Posted tagged ‘minimum wage’

Comforting the comfortable

July 25, 2014

Comfort the comfortable and penalize the poor. Like the idea? If so, you’ll really like legislation scheduled for consideration today in the U.S. House of Representatives.

The House is scheduled to take up legislation that would gut improvements for low-income Americans in the Child Tax Credit (CTC), improvements passed originally in 2009, renewed in 2010 and 2012, the latter as part of the “fiscal cliff” package, where it was used as a bargaining chip to pass very expensive exemptions in the estate tax — a benefit only to America’s super-rich.

To put this in context, the House leadership bringing this new legislation to a vote will not even consider an increase in the minimum wage, now stagnant over five years nationally (6 1/2 in Iowa). The CTC, it must be noted, is one of the nation’s most effective anti-poverty tools, offsetting part of the cost of raising a child. So, as families earning at or below the minimum wage continue to lose ground, the CTC proposal will set them back even further. As noted by the Center on Budget and Policy Priorities (CBPP):

But a single mother with two children who works full time throughout the year at the minimum wage of $7.25 an hour (which House leaders oppose raising) and earns just $14,500 would lose $1,725. Her CTC would disappear altogether.

A loss at lower incomes — yet a boost at higher incomes. According to Citizens for Tax Justice, the Iowa impact of the new legislation would be:

  • a $285 loss on average to families with incomes below $40,000, and
  • a $696 benefit (tax cut) to families with income above $100,000.

Here’s how it works, according to a summary by CTJ:

The House Republican bill, H.R. 4935, would expand the CTC in three ways that do not help the working poor. First, it would index the $1,000 per-child credit amount for inflation, which would not help those who earn too little to receive the full credit. Second, it would increase the income level at which the CTC starts to phase out from $110,000 to $150,000 for married couples. Third, that $150,000 level for married couples and the existing $75,000 income level for single parents would both be indexed for inflation thereafter.

Adding insult to injury for low-income folks is that the improvements targeted for repeal came in the aforementioned “fiscal cliff” package, which made permanent big estate tax breaks for the rich, while extending improvements in the Child Tax Credit and Earned Income Tax Credit for only five years. CBPP’s Robert Greenstein at the time called that a “bitter pill.”

That was before these new proposals not only to cut back the CTC for lower-income families — but to expand access at higher incomes — and to adjust the high end for inflation, something lawmakers have refused to do for the minimum wage.

A bitter pill? At least. For some, all of this might seem to be an overdose.

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

Policy choices are about quality, not quantity

May 28, 2014

The headline on my doorstep today says, “Legislature continues trend of passing fewer bills.” That lead story in the Cedar Rapids Gazette notes that for the fourth straight year, a divided Iowa Legislature has passed fewer than 150 pieces of legislation.

Ah, numbers. Can’t live with ’em. Can’t live without ’em. But in this case, they don’t make a lot of difference.

What matters are the words and the policies embodied in those 150 or fewer bills. It’s about quality, not quantity.

What have those bills included in recent years? Here are some key points:

  • A commercial property tax overhaul that is tainted by big benefits to huge out-of-state retailers that need no help and pay too little in Iowa tax as it is.
  • An expanded Earned Income Tax Credit that improves tax fairness for low- and moderate-income working families across Iowa.
  • Funding to assure a tuition freeze remains for a second year in regents institutions.
  • A small boost in child care assistance for working students, making them eligible for the benefit so they can get skills for better paying jobs to sustain their families.

What have those bills not included in recent years? Here are some noteworthy omissions:

  • No overhaul of the personal income-tax system to better balance tax responsibilities for all taxpayers regardless of income, or to assure revenues are kept adequate to meet costs of critical services.
  • No greater accountability on spending that is done through the corporate tax code, outside the budget process.
  • No increase in the minimum wage, stagnant at $7.25 for over six years now.
  • No broad expansion of child care access for struggling families who don’t make enough to cover costs, but make too much to receive assistance.
  • No move to battle wage theft, which we have estimated to be a $600 million annual problem in Iowa’s economy — not including the $60 million lost in uncollected taxes and unemployment insurance.
  • No long-term answers for funding of education at all levels, violating the promise of law for K-12 schools, and leaving a legacy of debt for many college students and their families.

Those are not exhaustive lists, but a statement of priorities established by agreement, stalemate or inertia. We covered some of these points in our end of session statement. Some will like the overall product of recent years, some will not. Few will ask how many bills were passed.

At least one theme weaved by this record cannot be disputed: Iowa is on record that we will not ask the wealthy and well-connected to do more. We pretend more often than not that we can meet our obligations to the citizens of Iowa without investing in the public services they require, that if we just keep cutting taxes all will be well. Every now and then we’ll say something about opportunity for all and mean it, but we’re not ready to make that a long-term commitment.

Sometimes, not passing something says as much about legislative priorities as passing it.

Owen-2013-57   Posted by Mike Owen, Executive Director

Raising debate about a raise

April 25, 2014

$10.10vs$7.25At the Iowa Policy Project, we deal with numbers — a lot. And the numbers matter — but only because those numbers affect people.

On no issue is that more important than the minimum wage.

As we all know, Iowa’s minimum wage is $7.25 an hour. It’s pathetic. (We’ll show why in a moment.)

It’s important to remember, Iowans considered $7.25 something of a triumph when it passed — seven years ago.

When it took effect a few months later, on Jan. 1, 2008, it put Iowa ahead of most of the country. It took another year and a half for the federal minimum wage to reach that level.

In the meantime, costs kept going up. And both the U.S. and Iowa minimum wage stayed the same. So the real question is not whether the minimum wage should rise. It’s: “How much?”

Certainly the $10.10 proposed by Senator Tom Harkin and others is a good start. It chips away at the bills. But let’s not lose sight of the fact that even then, people will be working full time in jobs that do not pay enough for them to get by.

Peter Fisher and Lily French show why with their “Cost of Living in Iowa” research for IPP. For example, in Linn County and the Cedar Rapids area, if you make $7.25 an hour and work a full-time job 50 weeks a year, you make $14,500 before taxes. As our analysis shows:

•  In Linn County, you need more than that whether you are single or married with kids.

•  In the Cedar Rapids metro area — covering Linn, Benton, Jones, Iowa and Cedar counties — a single mom with one child needs to make $20.17 an hour. For a married couple with two kids, the family-supporting wage is $16.43 for each parent. And for all other families with kids, a parent needs to make over $20 an hour.

So the minimum wage matters. The only problem is, it doesn’t matter enough.

2014-COL-linn-504

COL-FamilySuppWage-Region504

Owen-2013-57Posted by Mike Owen, Executive Director

Basic needs and the minimum wage

April 10, 2014

Basic RGBWorking full time is no guarantee that your family will be able to get by.

In fact, 1 in 6 Iowa households with a worker earned less than is needed to support a family at a very basic level. That is the finding of a report released Wednesday by the Iowa Policy Project.

The new report, part 2 of the 2014 edition of The Cost of Living in Iowa, used census data to estimate how many families earned less than is needed to pay for a no-frills basic standard of living – covering rent, food, transportation, child care, clothing and health care.

In all, at least 100,000 Iowa families earn less than the basic needs budget amount (reported in part 1 of the Cost of Living report). For those families, the average shortfall – the break-even income amount minus what they actually earned – was over $14,000.

So how would an increase in the minimum wage help such a family? A full-time wage earner at the current minimum wage of $7.25 would see an increase of almost $6,000 in annual income if the wage were raised to $10.10, as Senator Harkin and others have proposed. That’s a pretty good chunk of the average $14,000 shortfall facing these families.

The situation facing Iowa’s single-parent families is much bleaker. Almost 3 in 5 – over 27,000 families – fall short of the basic needs level of income despite working at least half time, and 29 percent earn less than half the break-even level. The average working single parent’s earnings fall over $21,000 short of what is needed. High child care costs are responsible for much of that shortfall.

How do such families get by? Some move in with relatives or find short-term strategies to survive, but many rely on work supports such as food assistance, hawk-i or Medicaid or the Affordable Care Act subsidies for health care, and the state’s Child Care Assistance program.

Wouldn’t it be better for everyone if Iowa’s low-wage employers followed the lead of Costco and others and quit using these public supports to subsidize their low wages?

An increase in the minimum wage makes all employers responsible for providing something closer to what is needed for a worker to get by in today’s world. Even a single person living alone needs in excess of $13 an hour to pay the bills.

We need to strengthen our work supports in Iowa as well. Child Care Assistance in particular needs to be reformed. We have one of the lowest eligibility ceilings in the country: At an income well below what any family needs to get by, assistance is eliminated.

And we make it difficult for the thousands of students who are parents to work part time while going to school part time to qualify for child care assistance at all. Still, employers need to do their part to make work pay.

Working full time shouldn’t leave a family in poverty.

Peter Fisher

Posted by Peter Fisher, Research Director

Minimum wage — why Iowa is behind

March 3, 2014

When we start talking about raising the minimum wage in Iowa the most important point is that we’ve been at $7.25 since Jan. 1, 2008, more than a year before the federal minimum rose. And every year that goes by without an increase affects Iowa families who are struggling to keep their heads above water. Families that count on minimum wage income for a major share of their household budget have seen their costs rise dramatically over the past six years.

In both Iowa and in Congress, there are proposals to raise the minimum wage to $10.10. In both Iowa and in Congress, many issues are raised to cloud what is really a pretty straightforward issue.

As we have shown in our most recent Cost of Living in Iowa report, the current minimum wage doesn’t even come close to paying the bills. A single parent with two children working a full-time job would need to make $28.11 per hour just to be able to pay for a basic, no-frills monthly budget; $56,212 annually before taxes and credits. Two-parent families with two children would each need to make $16.93 an hour or a combined total of $67,724 a year before taxes and credits. A single parent with two children working full time making $7.25 per hour is making $4,700 below what the federal government deems poverty for a family of this size and nearly four times less than what is needed for a family supporting hourly wage.

Basic RGBThirteen states have already seen an increase this year and now 21 states and the District of Columbia have a higher minimum wage than the federal. As these states have shown, there is no reason to wait for Congress because it’s not guaranteed that they are going to act in the near future.

One of the myths we hear is that increasing the minimum wage would lead to serious job losses — but the weight of the evidence shows that the net employment effect is minimal and that any slight loss of jobs is compensated by the increase in income for those low-wage families. Low-wage workers who see a wage increase are more likely to spend that additional income immediately, which puts more demand on goods and services and more money in the hands of small-businesses owners who may need to hire more people to keep up with that demand.

A prominent study last year by the Center for Economic and Policy Research explains why this employment effect is so small. Employers can adapt to wage increases through various channels. Employers might reduce the number of hours worked, for example, but the higher pay can raise the standard of living for affected employees. Higher pay can make it easier to find and keep employees; less employee turnover reduces training costs. There could be reductions in non-wage benefits, improvements in efficiency, higher demand from increased consumer spending, and employers may start upgrading the skill level of their workforce rather than cutting the level of their staffing. Employers might pass on some added costs as higher prices to consumers, but this increase is estimated to be very small.

On one point there can be no dispute: A higher minimum wage will substantially lift the earnings of low-wage workers and families will be better off. Now at six years, how long will the minimum wage be held down for families facing higher and higher costs?

  IPP-gibney5464Posted by, Heather Gibney, Research Associate 

A minimum wage increase for Iowa?

December 18, 2013

The question is an old one. Sadly.

Every few years, the pressure builds enough that we finally get a discussion about raising the minimum wage. We seem to finally be reaching that stage. The president supports a $10.10 minimum, up from the current and outdated $7.25 per hour, as Senate Labor Chair Tom Harkin of Iowa proposed last February. And it’s grown in popularity, if not in paychecks of the working poor.

A Washington Post poll finds two-thirds of Americans support a minimum wage increase, and a firm majority — 57 percent — believe federal policy should be used to reduce the wealth gap between rich and poor.

Many forget that in Iowa, the pressure has been building longer than it has nationally, as IPP’s Heather Gibney pointed out last March. Yet there’s no assurance we’ll hear much about it in a promised short session of the Iowa Legislature in 2014.

Iowa actually beat the feds to the punch in 2007, raising the state’s minimum wage to $7.25 in January 2008, a full year and a half ahead of the federal wage increase. That means six full years have eroded the buying power of those at the minimum wage — effectively, a 60-cents-per-hour wage cut.

Basic RGBThe Cedar Rapids Gazette, while not totally sold on the merits many economists see in a minimum wage increase, argued for an increase in an editorial today. Wrote the Gazette:

“The ultimate goal should be to make the minimum wage less political and more predictable, both for workers and for businesses owners charting costs. Neither should have to guess which way the political winds and whims will blow their livelihood.”

Given the lack of assurance of this being addressed in Washington, and even less of it being done in a nonpolitical manner, raising and indexing the wage to inflation as the Gazette suggests would be an effective way of ending these periodic squabbles that leave pay for the working poor to “political winds and whims.” Can our Governor and Legislature begin to look at the issue that way?

Mike OwenPosted by Mike Owen, Executive Director

Stagnant objections to minimum wage increases

March 7, 2013
Heather Gibney, Research Associate

Heather Gibney

Dialogue about increasing the minimum wage is finally emerging in 2013. President Obama proposed an increase in the minimum wage to $9.00 per hour in his State of the Union address, and Senator Tom Harkin and Representative George Miller have introduced the Fair Minimum Wage Act of 2013 — which would raise the minimum wage from $7.25 an hour to $10.10. The Harkin-Miller bill would raise the wage in three steps of 95 cents before indexing it to keep up with the rising cost of living.

Iowa’s minimum wage now matches the federal. Raising it to $10.10 per hour would put nearly $6,000 more dollars in the pockets of Iowa families, and for the first time since the late 1970s a single parent with two children would be above the federal poverty level — a wage gap that we should have seen diminishing over time, but have not.

poverty vs min wage

Recognizing that the federal minimum wage is too low, 19 other states, including the District of Columbia have a higher minimum wage than the federal and 10 states annually increase their minimum to keep up with the rising cost of living. Unfortunately, attempts to raise the federal minimum wage and set automatic adjustments to keep pace with the rising cost of living have been hindered by bad economics. Beliefs that increasing the minimum wage will lead to job loss, that the majority of those benefiting would be teenagers and that it would decrease output for certain industries is the consensus among opponents, however unfounded. A recent report from the Center on Economic Policy and Research (CEPR) looked at the most influential research done on the minimum wage in the last 20 years and continuously found insignificant or no discernible effects feared — and promoted — by opponents of raises in the minimum wage.

While the passage of any of these proposals remains uncertain, Iowans working for the minimum wage will have to get by with their creativity; possibly working two jobs, relying on cash assistance and tax credits, going without those amenities that make life a little more enjoyable and hoping that one day they might join the middle class.

Posted by Heather Gibney, Research Associate


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