There are two things that balance out the supposed higher cost of living: one, wages are generally a good bit higher here (especially in blue-collar industries--this is a blue-collar worker's paradise), and two, after a full calendar year of living here, each Alaskan receives the Permanent Fund Dividend, which has varied from anywhere from $800 per year to nearly $2000 per year since I've been here.

I'm not sure that I even agree with the assertion that the cost of living is "substantially higher" here than in other places. It's been my experience that the difference between here and the majority of the Lower 48 has shrunk over the last decade. Of course, my main comparison has been with the state of California, since that's where a vast majority of my family live, and that might not be too fair of a comparison (especially in regards to housing prices). But with the exception of fresh produce, the cost of goods and services up here isn't way out of whack like it once was.

Eastwest mentioned that it's a different way of life up here. That's true not only in the sense of the weather (it's colder and worse in places like North Dakota and Minnesota) but in the activities and attitudes of the people. Although Anchorage is a decent-sized city, it's missing a lot of the "civilized" amenities of large cities in the Lower 48. In order to really enjoy life up here, it really helps if you're into the outdoors. In the summertime, love of activities like fishing, hunting, ATV riding and/or hiking, kayaking, etc. are almost necessary, and in the winter, you'll develop cabin fever unless you're into skiing, snowmobiling (or what real Alaskans call snowmachining) or organized sports like hockey, etc. If you're into shopping or are into the arts, etc., Alaska may not be the place for you, unless you can afford to purchase a lot of weekend plane trips to Seattle. (Since Anchorage is the cultural center of the state, we do have a fairly decent arts community for a city our size, though; but consistent with the fairly blue-collar nature of the state, even oil execs wear jeans to the opera...)

That blue-collared attitude manifests itself in a lot of ways in Alaska, too. A large portion of Alaskans would probably find themselves in line with Libertarian policies, although the Republican party seems firmly entrenched up here (well, it did until news of all of these scandals broke). People generally have a good work ethic and not a lot of sympathy for those not willing to work their way. Government is generally frowned upon, especially in the cities, towns and villages outside of Anchorage. A relatively large number of people outside of the major cities literally live on little or no income by subsistence hunting and fishing.

There is a bit of camaraderie that manifests itself, too--a feeling like "we're all in the same boat together." If you get stuck on the side of the road, expect most of the people driving by to stop and offer assistance. The "rat race" isn't quite as hostile here. It's a small state, too, in terms of people and connections: with a very small capital city (30,000 or so) and one major town (275,000--half of the state's population) where almost all of the business is conducted, most likely you'll develop connections with people who know people or even find yourself hobnobbing with presidents and CEOs (and not even realize that they are such, since they dress in blue jeans and T-shirts and drive decade-old SUVs).

Here are some links to some commentary on Alaskan life to help you get an idea of the flavor up here:
http://www.bigwildlife.net (the city's official site with slickly-produced PR about living up here, but it's worth looking at)
http://www.elisetomlinson.com/faq-alaska.html (primarily Juneau-centered information from a librarian down there, but she provides good commentary on the whole state)
http://www.uq.net.au/hyperlinked/johnorr/alaska.htm (thoughts from a former Alaskan resident)
http://www.akla.org/jobs/librarians-in-alaska.html (perspectives from other librarians--they seem to write a lot about this kind of stuff)
http://www.susancanthony.com/AboutAlaska/alaska.html (links from an Alaskan resident)

This is the kind of stuff you won't get by visiting here for a few days no matter what time of year, so I thought it would be nice to provide you with a bit of this info before you committed the resources to transplant yourselves. Hope it helps!