Getting it right on minimum wage

Editor’s Note: IPP Research Director Peter Fisher authored a guest opinion for The Gazette in Cedar Rapids (published February 4) about minimum-wage research on which Fisher and University of Iowa Economics Professor John Solow collaborated for the Johnson County minimum wage task force. In the same issue, The Gazette included a staff editorial,Local wage hike achieved its goals.” The Fisher guest opinion ran beside another guest opinion by a spokesman for the low-wage industry backed Employment Policies Institute, an incessant critic of minimum-wage laws. Below is a response from Fisher and Solow to that criticism.

Michael Saltsman’s guest opinion in the February 4 Gazette says we got it “all wrong” in our report on the effects of the minimum wage increase in Johnson County. We examined county employment, earnings, and business establishments, overall and for the two major low-wage sectors, retail and “leisure and hospitality,” as well as overall unemployment, and retail sales in eating and drinking establishments. Despite the title of his column, he apparently found nothing wrong with any of these analyses. He takes us to task only for not focusing on restaurants, a subset of leisure and hospitality.

UnfIMG_3595ortunately for Mr. Saltsman’s critique, the actual story for restaurants in Johnson County is the same as the story we found for the larger hospitality sector, which includes bars, hotels and motels. Average weekly earnings in restaurants after the minimum wage increase rose at nearly three times the rate for the period preceding the wage increase, and rose at a much higher rate than in the comparison counties (Linn, Story and Black Hawk), or the state as a whole. The number of restaurant jobs continued to rise in Johnson County, and the number of restaurants or eating and drinking establishments continued to rise as well, in both cases at a faster rate than in the other counties and the state as a whole.

Our analysis relies on the best data available: the Department of Labor’s Quarterly Census of Employment and Earnings, and state sales tax data. Both come from an actual census of all private sector businesses, not a survey of a sample of businesses. To sort out the effects of the minimum wage you need to do what you can to control for other factors affecting the restaurant industry more broadly. That is why we compared the experience in Johnson County with the two other state regents’ institution counties, as well as neighboring Linn County, and the state as a whole, where the minimum wage remained unchanged.

What our analysis shows is that the average year-over-year growth rate of restaurant jobs in Johnson County fell from 3.5 percent for the four quarters prior to the wage increase, to 1.5 percent for the four quarters ending in the middle of 2017. Proof of a harmful minimum wage effect, as Mr. Saltsman would have us believe? Hardly. The growth rate in jobs in restaurants fell in the state of Iowa, and in all the comparison counties, only more so. While jobs in Iowa City restaurants grew on average at 1.5 percent per year post wage increase, they grew at only 0.3 percent in the state of Iowa and in Story County, 1.0 percent in Linn County, and fell 3.8 percent in Black Hawk. Furthermore, in all cases the growth rate was not only lower in the other areas, but fell more dramatically after 2015 than in Johnson County.

Perhaps Mr. Saltsman used a less reliable data source. Perhaps his math was wrong. Perhaps he did not choose to look at trends in restaurant jobs elsewhere, because that would have undercut his point. At any rate, it looks like we got it all right.

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For more information about the minimum wage and local minimum wages in Iowa, see previous reports on IPP’s website.

 

New blows to public accountability

curtains-tighterCompanion bills in the Iowa House and Senate move Iowa closer to making true monopolies out of the state’s regulated electric utilities.

Utilities are permitted monopoly status out of efficiency. It would be difficult and expensive to set up two or more competing electric utilities to serve one community, with separate power lines. So, in exchange for a monopoly presence in a given area, privately owned utilities are subject to community approval and state regulation of their rates and services.

These new bills would remove a significant share of regulation, and the bills are moving quickly with little scrutiny — while high-profile legislation from school funding to budget cuts captures more attention.

But the utility bills demand attention, just as utility bills do every month in your household budget. Presently the Iowa Utilities Board oversees MidAmerican Energy and Alliant Energy. This oversight protects customers, who have no choice as to which company brings them electricity.

It is ironic that legislators would threaten a structure that works and promotes economic development. Iowa has some of the lowest energy rates in the nation (3rd or 4th lowest depending on the year). At the same time, this state has developed one of the strongest clean energy economies. These make Iowa a big draw for certain industry — a far greater reason to locate here than tax breaks that any state can offer.

Under legislation being proposed (SSB3093 and HSB595), many policies that have led to Iowa’s cost-effective clean energy leadership could not have been implemented, especially energy efficiency programs mandated almost 30 years ago by the Iowa Legislature.

Without regulation, monopolies would profit by producing more power rather than help customers save energy. They could unfairly treat customer-generated solar and wind energy and discriminate in favor of their own energy generation.

In fact, the pending bills would let them cut back substantially on the energy efficiency plans they are required to file each five years.

Left to their own preferences, monopolies would charge the smallest users more. Alliant proved this in its last rate filing. The Alliant plan would increase the cost of electricity by about 10 percent and increase the mandatory charge just to hook up by 30 percent. The plan was designed to put more costs on those who use less, because they are low-income or because they have used the utility rebates to buy more insulation or buy more efficient appliances.

But because Alliant needed permission to raise rates, this rate scheme was not allowed.

The bills in the Legislature would encourage this behavior. And few have been at the table. A subcommittee last week met in a room so small that video indicated most of those present were standing, and the discussion was cut off to move the bill on to a full committee more quickly.

The strategy with the corporate-friendly SSB3093 and HSB595 is the same that we saw in 2017 on collective bargaining and workers compensation. These forces are still at work, to lessen public oversight and public accountability, with changes in law that were not promoted publicly in the last legislative campaigns, and have been developed behind closed doors.

David OsterbergDavid Osterberg, who served six terms in the Iowa House of Representatives, is former director of the nonpartisan Iowa Policy Project and is IPP’s lead researcher on environmental and energy policy. dosterberg@iowapolicyproject.org

Hear Osterberg’s Feb. 8 interview with KVFD-AM radio host Michael Devine about this issue at this link.

Imagine a funded Leopold Center

Farmers, students and former students at Iowa State University, researchers and advocates for a sustainable agriculture in this state are gathering at 10 a.m. on Tuesday, Feb. 6, in the Wallace Building auditorium northwest of the Iowa State Capitol.

The Iowa Sustainable Agriculture coalition are gathering to call for a re-funded, re-staffed, and re-imagined Leopold Center.

Last year the Iowa Legislature stripped all funding from this ISU center. They also tried to expunge the whole idea of sustainable agriculture by taking the Center out of the Iowa Code. Governor Branstad, who 30 years before signed legislation that created the center, vetoed the part of legislation ending it. He did not restore the funding, however.

The Leopold Center-sponsored research is not something corporations such as Monsanto promote, because sustainable farming often uses fewer of its chemicals. Leopold research is not what the owners of huge factory hog farms promote, either. The center pushes alternative animal farms that are smaller and use less energy. They create the type of manure that is a good soil amendment — not a slurry that often runs off into our rivers and streams.

Agribusiness is not interested in the Leopold Center. That is why the leaders in the Iowa Legislature took its funding away. Many farmers and regular Iowa citizens want that research. We will see if their voices overcome the wishes of industry.

For more information about the Feb. 6 event, visit Iowa Sustainable Agriculture.

David Osterberg

David Osterberg is co-founder and former director of the nonpartisan Iowa Policy Project and remains IPP’s lead environmental researcher. As a state legislator from Mount Vernon for six terms in the 1980s and 1990s, serving part of that time as chair of the House Agriculture Committee. He was involved with legislation creating the Leopold Center.

Get school funding numbers right

A good report by the Center on Budget and Policy Priorities (CBPP) shows states generally have done an exceedingly poor job in restoring education funding in the wake of the Great Recession. Unfortuntately in Iowa, this report is being characterized inaccurately by some at the Statehouse, including Governor Reynolds.

A two-page IFP backgrounder on this issue published Jan. 8 offers a summary of how to look at Iowa education funding in the full context of state education funding policy, which governs both state and local funding of education.

Here is a link to view the IFP piece online.

And here is a link to the PDF file.

Governor Reynolds is cherry-picking one figure in the report that looks exclusively at the state share. That figure misses how some education funding has been shifted from local to state responsibility without significantly increasing actual total funding per pupil for Iowa’s K-12 schools.

Instead of the graph (Figure 3) she is using to paint a rosy picture of Iowa’s performance on school funding, anyone serious about using the CBPP analysis to see what has happened in Iowa should look at Figure 8 of the report, reproduced below.

11-29-17sfp-f8

As you can see from the graph — which, again, is in the same report that Governor Reynolds and others have been citing — Iowa “ranks” 13th, if the ranking matters. More importantly, Iowa has increased state and local funding per student from 2008-15 by only 4.9 percent, far less than the figure quoted by Governor Reynolds in choosing only to look at the state funding number. That works out to seven-tenths of 1 percent per year for seven years.
At IFP, we continue to suggest that the only fair way to look at education funding in Iowa over time is to consider both state and local funding, as both are governed by what the Legislature and Governor permit. The best way to make that comparison is to look at the SSA (State Supplemental Aid) number, which governs the per-pupil building block for setting a school budget. Over the last eight years, this has been below 1.8 percent on average (see the IFP backgrounder linked above).

 

2017-owen5464Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@iowapolicyproject.org.

Putting the U.S. Constitution up for grabs

In a republic we have rules — laws — framed by a Constitution that sets limits on how far they go, and on who can exercise them, while assuring that we can change them as needed, in an orderly process that protects the rights of all.

Imagine these rules were gone, that they all changed, that a minority could routinely stop the majority from moving forward, that individual liberties could vanish.

Imagine the squabbling members of Congress you see every night on television setting themselves up as modern-day George Washingtons, James Madisons and Ben Franklins, and flipping everything on its head. A bill calling for a U.S. Constitutional Convention — approved last year by the Iowa Senate State Government Committee and moving again this year — could do just that.

The bill, Senate Joint Resolution 8, or SJR8, would put the State of Iowa on record calling for a constitutional convention, which could easily become a free-wheeling assault on our constitution, following whatever process it chooses, with no review by any existing court or legislative body.

While the resolution asserts that such a convention would be limited, the scope of issues is so broad as to effectively erase limitations: “to impose fiscal restraints, and limit the power and jurisdiction of the federal government.” Even then, it is not clear that states have the authority to limit the scope of a convention at all. According to constitutional scholars, the delegates would likely be free to define any limits as broadly as they wish, or to ignore them.

Why now? In some states, such as Iowa, far-right organizations including the Convention of States project and the American Legislative Exchange Council (ALEC) now have enough supporters in key positions to push for such changes even though none of this has been the focus — perhaps not raised at all — in Iowa election campaigns.

Supreme Court Justices ranging from the liberal Earl Warren to the conservative Antonin Scalia have warned against the dangers of opening up the constitution to radical change. If 34 states pass such a resolution, Congress will call a constitutional convention. One group counts 28 states that have already signed on.[1] It is conceivable that the threshold could be reached.

The Constitution contains very little guidance on the procedures for, or scope of, such a convention. The only precedent we have to go on is the constitutional convention of 1787, at which the existing document, the Articles of Confederation, was scrapped and an entirely new constitution, our present one, was created. That convention even changed the rules for ratification.

The delegates to a constitutional convention could set a rule that all decisions would require approval only by a simple majority of the states, with each state given one vote. That would allow the 26 least populous states, which contain less than 18 percent of the U.S. population, to rewrite the constitution.

The Constitution provides no guidance as to whether such a procedure is permissible. And even if Congress were to establish rules for the convention, there is no mechanism to force the convention to follow those rules.

Constitutional scholars say that under a convention now, the entire U.S. Constitution is up for grabs. It could quickly become a contentious and chaotic free-for-all, with moneyed interests free to lobby and purchase support however they chose.

[1] Iowa is shown as already on the approval list because of a resolution passed in 1979, but groups are pushing for a new one for fear that the age of that resolution will disqualify it, and because the wording of the 1979 version is different from the current one.

 

Peter Fisher is research director of the nonpartisan Iowa Policy Project in Iowa City.

 

Rest/best/worst of the story

redink-capitol

Senator Joni Ernst is using Facebook to gin up support for the new tax bill. It is a one-sided picture, to say the least.

So, what does it really mean for Iowans that the tax bill is law?

  • Middle and low-income Iowans will see temporary ​tax cuts in the short term that are ​drastically smaller​​ than those high-income taxpayers will see — and these will be taken away or turned into tax increases by 2027 to help pay for permanent tax cuts for corporations.
  • Millions of people nationwide will lose health insurance coverage as elimination of the individual mandate drives up costs for all.
  • The wealthy will keep more millions of dollars that have never been taxed due to further exemptions in the estate tax.
  • The Child Tax Credit will be extended to affluent families who do not need assistance, while 86,000 children in working families in Iowa receive a token increase of $75 or less — both expansions to evaporate after 2025.
  • Businesses will get enormous, permanent tax breaks with no requirements to create jobs.

Some might recall a longtime radio commentator, Paul Harvey, and his “Rest of the Story” pieces. The points above are the “rest of the story” that you might not hear from backers of the latest tax giveaway in Congress. You might be OK with them and call them the “best of the story.”

Or, you might be concerned about the impact they will have on U.S. and Iowa families, on national debt and new challenges they bring to the safety net, and call them the “worst of the story.”

But they are the real story, and they should not be forgotten as the spin continues.

2017-owen5464Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@iowapolicyproject.org

Tax bill: Not just a 2017 story

It would be so easy to close the book on the 2017 tax bill, to allow our attention to be diverted to the next issue or threat, because there are so many.

We owe it to ourselves and future generations not to fall for what happened in 2017 on the tax bill in Congress, sold on hyperbole and defended on ideological sand that will give way this spring to damaging cuts to health care and nutrition to those who need it most.

Our senators should have warned us. Instead, they sold only cherry-picked data molded into a messy ball of spin and trickle-down economics, bereft of full context or history.

Senator Joni Ernst did it here: https://outreach.senate.gov/iqextranet/view_newsletter.aspx?id=104023&c=JErnst

Senator Chuck Grassley did it here: https://www.grassley.senate.gov/news/news-releases/grassley-statement-president-trump-signing-historic-tax-reform-legislation-law

Just stick to the facts, and you can see that the expensive tax bill that will give us — conservatively — $1.5 trillion in deficit spending, also provides:
 
Basic RGB•     Breaks that provide meager help to low- and middle-income Iowans expire under this bill, including the Child Tax Credit expansion that the Senator notes in the linked piece, but does not note its emphasis to help the wealthy most, nor the expiration date in 2026.
As a result, as this table shows, the bottom 60 percent of Iowa taxpayers will, on average, see tax increases in 2027 when they are being told they will receive a “tax cut.”
 
•    A lessened value of the Earned Income Tax Credit for low-income working families because it holds down the formula to account for inflation.
•    New threats to the safety net as massive deficits caused by this legislation are used as an excuse to cut critical services that benefit the poor, the disabled, and low-income working families.
 
•     Permanent breaks that only reach the extremely wealthy and large corporations — permanent, at least until a future Congress has the courage to take on the interests that have successfully promoted them.
 
We need to do better in helping Iowans and all Americans understand the impact of major decisions that will affect the health and economic opportunity for themselves and their families.
In the coming months, the Iowa Policy Project will be examining these impacts further and in addition to reports, we will host public forums that expand on that understanding. It would be great to include either or both of our U.S. senators in any of these sessions, in a respectful and engaging environment, in a year when neither senator is on the ballot, so they can more fully discuss the impacts of  the bill that their initial statements did not cover.
 
The timing is important, with so many decisions coming for the Iowa General Assembly that may be affected by the just-passed tax bill in Congress, and responsibilities pushed to the states by Washington.
2017-owen5464Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@iowapolicyproject.org