Common Good Iowa

More than ‘Thank you’: Boost the minimum wage, and Iowa's economy

Posted on March 9, 2021 at 1:59 PM by Peter Fisher

As Iowa legislators move through a 14th consecutive session without action on a minimum wage increase, low-wage Iowans are left to hope for action in Washington. There is no guarantee, as the Senate thus far has been unable to reach agreement on a phased-in minimum wage of $15 an hour — even as big-name retailers are already at or above $15 on their own, such as Costco, Target and Amazon. Even Walmart is moving in that direction.

Still, many Iowa workers in retail, food service, child care and other occupations earn well under $10 an hour. When Iowa legislators will not act, working families need help from Congress. It is long overdue.

Key points about a minimum wage increase (See our fact sheet for more):

  • A federal boost to $15 over four years would help many Iowa workers and their families. Remember, an increase in the minimum wage helps more than people earning a minimum wage. Workers working at pay below the proposed new minimum, as well as some workers slightly above the new minimum will benefit as pay scales adjust. The Economic Policy Institute estimates that a raise to $15 an hour by 2025 would boost the earnings of 463,000 Iowa workers — about 30 percent of the state’s work force[1] — and their families. 

  • Workers are trying to raise families with minimum-wage jobs, which pay less than half a living wage in Iowa. By 2025, a living wage for any Iowa family with children will be over $15 an hour. This is the hourly wage needed by a full-time worker to cover basic, no-frills household expenses — food, rent, utilities, transportation, health insurance — without help from public assistance programs.[2] For a single-earner family with one or more children, the living wage is already over $20. Even a single person needs at least $14.

  • Workers have waited a long time for any raise, let alone a meaningful one. We are now in the longest stretch without a federal minimum-wage increase — over 11 years — since the minimum wage was established in 1938. It has been stuck at $7.25 since July 2009. Thirty states have responded with higher state minimums. But not Iowa, where the minimum has stood at $7.25 since January 2008. Five neighboring states have raised their minimums to $9.00 or above.

  • Minimum wage helps the state and local economy, as well as working families. The $15 wage in 2025 would provide an average wage increase of 17 percent, or $3,500, to those workers benefiting from it in Iowa. When low-wage workers spend that additional income, it would pump $1.6 billion of additional earnings into the Iowa economy and local businesses.

Of those Iowans benefiting from a $15 minimum (often in full-time service jobs), three-fifths are age 25 or older, including 43 percent in the prime earning years of 25 to 54. Not surprisingly, 62 percent are women, and 21 percent are black, Latinx, Asian or Native American.[3]

While there will be an impact on some businesses from an increase to a $15 wage, many economists argue the employment effects will be very small or nonexistent.[4] Business faced with higher minimum wages have historically found ways to accommodate for those rising costs. Wages are only about one-fifth of the total costs for the average restaurant; a 20 percent increase in total wage costs could be offset by a 4 percent increase in prices, if nothing else were done to adjust business operations.

Iowa workers deserve a living wage. These are the workers who have continued to care for our children, gather our groceries and perform other tasks that we so clearly recognize now as essential to our well-being and to the economy. It is time to do something more than say, “Thank You.”

[1] Economic Policy Institute: The impact of raising the minimum wage to $15 by 2025, by congressional district. Jan. 28, 2021.

[2] Iowa Policy Project, the Cost of Living in Iowa, 2019. To arrive at an estimate of the hourly wage needed by 2025, we assumed an average inflation in living costs of 2 percent per year from 2019 to 2025.

[3] See Economic Policy Institute, above.

[4] Economic Policy Institute, “CBO analysis confirms that a $15 minimum wage raises earnings of low-wage workers, reduces inequality, and has significant and direct fiscal effects.” February 8, 2021.

Categories: Budget & taxes

Tagged As: Minimum wage

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