Industry sign banking iowa living will myself
I'm gonna challenge you to do something that might sound completely ludicrous given that tonight is on poverty and we've been talking about poverty but I want you to just try to for the next 20 minutes 5 minutes take poverty out of your mind just drop the word don't think about it it's really a limited framework and it's one that has a lot of values and a lot of judgments and a lot of emotions attached to it so I want to just drop the poverty word at least while I'm up here and talk with you more about how people are doing it doesn't accurately describe how many people are struggling to get by and for a lot of the reasons that Kevin discussed and we'll go into a little bit more but I want to talk with you about trends in Iowa and what's happening with a number of people living in our state that are having a that are struggling to get by the factors that are contributing to this there are rising costs in the state for basic living expenses especially housing childcare food to some degree and as you heard last week health care costs there's also a leveling off a declining in some cases stagnating wages across the state so there's a growing gap between what it costs to live in our communities and what people are able to earn in the labor market and that's what I want to talk with you about and then we'll go into possible state policy responses so I want to talk with you first about our cost of living research we've done this research twice we did it in 2006 data and now we've done it again just released it recently using 2008 data we intended to set out specifically and look at a very basic budget we wanted to get a frugal estimate of what it would cost for a family to live in our state we did these budgets for seven different family types and we actually did them for all 99 counties in the state of Iowa what you have represented on this screen is just one family it's for a single-parent family in Iowa and we really looked at a very basic level of subsistence you'll see that we accounted for child care clothing and other necessities food we assumed this family cooked and ate all meals at home using the USDA low cost food plan we assumed that their housing expenses were the 40th percentile of hud market rates so not even your average housing costs were going down to the 40th percentile for families we assume that transportation costs this family was only driving to and from work no vacations no travel no recreational use this is to and from work and that they're paying their income taxes when you look at this you'll notice there are some very important things missing there's there's nothing for debt no student debt no consumer debt there's nothing for savings saving for their retirement saving for their families or their for training for themselves their children's education there are no savings for emergencies if they get sick and don't have paid leave this is really meant to represent a very basic day-to-day what a family face as far as costs you'll see that child care housing and transportation are the three largest portion of this family's budget these are exactly the expenses that get undercounted when calculating the federal poverty guideline which we will talk about when we get to state policy to provide context for just one of these since childcare is a really large expense for families looking at childcare in 2008 the average annual cost for having an infant in the childcare center was over $8,000 a year this is a twelve percent increase over 2007 average costs and is more than a year's tuition at the University of Iowa for an in-state student one child child care so we determined that a family supporting wage for a single parent in Iowa with one child is $16 and 53 cents an hour for two children that goes up to nineteen dollars and seventeen cents an hour you can see this little line at the bottom that talks about the gap between the median wage and the family supporting wage why that significant is the median wage is kind of an indicator of what kinds of wages someone could earn in Iowa it's the median level so half of the people in the state earn more than that and half of the drops in the state pay less than that so it's a pretty good middle ground this family is two to five dollars an hour under what they would need to make if they were earning just at the median wage level can you imagine how this family is going to be supporting themselves at the minimum wage level which is 725 so that's the basis of just costs average costs right now are not even average cost these are conservative estimate costs of what families are facing I did want to pull out as I mentioned we do this breakdown by county so if you wanted to look at our current community this is the Iowa City Metropolitan Statistical Area so it's Johnson and Washington counties together and you'll see the wages that a family would need really in Iowa City go up they need to earn about 18 dollars and 26 cents an hour well for one child about 22 dollars an hour if they have two children and they're single parents once you go to two parents with one working with two children they're each going to need to earn 19 dollars and one cent an hour or if both parents find employment and are working they're each going to need to earn just around $14 an hour if you look down at the bottom again only one family type out of this which is two parents both working full-time are earning enough at the median wage to support their family this is what's happening that is driving so many people to the brink of really not being able to make ends meet and having to choose between basic living expenses families doubling up and really suffering significant economic hardship we do have some new data this time around the first time we did this report and put it out a few years ago the first question we were asked especially by legislators but a lot of people heard the presentation said well how many families does this really affect forget the median wage level we want to know of families in Iowa how many fall above or below those cost-of-living thresholds and what we found this was in 2008 at the end of 2008 and this is only for families with young children as Iowa's sample grows over the years we'll be able to tell more but for families with young children two-thirds of single parents in Iowa earn less than what they need to meet their basic day-to-day living expenses two-thirds a quarter were almost a quarter of two parents with one adult working full-time do not earn enough to meet their basic living expenses and 10% of two parents working with both of them working earn less than enough to meet basic needs this was in 2008 and we do not expect these numbers have improved through the recession that we've been facing the last year and a half two years overall trends there was an increase between 2006 and 2008 the budgets increased by 14 to 19 percent and what that really translated into for a family was about 3200 - a little over $6,000 a year in additional costs in that 2-year period of time everything saw a little bit of an increase childcare housing and transportation remained the largest portion of a family's budget and there were small increases across the board except when it came to health insurance and and I didn't have the benefit of being here last week but I'll keep my healthcare costs limited I do want to note that health care costs are dramatically increasing for families in the state that as health care costs have grown over the last decade health insurance premiums have risen along with them and employers when they have kept their policies have begun passing on some of those costs to their to their workers in the form of either higher premiums or co-pays both or less comprehensive plans for the more than 430,000 Iowans without health insurance through their employer who purchased it on the private market last year they faced an average of more than $12,000 for family coverage on their own for the year so as a result of both of these people really covering costs on their own employers passing along costs to employees that they weren't facing before how care costs of really region risen and family budgets parents have seen a 28 percent increase from 2006 to 2008 as far as the expenses in their budget and single adults have experienced a 33 percent increase in health care costs so even with both parents working people generally think where people are working then you can really you know handle these things and these expenses aren't as much you share that burden health care costs which are both the premium contributions out and out-of-pocket costs consume about 13% of a family's budget whether they have one or two children so it's a real significant portion the other thing that's happening and it's something that we really have to pay attention to particularly in our policy responses if there's been a change and how adequately I was median wage or really our whole wage structure has been in meeting of families basic living expenses in our previous study just two years ago families with one working adult could support themselves at the median wage if they lived in the northwest corner of the state so there was somewhere in the state with as a single adult you could go ahead and support your family that's no longer the case statewide there's been a growing gap between wages and the cost of living so the only family that's able to support themselves in the state of Iowa at the median wage is a two-parent family both working full-time that's a real shift and that's just been over the course of two years we know that the costs are going up I think it's also really important to just briefly review sort of the health of Iowa's economy and to consider what the recession means for the number and the type of jobs that are available for families Iowa was slow to be affected by the recession but when it hit our state it hit us very hard in the last year we've lost more than 40,000 jobs and you look from the beginning of the recession our state has lost sixty thousand five hundred non-farm jobs this is a tremendous impact for our state's economy and to give you just a little bit of a perspective Iowa's job growth has slowed considerably in the recent decades and we're not adding back as many jobs as we have lost in the past we look at the last two recoveries from recessions you'll see that we added you know a little over one hundred ninety-three thousand jobs after the 1990s recession in that decade but just over a quarter of that number fifty-three thousand four hundred jobs after our most recent recession in the two thousand looking at it another way this is the same set of numbers but it's just stressed out over time so you can see it Iowa not only is adding back fewer jobs but we're just doing it much more slowly in our most recent session recovery and this is the bottom line that you'll see here in red it took us almost four years to recover the jobs that we lost at the beginning of the 2000s which is twice the rate of the west of the rest of the nation everyone else or all the other states really were back where they had been pre recession in two years so it took us four years just to break even to where we had recovered the ground we had lost and then it took a seven and a half years total to add fifty-three thousand four hundred jobs to our state's economy well in this recession we've already lost over 60,000 jobs so that's the hole that we're going to have to climb out of and that's what families are facing right now Iowa does not add back jobs very quickly and this will be a long hard climb for our state without some significant shifts and our economic development strategies I'm going to say two more things about the economy and then I'll go ahead and move on to two policy responses but additionally and a potentially greater concern is that the jobs that we're adding back in Iowa are not as good of the job as good of jobs as the ones that we were losing from a monetary standpoint you can see here that we're losing jobs with higher wages and replacing them with jobs that have lower wages and fewer benefits many of the jobs that we've lost in the last decade are not coming back and that's something that we really have to grapple with as a state at the higher wage end we've seen major losses and information jobs and this was the dot-com bust that happened but also we've had huge losses in manufacturing for example between 2000 and 2008 manufacturing lost twenty three thousand six hundred jobs that's a lot of jobs for Iowa but in the last year alone just in 2009 half of the jobs we lost across our entire state were all manufacturing so add to that total 20,000 jobs last year just in manufacturing alone those are not jobs that are coming back into Iowa we have to replace them with something unfortunately the greatest growth we've seen and you can see those here in the in the yellow have been in jobs with wages that are significantly under what we lost and Mannie and in information sectors so that's something that is shifting with what's available for people to even go out and earn you know with the employment that they have additionally there's also been a decline in employer sponsored health care coverage throughout Iowa which was definitely reflected in the rising cost of our family budgets in the last decade only education and health services saw both strong job growth this one right here and a stable rate of health insurance coverage all other sectors saw declining rates of coverage so every other sector lost jobs that offered health insurance the result is that the State lost 42,000 jobs with health insurance between 2000 and 2008 that reflects probably getting heavy on numbers but I will get to the point it reflects 3700 or 37,000 jobs just from declining employment so the insurance was gone because the job was gone but there were another 5,000 that the job remained but the coverage was gone so if we look at the trends that are happening both in job loss in uninsurance loss and an unemployment we can expect employment based coverage to fall 44,000 from January of 2008 through the end of 2010 what this means and this is this is the point two hundred and eighty people a week or 40 people a day are losing employer-based health coverage that is a policy reality that we need to deal with and shows up in these families budgets and they don't have the money to fill in the gap as a result of the erosion of jobs that pay well and have good benefits especially for less educated we are really seeing a decline in wages across the education level and it started to catch up now with more educated workers and this is not good news for you in this room I know but you can see that wages for workers with less than a high school diploma have dropped by more than 25 percent in the last three decades that's huge someone used to be able to support themselves with high school education is no longer the case in this state as with many other states but in the last decade just since 2000 more educated workers have started losing ground with their wages as well that's not necessarily something you're going to see in other states and again is something that Iowa really needs to have a response to so possible policy responses the challenges are immense but there are policy options that could make a real difference in both responding to economic crisis that families are facing and in building longer-term prosperity and security for our state first and these aren't all of the possibilities out there I'm just going to throw them out from a state respond we could look at altering Iowa's wage structure you can look at raising the minimum wage and indexing it to inflation Iowa's January 2008 increase was a good start it's already been caught up with or matched by the federal increase however we could index Iowa's minimum wage to increases in the cost of living going forward that would better help support this essential wage floor and close the gap between incomes and family budgets as a state Iowa could also seek better jobs unlike the federal government which I think Kevin said doesn't have tax credits or doesn't have money for creating jobs the state does Iowa runs a wide variety of economic development and business incentive programs
to attract new business here to draw them to do research and there's a variety of things that that we invest in as a state and these can be modified to focus on wage and job quality they can be modified to say if we're going to give you a subsidy to be here and we're going to invest in your business then we want to ensure that you're going to provide wages that actually support families at a certain level that they don't drive down than the median County wage that we're not going to subsidize the business and then have to support your workforce and subsidize them because they're not getting enough making enough to get by another strategy is to invest in post-secondary education particularly for low-wage workers in Iowa we know that skills and knowledge especially in an economy that's marked by rapid technological change which is happening throughout our country are key determinants to both family well-being and state economic growth so research shows that higher wages are connected to the proportion of college educated individuals in a state and we've done some analysis ourselves it not only helps you know a workers pocketbook but it also does yield a pretty positive return on investment for the state we found out that investing in a tuition education for low-income workers in Iowa would return three dollars and seventy cents for every dollar invested in an associate's degree and two dollars and forty cents for every dollar invested in a bachelor's degree and that's even with graduates leaving after this is invested in it's really a substantial payoff I was at a presentation last week and the Department of Workforce Development Director Liz Bach made a comment that it's an educated workforce that is the basis for attracting and keeping higher wage jobs and employers the tax credits just aren't going to make us competitive if we don't have a skilled workforce and that certainly impacts the trajectory of Iowa in the future the last area and I'll spend a little more time on that is work supports until wages come up in our state we're going to have people that have a significant gap between what it costs to live in the community that they're working in and what they're able to bring home through employment so work supports can help close that gap in Iowa here are some of the work supports that are available and state policies are set up around each of these child care assistance food assistance the state and federal Earned Income Tax Credit public health insurance and the low income Home Energy Assistance Program also known as LIHEAP those are some of the work supports available to families and so now I am going to go back to poverty for one second to say that in discussing work supports we have to talk about the difference between the federal poverty level and a basic cost-of-living benchmark which we're calling here a family supporting wage the difference between the federal poverty guidelines and a family supporting wage is significant and it impacts how effectively these programs actually help families work and earn more and how much they don't because it functionally determines who gets the program and who doesn't that's why it's important the federal poverty guideline which is used as the basis for earning eligibility what it is derived from a very outdated formula from the 1960s and it under counts both transportation and housing costs while omitting child care altogether you've got to remember it childcare is one of the largest expenses in a family's budget now it wasn't even considered in the calculation you know in the 1960s there's also no Geographic variation and we know it costs more to live in Iowa City than it does to live in Des Moines than it does to live in Cedar Rapids that these all have different costs our research indicates that the minimum wage is needed to support a family are about double the poverty guideline across family types so when you hear research say 200 percent of poverty and Kevin's did as well they classify it as low income that's really what we're talking about the difference between people choosing between having their child and childcare paying their medical bills seeking you know medical assistance getting appropriate food or not I mean they have to start making those traits because there's not enough to go around for all their basic needs why that 200% is important and just sort of a quick quick snapshot is that if state-funded program stays out before 200 percent of the federal poverty levels we sort of use that as a more appropriate benchmark of need they're not going to help people fully bridge the gap between what's their earning and what their basic expenses are so when programs phase out before two hundred percent in Iowa such as child care assistance and food assistance they're stopping before a family is able to pay for that on their own and families are not left with enough to get by the National Center for children in poverty worked with us to develop a family resource simulator and they analyzed where I was current work support policies are at so this is really to demonstrate how well each one of our programs helps the family successfully meet their basic needs as they work and earn more the programs are structured the way that they're structured now a family is not always better off as you can see as they work and earn more otherwise you'd have a steady upward trend of this graph food assistance which is the first significant cliff right there it looks like $11 an hour it's all quickly by childcare assistance which takes them below a break-even point so they lose more benefits than they even have the name then they are able to make up with their wage increases just to cover their basic cost and it serves as a real disincentive to work I mean the where our programs are currently structured so looking at this more closely when a family loses their childcare assistance they take an almost $6,000 loss to total resources and between the loss of childcare assistance and LIHEAP and they're pretty much at the same time around $12 an hour this family is going to have to work his or her way up to $14 an hour before they break even again then if they want to get back to where they were before they lost both of those public supports they're gonna have to earn $18 an hour to get back to that same point I'm not sure how easily or quickly it is for anyone to go from a $12 an hour job to an $18 dollar an hour job in that quick of a timeframe but when you're talking about less educated individuals it's it just doesn't happen the other thing that this slide shows and it's something that we really want to encourage policymakers to think about is the difference between when you end the benefits abruptly it creates this cliff as opposed to when you phase them out more gradually if you look at the loss of the federal and state earn income tax credit you'll see there is no cliff it gradually phases out so as a family earns more the subsidy or the refund is slowly tapered off so there is a progression of the more you work the more you earn the better off your family will be so this is our current policy arrangement you can see all the major work support programs that I mentioned they're the National Center for children poverty also developed the family resource simulator for us this is available online so you could find it at their website you could put in information there are six counties that are already pre registered but you could take our cost of living report and put in any county that you want and see how this works with the policies we have they went ahead and worked with us and simulated to policy changes we picked the two that happened the earliest on and they happened before a family is really on their feet financially we looked at raising the income limit for childcare to two hundred percent we determined that was a more appropriate threshold of where a family could take care of themselves financially and taking advantage of something called the federal SNAP program Supplemental Nutrition Assistance Program is now the new name for what's formally food stamps states can expand their food assistance program through an administrative loophole called categorical eligibility but it basically allows you to serve more families and this is actually getting some attention in the current legislative session so when we get to questions and answers that people want to know about advocacy this is an opportunity this is the impact first it phases out the food assistance cliff that first clip it just phases it out so it keeps going as a family earns more their resources continue to go up and it phases it out more vent more gradually and childcare assistance this did not phase out we just wanted to see what would happen if he moved it to two hundred percent you're still facing that big cliff but at least it moved the cliff out to a point in time where when they lose those resources the family then is not all of a sudden having to pull their child out of childcare to go to an informal setting or going into debt or losing their job and those are a number of things we found out that families do when they lose child care assistance before they have enough to pay for the cost of care on their own so these are two policy options we can simulate other policy changes those were the two we chose and before I close I'm just going to say there are other work support recommendations I just wanted to point out those to you to you because I think they're easier to grasp and there's some visual aids to go with them but in addition to increasing eligibility limits for child care and food assistance we are very much in support of phasing benefits out more gradually to avoid those cliffs so families can count on that and that they're better rewarded for their work efforts you think it's important to raise eligibility limits for Medicaid to address the declining employer-based health insurance they're very low in Iowa Medicaid eligibility is 70% of the poverty level it's 300% for kids which is a huge difference but for adults for for working adults at 70% and a lot of people are going without we do also advocate extending the state yet EC because regardless of the party people are very supportive of this and it's a very good anti-poverty program and we think it's really important to remind policymakers and I mean general constituents that we need to increase outreach to serve more elbow families most families that are elbow hurt programs are not receiving all those benefits and that the cliff's I showed you that assumes that they get all of the benefits that they're eligible for and most families do not and we lastly recommend that policymakers look at how these programs interact that so you're not losing multiple benefits at the same time and really setting families up for for a bigger hold and they're able to climb out of I'm not going to talk about this things here but I just wanted to let you know we that's the report for our general sort of overview of work support policies those graphs I showed you came from there and we've done additional work on the return on investments for public expenditures in EITC child care assistance Medicaid and post-secondary education to look at it I will were to put money into these programs what would be the public benefits coming back out and I thank you for the opportunity to share this information with you