The Cost of Living in Alaska: The single number that doesn't exist.

• Author: Kvapil, Rachael
• Position: REAL ESTATE

Cost of living seems like a simple calculation. Alaskans have an intuitive sense of paying more for necessities than households in the Lower 48 do. Off the road system, stickers that would shock an urban shopper are an everyday feature of store shelves. City dwellers, too, have long known that Alaska is a frontier when it comes to affordability, with extra expenses for home heating and for buying food shipped from Tacoma.

Yet the historic "end of the road" is getting a little closer to market. Despite a jump in the nationwide consumer price index (CPI) of 7.9 percent in the last twelve months, Alaska is a much less expensive state to live in, compared to the Lower 48, than it used to be.

To measure cost of living, economists define necessary expenditures and sort them into broad categories: transportation, groceries, healthcare, housing, utilities, and miscellaneous goods and services. Data collected on those expenditures are sorted into several indexes. According to Neil Fried, an economist with the research and analysis section of the Alaska Department of Labor and Workforce Development, there are two aspects to cost of living: tracking it in one place over time (inflation) and comparing it in different places at the same time. Either measurement has different applications.

"The numbers are the most practically used in long-term reat estate rental contracts, annual adjustments to the state's minimum wage, child support payments, and budgeting," says Fried. "The Alaska Permanent Fund Corporation uses these numbers to inflation-proof the fund, and Social Security payments are adjusted based on this information."

How to Measure the Impossible

To determine the cost of living in one place in Alaska over time, Fried says state economists rely on the CPI for Urban Alaska. The index is a result of detailed surveys of consumer spending habits conducted by the US Bureau of Labor Statistics. These surveys are a "market basket" of everyday items, to which the Bureau of Labor Statistics assigns location-specific weights to determine how people spend their money. Fried explains that this CPI can only track costs over time in one area and can't compare costs between places. As Fried wrote in the July 2021 issue of Alaska Economic Trends, published by Alaska Department of Labor and Workforce Development, the national index was 258.8 while Alaska was 226.153, which means prices have increased faster nationally since the early '80s than they have in Alaska...