections or collections as a percentage of personal income, the Alaska tax burden appears deceptively high -- ranking number one in the nation. This results from the prominence of oil taxes in the overall tax structure. The actual tax impact on individuals of personal taxes is minimal (as discussed earlier) and on non-petroleum businesses is much lower than the aggregate measures would indicate. Total non-petroleum corporate income tax collections for fiscal year 1989 were $25 million, less than 2 percent of unrestricted general fund tax revenues. When viewed in a broader context, the insignificance of general corporate taxes (i.e., taxes collected from non-petroleum businesses) is even more evident. General corporate income tax revenues for fiscal year 1989 were approximately 1.2 percent of total unrestricted revenues (comprised of tax revenues, licenses and permits, resources revenues (royalties), investment earnings, etc.). 15 ALASKA PRICES AND COSTS, ISER, AIDEA 42

51 VI. Conclusions and Data Shortfalls The cost of living is a vital ingredient of overall economic wellbeing. There are many issues, ranging from broad based public policy concerns to business and individual choices, that are affected by the cost of living or, absent actual information on the subject, perceptions regarding costs and prices. Often government programs are based upon the effect these programs are expected to have on the standard of living in an area or community. Policy makers face questions such as, is the standard of living improving over time; how is this standard effected by various public policy initiatives; does the standard of living vary from significantly from place to place; can and should programs be targeted to change these differentials; where and when should the government intervene in the economy and so on. On the individual level, choices as to location (or relocation), business expansion, wage offers and production methods, can all be strongly influenced by information (or lack thereof) regarding relative costs and prices. All these decisions have non-economic elements, but even choices strictly based on economic realities are far from clear-cut given the dearth and quality of data on this subject. Although far from complete, the bits and pieces of information from secondary sources discussed here give some indication of price trends and comparisons. In terms of overall cost of living comparisons (indexes), the best we have available are the Consumer Price Indexes for Anchorage and locations outside the state. These indexes which measure changes in the price level over time can be applied to the Department of Commerce family budget series to infer a gradual decline in the difference in Anchorage prices and the U.S. City Average from approximately 26 percent in 1980 to 15 percent in 1988 (Figure 6). One element of the cost of living where Alaskans appear to have a particular advantage is in personal taxes. The State of Alaska currently levies no major personal taxes and local property and sales taxes are relatively low compared with cities outside the state. For several years Anchorage has had the distinction of having lowest personal tax burden (combined state and local taxes) as estimated for a group of 51 cities comprised of the largest city in each state plus the District of Columbia (Table 5). There are no indexes of price levels in other communities in Alaska, but surveys of food and fuel prices indicate a gradual convergence of food prices for these commodities in several communities as well as some lessening of the differentials between Anchorage's (lower) prices and the (higher) prices in rural areas (Figures 7-11). However, the data do not address such elements as housing prices and personal transportation costs (to and from rural areas), which are significant budget components. In looking at components of the cost of doing business, it appears that in several sectors the ratio of Alaska weekly payroll per worker to U.S. average payroll has declined over the last several years (Table 6). In some cases (e.g., construction, trucking and warehousing, wholesale and retail trade, business services) this decline reflects an actual decline in payroll per worker and not simply a slower rate of increase in Alaska than elsewhere (Table 7). Although in part this decline may reflect fewer overtime hours, and lower levels of production associated with Alaska's economic slowdown, it still indicates a relative reduction in average payroll costs for these industries. Whereas this is a positive ALASKA PRICES AND COSTS, ISER, AIDEA 43

52 development from the viewpoint of the relative cost of doing business in Alaska, this is not necessarily a good thing from the earners' viewpoint. Lower relative wages, and inability to find employment (even at a lower wage) has contributed to the departure of a substantial number of Alaskans from the state in recent years. Looking at actual wage rates by job type could be more instructive, however our comparison of Seattle-Everett and Alaska wage rates was not particularly helpful. Although in most cases examined, the inflation-adjusted wages showed a smaller differential at the end of the twelve year period reviewed, the trends in the data were not clear or consistent. It may be that the Bureau of Labor Statistics procedures, regarding the size of firms surveyed (more than 50 employees), exclusions (construction industry), and aggregation (all of Alaska) served to obscure changes in relative wage rates (Tables 8 and 9). However, this wage series and perhaps comparisons with other locations may yield more definitive results over time. Although a consistent time series comparing in-state wage rates does not exist at this time, there may be methods of combining or indexing the detailed information gathered in the Alaska Wage Survey which will yield valuable insight over the upcoming years. The two years of data available did reveal consistently lower wage rates in the Gulf Coast region, and consistently higher rates in the Northern region. The most serious data shortfalls we encountered were in the areas of construction costs and transportation costs. For construction, the inter-state indexes we located are proprietary, and the details of their derivation uncertain. The Dodge Index, often used as a general guideline, was last published in 1988 (for 1987) and future publication is not planned. We were unable to locate a current (secondary source) intra-state construction cost comparison. The Department of Transportation and Public Facilities no longer publishes such an index. Although the Department of Defense has general construction cost differential guidelines, their methodology was unavailable, and the applicability for business construction purposes is uncertain in any case. The cost of the transportation of goods (either inputs to the production process or final products) to and from market is another gaping hole in the cost data. Deregulation in the transportation industry at the federal and state levels, and subsequent elimination of the Alaska Transportation Commission has reduced the availability of published tariffs. Although tariff information can be obtained from individual shipping companies, the printed rates often represent the "maximum" charge. The actual rates are in practice negotiated between the individual shipper and the customer, dependent upon not only size and weight of the shipment, but other factors such as timing, frequency, current competitive conditions, and bargaining power and skill (on both sides of this market). Thus although payroll per employee in the transportation industry (both relative and absolute) has been declining, we do not have a good secondary series which shows the impact on rates (Tables 6 and 7; Figure 17). Although beyond the scope of this project, the development of a standard measure or index for shipment of goods and materials to and from major ports, would be a valuable indicator of business costs. ALASKA PRICES AND COSTS, ISER, AIDEA 44

53 The general types of information gathered here from secondary sources is indicative of relative costs in Alaska, most clearly for Anchorage. For purposes of individual businesses seeking to compare the more specific costs of factor inputs in particular Alaska locations vis-a-vis some other location (say outside of Alaska), primary data will be required. An intermediate approach would be to describe model businesses and cost out a set of standardized inputs for these businesses in Alaska and elsewhere. This approach would provide comparative data at a point in time but would be merely illustrative. As discussed earlier, factor inputs vary significantly from among types of enterprises and even among businesses which produce the same good(s) or service(s). Since the relative cost of substitutable factors is a determinant of the amount of each input used, the use of standard factor input weights would be inappropriate. A further complication would arise in selecting the standard location or locations with which to compare costs. To reiterate, a thorough understanding of the cost of living and doing business in Alaska would be useful to policy makers and individuals. It would be helpful to know what is happening to Alaska costs over time; how costs compare between Alaska and various places outside the state; how costs vary around the state and how these differences are changing over time. Although answers to these and related questions would enhance the understanding of the Alaska economy, much of the data necessary for a definitive description of the cost of living and cost of doing business in Alaska is unavailable from secondary sources. In this report we have summarized secondary data on prices and costs, and have pointed out where significant shortfalls exist. ALASKA PRICES AND COSTS, ISER, AIDEA 45

54 ENDNOTES 1. The CPI for Fairbanks was issued for a few years (1979 to 1982), but was discontinued due to budget constraints. 2. The Consumer Price Index for All Urban Consumers has been available for Anchorage only since For further discussion, see "Spending and Earning in the Recession," Alaska Review of Social and Economic Conditions, Vol. XXVI, No. 2, Institute of Social and Economic Research, June Also see Goldsmith and Rowe, "The Anchorage Consumer Price Index -- How Accurate?" Research Summary No. 14, Institute of Social and Economic Research, January See the Alaska Department of Labor, Alaska Economic Trends, October 1989, "Measuring the Cost of Living" for further discussion of the ACCRA Index. Also, the ACCRA index is regularly published in the Fairbanks Community Research Quarterly. 5. Forest, M. and S. Fison. Fairbanks/Anchorage Cost of Living Comparison, Community Information Center, Special Report No. 2, July Forest, M. Cost of Living Comparison Fairbanks/Anchorage, Community Information Center, Special Report no. 7, The McDowell Group, Alaska Geographic Differential Study, prepared for State of Alaska, Division of Labor Relations, April See "Where Have All the Billions Gone," Alaska Review of Social and Economic Conditions,Vol. XXIV, No.1, Institute of Social and Economic Research, February For alternative levels of income, median and Anchorage burdens in 1988 were as follows: Income Average Anchorage $ 20,000 $ 50,000 $ 75,000 $100, % 8.9% 9.1% 9.0% 3.9% 3.5% 3.4% 3.2% Census of Wholesale Trade, Geographic Area Series, Alaska. U.S. Department of Commerce, Bureau of the Census, June A similar comparison using BLS survey data is found in "Alaska Economic Growth and Change: Opportunities for Import Substitution," Institute of Social and Economic Research, August Not covered are self-employed persons, unpaid family help, domestics and most persons engaged in agriculture. In Alaska, many people in the fishing industry are self employed. ALASKA PRICES AND COSTS, ISER, AIDEA 46