Don’t take talkers’ comments at face value

What actually occurred is that restaurant and bar jobs grew in the Seattle metro area after the wage was raised.

The shameless way the public debate can be distorted never ends. Case in point: discussion about the minimum wage.

If you were in Eastern Iowa this morning listening to Simon Conway’s program on WMT-AM radio, you would not have an accurate idea of what happened in Seattle, Washington, following that city’s first step — to $11 — toward an eventual minimum wage of $15. Confusion on this issue has occurred in Johnson County, where supervisors have approved a $10.10 minimum wage by 2017.

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Peter Fisher
IPP Research Director

What actually occurred, as Peter Fisher of the Iowa Policy Project has pointed out, is that job numbers rose in Seattle after the wage was raised. See his Aug. 25 guest opinion in the Iowa City Press-Citizen. Excerpt:

There is also misinformation flying around about Seattle, which took the first step toward raising the minimum wage to $15 in April of this year. What actually occurred is that overall employment in Seattle grew after the wage was raised. … The idea that restaurants closed because of the wage hike turned out to be a myth — the owners of the four restaurants in question reported that wages had nothing to do with their decisions.

New job numbers since then show jobs to be up in Seattle — both overall and in the restaurant and drinking places category — and both over the year and since the first step of the minimum wage increase. While it would be a mistake to suggest the minimum wage is responsible, the leisure and hospitality category alone shows a net gain of 1,100 jobs since the higher minimum went into effect.*

Much number-crunching is yet to be done to enhance understanding about how the Seattle increase is now affecting and ultimately will affect the labor market in that area. But the fact that the scare tactics have had little substance behind them has been pretty clear from early on. See this Seattle Times story. Or this Forbes.com story.

The lesson here is not that the minimum wage increase caused an increase in jobs in Seattle — but that it’s ridiculous to say it hindered jobs.

That is, of course, if you are at all interested in the facts.

Owen-2013-57Posted by Mike Owen, Executive Director, Iowa Policy Project
Learn more about Iowa issues with the minimum wage on our website, www.iowapolicyproject.org
* seasonally adjusted jobs, Washington State Employment Security Department.

Another voice: Subsidizing Server Farms in Iowa

Iowa throws a lot of money at the server farm industry, even though the state’s assets would make it attractive for the industry even without lucrative subsidies.

by Kasia Tarczynska, Good Jobs First

Facebook just announced a third expansion of its $1.5 billion data center in Iowa. This followed a similar move by Google for its server farm in the state. These developments are fruits of the effort by officials to encourage big-name tech companies to locate in Iowa. This private investment, however, does not come free. For example, the $1 billion Google expansion is supported by $19.8 million in state subsidies. Since 2007, Iowa has offered almost $100 million in state tax credits and refunds to Facebook, Google, and Microsoft.

Google data center facility in Council Bluffs, Iowa. Credit: Google

Google data center in Council Bluffs, Iowa. Image via Google

Subsidies to server farms raise a lot of questions and controversy.  A key issue is whether the tech companies should get subsidies at all, given that their location decisions are based primarily on the availability of cheap electricity (preferably renewable), plenty of land, cooler climate, access to water, and lack of natural disasters. These make places like Iowa seem a natural choice.

Because data centers are capital intensive projects, they usually create a small number of jobs and thus per-job subsidies tend to be quite large.

Despite these factors, Iowa still throws lots of money at the industry.  Here is a quick look at Iowa’s subsidies to the three tech giants:

Google, located in Council Bluffs

2007- The company received $1.4 million in state tax credits and $48 million in local property tax abatements. Google was the first big-name tech company to locate a data center in the state.

2013 – The Iowa Economic Development Authority approved another $16.8 million in tax credits for a second Google facility.

2015 – The company received an additional $19.8 million in state sales and use tax refund for an expansion. Google will also pay only 20 percent of local property taxes for 5 years.

Altogether, Google promised to invest $2.5 billion but create just 70 jobs.

Microsoft, located in West Des Moines

Microsoft’s state subsidies started on a small scale, $568,000 in 2008 and $131,242 in 2011.

2013 – The company was awarded $20 million from the state’s High Quality Jobs Tax Credit program for a $679 million investment.

2014 – EDA approved $20.3 million in state tax credits to Microsoft for another round of expansion. The city chipped in $18 million for construction and infrastructure improvements on the site. $3.5 million in Tax Increment Financing was committed to build a water facility that will be used by Microsoft, and others, to cool servers.

Facebook, located in Altoona

2013 – After an intense and secretive competition with Nebraska, Iowa won Facebook’s server farm.  The company was approved for $18 million in tax credits for creating 31 jobs and investing $1.5 billion (the EDA report lists Facebook under Siculus, Inc, a Facebook initiative). The company also enjoys discounted water rates and has received money through Tax Increment Financing.

There is one additional thing that stands out: Google, Microsoft, and Facebook are rich tech companies that easily can afford any costs related to construction and operation of those server farms.  As one journalist put it: “Google needs a tax break like Bill Gates needs food stamps.”

Kasia Tarczynska is a research analyst at Good Jobs First, http://www.goodjobsfirst.org. She has a Masters in Urban Planning and Policy from the University of Illinois at Chicago. This blog originally appeared on the Good Jobs First blog at this link.
Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development and smart growth for working families.

Avoid snap judgments on SNAP use

The fact that SNAP exists says more about us as a nation than do snarky shoppers who stalk the poor in the checkout line.

Legislators have enough to do finding answers to real problems. However, some seem ready to invent problems so they can come to the rescue.

Case in point: the Missouri representative who wants to stop food assistance recipients from buying steak.

Photos, please, of this actually happening. Because common sense tells us that other than some unusual case or two, it’s just not the way people allocate their meager food assistance benefit.

Why? Let’s look at the average benefit in Iowa from SNAP — the Supplemental Nutrition Assistance Program, formerly known as Food Stamps.

People who qualify for SNAP are making less than $2,200 a month in a three-person family, about $2,600 in a four-person family. On average, their SNAP benefit as of March was about $1.18 per person per meal. That’s why they call it “supplemental” assistance: On its own, SNAP is not enough to keep bellies full, let alone fully support good family nutrition.

SNAP is there to help people piece together what they need to get by. SNAP is part of a mix of resources that includes a share of a low-wage family’s own earnings, and probably the help of a local food pantry.

During the Great Recession, SNAP clearly helped Iowans. In our slow recovery from the last national recession, the number of SNAP recipients rose to over 423,000. As things have gotten better, that number has steadily fallen and was under 393,000 as of last month — a decline of 7 percent. That’s the way it is supposed to work.

But for those who still need it, SNAP is there. This critical point should not be missed by distractions like the bill in Missouri, or others that may crop up — even in our state.

The fact that SNAP exists says more about us as a nation than do snarky shoppers who stalk the poor in the checkout line.

Do we really want people who don’t even believe in SNAP to nitpick what people can buy with it? Because those are often the people attempting to call the shots on what goes in the shopping cart.

I’m not buying what they’re selling. They can check my cart.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
 Hear Mike Owen and KVFD’s Mike Devine discuss this issue in this April 9 interview.

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Hyperbole Alert: The drumbeat to cut corporate taxes in Iowa

Want to talk reform? Then recognize the real problems — we receive less in corporate tax than we used to, and don’t collect a lot because of the swiss-cheese nature of our tax code.

Mike Owen
Mike Owen

TWELVE PERCENT!

The figure practically screams at you, even when it’s not in all caps, when the conversation comes to corporate tax rates in Iowa.

Here’s the thing: It’s not a real number. Not really.

That is what is known as Iowa’s “top marginal rate” on corporate income tax. And it’s not a real number because it simply does not — cannot — reflect what a business pays on all its profits. Yet that is the implication when people (especially politicians) or corporations complain about it.

A top Iowa columnist, Todd Dorman of the Cedar Rapids Gazette, this week discussed the political battles over Iowa’s latest gigantic subsidies to Egyptian fertilizer company Orascom. In his piece he expressed a note of concern about the hyperbole in those battles. Then, he turned the discussion to Governor Branstad’s desire for cuts in corporate income taxes.

It is in that discussion where the hyperbole typically has been the strongest in Iowa. We are often told — as Dorman noted — that Iowa’s top corporate income tax rate is the nation’s highest. Note the emphasis added on “top.” More on that in a moment. Dorman also noted, accurately, that Iowa “has four brackets and a tangle of special interest credits.”

Because of the latter, any serious concern for our corporate friends should evaporate. Because they’re really being taken care of quite nicely, thank you, by their friends in the General Assembly and the Governor’s Office.

Now, about that “top rate.” It applies only to Iowa-taxable corporate profits above $250,000. Iowa doesn’t tax any profits from sales outside the state, so the rate doesn’t apply at all there, which for many businesses is a significant share of profits. For all taxable profits below $250,000, rates are lower — 6 percent on the first $25,000, 8 percent on the next $75,000 and 10 percent on the next $150,000.

Before these rates kick in, the business gets to deduct half its federal income tax from taxable income, and may have other deductions or ways to shelter income from state tax.

Then, after the rates are computed and the taxes determined, the tax credits enter the picture — and state revenues exit. The state just expanded the potential for those credits by $50 million, raising the cap on a select group of credits. In the case of the Research Activities Credit, these credits not only erase all tax liability, but offer state checks for the remaining amount of the credit. Through that program in 2012, Iowa paid out almost $33 million to 130 firms that paid no income tax, because those companies had more credits than tax liability.

And you can bet the corporate execs and their accountants fully understand all these nooks and crannies in our tax code. But if you want to give them a free million or so, they’ll take it. They are smart folks, and they have proven themselves to be more skilled negotiators than Iowa’s economic development moguls.

Want to talk reform? Then recognize the real problems — that we receive less in corporate tax than we used to, and that a lot of corporate tax is not collected because of the swiss-cheese nature of our tax code. That gives us all something to talk about.

Just be ready for the hyperbole from those who don’t want to change that part of our system.

Posted by Mike Owen, Executive Director


For more information about Iowa business taxes, see these Iowa Fiscal Partnership reports:
— “Reducing Iowa Commercial Property Taxes,” by Heather Milway and Peter Fisher, April 24, 2013.
— “Amid Plans to Relax Limits, Business Tax Credits Grow,” by Heather Gibney, April 16, 2013.
— “Corporate Taxes and State Economic Growth,” by Peter Fisher, revised April 2013.
— “A $40 Million Budget Hole: Persistent and Growing,” IFP backgrounder, February 25, 2013.
— “Tax Credit Reform Glass Half-Full? Maybe Some Moisture,” IFP backgrounder, revised March 23, 2010.
— “Single Factor to Consider,” IFP backgrounder, April 2, 2008.

Different goals for progress on Iowa jobs

Depending on which goal you choose, we’re anywhere from 4,100 to 155,100 from meeting it.

David Osterberg
David Osterberg

The graph below offers one way — actually, four ways — to look at the latest nonfarm job numbers in the context of history and job goals for Iowa.

As of February, we’re 4,100 behind where we were at the start of the recession in December 2007, and 7,200 behind Iowa’s peak nonfarm job level in May 2008.

However, Economic Policy Institute analysis suggests that those historical numbers don’t give an apples-to-apples picture for how well the economy is producing jobs to meet the demand for jobs — that you need to factor in growth in the population. When that is done, Iowa still has 60,900 to go to reach where we were before the recession.

Yet another number to consider is Governor Branstad’s goal of creating 200,000 jobs in five years. Since his term started in January 2011, Iowa has produced a net total of 44,900 jobs, which works out to a pace of 1,800 net new jobs per month. At that pace, the state is well off what is necessary to reach the Governor’s goal — 4,400 per month for the remaining 35 months of the five-year period.

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As we point out in our monthly Iowa JobWatch report, the overall job numbers do not tell the full story about the job climate in our state. One thing those monthly numbers do not disclose is any detail about job quality — whether jobs gained or lost are full-time or part-time jobs, or are permanent or temporary positions, or pay well, or offer health and/or retirement benefits.

For more, see our latest Iowa JobWatch report and also The State of Working Iowa 2012.

Posted by David Osterberg, Executive Director

IPP to EPA: Hold DNR Accountable on Water Quality

There is no question that if EPA simply accepts the agency’s agreement to try to do better, water quality will not improve in this state.

Tonight (October 18) in Des Moines, Environmental Protection Agency Region 7 Administrator Karl Brooks will meet with Iowans to hear comments and concerns about a new work plan by the state Department of Environmental Resources to bring Iowa into compliance with the Clean Water Act.

Below is a letter outlining remarks prepared by IPP Executive Director David Osterberg for tonight’s meeting.

The meeting is at the State Historical Building, 600 East Locust Street, Des Moines, from 7 p.m. to 9 p.m.

——————————

Oct. 17, 2012

Stephen Pollard, Water Enforcement Branch
United States Environmental Protection Agency, Region 7
11201 Renner Blvd
Lenexa, KS 66219

RE: Public comments on Iowa DNR’s response to EPA’s Water Quality findings

Dear Mr. Pollard:

The Iowa Policy Project is a nonprofit research organization located in Iowa City. We wish to make the following comments about the response by the Iowa Department of Natural Resources to your report of inadequacies in the state NPDES program. We limit our remarks to the question of staffing and funding the agency.

  1. The DNR acknowledged that it has given less attention to water quality problems caused by animal feeding operations — see quote below:

“Since 2007, the DNR has had a significant reduction in its animal feeding operations staff. To better meet our responsibilities, the DNR needs both an increase in staffing and to reprioritize workloads.”

While the DNR did not explain to you the extent of the deep reduction in agency field staff they have answered elsewhere.

From a DNR 2011 report on manure on frozen and snow covered ground:

“The scope and complexity of confinement program work increased disproportionately beginning with legislation in the late ’90s. With this, public awareness of environmental issues also grew, resulting in a significant increase in local demand for education, compliance assistance and compliance assurance. To address these needs, animal feeding operations field staffing gradually increased to a high of 23 by SFY 2004. In SFY 2008, four staff people were shifted into a newly established open feedlots program. Then in the fall of 2009, as General Fund expenditures declined, confinement staffing was reduced again. This reduced staff numbers from 19 to 11.5. Further reductions leave the total of field staff for confinement work at 8.75 full time equivalents. This reduction means that the DNR will not be able to maintain an adequate level of compliance and enforcement activity in confinements.”

Thus the 2011 DNR report demonstrates that the envisioned 13 staff-person increase would only bring numbers back to approximately the 2004 staffing levels — before the addition of many more confinement operations.

  1. Underfunding of water quality programs is not limited to animal agriculture. An IPP report from March 2012 demonstrated an overall decrease in water quality funding of $5 million over the decade. Drops in the Bucket: The Erosion of Iowa Water Quality Funding found that this water-quality funding decline came despite greater needs for water protection and public willingness to fund it.
    http://www.iowapolicyproject.org/2012docs/120301-water.pdf
  1. Given this underfunding by the Iowa Legislature, there appears to be no basis for the agency’s belief that it will get approval for 13 more staff members. First, the request must be made in the Governor’s proposed budget that will be drawn up in January of next year. Second, the Legislature must agree to this increase without endangering other water quality programs.
  1. EPA should help the agency in bargaining with a legislature that has shown itself to be less concerned with water quality protection than tax cuts. EPA should tell the DNR that if it fails to get a proposed increase in staff in the Governor’s budget and also to have the request authorized by the General Assembly, there will be consequences. These must be severe consequences commensurate with the funding being sought — that is, EPA should establish a minimum number of staff additions that will be required. Absent that it should state that it will withdraw the authorized NPDES program from DNR. There is no question that if EPA simply accepts the agency’s agreement to try to do better, water quality will not improve in this state.

Thank you for your attention to improving the quality of water in our state.

Sincerely,

David Osterberg, Executive Director, The Iowa Policy Project

Connecting dots draws tough course for Iowa jobs

Why is job outlook dim? Don’t blame an educational gap or the business cycle. Long-term projections favor low-wage service jobs over better-paying sectors.

The chart projecting Iowa jobs in the near future is not pretty.

click on image for interactive version

Using the most current state level numbers, for 2008-2018), this graph shows that the fastest growing jobs taking larger shares of the Iowa job market through 2018 are in sectors that pay lower than the state median wage. Dots represent occupations; blue dots pay higher than the statewide median wage (2011 numbers) and red dots pay lower. Move your cursor to each dot to see the occupation, its 2008 employment, its median wage and projected employment.

Only 4 of 18 occupations projecting job gains over 1,500 by 2018 pay better than a median wage, and only one of the 10 occupations projecting job gains over 2,000 pay better than the median. Six occupations (retail sales, office clerk, nursing aides, home health aides, food preparation, and customer service) project job growth greater than 4,000 and the highest wage in this group falls more than $2.00 short of the median wage.

Why is this happening? Don’t blame it on an educational gap, in which workers with skills pull away from the rest. As the Center for Economic and Policy Research has shown — here and here and here — today’s low wage workers are older and better educated  than ever.

It also is not an artifact of the business cycle, as the Department of Labor estimates in long-term projections that about a third of new jobs through the next decade will be in low-wage service occupations (retail, home health care, child care, janitorial).

Combine these projections with the troubling trend of the last business cycle, which hit good jobs hard. The National Employment Law Project has shown (here and updated here), that job losses during the recession were concentrated in mid-wage occupations, while job gains during the recovery have been concentrated at the low end.

Our work, it seems, is cut out for us — well-paid or not.

Posted by Colin Gordon, Senior Research Consultant

Note: Colin Gordon is a Professor of History at the University of Iowa and Senior Research Consultant at the Iowa Policy Project. This post is taken from his blog, TelltaleChart.org