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.
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.
Posted by Mike Owen, Executive Director of the Iowa Policy Project
The time is right for Governor Branstad to propose a minimum wage increase. It’s the right thing to do, and the ball is in his court.
Election Night 2014 — the hours that established why Governor Terry Branstad should push for an increase in the state minimum wage.
At first blush, this might not seem obvious. It was a big Republican night, and support of the minimum wage is not a marquee issue for Republicans.
On Election Night, a minimum-wage critic won the U.S. Senate seat of one of the nation’s most high-profile and ardent supporters of a minimum-wage increase, Iowa’s Tom Harkin, and Republicans took control of that chamber. Over in the House, Republicans flipped one seat and now hold three of Iowa’s four, along with a historically overwhelming majority that makes the minimum-wage increase sought by President Obama highly unlikely.
This turns the focus to the Iowa Statehouse, where the power structure remains effectively the same: Republican governor, narrowly Democratic Senate, slightly stronger Republican majority in the House.
With little change in Des Moines, why would passage be more likely now?
For one thing, we have gone one more year without an increase. It has been almost seven years now at $7.25; it is only a matter of time — and we may be there — when Iowa reaches a tipping point where inertia succumbs to an increase in the minimum wage.
For another, the near-certainty that it will not pass in Washington erodes pleas to wait for the feds. Recall that Iowa stopped waiting in 2007, passing the $7.25 wage that took effect in January 2008, almost 19 months ahead of the federal $7.25.
Finally, the tipping point noted above may be signaled in state referendum victories on Election Night for minimum-wage forces in two neighboring “red” states — Nebraska and South Dakota — indicating the time is right politically. Of the states bordering Iowa, only Wisconsin is stuck with us at $7.25.
An increase would be popular in Iowa. A recent poll showed 53 percent support for an increase to $10.10 an hour.[i] No politician in either party will be disadvantaged in 2016 having supported a minimum wage increase.
On the merits, it is well established that a minimum-wage increase is overdue. It comes nowhere close to a family-supporting income, and it has not kept pace with rising costs for almost seven years. Families depending on minimum-wage income have not seen lower costs of food, fuel, housing, clothing and health care in those years. Passing it now would mean:
Fewer Iowans in poverty.
A boost to local and state economies as families have more to spend.
A fiscal benefit to the state as less is needed to support extremely low-income working families.
More resources to support stronger work-support programs to point low-wage workers on a path to the middle class.
In the past, Governor Branstad has made it clear the issue was not his priority but he has not ruled it out.[ii]
For all of these reasons, the time is right for Governor Branstad to move ahead. It’s the right thing to do, and the ball is in his court.
Look specifically at the “leisure and hospitality” sector — which includes low-wage restaurant and hotel/motel jobs.
Over half (55 percent) of all workers in hourly jobs at or below the minimum wage are in the leisure and hospitality sector.
About 1 in 5 hourly workers in that sector (19 percent) are at or below the minimum wage.
These are not jobs of “leisure and hospitality,” as a cavalier dismissal of their being “easy” might imply. They are jobs that provide “leisure and hospitality” to others, and they’re hard work: in kitchens, and laundries, and cleaning restrooms, and hustling meals and drinks for customers who might or might not leave a decent tip. In fact, these jobs are arguably harder than gabbing for a couple of hours on a radio show.
According to those official numbers, some 3.3 million workers in the United States toil at jobs paying at or below the minimum wage. Note: This figure does not include those who would be affected by an increase because they make more than $7.25 an hour but less than the proposed $10.10.
Probably a better observation about the issue is that our wage structure in this country does not necessarily value work, and when we have an artificially low minimum wage, neither does public policy.
Issues that were big for our state before the election remain big issues.
As election dust settles, priorities remain clear for Iowa families
Now that the votes are counted, the real work begins. Job 1? It could be any of a number of areas where solid research and analysis have shown better public policy could make a difference for a more prosperous, healthier Iowa. Take a step back from the TV ads and “gotcha” politics and these issues come clearly in focus.
In Iowa, research shows solid approaches to economic prosperity for working families include:
Expanding eligibility for Child Care Assistance — a needed correction to Iowa’s low income eligibility ceiling, which blocks low-income families from receiving assistance they need to be able to work outside the home, or to accept slightly higher-paying jobs without a net loss of resources in their family budget. http://www.iowapolicyproject.org/2014docs/140313-CCA-cliffs.pdf
Enforcing laws against wage theft — a $600 million problem in Iowa alone, swiping $60 million in tax revenue as the state of Iowa has effectively stood by and ignored it with less than two full-time positions devoted to looking out for 1.2 million private-sector employees. http://www.iowapolicyproject.org/wagetheft.html
In Iowa, research shows a fiscally responsible approach to both find revenues and do better with what we have includes:
Stopping tax giveaways to companies that pay no income tax — which occurs at a cost of between $32 million and $45 million a year through one research subsidy program alone, even though there is nothing to show this spending boosts the Iowa economy or produces activity that would not occur anyway. http://www.iowafiscal.org/big-money-big-companies-whose-benefit/
Reining in unnecessary “tax expenditures” — tax breaks, tax credits and other spending done through the tax code — could bring in tens or hundreds of millions of dollars for public services. A five-year sunset on all tax credits would force lawmakers to review and formally pass renewals of this kind of spending, now on autopilot. The last attempt at real reform fell woefully short. http://www.iowafiscal.org/tax-credit-reform-glass-half-full-maybe-some-moisture/
Plugging tax loopholes — a $60 to $100 million problem — would pay for a 2 or 3 percent annual increase in state per-pupil funding of K-12 schools. Twenty-three states, including 4 of 6 Iowa neighbors, don’t permit multistate corporations to shift profits out of state to avoid Iowa income tax and contribute their fair share to local education and other state services. https://iowapolicypoints.org/2013/05/22/will-outrage-translate-into-policy/
Reforming TIF — tax-increment financing, which is overused and often abused by cities around the state, has caught lawmakers’ attention in the past and should again. Like many tools that provide subsidies to private companies and developers, it should be redesigned to assure subsidies only go to projects with a public benefit and only where the project could not otherwise occur. Further, it should be designed to assure that only the taxpayers who benefit are the ones footing the bill, which is a problem with current TIF practice. http://www.iowafiscal.org/category/research/taxes/tax-increment-financing-tif/
In Iowa, research shows a healthy environment and smart energy choices for Iowa’s future includes:
Allowing local government to regulate frac sand mining — When it comes to cigarettes, guns and large hog facilities the Iowa Legislature took away the right of local government to listen to citizen desires. The General Assembly and the Governor should let democracy thrive and not take away local control of sand mining.
Comfort the comfortable and penalize the poor. Like the idea? If so, you’ll really like legislation scheduled for consideration today in the U.S. House of Representatives.
The House is scheduled to take up legislation that would gut improvements for low-income Americans in the Child Tax Credit (CTC), improvements passed originally in 2009, renewed in 2010 and 2012, the latter as part of the “fiscal cliff” package, where it was used as a bargaining chip to pass very expensive exemptions in the estate tax — a benefit only to America’s super-rich.
To put this in context, the House leadership bringing this new legislation to a vote will not even consider an increase in the minimum wage, now stagnant over five years nationally (6 1/2 in Iowa). The CTC, it must be noted, is one of the nation’s most effective anti-poverty tools, offsetting part of the cost of raising a child. So, as families earning at or below the minimum wage continue to lose ground, the CTC proposal will set them back even further. As noted by the Center on Budget and Policy Priorities (CBPP):
But a single mother with two children who works full time throughout the year at the minimum wage of $7.25 an hour (which House leaders oppose raising) and earns just $14,500 would lose $1,725. Her CTC would disappear altogether.
A loss at lower incomes — yet a boost at higher incomes. According to Citizens for Tax Justice, the Iowa impact of the new legislation would be:
a $285 loss on average to families with incomes below $40,000, and
a $696 benefit (tax cut) to families with income above $100,000.
Here’s how it works, according to a summary by CTJ:
The House Republican bill, H.R. 4935, would expand the CTC in three ways that do not help the working poor. First, it would index the $1,000 per-child credit amount for inflation, which would not help those who earn too little to receive the full credit. Second, it would increase the income level at which the CTC starts to phase out from $110,000 to $150,000 for married couples. Third, that $150,000 level for married couples and the existing $75,000 income level for single parents would both be indexed for inflation thereafter.
Adding insult to injury for low-income folks is that the improvements targeted for repeal came in the aforementioned “fiscal cliff” package, which made permanent big estate tax breaks for the rich, while extending improvements in the Child Tax Credit and Earned Income Tax Credit for only five years. CBPP’s Robert Greenstein at the time called that a “bitter pill.”
That was before these new proposals not only to cut back the CTC for lower-income families — but to expand access at higher incomes — and to adjust the high end for inflation, something lawmakers have refused to do for the minimum wage.
A bitter pill? At least. For some, all of this might seem to be an overdose.
Posted by Mike Owen, Executive Director, Iowa Policy Project
Iowa is on record that we will not ask the wealthy and well-connected to do more. Sometimes, not passing something says as much about legislative priorities as passing it.
The headline on my doorstep today says, “Legislature continues trend of passing fewer bills.” That lead story in the Cedar Rapids Gazette notes that for the fourth straight year, a divided Iowa Legislature has passed fewer than 150 pieces of legislation.
Ah, numbers. Can’t live with ’em. Can’t live without ’em. But in this case, they don’t make a lot of difference.
What matters are the words and the policies embodied in those 150 or fewer bills. It’s about quality, not quantity.
What have those bills included in recent years? Here are some key points:
A commercial property tax overhaul that is tainted by big benefits to huge out-of-state retailers that need no help and pay too little in Iowa tax as it is.
An expanded Earned Income Tax Credit that improves tax fairness for low- and moderate-income working families across Iowa.
A small boost in child care assistancefor working students, making them eligible for the benefit so they can get skills for better paying jobs to sustain their families.
What have those bills not included in recent years? Here are some noteworthy omissions:
No overhaul of the personal income-tax system to better balance tax responsibilities for all taxpayers regardless of income, or to assure revenues are kept adequate to meet costs of critical services.
No greater accountability on spending that is done through the corporate tax code, outside the budget process.
No increase in the minimum wage, stagnant at $7.25 for over six years now.
No broad expansion of child care access for struggling families who don’t make enough to cover costs, but make too much to receive assistance.
No move to battle wage theft, which we have estimated to be a $600 million annual problem in Iowa’s economy — not including the $60 million lost in uncollected taxes and unemployment insurance.
No long-term answers for funding of education at all levels, violating the promise of law for K-12 schools, and leaving a legacy of debt for many college students and their families.
Those are not exhaustive lists, but a statement of priorities established by agreement, stalemate or inertia. We covered some of these points in our end of session statement. Some will like the overall product of recent years, some will not. Few will ask how many bills were passed.
At least one theme weaved by this record cannot be disputed: Iowa is on record that we will not ask the wealthy and well-connected to do more. We pretend more often than not that we can meet our obligations to the citizens of Iowa without investing in the public services they require, that if we just keep cutting taxes all will be well. Every now and then we’ll say something about opportunity for all and mean it, but we’re not ready to make that a long-term commitment.
Sometimes, not passing something says as much about legislative priorities as passing it.
The minimum wage matters. The only problem is, it doesn’t matter enough.
At the Iowa Policy Project, we deal with numbers — a lot. And the numbers matter — but only because those numbers affect people.
On no issue is that more important than the minimum wage.
As we all know, Iowa’s minimum wage is $7.25 an hour. It’s pathetic. (We’ll show why in a moment.)
It’s important to remember, Iowans considered $7.25 something of a triumph when it passed — seven years ago.
When it took effect a few months later, on Jan. 1, 2008, it put Iowa ahead of most of the country. It took another year and a half for the federal minimum wage to reach that level.
In the meantime, costs kept going up. And both the U.S. and Iowa minimum wage stayed the same. So the real question is not whether the minimum wage should rise. It’s: “How much?”
Certainly the $10.10 proposed by Senator Tom Harkin and others is a good start. It chips away at the bills. But let’s not lose sight of the fact that even then, people will be working full time in jobs that do not pay enough for them to get by.
Peter Fisher and Lily French show why with their “Cost of Living in Iowa” research for IPP. For example, in Linn County and the Cedar Rapids area, if you make $7.25 an hour and work a full-time job 50 weeks a year, you make $14,500 before taxes. As our analysis shows:
• In Linn County, you need more than that whether you are single or married with kids.
• In the Cedar Rapids metro area — covering Linn, Benton, Jones, Iowa and Cedar counties — a single mom with one child needs to make $20.17 an hour. For a married couple with two kids, the family-supporting wage is $16.43 for each parent. And for all other families with kids, a parent needs to make over $20 an hour.
So the minimum wage matters. The only problem is, it doesn’t matter enough.