Entrepreneurs

Alaska gives residents free cash handouts—here's what Mark Zuckerberg thinks everyone can learn from it

The billionaire founder of Facebook Mark Zuckerberg spent his July 4th weekend in Alaska learning about fishing and local economics as part of his "Year of Travel Challenge." In Alaska, all residents get a yearly cash payment just for living in the state.

The trip gave Zuckerberg yet another platform to lobby for universal basic income (UBI), as he did during his commencement address to Harvard in May.

Alaska has a state-wide version of UBI. In 1976, the state voted to create the Alaska Permanent Fund as the Alaska pipeline construction neared completion. The goal was to share the oil riches with future generations. Still today, people living in Alaska get cash payouts from the fund, called the Permanent Fund Dividend. Recipients must be Alaska residents for the entire calendar year before applying, with no plans to leave the state, according to the Alaskan government's website.

Zuckerberg says the state's cash handout program "provides some good lessons for the rest of the country."

The dividend averages $1000 (or more) per person. "That can be especially meaningful if your family has five or six people," says Zuckerberg in a post he wrote about the payment.

"This is a novel approach to basic income in a few ways. First, it's funded by natural resources rather than raising taxes. Second, it comes from conservative principles of smaller government, rather than progressive principles of a larger safety net," says Zuckerberg. "This shows basic income is a bipartisan idea."

Source: Mark Zuckerberg | Facebook

Fundamentally, Zuckerberg says people think and work differently when they have their basic needs met.

"Seeing how Alaska put this dividend in place reminded me of a lesson I learned early at Facebook: organizations think profoundly differently when they're profitable than when they're in debt. When you're losing money, your mentality is largely about survival," says Zuckerberg.

"But when you're profitable, you're confident about your future and you look for opportunities to invest and grow further. Alaska's economy has historically created this winning mentality, which has led to this basic income. That may be a lesson for the rest of the country as well."

This is the second time Zuckerberg, who at 33 years old is worth almost $62 billion according to Forbes, has publicly extolled the virtues of social safety net programs that give free money to citizens regardless of employment status.

"We should have a society that measures progress not just by economic metrics like GDP, but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to give everyone a cushion to try new things," says Zuckerberg, while speaking at Harvard, from which he famously dropped out.

According to Zuckerberg's remarks at Harvard, having your basic needs met allows and encourages creativity and innovation. If he hadn't been comfortable financially as a kid (his dad was a dentist), he says, then he might not have created Facebook.

"I know lots of people who haven't pursued dreams because they didn't have a cushion to fall back on if they failed," says Zuckerberg. "We all know we don't succeed just by having a good idea or working hard. We succeed by being lucky too. If I had to support my family growing up instead of having time to code, if I didn't know I'd be fine if Facebook didn't work out, I wouldn't be standing here today."

Zuckerberg isn't alone in promoting the idea of universal basic income. Tech titan Elon Musk has said it will be a virtual necessity as automation replaces lower skilled jobs. And Sam Altman, the president of Silicon Valley start-up shop Y Combinator, has also supported the idea of giving cash handouts to everyone. "We think everyone should have enough money to meet their basic needs—no matter what, especially if there are enough resources to make it possible," he says.

Despite Zuckerberg's thoughts, some have questioned whether Alaska's model is having a positive impact on its residents.

A 2016 survey credits the dividend with keeping two to three percent of Alaskans above the poverty line. However, there is some evidence that receiving a large lump sum payment can be detrimental. According to a study published in the Journal of Public Economics in 2011, Notre Dame economist William Evans and Timothy Moore from the University of Maryland found mortality among urban Alaskans increases by 13 percent during the week that fund direct deposits are made. (Mortality rates increase for other groups that receive lump payments, too.)

And a July 2010 paper from Scott Goldsmith, a Professor of Economics at the University of Alaska Anchorage, says that while there is not an overabundance of research into exactly what and how people are spending their checks, anecdotal evidence suggests that Alaskans tend to spend the lump sum payment right away, rather than using it to help sustain them through the year.

But "One reason for this is that a large dividend or the combination of several dividends together provides some recipients with the 'liquidity' necessary to buy an expensive consumer durable that provides consumption benefits lasting a long time—appliances, snow machines, etc.," says Goldsmith.

While the evidence is inconclusive surrounding the Alaskan cash handouts, one thing is more clear: once cash handouts are implemented and people expect them, they are very hard to reverse.

"The first lesson from Alaska is that once such a scheme is in place, it is very difficult to reverse. Popular support for these handouts is so strong that it is politically taboo to even suggest tampering with it," says a 2011 report from the World Bank in Mongolia, after the country had just instituted its own cash handout program.

See also:

Elon Musk: Robots will take your jobs, government will have to pay your wage

Elon Musk says robots will push us to a universal basic income—here's how it would work

Mark Zuckerberg: Success comes from 'the freedom to fail,' so billionaires like me should pay you to do that