Labor Day 2017: Disappointing trends for Iowa working families

A higher minimum wage, union representation and investments in education produce growth and productivity in local and state economies that tax cuts never deliver.

Editor’s Note: This piece by Colin Gordon, senior research consultant at the Iowa Policy Project, ran as a guest opinion in The Des Moines Register.

Hear Colin Gordon’s Sept. 7 interview on Michael Devine’s “Devine Intervention program on KVFD-AM 1400 Fort Dodge.

Labor Day is always a good time to take stock of the state of working Iowa. Patterns of employment, job creation, and wage and income growth across the Iowa economy are telling — and disappointing.

This long-term economic pattern combines with the most disheartening legislative changes for working families in the lifetimes of most Iowans. The year 2017 poses great challenges to Iowans’ economic security, let alone opportunity for those coming to, serving in or retiring from the job market.

The Iowa Policy Project’s upcoming State of Working Iowa review finds the following:

•   Recovery is elusive. The Great Recession is over, but the national and Iowa economies are still struggling to recover. While Iowa regained its pre-recession threshold of jobs in June 2013, our economy and population have continued to grow — leaving us a jobs deficit of 34,000 jobs as of July.

While the unemployment rate has come back down to a healthy 3.2 percent, the labor force participation rate is still well below its peak and rates of underemployment and long-term unemployment are still higher than they were before the financial crisis hit in 2007.

•   Despite job gains, we have fewer good jobs. Counting jobs lost or added is important, but so is the quality of those jobs. Since the 1970s, Iowa has shed many good jobs in sectors like manufacturing, and replaced too many of them with lower-wage service jobs.

But the real damage has been done by the collapse of security and job quality within sectors and occupations. We have traded good jobs for bad jobs, due to economic shifts, loss of union representation, lax enforcement of labor standards, and alarming growth in contingent work relationships.

•   We are treading water. Wage growth is anemic for all but the highest earners, underscoring both low job quality. In Iowa, the median wage in inflation adjusted dollars inched up less than 1 percent, across the last generation (since 1979).

The constraints on wage growth are mostly political: a weak commitment to full employment, the declining real value of the minimum wage, and loss of voice and bargaining power with the loss of union representation.

•   We are choosing the wrong policies at the wrong time. The last year in state and national politics has only made things worse. The Trump Administration has moved to roll back both the substance and enforcement of key labor standards, and trade, tax, and financial policies have lavished the economy’s rewards on the highest earners. In Iowa, the legislative fusillade of the last session took aim at precisely the policies — including public sector collective bargaining and local minimum wage initiatives — that were helping to contain the damage.

Recent experience across the states offers us a good sense of what works and what doesn’t. A higher minimum wage lifts families out of poverty with no decrease in employment or economic growth. Union representation and collective bargaining offer a robust defense against income inequality and the erosion of job quality. Investments in education produce growth and productivity in local and state economies that tax cuts never deliver.

When states ignore these facts — as Kansas and Wisconsin have — they undermine the prosperity, security and mobility of their citizens.

The high road to economic growth and worker security is the better course for Iowa.

Colin Gordon is a professor of history at the University of Iowa and senior research consultant at the nonpartisan Iowa Policy Project in Iowa City. He is the author of reports in IPP’s “State of Working Iowa” series. Contact: cgordonipp@gmail.com.

 

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.

 

Watching Iowa jobs: Don’t miss the deficit

Given that the population of Iowa has grown, it makes sense that more jobs need to be added to keep up. Our job deficit is almost 48,000.

Iowa’s up-again, down-again job picture is looking up again, at least for now. The May numbers from the state show an increase of 6,200 jobs. Coming on the heels of a 3,700 increase in April, this marks the first two-month gain since the end of last year, and the increase is the largest since last October.

One-month results, however, do not tell the whole story of what’s happening in the state economy and the job market. Over the past year, Iowa has averaged a gain of about 2,100 jobs per month, which is a modest pace. At this rate it would take about three years for Iowa to completely recover from recession losses.

In fact, even though Iowa has more jobs than it did when the recession started, the state shows a jobs deficit:

Basic RGBSource: Economic Policy Institute

Given that the population of Iowa has grown since the start of the recession, it makes sense that more jobs need to be added to the economy each year in order to keep up with the growing number of people. According to the Economic Policy Institute, 23,800 jobs have been added so far but 71,600 were needed by now to keep up with this growth. This means that there aren’t enough jobs for everyone who wants or needs one — a deficit of 47,800, as shown in the graph above.

For more about the latest Iowa job numbers, see our new Iowa JobWatch report. IPP has given its view of the monthly numbers since 2003 — there are always plenty of new angles for a “Job Watcher.”

IPP-gibney5464   Posted by Heather Gibney, Research Associate

A minimum wage increase for Iowa?

Many forget that in Iowa, the pressure for a minimum-wage increase has been building longer than it has nationally.

The question is an old one. Sadly.

Every few years, the pressure builds enough that we finally get a discussion about raising the minimum wage. We seem to finally be reaching that stage. The president supports a $10.10 minimum, up from the current and outdated $7.25 per hour, as Senate Labor Chair Tom Harkin of Iowa proposed last February. And it’s grown in popularity, if not in paychecks of the working poor.

A Washington Post poll finds two-thirds of Americans support a minimum wage increase, and a firm majority — 57 percent — believe federal policy should be used to reduce the wealth gap between rich and poor.

Many forget that in Iowa, the pressure has been building longer than it has nationally, as IPP’s Heather Gibney pointed out last March. Yet there’s no assurance we’ll hear much about it in a promised short session of the Iowa Legislature in 2014.

Iowa actually beat the feds to the punch in 2007, raising the state’s minimum wage to $7.25 in January 2008, a full year and a half ahead of the federal wage increase. That means six full years have eroded the buying power of those at the minimum wage — effectively, a 60-cents-per-hour wage cut.

Basic RGBThe Cedar Rapids Gazette, while not totally sold on the merits many economists see in a minimum wage increase, argued for an increase in an editorial today. Wrote the Gazette:

“The ultimate goal should be to make the minimum wage less political and more predictable, both for workers and for businesses owners charting costs. Neither should have to guess which way the political winds and whims will blow their livelihood.”

Given the lack of assurance of this being addressed in Washington, and even less of it being done in a nonpolitical manner, raising and indexing the wage to inflation as the Gazette suggests would be an effective way of ending these periodic squabbles that leave pay for the working poor to “political winds and whims.” Can our Governor and Legislature begin to look at the issue that way?

Mike OwenPosted by Mike Owen, Executive Director

The problem with political goals on jobs

Why not get rid of the political goal and focus on a realistic economic goal: the job growth we would need to bring down unemployment and keep pace with the growth of the labor market. As of the latest count, we are 55,100 short.

Mike Owen
Mike Owen

This week we were treated (?) to the latest bizarre count provided by Governor Branstad’s administration on how many jobs he has created.

The Governor is claiming 160,600 jobs already created since he took office, and it’s nowhere close to reality, if for no reason other than the fact that he’s only wanted to count job gains and ignore the losses.* But even then, the number is inflated.

So, class, let’s all take out our abacus and our slide rule and try to come up with the same number. On second thought, let’s not. Let’s get past the politics on job numbers and just count ’em ourselves. A pencil will do.

As you’ll recall, the Governor promoted a goal of creating 200,000 jobs in five years. He took office in January 2011.

We start with 1,475,900 — the number of nonfarm jobs in Iowa in January 2011, according to Iowa Workforce Development. (Find IWD’s spreadsheet here.) The latest data, which are preliminary and might be adjusted, put that number at 1,530,300 as of June 2013. That’s a net increase of 54,400 jobs.

To reach 200,000 jobs by January 2016, the Governor’s goal, Iowa would have to add 4,700 jobs per month for the next 31 months.

130719-NF-goalsIPP’s latest JobWatch report shows we have not kept that kind of pace in Iowa over the last decade. In 2013 the average net gain has been 2,400 a month, which is higher than usual.

Why not get rid of the political goal and focus on a realistic economic goal: the job growth we would need to bring down unemployment and keep pace with the growth of the labor market. As of June, we are still 55,100 jobs short of this basic threshold. But that’s a more manageable number than the 145,600 left to meet the Governor’s goal, and probably a more meaningful one.

Governors and state legislators have only so much impact on the overall health of a state economy to influence its job performance; there are much greater forces at work.

In the end, the issue for Iowa families is not as much a Governor’s goal as it is whether the economy is producing the number — and quality — of jobs necessary to maintain and improve all Iowans’ standard of living.

But we didn’t raise the issue about the job count. Others have. So as long as Iowans are going to be looking at it, we’ll help them to monitor it accurately.

* The Governor’s count of jobs already produced, 160,600, is far above even the number you’d accurately compute if you avoided counting job losses. Iowa Workforce Development has added a line on its nonfarm jobs spreadsheet leaving out the job losses and counting only gross jobs added, month by month, since January 2011. For what it’s worth, that number is 112,700 — about 48,000 behind what the Governor’s office was claiming Wednesday, and more than twice the actual net increase of 54,400.

Posted by Mike Owen, Executive Director

Smokey and the Jobs

We’re not going to say it can’t be done. But we’ve got a long way to go, and a short time to get there.

The controversy over speeding by the Governor’s SUV prompted one columnist [1] to tinker with the lyrics for the theme song from Smokey and the Bandit (the Burt Reynolds film in which a couple of lead-footed drivers set out on a multistate beer run through the South beating the law at every turn): “Gov. Terry Branstad’s SUV was apparently westbound and down, loaded up and truckin.’”

This naturally leads to a discussion about the Governor’s job goals, because of the next lines from the same song: “We gonna do what they say can’t be done. We’ve got a long way to go, and a short time to get there….”

Governor Branstad set out to produce 200,000 jobs in five years, a lofty goal and one all Iowans should want to see happen. But to do that, we need to average a net increase of about 3,300 jobs a month for that whole span. A pace like that has never come easily in Iowa. In the last two decades we have reached it only once, in 1994, over an entire calendar year.

And, through the first 28 months of his term, tracking we do for IPP’s monthly JobWatch shows we have a net gain of 48,000 jobs — a pace of 1,700 new jobs per month. That leaves 32 months at a pace of 4,800 jobs per month to gain the remaining 152,000. So the Governor has set an aggressive goal for one year, let alone five.

As the graph below indicates, the Iowa economy has just about caught up with both the state’s peak level of jobs and peak before the 2007-09 recession, while falling well short not only of the Governor’s goal but also the number of jobs needed to keep up with population growth.

Basic RGB

Another 152,000 jobs over 32 months?

We’re not going to say it can’t be done. But we’ve got a long way to go, and a short time to get there.

Posted by Mike Owen, Executive Director

[1] Todd Dorman, The Gazette, Cedar Rapids, “Smokey and the Branstad,” updated July 3, 2013 — http://thegazette.com/2013/07/03/smokey-and-the-branstad/

Job Creationism

Because he wanted to be a Job Creator, since he had heard that Job Creators get all kinds of public praise and respect, not to mention some significant perks, like being able to flash the Job Creator ID card whenever anyone threatens to raise your taxes.

Peter Fisher
Peter Fisher

In the beginning, there was a CEO. And he said, “Let there be jobs.” Because he wanted to be a Job Creator, since he had heard that Job Creators get all kinds of public praise and respect, not to mention some significant perks, like being able to flash the Job Creator ID card whenever anyone threatens to raise your taxes. Others touted the ability of the Job Creator card to transfix governors and state legislators, who would then intone “We will grant you any incentives you ask for, oh wonderful Job Creator.” And amazingly, spending public money indiscriminately on Job Creators helps those public officials get re-elected. A win-win situation, at least if you leave ordinary working citizens out of the equation.

And his board of directors said, “Hey wait a minute; how about a new product first, and consumers who are willing and able to buy it.” So the CEO bought up an innovative start-up company, and conducted market studies. And it turned out that indeed there was a market for this product, and sales to be had, and profits to be made.

But the CEO discovered that his board of directors and his shareholders really wanted him to focus on that last point: profits. It turned out that maximizing profits required minimizing costs, which actually meant hiring as few people as possible. Workers, it seemed, could be a pain; they wanted to be paid, and to get benefits like health insurance, and work in safe and reasonable conditions, and maybe join a union. So the CEO set about creating as few jobs as he could, at the lowest wages that would get the skills he needed, with as little job security as he could get away with. He hired consultants to tell him how to keep them from joining unions. And he dreamed of a company that had no employees whatsoever.

As consumers spent more, the company produced more, and hired more workers. (Hmmm; seems like consumers are creating jobs. We can’t call everyone a Job Creator, though; sorry folks.) But then there was a recession, and consumers stopped buying and the CEO had to lay off half his work force. And when the economy recovered he found he could make more profits without hiring them all back, by mechanizing some operations and outsourcing others to low-paid workers overseas.

The CEO fretted for a moment. Would they repossess his Job Creator card, because he was actually destroying jobs? Well, not to worry. It turns out that you can destroy jobs right and left and that has no effect on your status. In fact, you can ship 1,000 jobs overseas and then get praised for opening a new U.S. branch that employs 50. Not just praised, but rewarded, with tax exemptions and credits and such. Things that really help that profit maximizing thing that your board is so worried about.  In fact, it seemed that the more Job Creators laid off workers, the more desperate people became for jobs, and the more lavishly they showered benefits on the Job Creators. How could you lose with a deal like this?

When he read the fine print on the back of the card the CEO understood how membership actually worked: Anyone in a position to hire (and fire) was a Job Creator. Your actual record didn’t matter. Nor did anyone seem to worry about the actual source of job gains being traced to innovation, and research, and public support of universities, and public investments in transportation and other infrastructure, and broadly shared income that allowed consumers to buy the products and services that workers were producing.

So the CEO quit worrying, and sipped his martinis on the beaches of various tax havens in the Caribbean, contemplating how well deserved was his status as a Job Creator, and how nice it was to be worshipped for who you were instead of what you did.

Posted by Peter Fisher, Research Director