Iowa Fiscal Partnership / Cost of Living in Iowa
SHARE:
Policy Points from Iowa Fiscal Partners

Posts tagged Cost of Living in Iowa

An opportunity for Governor Reynolds

IFP Statement:

New Governor Takes Office Facing Issues that Demand Leadership

 Basic RGB

Statement of Iowa Fiscal Partnership • Mike Owen, Iowa Policy Project

 

Iowa-StateSealIowa has a new Governor. We cannot say that very often, as only four individuals previously held the office over the last 48 years. The swearing-in today of Governor Kim Reynolds offers all Iowans, including the Governor, an opportunity to lead us past the divisive and cloistered decision making of the last six years.

  • Over 367,000 Iowans are in poverty, including 105,000 children, despite their families’ hard work and long hours. A 12 percent poverty rate is daunting, but far greater shares of Iowa households — particularly single and single-parent households — cannot make ends meet on what they earn in our low-wage state. This imposes extra demands on taxpayers who also frequently subsidize low-wage employers due to poorly designed economic development strategies.
  • Nearly 239,000 Iowans are employed in state and local government. Legislative attacks in 2017 dishonored their service. Trust needs to be restored. That starts by recognizing the contribution of these workers to our economy, and honoring our commitments to them.
  • More than 300,000 Iowa workers — about 1 in 10 Iowans, plus the families they support — would benefit from a meager minimum wage increase to $10.10. Anything less than that is inadequate, especially when federal policy changes in the works would undermine work-support programs such as the Earned Income Tax Credit.
  • Iowa spends hundreds of millions of dollars on tax breaks that have no demonstrated net benefit to the state, while underfunding our most important investment opportunity — in public education, from pre-K through post-secondary institutions.
  • Iowa water quality is an embarrassment as well as a health hazard. It’s time to get it cleaned up and to demand that those causing the pollution contribute to the solutions.

The most controversial policy changes of 2017 came in a climate that undermined Iowa’s longstanding reputation of good governance. Backroom dealing and abbreviated debate must not become the norm.

We stated at the end of the legislative session that history “will mark 2017 as a low point in Iowans’ respect and care for each other.” Governor Reynolds could change that. The legacy of 2017 does not have to be limited to the failure of vision, and the lack of compassion, stewardship and justice, that marked the legislative session. And, it is fair to note, 2018 could be even worse unless we change course.

Governor Reynolds has a chance to help us do more, and do it better. We wish her the best, and hope she will reach out to all Iowans to achieve collaboration on the way forward for Iowa.

#     #     #     #     #

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit, Iowa-based organizations — the Iowa Policy Project in Iowa City, and the Child & Family Policy Center in Des Moines. Find reports at www.iowafiscal.org, and the IPP and CFPC websites, www.iowapolicyproject.org and www.cfpciowa.org.

Will local wage laws spark state action?

Posted October 17th, 2016 to Blog

The pressure is building in Iowa for a minimum wage increase.

Polk County last week became the latest county to take matters into its own hands as Iowa lawmakers and Congress have left the state and national minimum wages at $7.25. Four counties have now approved minimum wage increases above $10 per hour by 2019, with one of them — in Johnson County — scheduled to be fully phased in by Jan. 1.

Within several days of that, the Iowa Legislature will convene and the ball will be in state lawmakers’ court.

In the meantime, Iowans tired of the nine-year wait for an increase may keep acting locally to boost prosperity for low-income working families — which is critical as about 1 in 5 Iowa do not earn enough for a basic-needs household budget.

Here is the current local minimum-wage lineup in Iowa:

Johnson County is currently at $9.15 in the second step of its three-step increase to $10.10 on Jan. 1, indexed to inflation after that.
Linn County has approved an increase to $10.25 by 2019 (three $1 steps, Jan. 1, 2017-19).
Wapello County will move to $10.10 by 2019 (three 95-cent steps, Jan. 1, 2017-19).
Polk County approved a wage of $10.75 by 2019 (three steps: $1.50 April 2017, $1 more in January 2018 and 2019), indexed to inflation afterward. Includes exception for workers under age 18.

There has been discussion or interest in a similar move in at least four other counties: Lee, Woodbury, Des Moines and Black Hawk. For some, this has become a county supervisor campaign issue.

The question in October is a question for January: Will the pressure of these local efforts, which are growing, be enough to force a serious debate in the Legislature on a statewide increase? And if it is, will that effort produce a wage that pushes Iowa closer to a cost of living wage? (Hint: Even $10 an hour is nowhere close.)

Stay tuned.

owen-2013-57Posted by Mike Owen, Executive Director of the nonpartisan Iowa Policy Project. mikeowen@iowapolicyproject.org

On Labor Day, don’t forget single workers

Posted September 2nd, 2016 to Blog

Our focus at the Iowa Policy Project frequently emphasizes the impact of public policy on working families.

But the demand of meeting a household budget is faced by more than parents, whether in single- or married-couple families. Single workers without children also need to get by.

So, on Labor Day weekend, let’s make sure the spotlight hits those folks as well. Here are three areas:

•    the Earned Income Tax Credit (EITC);
•    the Cost of Living in Iowa; and
•    the minimum wage.

EITC
chuck_marr-5464A new report from the Center on Budget and Policy Priorities (CBPP) focuses on single working people who do not raise children and thus do not benefit from the Earned Income Tax Credit (EITC). Childless workers under age 25 are ineligible for that benefit, notes CBPP’s Chuck Marr, who states:

On Labor Day, many of these low-wage workers will be serving meals in restaurants, ringing up back-to-school supplies at the mall, or driving a truck down the highway. They deserve a decent day’s pay for a hard day’s work, but many of their paychecks are too small to make ends meet. An expanded EITC that targets this group would do more to help deliver a decent day’s pay.

There are bipartisan proposals on the table in Washington to extend the EITC to these workers, 7.5 million of whom are now “taxed into poverty,” Marr notes. The table below shows the Iowa impacts of these proposals.

Iowa Workers helped under Obama, Ryan plans Workers helped under Brown, Neal plans
Cooks  6,000  6,000
Cashiers  5,000  6,000
Waiters and waitresses  5,000  5,000
Retail salespersons  4,000  5,000
Custodians and building cleaners  4,000  4,000
Laborers and freight, stock, and material movers  4,000  4,000
Truck drivers  4,000  4,000
Nursing, psychiatric, and home health aides  3,000  4,000
Maids and housekeeping cleaners  3,000  3,000
Stock clerks and order fillers  2,000  3,000
Child care workers  2,000  2,000
Construction laborers  2,000  2,000
Food preparation workers  2,000  2,000
Grounds maintenance workers  2,000  2,000
Personal and home care aides  2,000  2,000

Source: Chuck Marr blog, Center on Budget and Policy Priorities

CBPP has done much work on this issue. See this earlier report and another report by Marr and his colleagues at CBPP.

Cost of Living in Iowa
2010-PFw5464As IPP’s Peter Fisher shows in Part 2 of our “Cost of Living in Iowa” report for 2016, more than a quarter of working single persons statewide (27.5 percent) do not make enough at work to meet a basic-needs household budget. In fact, for those workers who fall short, they fall more than $10,000 short, on average. It is worth noting that this basic needs gap is even more severe for single parents, who fall almost $23,000 short, on average.

Minimum Wage
One of the efforts being used to stop or hold down local minimum wage increases in Iowa is the issue of “cliff effects” in work support programs — particularly Child Care Assistance — in which benefits abruptly drop for a worker if he/she gets slightly higher pay.

This is a very real issue for some workers, but not for the vast majority of workers who would benefit from a minimum wage increase statewide to $12 (phased in over five years), because they do not have children.

It makes no sense to block a wage increase for the three-fourths or more of workers who are not affected by the child care issue.

Rather, Iowa could raise the minimum wage and, separately, improve access to its Child Care Assistance program so that the cliff effects are eased or erased. There are ways to do so. See Fisher’s report with Lily French from 2014, Reducing Cliff Effects in Iowa Child Care Assistance.

owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

mikeowen@iowapolicyproject.org


IPP’s Cost of Living: A better measure

Posted April 6th, 2016 to Blog

Cost of Living Threshold Is More Accurate than Federal Poverty Guideline

Why do we produce our Cost of Living in Iowa research at the Iowa Policy Project? One reason is accuracy — to offer a better picture of what it takes to get by, rather than a vague concept of “poverty.”

Federal poverty guidelines are the basis for determining eligibility for public programs designed to support struggling workers. But those official guidelines have challenges that we address with basic-needs budget calculations in The Cost of Living in Iowa.

The federal guidelines do not take into account regional differences in basic living expenses and were developed using outdated spending patterns more than 50 years ago.

For example, the calculations that compose the federal poverty guidelines assume food is the largest expense, as it was in the 1960s, and that it consumes one-third of a family’s income. Today, however, the average family spends less than one-sixth of its budget on food.

Omitted entirely from the guideline, child care is a far greater expense for families today with 23.5 million women with children under 18 in the labor force.[1] Transportation and housing also consume a much larger portion of a family’s income than they did 50 years ago.[2]

Considering the vast changes in consumer spending since the poverty guidelines were developed, it is no wonder that this yardstick underestimates what Iowans must earn to cover their basic needs. Figure 1 below shows that a family supporting income — the before-tax earnings needed to provide after-tax income equal to the basic-needs budget — is much higher than the official poverty guidelines.

Figure 1. Cost of Living is Much Higher than the Poverty Level

Fig 1 pov guideline comp

In fact, family supporting income in the absence of public or employer provided health insurance ranges from 2.1 to 3.3 times the federal poverty guideline for the 10 family types discussed in this report. Most families, in other words, actually require more than twice the income identified as the poverty level in order to meet what most would consider basic household needs.[3]

[1] Hilda L. Solis and Keith Hall, Women in the Labor Force: A Databook, Bureau of Labor Statistics (December 2011).
[2] Sylvia A. Allegretto, Basic family budgets: Working families’ incomes often fail to meet living expenses around the US, Economic Policy Institute (August 30, 2005).
[3] Even with public health insurance, the family supporting income exceeds twice the poverty level in all cases except the two parent family with one worker. (That family type not shown here.)
2010-PFw5464Posted by Peter Fisher, Research Director of the nonpartisan Iowa Policy Project and author of The Cost of Living in Iowa, 2016 Edition.
Peter Fisher is a nationally recognized expert on tax and economic development policy. He holds a Ph.D. in Economics from the University of Wisconsin-Madison, and he is professor emeritus in the School of Urban and Regional Planning at the University of Iowa.

 

 


When Iowa Wages Fall Short, Do Policy Choices Fill the Gap?

What does it take to get by these days? The Cost of Living in Iowa, 2014 Edition, from the Iowa Policy Project answers this question, and connects the answer to public policy choices that are in the hands of state and federal lawmakers. We present this report in three installments, outlined below, with links to the three pieces and support materials.

Part 1 — Basic Family Budgets

View full report or download 22-page PDF
News release
County data (map, printable tables)
County and regional data (spreadsheet)

Iowans pay differing amounts for the basic living essentials depending on where they live. A family living in Linn County and a family living in Clay County will face different housing costs, commuting times and health insurance premiums; child care costs will differ as well. Part 1 of this report details how much families throughout the state must earn in order to meet their basic needs and underscores the importance of public work support programs for many Iowans, who despite their work efforts, are not able to pay for the most basic living expenses.

Below, see how costs compare for families in your county and neighboring counties; click on any county for the data.

map

Union Shelby Woodbury Ringgold Van Buren Wapello Scott Sioux Sac Tama Webster Warren Washington Wayne Wright Worth Winnebago Winneshiek Muscatine Mahaska Poweshiek Jasper Marion Monroe Lucas Page Montgomery Pottawattamie Mills Monona Marshall Story Humboldt Pocahontas Palo Alto O'Brien Plymouth Mitchell Hamilton Hardin Grundy Guthrie Franklin Madison Keokuk Louisa Iowa Lee Henry Fremont Ida Jones Linn Howard Kossuth Hancock Johnson Jackson Harrison Greene Jefferson Decatur Davis Emmet Floyd Delaware Dubuque Fayette Dallas Dickinson Des Moines Butler Buena Vista Boone Bremer Clayton Chickasaw Cerro Gordo Cass Crawford Calhoun Clay Cherokee Clarke Carroll Buchanan Black Hawk Benton Clinton Cedar Audubon appanoose Adair Adams Osceola Allamakee Lyon Taylor Polk

Part 2 — Many Iowa Families Struggle to Meet Basic Needs

View full report or download 6-page PDF
News release

Part 2 shows that over half the jobs in Iowa pay less than what is needed by many families to achieve basic self-sufficiency. How many Iowa families earn below the family supporting income levels reported here? How many families, in other words, must rely on work supports to get them closer to the basic needs budget level?

Fig 2 graph: basic needs vs. median

Part 3 — Strengthening Pathways to the Middle Class: The Role of Work Supports

View full report or download 21-page PDF
View executive summary or download 3-page PDF
News release or download 2-page PDF

Part 3 examines what are known as the “cliff effects” that occur when a family makes just enough to lose eligibility for various work support programs — creating an “income cliff” that costs far more than they gain from a meager pay increase.

Fig 2 graph: basic needs vs. median

Like Falling Off a Cliff

Iowans can fall off an income cliff when even a minimal pay increase costs them child care assistance — one challenge for the state’s working families.

Like Falling Off a Cliff
Trying to Get Ahead with the Help of Iowa’s Child Care Assistance Program

2-page PDF of this policy brief

By Peter S. Fisher

One of the most significant roadblocks on the path to self-sufficiency for low-wage working parents in Iowa is the cost of child care. The statewide average cost of care in a licensed center for a 2- to 5-year-old was $148 per week in 2013. Yet weekly pay before taxes for someone making $9.00 per hour (well above the minimum wage) is just $360; 41 percent of that pay would go to child care. With a minimum wage job, or with more than one child (or an infant), the percentage is even higher.

Fortunately for those with very low wages, Iowa has a program that pays for all or part of child care for working parents. The bad news is that Iowa has one of the lowest income eligibility ceilings in the country: 145 percent of the federal poverty guideline. Only six states have a ceiling equal to or lower than 145 percent, and in 19 states the threshold was at or above 200 percent.[1] When parents trying to provide for their families get a better job or one with more hours that pushes the family income above 145 percent of poverty, they find themselves worse off instead of better off. Their income falls off a cliff as the child care assistance disappears and they are suddenly left footing the entire bill.

Basic RGB

Table 1. Monthly Basic Needs Budget:
Single Parent with Two Children, 2013-14

To illustrate this fundamental problem with the Child Care Assistance Program, consider the basic needs budget for a single mother with two children, one age 2 or 3, the other 6 to 10. Table 1 illustrates the expenses such a family would face in Polk County (with high child care and rent costs) and in Southeast Iowa (with relatively low costs, except for health care), based on the cost of basic needs such as food, rent, utilities, clothing and transportation in 2013-14.[2] She would need to earn $24.09 an hour in Polk County, $22.70 in Southeast Iowa, to cover basic family needs without public supports.

131201-Fig2-ccacliff

The Cliff Effect:
How Net Resources Change as Earnings Increase

Figure 1. Single Parent with Two Children, Polk County

Figure 1 illustrates the various cliff effects that impact a family’s net resources — after-tax wages plus public supports — as earnings increase. The chart assumes that this family participates in every possible assistance program: TANF (Temporary Assistance to Needy Families), SNAP (Supplemental Nutrition Assistance Program, formerly Food Stamps), LIHEAP (Low Income Home Energy Assistance Program), and the federal and state EITC (Earned Income Tax Credit), as well as other credits available. (In fact, this is highly unlikely; for most of these programs only a third to two-thirds of those eligible actually participate, the exception being the EITC.) It also assumes the parent has no job-based health benefits, and relies on Medicaid and hawk-i, or on the premium and cost-share subsidies available under the Affordable Care Act.[3]

As earnings increase, the family loses TANF benefits (at a full-time wage well below minimum wage), then SNAP benefits. Each creates a small cliff effect. But when the family loses child care assistance (CCA), the cliff is huge, because child care costs are huge. At 144 percent of poverty the family will pay about 17 percent of the cost of child care, because the program requires a co-payment once income reaches the poverty level. But when income rises to 145 percent of poverty, benefits disappear all at once, leaving the family with 100 percent instead of 17 percent of the cost of caring for the two children.

As the hourly wage increase to $13, the family can just about cover the cost of a basic needs budget, with the help of the various assistance programs. But the loss of child care assistance when the hourly wage reaches $13.65 cuts their net resources by $9,320, and they do not achieve the basic needs budget level again until they earn $24 per hour. And most of the remaining assistance programs (including the EITC) disappear before that self-supporting wage is attained.

The Cliff Effect: How Net Resources Change as Earnings Increase Figure 1. Single Parent with Two Children, Polk County

Figure 2. Single Parent with Two Children, SE Iowa

The picture is pretty much the same in Southeast Iowa (Figure 2). The difference is that the lower cost of living means the family is able to generate net resources above the basic needs level (though only with the unlikely assumption that they take advantage of all available programs), until the loss of child care assistance punches a $7,831 hole in their budget. The family then faces a long and daunting climb from $14 to $24 an hour.

The cliff effect and the low ceiling on eligibility for Iowa’s Child Care Assistance Program create a serious disincentive for working families to increase working hours or seek a better paying job. They also create a huge hardship for those who do earn more than the limit despite those disincentives. An increase in the income limit, along with a phase-in of the co-pays, could reduce the cliff effect substantially and push it off to a higher wage level where the family is closer to self-sufficiency. 


[1] Karen Schulman and Helen Blank. Downward Slide: State Child Care Assistance Policies, 2012. National Women’s Law Center, Washington, D.C.

[2] Southeast Iowa includes Louisa, Des Moines, Henry and Lee counties. The basic budget does not include savings, loan payments, any entertainment or vacation, or meals outside the home. It is based on the actual county average child care costs for a registered home, the USDA low-cost food plan, the 40th percentile fair market rent for the county, average commuting costs, average cost of clothing and other necessities for a family at 200 percent of poverty, and the premium for the second-lowest-cost silver plan available for that county on the health care exchange plus out-of-pocket health care costs.

[3] The rules for all programs are based on eligibility criteria and benefit levels in effect for Fiscal Year 2014 (including the recent cuts to SNAP), or calendar 2014 in the case of health programs.

2010-PFw5464 Peter S. Fisher is research director of the Iowa Policy Project, part of the nonpartisan Iowa Fiscal Partnership. Learn more at http://www.iowapolicyproject.org.

We promise: We won’t cook burgers

Posted July 18th, 2013 to Blog
Mike Owen

Mike Owen

So, McDonald’s and VISA have teamed up to tell low-wage workers how to make ends meet.

We have a proposal for McDonald’s and VISA: Leave economic and policy analysis to us, and we won’t compete with you on burgers and debt.

The McDonald’s/VISA plan is ironic on two fronts.

First, McDonald’s is an example of a low-wage employer — the folks who have profited mightily while their employees have not. In fact, the McDonald’s/VISA plan expects the worker to have two jobs, to make ends meet on an unrealistically low budget and have money left over — “spending money,” the plan happily calls it. That “spending money” would have to cover all food, among other things.

As Iowa Policy Project research has shown, the cost-of-living assumptions by McDonald’s are too low. A bare-bones budget for a single person in Iowa with no kids is just over $20,100 (2011 figures), requiring a job that pays about $24,000 before taxes. It assumes absolutely nothing for eating out (even at McDonald’s), let alone saving for school or retirement.

Second, McDonald’s/VISA doesn’t assume any cost of consumer credit for debt incurred, other than a car payment. VISA depends upon low- and middle-income folks taking on debt and seeing it pile up. Sometimes it’s consumer debt, but debt also can come from health-care out-of-pocket costs when your budget is on the edge. This is a very real cost for low- and middle-income families, and it can be made even worse with predatory lending practices that are dealt with feebly by state and federal lawmakers.

McDonald’s/VISA’s tortured compilation of expenses, it should be noted, comes fairly close to the one-person, total basic-needs budget we computed for 2011 — but a single person without kids would not come close to making that total budget by following the McDonald’s/VISA plan. Add child-related expenses, and — whoa! — there’s a fire in the kitchen!

McDonald’s and VISA also include some handy money-saving tips in their brochure to help low-wage workers get by, like riding your bike to work. How about these tips for saving money: Don’t eat out, and tear up your VISA card.

Click here to see how our researchers — Peter Fisher, Lily French and Noga O’Connor — came up with our numbers. Setting money aside for savings? Not possible. Health insurance at $20 a month? Actual insurance and out-of-pocket costs are far greater. The idea of having “spending money” left over? Laughable at best.

From “The Cost of Living in Iowa,” on IPP website

From “The Cost of Living in Iowa,” on IPP website

But none of this is funny. It illustrates that in the real world, choices for working people in Iowa are often about how to make ends meet when income falls short. And that is the situation for about three-fourths of single-parent families and about 23 percent of all families in our state.

Instead of assuring better ways to boost income, including a higher minimum wage, much of the public policy discussion is focused on cutting back supports such as food and energy assistance, not to mention Social Security, and holding down child-care assistance. We don’t seem to recognize the need for a living wage, however that may be computed. In the end, are we even willing to support a low-wage economy?

Posted by Mike Owen, Executive Director


Why SNAP matters: Wages aren’t always enough

Posted July 11th, 2013 to Blog
Mike Owen

Mike Owen

It’s really quite amazing what kind of arguments people will use to beat up poor people.

Such an example is in the comments section of a story in today’s Des Moines Register about the debate over the Supplemental Nutrition Assistance Program, or SNAP, commonly known as Food Stamps.

One writer, in playing to SNAP opponents, is pushing the idea that two full-time jobs at minimum wage lift a family above poverty according to the current administration. In that case, the writer implies, food assistance isn’t needed.

Let’s take a look at the actual numbers and what they mean. It’s not heavy lifting.

Actually the federal poverty guidelines as established have been consistent — and consistently faulty — through several administrations. They are seriously outdated and underestimate what is necessary to make ends meet.

The official poverty level for a family of four in 2013 is $23,550. Does anyone seriously believe a family of four can make it on that kind of income? Rent, food, clothing, utilities — the basics of just getting by — cost more than that in real life.

The Iowa Policy Project has looked at this issue and is constantly updating a more reliable estimate of what it costs to get by — our report, “The Cost of Living in Iowa,” is available on our website with county-by-county numbers that reflect this cost for varying family sizes.

You can quickly see how two minimum-wage jobs don’t get the job done.

A bare-bones family budget for a four-person family in the Des Moines area is — conservatively — $37,886 for one working parent. (Table below). That assumes $3,157 per month for clothing, household expenses, food, health care, rent and utilities, and transportation. If a second parent works you add more transportation costs, plus child care, which becomes the second-largest expense.

Next, figure in taxes — yes, they pay taxes, and a lot as a share of their income — and you get what it takes for a family just to get by. So, this absolutely no-frills budget, with no savings for school or a home or retirement, not even burgers at McDonald’s, rings up at $39,122 before taxes for one working parent, $58,520 for two.

120523-app-04-dm-w

And that means jobs that pay $14.63 an hour for each working parent, or $19.56 if one works.

Yet, at the $7.25 minimum wage, two jobs would pay $30,160. So much for the argument that two minimum-wage jobs per family solve poverty.

This helps to show why the meager Food Stamp benefit of about $1.25 per person per meal is such an important support for Iowa’s low-income working families. But while we’re at it, we could start talking about a higher minimum wage. Another day, perhaps.

Posted by Mike Owen, Executive Director