Illusory and elusive economic strength

The hard work of Iowans ought to be celebrated through public policy that raises wages to meet worker productivity and the cost of living, protects workers on the job, and ensures dignified retirement.

This Labor Day we celebrate the successes of the labor movement and workers across Iowa. In that spirit, let’s look at how our economy is doing a decade after the Great Recession. Why doesn’t this feel like an economic recovery? And, isn’t it a bit late to call this a recovery?

Wages

In terms of wage growth, only high-wage earners (making $41.53 hourly) have seen meaningful wage growth over the past 10 years. We see disparities in Midwest median wages by gender and race: Women make $4 less per hour than male peers, and Latino and African American workers make $5 less per hour than their white peers. As we will demonstrate in an upcoming report, these disparities are driven by structural factors like discrimination before and after hiring and the loss of unionized manufacturing jobs.

 

Jobs

Job growth in Iowa has been slow this year compared to monthly averages from 2011 to 2014. A low unemployment rate shrouds the reality that many Iowans have low-paying jobs without benefits, with some cobbling together multiple part-time jobs. We are almost 40,000 jobs short (graph below) of what is needed for a full recovery from the last recession when considering population growth.

Family Security

Many working Iowa households are unable to meet basic needs despite having one or more full-time worker in the house. For example, IPP’s Cost of Living in Iowa analysis shows 6 in 10 single-parent working households are unable to make ends meet on their earnings alone. When companies aren’t paying enough, these households need public assistance (work supports) for food, housing and other necessary items.

Taxes

Iowa’s tax system is upside down with low-income Iowans paying a larger share of their income in state and local taxes than the richest Iowans. Large corporations can reduce their state corporate income tax to zero and even receive a refund through Iowa’s Research Activities Credit. That results in so-called “refunds” — checks to companies that had more tax credits than they needed to pay their taxes — totaling $42 million in 2018 and $44 million in 2017. Those “refunds” to companies not paying Iowa corporate income taxes cost about the same as a 1 percent increase in State Supplemental Aid to public schools.

Public Investments

Iowa state and local spending as a share of personal income has remained virtually unchanged over the past 12 years, contrary to standard political rhetoric at the Capitol. State K-12 funding has not kept up with costs of educating children. Public spending on private schools continues to rise. The Iowa private scholarship subsidy cap doubled in nine years.

The hard work of Iowans ought to be celebrated through public policy that raises wages along with worker productivity. This would allow wages to keep up with the cost of living. Better public policy would protect workers on the job, and ensure a dignified retirement.

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project.

nveldhouse@iowapolicyproject.org

One more data point in the public employee compensation debate

Public-sector workers provide services on which we all rely. If anything, they are undercompensated relative to similarly educated private-sector workers.

Andrew Cannon photo
Andrew Cannon

In the discussion of public workers and their compensation, let’s not lose sight of basic facts.

First, we rely on public workers every day. We may not see the public workers on a daily basis, but we certainly benefit from their work and services daily. Many of those services are such a normal part of our lives that we don’t even think about it.

So think about it for a minute. When you flush the toilet and the wastewater goes away but clean water comes out of your kitchen faucet, that’s the work of public-sector employees. The garbage and recycling you left on your curb Monday night did not magically disappear Tuesday morning; city sanitation workers collected that waste and took it away. Public employees educate our children in our elementary, middle and high schools and in our community colleges and universities. They protect our neighborhoods and respond to emergencies. They treat our ill or injured relatives in hospitals and clinics; they keep our roads in working order and ensure that traffic signals work properly; they work to protect kids in dire circumstances.

Second, the reality is that these workers are underpaid when you make a fair comparison to comparable private-sector workers. IPP’s “Apples to Apples: Private-Sector and Public-Sector Compensation in Iowa” report highlighted this reality last February. Most public-sector workers earn less than similarly educated private-sector workers. When benefits are included, the gap in Iowa narrows but still remains.

Ours was not the only report to issue such findings. Such findings have been replicated again and again, all over the nation. Some reports found that benefits erased the compensation gap or even gave public workers a slight “advantage”; others matched Iowa’s findings in that benefits narrowed the gap but did not completely eliminate it.

Well, here’s another data point. “Comparing Compensation: State-Local Versus Private Sector Workers,” written by Boston College researchers, echoes many of the findings of the IPP report (as well as reports from the Economic Policy Institute, the Institute for Research on Labor and Employment at UC-Berkeley, and the Center for State and Local Government Excellence studies).

The new Boston College report is notable for another reason, however. It examines assertions designed to undermine or call into question the findings of studies like IPP’s. Specifically, the report includes early retiree health benefits in the benefit package, adjusts for differences in pension/retirement packages between the two sectors, and examines the claim that public employees enjoy greater job security than private sector workers (when controlled for education level, they do not).

In sum, state and local government workers are paid about 9.5 percent less than private-sector workers. When benefit packages are included, the gap shrinks, but private-sector workers come out about 4 percent better.

Public-sector workers provide services on which we all rely. If anything, they are undercompensated relative to similarly educated private-sector workers. Should the debate around public employee compensation continue in coming months, let’s remember those two simple facts.

Better yet, let’s remind our family, friends, neighbors and elected representatives of those facts if the opportunity and need should arise.

Posted by Andrew Cannon, Research Associate

Stewardship, community and freedom

The assault on our public structures by convenient, slick, political messages of the day defies American values of stewardship and community.

Today America faces a daunting task: finding a way to reduce deficits and debt while not crashing the economy and still maintaining the critical services that are only, or best, provided by the public sector.

At the Iowa Policy Project, we have the opportunity to work with many similar state and national organizations — nonpartisan, nonprofit, issue-focused and fact-based analysis at the heart of their missions and their work. One of these colleagues, Michael Lipsky, distinguished senior fellow at Demos, recently wrote a column in The New York Times about a hiking trip in the Pasayten Wilderness in Washington state, near the Canadian border.

In his excellent piece, “A Well-Regulated Wilderness,” Lipsky wrote that, even there, he found himself thinking about government. “Not that there was much of it in sight,” he remarked. He continued:

There were no rangers to check our reservations, no posted rules telling us where and how to set up camp.

Michael Lipsky, distinguished senior fellow, Demos
Michael Lipsky, Demos

If anything, the Pasayten seemed to prove that we don’t need government, that humans can be self-regulating: per the unofficial rules of backpacking, most of our campsites had been reused repeatedly, to minimize damage to the environment, and litter was rare.

On reflection, however, this nursery of freedom spoke directly to the role of government in shaping our world. It was thanks to decades of effective lawmaking that we could enjoy four days in the open country, fixing meals, hiking and spending family time together. … Americans once feared the wilderness and sought to tame it. Now we seek it out as redemptive. …

In 1964 Congress passed the Wilderness Act, which set aside 9.1 million acres of public land as places where people would be visitors but not leave any marks; today some 108 million acres are protected under the act.

Mike Owen
Mike Owen

Michael Lipsky’s perspective is spot-on. Let’s look at it another way: Would Exxon have done this? Or Microsoft? Or Wal-mart? Would it even make sense for them, or their stockholders, to do so? To whose mission, then, do such responsibilities fall? Does it not make sense that this would fall to the federal government? Would you not say the same about basic economic safety-net programs? Infrastructure such as roads and bridges? Workplace safety? Clean water and clean air protection? Civil rights and education? National security?

The assault on our public structures by convenient, slick, political messages of the day not only disregards, but defies, what in our hearts and minds we know are the American values of stewardship and community that are the thrust of what government does.

We’re all concerned about deficits and debt and the impact on our children and grandchildren, but we also must be challenged to address the impact on those future generations of a failure to accept the mantle of responsibility of maintaining and nurturing the structures that have sustained us, when “self-regulation” is not enough. For if we do fail on that score, it will be every bit as much a debt as one of dollars.

Posted by Mike Owen, Assistant Director