Archive for the ‘Economic Opportunity’ category

The case for Governor Branstad’s minimum wage increase

November 14, 2014

Election Night 2014 — the hours that established why Governor Terry Branstad should push for an increase in the state minimum wage.

At first blush, this might not seem obvious. It was a big Republican night, and support of the minimum wage is not a marquee issue for Republicans.

On Election Night, a minimum-wage critic won the U.S. Senate seat of one of the nation’s most high-profile and ardent supporters of a minimum-wage increase, Iowa’s Tom Harkin, and Republicans took control of that chamber. Over in the House, Republicans flipped one seat and now hold three of Iowa’s four, along with a historically overwhelming majority that makes the minimum-wage increase sought by President Obama highly unlikely.

This turns the focus to the Iowa Statehouse, where the power structure remains effectively the same: Republican governor, narrowly Democratic Senate, slightly stronger Republican majority in the House.

With little change in Des Moines, why would passage be more likely now?

For one thing, we have gone one more year without an increase. It has been almost seven years now at $7.25; it is only a matter of time — and we may be there — when Iowa reaches a tipping point where inertia succumbs to an increase in the minimum wage.

For another, the near-certainty that it will not pass in Washington erodes pleas to wait for the feds. Recall that Iowa stopped waiting in 2007, passing the $7.25 wage that took effect in January 2008, almost 19 months ahead of the federal $7.25.

Finally, the tipping point noted above may be signaled in state referendum victories on Election Night for minimum-wage forces in two neighboring “red” states — Nebraska and South Dakota — indicating the time is right politically. Of the states bordering Iowa, only Wisconsin is stuck with us at $7.25.

State minimum wages higher than U.S. minimum on Jan. 1, 2015

State minimum wages higher than U.S. minimum on Jan. 1, 2015 (National Conference of State Legislatures)

An increase would be popular in Iowa. A recent poll showed 53 percent support for an increase to $10.10 an hour.[i] No politician in either party will be disadvantaged in 2016 having supported a minimum wage increase.

On the merits, it is well established that a minimum-wage increase is overdue. It comes nowhere close to a family-supporting income, and it has not kept pace with rising costs for almost seven years. Families depending on minimum-wage income have not seen lower costs of food, fuel, housing, clothing and health care in those years. Passing it now would mean:

  • Fewer Iowans in poverty.
  • A boost to local and state economies as families have more to spend.
  • A fiscal benefit to the state as less is needed to support extremely low-income working families.
  • More resources to support stronger work-support programs to point low-wage workers on a path to the middle class.

In the past, Governor Branstad has made it clear the issue was not his priority but he has not ruled it out.[ii]

For all of these reasons, the time is right for Governor Branstad to move ahead. It’s the right thing to do, and the ball is in his court.

[i] http://globegazette.com/news/iowa/poll-majority-of-iowans-favor-raising-minimum-wage/article_1b688a49-214b-5688-bfff-9e74ead757bd.html

[ii] http://whotv.com/2014/01/31/minimum-wage-branstad-hasnt-ruled-out-increase/

Owen-2013-57Posted by Mike Owen, Executive Director, The Iowa Policy Project

Real issues, bogus commentary

November 11, 2014

An Eastern Iowa radio host recently ran a recording of Senator Tom Harkin noting — correctly — that people at the minimum wage work “essential and often difficult jobs.”

Alone on the air and safe from any retort by the senator or a minimum-wage worker, the host countered: “There is not a minimum wage job in the world that is a, quote, difficult job.”

Said the host: “There’s a reason they are minimum wage jobs. They are easy.” Strong emphasis on the “easy.”

The facts say otherwise. The Department of Labor provides information about people working at or below the minimum wage, now frozen at $7.25 in Iowa for almost seven years.

Look specifically at the “leisure and hospitality” sector — which includes low-wage restaurant and hotel/motel jobs.

  • Over half (55 percent) of all workers in hourly jobs at or below the minimum wage are in the leisure and hospitality sector.
  • About 1 in 5 hourly workers in that sector (19 percent) are at or below the minimum wage.

These are not jobs of “leisure and hospitality,” as a cavalier dismissal of their being “easy” might imply. They are jobs that provide “leisure and hospitality” to others, and they’re hard work: in kitchens, and laundries, and cleaning restrooms, and hustling meals and drinks for customers who might or might not leave a decent tip. In fact, these jobs are arguably harder than gabbing for a couple of hours on a radio show.

According to those official numbers, some 3.3 million workers in the United States toil at jobs paying at or below the minimum wage. Note: This figure does not include those who would be affected by an increase because they make more than $7.25 an hour but less than the proposed $10.10.

Probably a better observation about the issue is that our wage structure in this country does not necessarily value work, and when we have an artificially low minimum wage, neither does public policy.

So, whatever you say about raising the minimum wage, start with the facts. Click here for an IPP fact sheet on the issue.

Owen-2013-57 Posted by Mike Owen, Executive Director, The Iowa Policy Project

 

Job 1 for Day 1 — putting Iowa families first

November 6, 2014

As election dust settles, priorities remain clear for Iowa families

Now that the votes are counted, the real work begins. Job 1? It could be any of a number of areas where solid research and analysis have shown better public policy could make a difference for a more prosperous, healthier Iowa. Take a step back from the TV ads and “gotcha” politics and these issues come clearly in focus.

In Iowa, research shows solid approaches to economic prosperity for working families include:

In Iowa, research shows a fiscally responsible approach to both find revenues and do better with what we have includes:

  • Stopping tax giveaways to companies that pay no income tax — which occurs at a cost of between $32 million and $45 million a year through one research subsidy program alone, even though there is nothing to show this spending boosts the Iowa economy or produces activity that would not occur anyway. http://www.iowafiscal.org/big-money-big-companies-whose-benefit/
  • Reining in unnecessary “tax expenditures” — tax breaks, tax credits and other spending done through the tax code — could bring in tens or hundreds of millions of dollars for public services. A five-year sunset on all tax credits would force lawmakers to review and formally pass renewals of this kind of spending, now on autopilot. The last attempt at real reform fell woefully short. http://www.iowafiscal.org/tax-credit-reform-glass-half-full-maybe-some-moisture/
  • Plugging tax loopholes — a $60 to $100 million problem — would pay for a 2 or 3 percent annual increase in state per-pupil funding of K-12 schools. Twenty-three states, including 4 of 6 Iowa neighbors, don’t permit multistate corporations to shift profits out of state to avoid Iowa income tax and contribute their fair share to local education and other state services. http://iowapolicypoints.org/2013/05/22/will-outrage-translate-into-policy/
  • Reforming TIF — tax-increment financing, which is overused and often abused by cities around the state, has caught lawmakers’ attention in the past and should again. Like many tools that provide subsidies to private companies and developers, it should be redesigned to assure subsidies only go to projects with a public benefit and only where the project could not otherwise occur. Further, it should be designed to assure that only the taxpayers who benefit are the ones footing the bill, which is a problem with current TIF practice. http://www.iowafiscal.org/category/research/taxes/tax-increment-financing-tif/

In Iowa, research shows a healthy environment and smart energy choices for Iowa’s future includes:

  • Putting teeth into pollution law — which means reforms in Iowa’s Nutrient Reduction Strategy to eliminate pollution in waterways. http://www.iowapolicyproject.org/2014Research/140717-nutrient.html
  • Allowing local government to regulate frac sand mining — When it comes to cigarettes, guns and large hog facilities the Iowa Legislature took away the right of local government to listen to citizen desires. The General Assembly and the Governor should let democracy thrive and not take away local control of sand mining.
  • Encouraging more use of solar electricity in Iowa — Jobs are created while we confront climate change if we build better solar policy in Iowa. http://www.iowapolicyproject.org/110325-solar-release.html
  • Promoting local food and good food choices with school gardens — and a pilot project to offer stipends to Iowa school districts could encourage both learning and better nutrition. http://www.iowapolicyproject.org/2014Research/140514-school_gardens.html

None of these issues are new and it’s not an exhaustive list. But these were big issues for our state before the election and remain so, no matter who is in charge.

Together, we can build on the solid research cited above and lay the foundation for better public policy to support those priorities.

Owen-2013-57   Posted by Mike Owen, Executive Director of the Iowa Policy Project

Bad math, good math — and Iowa jobs

October 22, 2014

Those 31 points the Iowa Hawkeyes scored last Saturday were something, huh?

It sure feels better when you don’t include Maryland’s 38 points. And that’s the way Governor Branstad counts jobs.

Enough with the bad math, and let’s talk about those Iowa jobs.

The actual job performance of Iowa’s economy is pretty simple to compute from the state’s official spreadsheet, which shows seasonally adjusted, nonfarm jobs, month by month and sector by sector, back to January 2008. You can find that sheet here.

Doing it wrong

As we have pointed out in the past on this blog, the Branstad administration chose to edit the official spreadsheet by adding a special line that only shows increases. No job losses are counted. Ask anyone who’s lost a job whether that sounds reasonable. But when you’ve promised 200,000 jobs in five years, you have to get there somehow.

A snapshot of the key but distorted line is highlighted in the photo at right. Basic RGBThat line, “Gross Over-the-month Employment Gains,” ignores the monthly performance of any job sector showing a decrease. Instead, the increases in the other job sectors each month are added, and the total inserted into the “Gross Gains” total compiled from previous months during the Governor’s current term. Twisting the numbers this way, the Governor has reached 156,500 — almost twice the actual increase since he took office.

In September, the Governor’s math turns a 1,300-increase month into 4,900. A happy result, but false.

Doing it right

The Iowa Policy Project has put out a monthly analysis of state job numbers for 11 years now. And as we point out in our latest Iowa JobWatch, not only is the Governor’s number exaggerated, but there is a better approach that does not tie him to his ambitious and apparently unreachable goal.

If you want to measure progress, you measure everything. And that’s simple: How many jobs were there in the base month, and how many are there in the latest one?

So, for the real math as of September 2014:
— Since the Governor took office in January 2011, Iowa has added 80,000 jobs.
— The pace of job growth in those 44 months has been about 1,800 jobs per month.
— To reach the Governor’s goal of 200,000 by January 2016, the next 16 months would have to show an average monthly increase of 7,500.

More importantly, the best way to look at job growth is to remove the artificial political frame and examine it the way economists would. The Economic Policy Institute came up with a sensible measure, from a relevant starting place: the start of the last recession. Look at the job change from the start of the last recession and compute what would be needed to (1) make up lost jobs and (2) keep up with increased population, which for Iowa is about a 5 percent increase.

In this approach, we can see that as of September 2014:
— Iowa showed a net gain of 31,300 net jobs since December 2007.
— To keep up with population growth, Iowa needed a net gain of 76,800 jobs from the December 2007 level of 1,524,900.
— Iowa has a jobs deficit of 45,500.

Basic RGB

The Governor will do what the Governor wants to do. But that doesn’t mean the rest of the state or its policymakers should take their eye off what’s really happening in our economy.
Owen-2013-57
Posted by Mike Owen, Executive Director

Issues in Waiting: Tax-Increment Financing Reform

October 2, 2014

Basic RGBThis is an excerpt from an interview with IPP’s Peter Fisher on “The Devine Intervention,” KVFD-AM 1400, Fort Dodge. Host Michael Devine discussed tax-increment financing, or TIF, with Fisher, whose reports on this issue have prompted many to call for reform. TIF is one of Iowa’s “Issues in Waiting” — issues discussed year after year, but not resolved. The quotes below are actual quotes from the interview; the questions are paraphrased.

What was the idea behind tax-increment financing, or TIF?

It was originally a tool to help cities redevelop blighted or declining areas and what it did was allowed a city to capture more of the tax revenue from redevelopment when the city undertook some project to try to turn around a declining neighborhood. If they were successful, businesses would come in, the tax base would go up.

And what TIF did was allow the city to use not just the city taxes on all that growth, but the county and school taxes as well for some period of time to pay the city back for their expenses for this project, for redevelopment. And in the long run the county and school districts were better off. The cities got their money back, they got more tax base. That was the idea.

How did the implementation of TIF look?

It worked that way for quite a while. And then about 20 years ago we opened the door to just about anything cities wanted to do by saying well it doesn’t have to be a blighted area, it doesn’t have to be a redevelopment. It just has to be “economic development.” And just about anything cities do it turns out they can call “economic development” and finance with TIF.

Is there a consequence if TIF is abused?

Not really — as long as they are doing something within the law. The county and the school district don’t have any say on whether the city is going to divert their taxes to the city’s TIF fund. And there’s no state regulation either, other than the court system.

To hear the full interview, click here.

For more resources from Peter Fisher and the Iowa Fiscal Partnership about TIF, click here.

Iowa JobWatch: Jobs Rise in August, Still Sluggish

September 19, 2014

IOWA CITY, Iowa — Iowa nonfarm jobs increased in August to 1,553,500, but the unemployment rate remained at 4.5 percent, down from 4.7 percent a year ago. The Iowa Policy Project today released the following statement by research associate Heather Gibney about the latest numbers:

“The month of August saw a very small increase in total nonfarm jobs, which is right in line with the fact that Iowa’s major job sectors lost about the same amount of jobs that were gained. Professional and business services and leisure and hospitality saw the largest gains while construction experienced the biggest loss.”

“It’s also important to look at long-term trends rather than one-month changes. Iowa is now above pre-recession job levels — but those jobs serve a 4.9 percent larger population, according to the Economic Policy Institute (EPI). The net job gain since the December 2007 start of the recession is only 28,600 — but 75,400 jobs were needed by now to keep up with population growth. Therefore, the state shows a job deficit of 46,800 jobs.”

Job Growth Perspective

Governor Branstad set a goal of 200,000 new jobs over five years. Iowa’s economy has produced 77,300 net new jobs through the first 43 months of his term. To add the remaining 122,700 jobs, Iowa would need to add 7,200 new jobs per month over the next 18 months, compared to a pace of 1,800 for the first 43 months.

Key Numbers

  • Nonfarm jobs held steady in August at 1,553,500. Nonfarm jobs are 18,000 ahead of where they stood a year earlier.
  • Nonfarm jobs are 25,500 ahead of the May 2008 peak of 1,528,000, and 28,600 ahead of the level at the start of the last recession in December 2007.
  • The unemployment rate remained at 4.5 percent in August but was down from 4.7 percent a year earlier.
  • The labor force — those working or looking for work — rose by 2,400 from July to 1,703,000 and was up 29,800 over 12 months.
  • Initial unemployment claims were 11,445 in August, down 11.2 percent from July and 4.6 percent from a year earlier. The number of continuing claims — 23,053 — was down 6.6 percent for the month and down 7.5 percent for the year.
  • Five sectors posted gains in August led by professional and businesses services and leisure and hospitality (1,200), trade and transportation (500), financial activities (300) and mining (100).
  • These increases were offset by losses of 1,100 in construction, a loss of 600 in education and health and government jobs, a loss of 500 in manufacturing, 200 in other services, and 100 for information jobs.

Key Trends

  • All job sectors except information and manufacturing have shown net gains over the last 12 months. Construction jobs are up 3.2 percent over the year, with changes in other major categories up by less than 2.4 percent over 12 months.
  • 300 jobs were added during the month of August.
  • Iowa averaged a monthly increase of about 1,500 jobs over the last 12 months.
  • For a full year, Iowa has remained above the previous job peak of 1,528,000, reached in May 2008, just before jobs began to plummet during the last recession.

 

Beware the “business climateers”

August 18, 2014

Fisher-GradingPlacesIowa’s business lobby appears to be preparing a new assault on the ability of our state to provide public services.

It would be the latest in a long campaign, in which lobbyists target one tax at a time under a general — and inaccurate — message about taxes that we will not repeat here.

Suffice to say, Iowa taxes on business are low already. Many breaks provided to businesses are rarely reviewed in any meaningful way to make sure that taxpayers are getting value for those dollars spent, ostensibly, to encourage economic growth. Rarely can success be demonstrated.

The Iowa Taxpayers Association is holding a “policy summit” this week and promoting a new report by the Tax Foundation to recycle old arguments that are no better now than they have been for the last decade.

Fortunately in Iowa, we know where to turn to understand claims from the Tax Foundation, and that resource is Peter Fisher, our research director at the Iowa Policy Project. Fisher has written two books on the so-called “business climate” rankings by the Tax Foundation and others, and is a widely acknowledged authority on the faults in various measures of supposed “business climates” in the states.

Fisher, in this guest opinion in the Cedar Rapids Gazette, noted weaknesses in the Tax Foundation’s claims, not the least of which is that the anti-tax messages are not supported by the foundation’s own report. Fisher notes this about the Tax Foundation’s “State Business Tax Climate Index”:

It is a mish-mash of 118 tax features … weighted arbitrarily and combined into a single number for the index.

This number has no real meaning. It produces wacky results because it gives great weight to some minor tax features (such as the number of tax brackets) while leaving out completely two things that have a huge impact on corporate income taxes in Iowa: single sales factor, and federal deductibility.

This past spring, this Iowa Fiscal Partnership two-pager noted:

A variety of factors influence the decisions businesses make about whether they want to locate or expand within a given state. These factors include available infrastructure, the proximity to materials and customers, the skill of its workforce, and whether the state has good schools, roads, hospitals, and public safety. As we have shown elsewhere, state taxes play at best a minor role.

In Iowa, we constantly hear the same old argument … used to enact large tax cuts for commercial and industrial property this past year and continues to be an excuse used to justify giving away large tax credits to businesses throughout the state.

But this argument just isn’t true…

Whether we are looking at the entire range of taxes that fall on businesses or just the corporate income tax, the fact is that business taxes in Iowa are low.

Only if Iowa policy makers and the public ignore the reality on Iowa business taxes will these special interests get their way again.

Owen-2013-57 Posted by Mike Owen, Executive Director of the Iowa Policy Project

*View Peter Fisher’s reports for Good Jobs First on business climate rankings:

 


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