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.

 

Looking past the distractions on job numbers

How many jobs we add this month or last is less important than the longer term goal of real recovery from the Great Recession. And on that score, we still have some ground to cover.

Colin Gordon
Colin Gordon

Each month about this time, the Bureau of Labor Statistics updates its regional and state job numbers. It’s an important monthly scorecard, an opportunity to measure the state’s performance against the experience of other states, the national picture, and our own recent employment trends. And it’s an important political moment — especially as Governors around the country (and here in Iowa) have tied policy and budgetary decisions to job creation or employment targets.

But this monthly flurry of interest can also distract us from the bigger picture. How many jobs we added this month or last, after all, is less important than the larger and longer term goal of real recovery from the Great Recession. And on that score, we still have some ground to cover.

The graph below (from our State of Working Iowa report, updated through March 2013) compares the 2007 recession to all other postwar recessions, for Iowa and the United States. For the country, the 2007 recession is deeper and longer than any other postwar downturn. Now more than five years (63 months) since the onset of the recession in December 2007, we are far short of pre-recession employment levels.  For Iowa, the picture is a little better — but we are still 7,700 jobs short of the pre-recession peak.

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This is only part of the story.  As the recessions (and weak recovery) have dragged on, the state has continued to add to its labor force:  now five year’s worth of immigration, in-migration, and high school or college graduations. So our real jobs deficit is not the number of jobs we are short of the pre-recession peak. It is the number of jobs, given our current labor force, we are short of returning to pre-recession rates of employment. That deficit, captured in the graph below, is over 65,000 jobs. In order to clear that deficit in the next three years (during which time the labor force will continue to grow), we would need to add over 80,000 jobs — about 2,000 a month over that span.  Over the past year, or rate of job creation has been about half that (averaging only 920 jobs/month).

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Posted by Colin Gordon, Senior Research Consultant

Iowa’s decline in job-based health insurance

When the costs of insurance keep rising, that makes it tougher on the household budget — or results in people not having insurance.

The Cedar Rapids Gazette today offered an interesting look at the question of where Iowans get their insurance. It’s less and less something that comes through employment. And when the costs of insurance keep rising, that makes it tougher on the household budget — or results in people not having insurance.

This is a trend we’ve been watching and reporting on at the Iowa Policy Project for many years, as have several good research organizations such as the Economic Policy Institute.

The Affordable Care Act offers at least a partial remedy. As health insurance exchanges are developed, affordable insurance should be more readily available. Tax credits for employers providing insurance will provide a targeted incentive to offer employees a better option than what employees might find on the individual insurance market.

Colin Gordon
Colin Gordon

Our State of Working Iowa report for 2012 offers another good look at this issue. As author Colin Gordon observes, wage stagnation, erosion of good jobs and recession have combined to batter workers, at the same time non-wage forms of compensation, health and pension benefits, also have declined. This has eroded both job quality and family financial security, and increased the need for public insurance. In Chapter 3, “The Bigger Picture,” Gordon writes that Iowa is one of 15 states, including five in the Midwest, to lose more than 10 percent of job-based coverage in a decade. He continues:

These losses reflect two overlapping trends. The first of these is costs. Health spending has slowed in recent years, but still runs well ahead of general inflation. Both premium costs … and the employee’s share of premiums have risen sharply — especially for family coverage — while wages have stagnated.

In 1999, a full-time median-wage worker in Iowa needed to work for about 10 weeks in order to pay an annual family premium; by 2011, this had swollen to nearly 25 weeks. Steep cost increases have pressed employers to drop or cut back coverage, or employees to decline it when offered. High costs may also encourage more employees to elect single coverage — counting on spousal coverage from another source and kids’ coverage through public programs. The second factor here is the shift in sectoral employment outlined above: Job losses are heaviest in sectors that have historically offered group health coverage; and job gains (or projected job gains) are strongest in sectors that don’t offer coverage.

This graph looks at the rate of employer-sponsored coverage, by industry sector, from 2002 to 2012.

job-based coverage comparison, Iowa 2002-2012

An interactive version of that graph in the online report allows the reader to toggle between those two years; the colored balloons sink on the graph in moving from 2002 to 2012, as if they all are losing air — the result of declining rates of coverage.

Good public policy could help to fill them again.

2010-mo-blogthumbPosted by Mike Owen, Assistant Director

 

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

Minimum wage just doesn’t keep up

The State of Working Iowa 2011 offered a good perspective on the arguments we are hearing now against an increase in the minimum wage. We should raise it and index it to inflation.

Noga O'Connor
Noga O'Connor

Once again there is attention in Iowa to the question of raising the minimum wage. This happens every few years after the passage of a new minimum, when it inevitably becomes outdated due to inflation, which hits that part of the working population the hardest.

So, right on schedule, we are beginning to hear many of the same arguments against the minimum wage that are thrown in its path by entrenched business lobbyists who recite talking points that they want to pass off as research.

As the Iowa Policy Project suggested back in 2007, when the General Assembly passed a strong minimum wage that put Iowa among the leaders in the nation on the issue, one important step to avoid these regular arguments is to find a good minimum wage, pass it, and index it to inflation.

IPP’s State of Working Iowa 2011 set the stage for the latest discussions with one of its recommendations last fall:

Reward Work I: Raise and index the minimum wage

Iowa raised its minimum wage to $7.25 in 2007, a rate which was matched by the new federal minimum in 2009. We are now one of 23 states that echo the federal minimum wage (19 states have higher rates). Even with those increases, the real (inflation-adjusted) minimum wage is still near its postwar low (in real dollars, the federal minimum was above $8.00/hr from 1960-1980, peaking at $10.38 in 1968). And since those legislated increases, the Iowa minimum has lost about 10 percent of its value and the federal, coming later, has slipped 5 percent. If, at the time we last raised the minimum wage in 2007, we had simply indexed its value to inflation, the Iowa minimum would be $7.90/hr — an increase that would put another $1,300 in the pocket of a full-time minimum wage worker. [1] Indexing the minimum would protect its future value from the eroding effects of inflation, allow future legislative sessions to focus attention in other areas instead of on these redundant debates, and provide employers with a measure of predictability when forecasting future costs. [2]

Proposals to raise the minimum wage often provoke worries about job loss. Recent research has not only punctured this myth, but underscored the substantial and sustained economic benefits of a higher wage floor. Recent studies of cities adopting higher minimum wage rates, and of job performance in contiguous counties with differing minimum wage rates, have found that higher minimum wages do not reduce employment.[3] A higher minimum wage, like all policies that put more money in the pockets of
working families, is also widely recognized as an effective form of economic stimulus. [4] Indeed, many employers have come to appreciate that a higher minimum wage offers them a net benefit, “by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality, customer satisfaction and company reputation.”[5] (emphasis added)

[1] Authors’ calculations using Bureau of Labor Statistics inflation calculator
[2] Raising Minimum Wage Helps Iowa’s Poor Families. Iowa Policy Project, January 2007.
[3] Dube, A., Lester, T. W., and Reich, M. (2010). Minimum Wage Effects across State Borders: Estimates Using Contiguous Counties. The Review of Economics and Statistics, 92(4): 945–964. ; Schmitt, J. and Rosnick, D. (2011). The Wage and Employment Impact of Minimum-Wage Laws in Three Cities. Center for Economic and Policy Research.
[4] Aaronson, D., Agarwal, S., and French, E. (2011). The Spending and Debt Responses to Minimum Wage Increases. Federal Reserve Bank of Chicago, WP 2007-23. Falling Wages Curb Consumer Spending, Economic Recovery. National Employment Law Project news release, July 2011.
[5] Business Owners and Executives for a Higher Minimum Wage: Raise Minimum Wage From $5.15 to $7.25. An online petition of Business for a Fair Minimum Wage. 

Posted by Noga O’Connor, Research Associate

Coming this weekend: The State of Working Iowa 2011

State of Working Iowa 2011 coverIt’s almost Labor Day, and that means it’s time for another edition of The State of Working Iowa.

Be watching this weekend in Iowa media and on the Iowa Policy Project website for The State of Working Iowa 2011. Authored this year by Noga O’Connor, Colin Gordon and Peter Fisher, the report takes a look at how Iowa is doing in recovery from the 2007 recession, the challenges ahead and potential policy options to deal with them.

Find previous reports in the series here.