Is it time for Woodbury County to join the party?

This week, two more counties in Iowa — Linn and Wapello — joined Johnson County in setting a countywide minimum wage. In Linn County, the wage will rise to $10.25 by January 2019, while Wapello County followed Johnson County’s lead in raising the wage to $10.10 in three installments. Polk County is expected to take up a proposal soon to raise the wage there to $10.75 by 2019. Lee County supervisors, meanwhile, have appointed a study group to consider a minimum wage.

Unlike these counties, Woodbury is part of a three-state metropolitan area that includes counties in Nebraska and South Dakota where the state minimum wage has already been raised above the federal. The minimum wage is currently $8.55 in South Dakota and $9.00 in Nebraska. Sioux City employers are already competing in a labor market with wages above the Iowa minimum of $7.25.

Using data from the U.S. Census Bureau’s American Community Survey, economists at the Economic Policy Institute estimate that about 10,000 workers in Woodbury County would see an increase in their hourly wage if the county set a minimum equal to Nebraska’s $9.00 by January 2018. Those 10,000 workers on average would see their annual income rise by about $1,500.

If the Woodbury County wage were raised further, to $10.25 by January 2019, putting it on a par with Linn County, the number of workers benefiting would grow to about 12,600. The average gain in income would about double, to $3,000.[i]

The Census data dispel the usual myths about low-wage workers. In Woodbury County, over 80 percent of those benefiting from the $9.00 or $10.10 minimum would be age 20 or over, with about a third over age 40. Well over half of them work full time. About 26 percent are parents, and 3,400 to 4,700 children live in a family that would see a rise in income.

Raising the minimum wage puts more disposable income in the pockets of the work force. Much of that income would be returned to the local economy as workers spend more at grocery stores, car dealerships, clothing stores, restaurants, theaters — in fact, throughout the local retail and service sectors. Increased sales in turn would create a need for more workers.

It is this increase in local spending that is a major reason that studies of local minimum wage laws have found no effect on employment. The higher labor costs to employers are offset in part by increased demand for their goods and services, and in part by lower employee turnover and greater productivity.

The Iowa Policy Project’s 2016 Cost of Living in Iowa shows what it takes for families to get by, just covering basic expenses for food, rent, transportation, child care and health care. In Woodbury County, a married couple who both work and who have two children needing child care would each need to earn at least $13.00 an hour to get by, even with health insurance provided by an employer. Without health insurance, they would need to make over $16 an hour. Even a single person living alone would need a wage of $12.46 to get by without public assistance, or nearly $11.00 an hour in a job with health benefits.

While $9.00 or $10.10 does not represent a living wage in Woodbury County, it gets workers closer to that goal and helps thousands of families, many struggling below the poverty line. And it provides a significant boost to the local economy through increased spending.

 

[i] These estimates include those affected directly and indirectly. About three-fourths of the workers gaining a higher wage represent those earning less than the new minimum. But the other fourth represent those a little higher up the wage scale who would benefit as employers adjust pay levels to remain competitive or to restore parity within a business.

2010-PFw5464Posted by Peter Fisher, Research Director of the Iowa Policy Project

pfisher@iowapolicyproject.org

Enriching the minimum wage discussion

History shows the minimum wage was meant to be a meaningful policy tool to help working families, not limited to “entry level” work or teens. In fact, efforts to establish the wage came as policy makers were trying to remove young teenagers from the workforce.

The spin against any minimum wage increase — or even having a minimum wage — has become predictable. This should surprise no one. Policy makers since President Franklin D. Roosevelt have battled the same stuff.

A little relevant history might be just what is needed as Iowans consider the arguments for a national, state or even local increase, which passed in Johnson County.

History shows the minimum wage was meant to be a meaningful policy tool to help working families, not limited to “entry level” work or teen wages. In fact, efforts to establish the wage came at the same time policy makers were trying to remove young teenagers from the workforce.

The U.S. Department of Labor website has an interesting paper published almost 40 years ago by a DOL historian, Jonathan Grossman: Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage In it, Grossman relates a story about a young girl’s note to Roosevelt, telling of pay being cut from $11 a week to between $4 and $6 a week. 

To a reporter’s question, the President replied, “Something has to be done about the elimination of child labor and long hours and starvation wages.”

“Starvation wages” are your concern if you expect the wage to be meaningful to a household budget.

Interestingly, Iowa Policy Project research shows what is needed for a household budget. In Linn County, where a very low $8.25 has been suggested by a split task force, a single parent needs to make between $21 and $25 an hour to support a household on a bare-bones, basic-needs budget without public supports. In Polk County, it takes between $22 and $27 for a parent in similar circumstances.

IPP and Economic Policy Institute analysis also show this issue is scarcely about teens. Statewide, more than 4 out of 5 workers affected by an increase to $12 are 20 years old or older. A quarter of them have children. Over half of them work full time. On average, they account for over half of their family’s total income.

County supervisors in Johnson County have taken the baton across generations from FDR, to assure families have a chance. They acted last year to raise the local wage in three steps to $10.10 by next January 1, and they have already taken two steps, to $9.15.

Discussions are moving ahead in Polk County, Linn County and Lee County. Passing a local wage is a significant signal to state leaders that they are through waiting for action. Any county must consider whether the content of its action is significant as well — however bold it may seem to pass local law on this issue, the amount does matter.

And for those who say, “Let the market handle it,” just wake up. Clearly, it does not. As FDR stated in 1937:

The truth of the matter, of course, is that the exponents of the theory of private initiative as the cure for deep-seated national ills want in most cases to improve the lot of mankind. But, well intentioned as they may be, they fail…. (T)hey have no power to bind the inevitable minority of chiselers within their own ranks.

Though we may go far in admitting the innate decency of this small minority, the whole story of our Nation proves that social progress has too often been fought by them. In actual practice it has been effectively advanced only by the passage of laws by state legislatures or the National Congress. [1]

Do we value history? Do we value work? Do we value families? Do we value practical solutions through public policy? We are about to see.

[1] Franklin D. Roosevelt: “Message to Congress on Establishing Minimum Wages and Maximum Hours.,” May 24, 1937. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=15405.

owen-2013-57By Mike Owen, Executive Director of the Iowa Policy Project.

Contact: mikeowen@iowapolicyproject.org

About those jobs …

That we don’t have a chance of reaching Governor Branstad’s ambitious jobs goal is not surprising, because our long-term pace of growth is far too slow.

To read the headlines, you might not know we actually lost jobs the last two months. In fact, we’ve lost jobs in three of the last six months.

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Our monthly Iowa JobWatch report offers context you don’t get from official news releases.

Overall, we continue to have stubbornly and staggeringly slow job growth in Iowa. We are only about halfway to the ambitious job goal set by Governor Branstad when he sought Terrace Hill in 2010 — 200,000 jobs in five years. Through 56 of those 60 months, Iowa’s economy has added only 97,400 jobs.

That we don’t have a chance of reaching his goal is not surprising, as the long-term trend of 2,000 or fewer jobs added per month, which has held through his term, is far too slow a pace for the job growth that the Governor promised.

This has been going on for many years, and we have not fully recovered from a recession that ended six years ago. We have a 37,800-job deficit from the number of jobs we need — accounting for population growth — to be where we were at the start of the recession in 2007. (See graph below)

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For the state to be trumpeting a sixth-lowest unemployment rate really misses the job picture in Iowa — which is neither one of sweetness and light nor of gloom and doom, but one that demands a little more critical thinking about the challenges that face us.

How do we encourage more, and better, jobs in Iowa with sensible public policies that do not squander our state revenues on subsidies for companies to do what they would do anyway?

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

Careful with the comments, Council Members

Whichever way Solon council members vote on a local minimum wage, they should make the decision with good information, not discredited myths.

As the Solon City Council decides whether to back out of a Johnson County minimum wage increase, good information is available for comparison to recent comments by council members.

Peter Fisher of the Iowa Policy Project took a look recently at what a larger increase — to $15 — would do in Johnson and Linn counties. That report is here.

Separately, we have an Iowa Policy Project fact sheet available here on how Iowans statewide would be affected by an increase to $10.10, which is the level recently established by Johnson County supervisors to be phased in by 2017.

Findings of that research contradicts many comments by council members in Solon. For example, the minimum wage clearly is not, as one suggests, “for kids to go out and have some pocket money, that sort of stuff.”

In fact, the wage has been held so low for so long that it has become is part of a larger low-wage climate in our state, so that parents account for 1 in 5 of those who would be helped by a $10.10 minimum statewide. And almost half — 46 percent — of total family income in homes with a worker making less than $10.10 an hour comes from that job.

One council member ignores a lot of people in Iowa, very likely many of his own neighbors, when he suggests this is all about part-time work. More than 4 in 10 — 43 percent — of the workers who would benefit from an increase to $10.10 in Iowa are working full time.

Finally, an observation by a third council member is particularly noteworthy — that local restaurants are having trouble finding help. Wonder why that would be? Something about low pay, perhaps? How many more would be willing to work if pay were increased? How many more would be patronizing local businesses because they could afford to do so?

It is certainly up to the good people of Solon and their leaders to decide whether to go along with the new Johnson County ordinance, and by doing so to put pressure on the state to raise the state minimum. The latter, by the way, is what some council members are quoted that what they want to see: a statewide increase. Yet with no local pressure, is that really the message they send to state lawmakers who are holding Iowa’s minimum below that of 29 other states?

Whichever way they decide, however, they should be making the decision with good information, not discredited myths.

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

What happens at $8.75 in Iowa?

What cannot be denied is that the minimum wage is not enough — not nearly enough — to get by. Any increase will benefit a large number of Iowa working families.

There are serious competing ideas in Iowa about the minimum wage — whether to raise it, and by how much. Iowa lawmakers are currently discussing the issue; the Governor is staying out of it.

What cannot be denied is that the minimum wage is not enough — not nearly enough — to get by, and that regardless of political spin to the contrary, there are many families in Iowa whose household budgets depend greatly on that wage. Any increase will benefit a large number of Iowa working families.

We have illustrated with data from the Economic Policy Institute (EPI) how an increase to $10.10 from the current $7.25 would affect Iowans. That two-page piece is here. That proposal would raise the hourly wage for an estimated 306,000 Iowans (216,000 directly, and 90,000 indirectly*).

A proposal in the Iowa Senate would raise the wage by a smaller amount, to $8.75. Again with analysis from EPI, below is what could be expected if the wage were raised to $8.75 in July 2016. Compared to the current $7.25, the new wage would affect:

•   12 percent of Iowa workers
•   112,000 Iowa workers directly
•   69,000 Iowa workers indirectly*
•   181,000 Iowa workers in total — about 3 1/2 times the number of people working at the current minimum.

150205-MWgraphic

More impacts are shown in the adjacent graphic. EPI projects increased wages of $147 million and increased economic activity (GDP) of $93 million.

There are those who dismiss the minimum wage as a minor issue. They are wrong, and the numbers show this.

* Workers affected indirectly have wages slightly above the proposed minimum and will be affected as pay scales adjust.
Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

Bad math, good math — and Iowa jobs

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.

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.

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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

Iowa JobWatch: Jobs Rise in August, Still Sluggish

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.