Basic needs and the minimum wage

Almost 3 in 5 single-parent families in Iowa 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.

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

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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