The Cost of Living in Iowa, 2018 Edition
Strengthening Pathways to the Middle Class: The Role of Work Supports
Cost of Living in Iowa Part 3: Connecting the data to the public policy issues for family prosperity
NEWS RELEASE

WEDNESDAY, SEPTEMBER 12, 2018


Latest report — Part 3

Previous 2018 parts of this research:
Full report Part 1
Full report Part 2
Map to county-by-county tables

IOWA CITY, Iowa (Sept. 12, 2018) — Increasing access to child care and expanding key supports to low- and moderate-wage working families can help parents keep their children out of poverty and boost their future economic prospects.

A new report from the nonpartisan Iowa Policy Project — capping its 2018 series of “Cost of Living in Iowa” reports — illustrates how lawmakers can help Iowans cope with longstanding issues of stagnating wages and rising costs.

“This final piece of our Cost of Living research pulls together its most critical findings — that a basic-needs budget costs much more than about 100,000 working family households can provide with Iowa’s low-wage economy — and addresses the question of how public policy can best respond,” said Peter Fisher, IPP research director and co-author of the report.

Fisher and colleague Natalie Veldhouse, an IPP research associate, suggest:

  • Reforming Child Care Assistance to eliminate so-called “cliff effects” that abruptly drop families from that important work support when they receive only a small pay increase;
  • Expanding the Earned Income Tax Credit (EITC); and
  • Expanding the Child and Dependent Care Credit, especially important when child care assistance is lagging.

“Iowa lawmakers have doubled state spending on business tax credits to $400 million a year over only five years. A far better approach would curtail those rampant and largely unaccountable costs and focus on ways to help the most vulnerable people in our state support their families and boost the state economy,” Fisher said.

The report also argues for:

  • Expanding the universal preschool program;
  • Returning to Iowa’s traditional support of K-12 school funding by adequately funding Supplemental State Aid — the per-pupil spending authority that has been held at 1.7 percent per year on average for the last nine years; and
  • Making post-secondary education more affordable, holding down tuition growth that has bloomed with lagging state support of community colleges and state universities.

“The numbers for working families are daunting,” Veldhouse said. “We have a state and federal minimum wage of $7.25, but a single mother with two children and health insurance from her employer would still need to make about $25 an hour just to meet basic needs.

“IPP’s State of Working Iowa analysis has shown our state’s wage stagnation across all but the very top wage levels, and that we lag both the Midwest and the nation on our minimum wage — a trend spanning decades.”

The IPP report comes just ahead of the new poverty report that will be released Thursday by the Bureau of the Census. IPP’s Cost of Living analysis puts the official poverty guidelines in context, as those guidelines are outdated and set a standard that is typically about half of what it takes a family to get by.

“The poverty guidelines are used to help determine eligibility for support programs, which often recognize their inadequacy in determining who needs support because they are set at levels above the poverty levels,” Fisher said.

“Our research suggests a more important question in understanding what is poverty: How much does it take to get by without public support? And then it puts other policies in context: Why is the minimum wage only $7.25 when a worker — in every scenario we examine — needs more and often far more than that just for a subsistence level?

“Further, for those who do not support raising wages, what policies would you support, and increase, to make sure those low-wage workers can even show up for a job? These are public policy questions that lead directly from this research.”

Veldhouse focused on the cliff effect issue.

“The effectiveness of work supports in helping people move to self-sufficiency is diminished when so-called cliff effects occur; that happens when a small increase in wages makes a family worse off due to the loss of eligibility for assistance,” she said. “They actually have a net loss of resources despite a better paying job.”

She noted that for a two earner couple with two children, once both workers earn $8.60 an hour the family loses child care assistance. The family loses more than $8,000 in child care assistance benefits due to the wage increase.

“It doesn’t make sense to penalize workers for making more, or for working more hours,” she said.

The Iowa Policy Project is a nonpartisan, nonprofit public policy research analysis organization in Iowa City. Reports are available at www.iowapolicyproject.org.

IPPís Cost of Living analysis is funded by general support to the organization and not a sponsoring funder or specific grant. Contributions to IPP may be made online on the organizationís website or by check to the Iowa Policy Project, 20 E Market Street, Iowa City, IA 52245.

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