Iowans are faced with limited economic opportunity despite their hard work.
Many Iowa families are unable to afford groceries, car maintenance or prescription refills, even though there is at least one full-time worker in the household. This presents a double bind, where Iowans are faced with limited economic opportunity despite their hard work.
IPP constructs basic needs budgets that reflect a frugal standard of living — including food, health care, child care, household expenses, and transportation, then uses Census data to calculate the number of working households that make less than a wage that meets these basic requirements. These budgets leave no room for Netflix, student loan debt, vacations or eating at restaurants.
A majority of single-parent working households are unable to meet basic needs in Iowa. Our analysis shows that a wage of at nearly $20 per hour is needed just to afford basic expenses for single-parent families. This is consistent with research showing higher poverty rates among single-parent households, due to single incomes, child care expenses, generally lower educational attainment and low wages.
Evidence-based policymaking can address the reality that many working Iowans do not make enough to afford basic expenses. Policies that increase the minimum wage and adjust it to the cost of living, provide paid family leave, and boost Child Care Assistance will serve to ensure Iowans are able to just get by and hopefully get ahead.
Natalie Veldhouse is a research associate at the nonpartisan Iowa Policy Project. email@example.com
The CBPP report illustrates that the Trump plan would magically declare that some people below the current poverty line are no longer poor.
If you wanted to reduce the number of people defined as being in poverty, without reducing poverty itself, what might you do? You could always mess with the numbers.
The Center on Budget and Policy Priorities has a solid report out today showing how a Trump administration proposal would do just that. Authors Arloc Sherman and Paul van de Water examine the administration’s proposed alternative to the way cost-of-living adjustments are made to the official poverty guidelines.
The first problem, of course, is that the official poverty guidelines have almost nothing to do with the cost of living. They are an outdated formula — they are a half-century old while, not surprisingly, families’ spending needs have changed. We have shown this regularly at the Iowa Policy Project with our Cost of Living in Iowa research.
Here is what our report, by Peter Fisher and Natalie Veldhouse, noted last year:
Cost of Living Threshold Is More Accurate than Federal Poverty Guideline
Federal poverty guidelines are the basis for determining eligibility for public programs designed to support struggling workers. However, the federal guidelines do not take into account regional differences in basic living expenses and were developed using outdated spending patterns more than 50 years ago. The calculations that compose the federal poverty guidelines assume food is the largest expense, as it was in the 1960s, and that it consumes one-third of a family’s income. Today, however, the average family spends less than one-sixth of its budget on food. Omitted entirely from the guideline, child care is a far greater expense for families today…. Transportation and housing also consume a much larger portion of a family’s income than they did 50 years ago.
Considering the vast changes in consumer spending since the poverty guidelines were developed, it is no wonder that this yardstick underestimates what Iowans must earn to cover their basic needs. Figure 1 above shows that a family supporting income — the before-tax earnings needed to provide after-tax income equal to the basic-needs budget — is much higher than the official poverty guidelines. In fact, family supporting income even with public or employer provided health insurance ranges from 1.1 to 3.0 times the federal poverty guideline for the 10 family types discussed in this report. Most families actually require more than twice the income identified as the poverty level in order to meet what most would consider basic household needs. Even with public health insurance, the family supporting income exceeds twice the poverty level in all cases except the two-parent family with one worker.
Because the guidelines do matter in the computation of eligibility for work-support programs, it is essential that they are not eroded further to disadvantage low-income families. As the CBPP authors note, not only is the poverty line itself too low to reflect basic needs, but the annual cost-of-living adjustment, the Consumer Price Index for All Urban Consumers (CPI-U), also is flawed:
Prices have been rising faster than the CPI-U does for the broad categories of goods and services that dominate poorer households’ spending. The poorest fifth of households devote twice as large a share of spending to rent as the typical household, for example, and the cost of rent rose 31 percent from 2008 to 2018, compared to 17 percent for the overall CPI-U. In addition, recent studies find that low-income households may face more rapidly rising prices than high-income households even for the same types of goods, possibly because low-income households have fewer choices about where and how to shop.
The Trump plan would make that worse, substituting another cost-adjustment measure that slows the pace of upward adjustments in the poverty guidelines. The plan would magically declare that some people below the current poverty line are no longer poor.
Messing with the numbers is never an answer to identifying the challenges one might address with better public policy. Seriously analyzing the relevant ones is essential.
Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. firstname.lastname@example.org
This Labor Day could be the low-road benchmark for celebrations of improvements to be seen in the future, reversing current trends against working families.
As always, Labor Day is a day to celebrate Americans’ work ethic and spirit — things that hold promise for better times ahead.
But it is not a time to celebrate what has been happening in Iowa.
A look at the landscape for working families shows this Labor Day could be the low-road benchmark for celebrations of improvements to be seen a year, two years, maybe 10 years from now.
Iowa lawmakers repealed local minimum-wage increases in four counties that acted when state and federal leaders refused. Iowa’s minimum wage is a measly $7.25 an hour and has been held there for 10 1/2 years; some 400,000 workers — and their families — could gain with a raise to $12. (IPP report, 2016) Twenty-nine other states have acted, including all but two of Iowa’s neighbors.
Even at higher wage levels, Iowans are falling short. As Gordon noted:
“(T)he wage structure in Iowa is more compressed than it is nationally or in the Midwest. Low-wage workers in Iowa make about the same as low-wage workers everywhere else, but at the higher wages, Iowa workers fall further and further behind. Higher wage jobs are scarcer in Iowa than in most states. And wages in many professions — such as nursing or teaching — trail national and regional peers by wide margins.
“The key point here is not just that wages have stagnated, but they have done so over an era in which the productivity and educational attainment of Iowa workers have improved dramatically.”
If the wage levels weren’t lagging enough already, policy makers have utterly failed Iowa workers by refusing to assure that wages owed are actually paid. Wage theft — refusing to pay wages owed, or violating overtime and employee classification rules — is winked at by a state system that devotes too few resources to enforcement. Lawmakers have refused to act.
Lawmakers deliberately smacked working people with significant legislation in the last General Assembly in at least two other areas:
• They curtailed collective bargaining rights of public employees, making it tougher for them to organize, and tougher for them to negotiate. In the arena where the state, counties, cities and schools should be leading by example on how to treat employees, the Legislature has chosen to push Iowa toward a race to the bottom. And make no mistake about the impact on the economy: Public-sector jobs are 1 in 6 of all jobs in the state.
• They also passed legislation to erode workers’ protection and financial security long provided through Iowa’s workers’ compensation law. A study of the effects of one change, reclassifying shoulder injuries, found that the typical worker with such an injury could expect to receive 75 percent less under the new rules.
On top of these, we see the University of Iowa unilaterally acting to eliminate, or eliminate funding for, its own Labor Center that serves thousands and helps Iowans understand what rights they have in the workplace.
And we can count on a continuing assault on Iowa’s strong and accountable public employees’ retirement plans — not to help employees or actually save money, but to feed the ideological drive against public services that is illustrated in examples above. How better to damage those services than to lessen the attraction of jobs that provide them?
Celebrate Labor Day for the people who work to make our nation great. Keep in mind throughout the day that forces are trying to undermine the security of working families — and that Iowans can come together behind policies to support all.
Think of how much better that Labor Day burger off the grill will taste — in some future year — with a side of responsible minimum wage and workplace protection laws, topped off with a stronger economy that will result as more Americans prosper.
Mike Owen is executive director of the nonpartisan Iowa Policy Project. email@example.com
Public policy debates now and on into 2019 should keep this fact in focus: Working families in Iowa must earn substantially above the official poverty threshold just to get by.
Our 6th edition of TheCost of Living in Iowa finds that roughly 100,000 Iowa working households are unable to make basic needs. Put another way, about 17 percent — or 1 in 6 — households cannot get by on their income alone. It is a critical number that should inform countless public policy discussions for the remainder of 2018 and on into the next legislative session.
Part One of this report details how much working families must earn in order to meet their basic needs, while Part Two estimates the number and proportion of Iowa working households able to earn enough. This latest edition adds new analysis by race, Hispanic origin, and gender.
These pieces provide the foundation for Part Three, which is forthcoming and will connect the dots further illustrate the importance of public work support programs for many Iowans, who despite their work efforts, are not able to pay for the most basic living expenses.
We construct basic needs budgets that represent what it takes to survive rather than thrive in the state of Iowa. These budgets include allowances for rent, utilities, food prepared at home, child care, health care, transportation, clothing and other household necessities. The basic budget does not include savings, loan payments, education expenses, any entertainment or vacation, social or recreational travel, or meals outside the home.
In Part One, we find statewide that a single parent with two children needs to earn a wage of $23.91 per hour in order to meet basic needs. A two-parent household with one child and one parent working need an hourly wage of $13.29, compared to $16.30 for the same family type with two workers. Differences in cost from one county to another can be dramatic. The total annual basic needs budget for a family with two working parents and two children was $10,600 higher in the highest cost county compared to the lowest cost county. No family type is able to meet basic needs on Iowa’s $7.25 minimum wage.
Part Two uses census data to estimate the number of Iowa working households that are able to meet the basic needs without public assistance. In 2018 we find that 17 percent of households or 227,000 Iowans live below this threshold. Broken down further, fully 62 percent of single-parent working households are unable to meet basic needs. For this family type, there is an average gap of $20,000 between after-tax income and basic needs expenses. A larger share of African American (30 percent), Hispanic (28 percent), and female-headed (19 percent) households are unable to meet basic needs in Iowa.
The cost of living in Iowa continues to rise. Working families and individuals in Iowa must earn substantially above the official poverty threshold — in some cases nearly three times the poverty level — to achieve a very basic standard of living in Iowa without the help of public supports. Part Three of The Cost of Living in Iowa 2018 will show the role of work support programs in bridging this gap.
Posted by Natalie Veldhouse, research associate for the nonpartisan Iowa Policy Project. She and IPP Research Director Peter Fisher are the authors of the latest edition of The Cost of Living in Iowa. firstname.lastname@example.org
The question in October is a question for January: Will local minimum wage efforts force a serious debate and action on a meaningful minimum wage for Iowa?
The pressure is building in Iowa for a minimum wage increase.
Polk County last week became the latest county to take matters into its own hands as Iowa lawmakers and Congress have left the state and national minimum wages at $7.25. Four counties have now approved minimum wage increases above $10 per hour by 2019, with one of them — in Johnson County — scheduled to be fully phased in by Jan. 1.
Within several days of that, the Iowa Legislature will convene and the ball will be in state lawmakers’ court.
In the meantime, Iowans tired of the nine-year wait for an increase may keep acting locally to boost prosperity for low-income working families — which is critical as about 1 in 5 Iowa do not earn enough for a basic-needs household budget.
Here is the current local minimum-wage lineup in Iowa:
— Johnson County is currently at $9.15 in the second step of its three-step increase to $10.10 on Jan. 1, indexed to inflation after that.
— Linn County has approved an increase to $10.25 by 2019 (three $1 steps, Jan. 1, 2017-19).
— Wapello County will move to $10.10 by 2019 (three 95-cent steps, Jan. 1, 2017-19).
— Polk County approved a wage of $10.75 by 2019 (three steps: $1.50 April 2017, $1 more in January 2018 and 2019), indexed to inflation afterward. Includes exception for workers under age 18.
There has been discussion or interest in a similar move in at least four other counties: Lee, Woodbury, Des Moines and Black Hawk. For some, this has become a county supervisor campaign issue.
The question in October is a question for January: Will the pressure of these local efforts, which are growing, be enough to force a serious debate in the Legislature on a statewide increase? And if it is, will that effort produce a wage that pushes Iowa closer to a cost of living wage? (Hint: Even $10 an hour is nowhere close.)
Hundreds of single workers — and millions nationally — are taxed into poverty because they do not have kids and do not qualify for the EITC. And problems with child care assistance are being used to oppose a minimum-wage increase, even though the vast majority of affected workers do not have children. On Labor Day, let’s not forget the needs of single workers.
Our focus at the Iowa Policy Project frequently emphasizes the impact of public policy on working families.
But the demand of meeting a household budget is faced by more than parents, whether in single- or married-couple families. Single workers without children also need to get by.
So, on Labor Day weekend, let’s make sure the spotlight hits those folks as well. Here are three areas:
• the Earned Income Tax Credit (EITC);
• the Cost of Living in Iowa; and
• the minimum wage.
EITC A new report from the Center on Budget and Policy Priorities (CBPP) focuses on single working people who do not raise children and thus do not benefit from the Earned Income Tax Credit (EITC). Childless workers under age 25 are ineligible for that benefit, notes CBPP’s Chuck Marr, who states:
On Labor Day, many of these low-wage workers will be serving meals in restaurants, ringing up back-to-school supplies at the mall, or driving a truck down the highway. They deserve a decent day’s pay for a hard day’s work, but many of their paychecks are too small to make ends meet. An expanded EITC that targets this group would do more to help deliver a decent day’s pay.
There are bipartisan proposals on the table in Washington to extend the EITC to these workers, 7.5 million of whom are now “taxed into poverty,” Marr notes. The table below shows the Iowa impacts of these proposals.
Cost of Living in Iowa As IPP’s Peter Fisher shows in Part 2 of our “Cost of Living in Iowa” report for 2016, more than a quarter of working single persons statewide (27.5 percent) do not make enough at work to meet a basic-needs household budget. In fact, for those workers who fall short, they fall more than $10,000 short, on average. It is worth noting that this basic needs gap is even more severe for single parents, who fall almost $23,000 short, on average.
One of the efforts being used to stop or hold down local minimum wage increases in Iowa is the issue of “cliff effects” in work support programs — particularly Child Care Assistance — in which benefits abruptly drop for a worker if he/she gets slightly higher pay.
This is a very real issue for some workers, but not for the vast majority of workers who would benefit from a minimum wage increase statewide to $12 (phased in over five years), because they do not have children.
It makes no sense to block a wage increase for the three-fourths or more of workers who are not affected by the child care issue.
Rather, Iowa could raise the minimum wage and, separately, improve access to its Child Care Assistance program so that the cliff effects are eased or erased. There are ways to do so. See Fisher’s report with Lily French from 2014, Reducing Cliff Effects in Iowa Child Care Assistance.
Posted by Mike Owen, Executive Director of the Iowa Policy Project
One reason we produce our Cost of Living in Iowa research is to offer a better picture than official definitions of what it takes for a family to get by.
Cost of Living Threshold Is More Accurate than Federal Poverty Guideline
Why do we produce our Cost of Living in Iowa research at the Iowa Policy Project? One reason is accuracy — to offer a better picture of what it takes to get by, rather than a vague concept of “poverty.”
Federal poverty guidelines are the basis for determining eligibility for public programs designed to support struggling workers. But those official guidelines have challenges that we address with basic-needs budget calculations in The Cost of Living in Iowa.
The federal guidelines do not take into account regional differences in basic living expenses and were developed using outdated spending patterns more than 50 years ago.
For example, the calculations that compose the federal poverty guidelines assume food is the largest expense, as it was in the 1960s, and that it consumes one-third of a family’s income. Today, however, the average family spends less than one-sixth of its budget on food.
Omitted entirely from the guideline, child care is a far greater expense for families today with 23.5 million women with children under 18 in the labor force. Transportation and housing also consume a much larger portion of a family’s income than they did 50 years ago.
Considering the vast changes in consumer spending since the poverty guidelines were developed, it is no wonder that this yardstick underestimates what Iowans must earn to cover their basic needs. Figure 1 below shows that a family supporting income — the before-tax earnings needed to provide after-tax income equal to the basic-needs budget — is much higher than the official poverty guidelines.
Figure 1. Cost of Living is Much Higher than the Poverty Level
In fact, family supporting income in the absence of public or employer provided health insurance ranges from 2.1 to 3.3 times the federal poverty guideline for the 10 family types discussed in this report. Most families, in other words, actually require more than twice the income identified as the poverty level in order to meet what most would consider basic household needs.
 Hilda L. Solis and Keith Hall, Women in the Labor Force: A Databook, Bureau of Labor Statistics (December 2011).
 Sylvia A. Allegretto, Basic family budgets: Working families’ incomes often fail to meet living expenses around the US, Economic Policy Institute (August 30, 2005).
 Even with public health insurance, the family supporting income exceeds twice the poverty level in all cases except the two parent family with one worker. (That family type not shown here.)
Peter Fisher is a nationally recognized expert on tax and economic development policy. He holds a Ph.D. in Economics from the University of Wisconsin-Madison, and he is professor emeritus in the School of Urban and Regional Planning at the University of Iowa.