The Cost of Living in Iowa 2022 | Narrative
Many households working hard, but barely scraping by
By Peter Fisher and Natalie Veldhouse
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Working full time, year-round does not guarantee an Iowa worker a middle-class standard of living. Even before the recent round of inflation pressured household budgets, nearly 114,000 Iowa working families with at least one full-time worker in the home could not meet a bare-bones, basic-needs budget without public supports beyond health insurance.
That group includes 15 percent of all working households (Figure 1). It includes 45 percent of single-parent working households, who face the daunting challenge of having a sole breadwinner while having to pay for child care. In addition, a large majority of single parents are women and thus confront lower wages on average in the labor market. The group also includes more than a quarter of single workers without children. Because of long-standing discrimination in education, employment and other systems, families of color are also less likely to earn enough to meet a basic-needs budget.
One in 7 Iowa working households can't meet basic-needs
budget; share higher among those led by singles
Percentage of working households earning below what is
needed to meet basic-needs budget, selected households
Full-time work at a self-supporting wage can be difficult to find, even in a tight labor market. An Iowa worker must earn well over the minimum wage, and in some cases well above the state’s median wage of $19.19 per hour, to sustain a basic-needs budget:
A single parent with one child has to earn an hourly wage of $21.16.
Two working parents with two children each need to earn $16.11 or more.
The working parent in a two-parent household with a stay-at-home parent and two children must earn $21.59.
The city of Des Moines has the highest share of all families with incomes below self-sufficiency: 21.2 percent. The area with the lowest share, 10.1 percent, is the area composed of Des Moines suburbs and Ames (Polk County outside Des Moines plus the 7 counties surrounding Polk). In the rest of Iowa’s urban and rural areas the proportion ranges from 15 to 18 percent.
The fact that so many working households can’t meet even an exceptionally frugal household budget is a function of our highly unequal economic system. That system is shaped by public policy choices over decades that have eroded the earning power of workers. Reversing course will require policies to:
Boost workers’ earnings
Build a robust safety net
Invest in education
Undo barriers that have excluded communities of color and other marginalized groups from equal opportunity
What is a basic family budget?
The basic-needs budget outlined in this report is very frugal, excluding many expenses middle-class families would consider “basic.” No savings for retirement or emergencies; no student loan payments. It includes no streaming services, no quick stops for takeout after a busy day, no piano lessons or youth sports fees. The budget is based on what is needed to “survive” rather than “thrive.”
Budgets for four representative household types are found in this overview (Figure 2).
Budgets for these and six other household types in each of Iowa’s 99 counties can be found at www.commongoodiowa.org/data/cost-of-living-in-iowa. They use costs as of 2021, except health insurance, which is based on 2022 premiums. See the data sources and methodology appendix for details on how family budgets were created.
Key assumptions in basic-needs budgets
The family cooks and eats all meals at home, at the cost of the USDA Low-Cost family food plan.
The family pays for rent and utilities at the 40th percentile level for a house of appropriate size in each county based on the HUD Fair Market Rent.
The family’s health care expenses include insurance premium and out-of-pocket costs. Costs represent an average of the employee share of employer sponsored insurance costs and the household’s health costs after premium assistance with a bronze plan purchased on the exchange.
Workers drive to work, and the family has other basic transportation needs, such as getting to school and the grocery store.
Except for those in two-parent families with only one parent working and those age 12 or older, all children attend a licensed child care center during normal working hours when not in school. Child care costs, calculated from county-level data from Iowa Child Care Resource and Referral, are for a 2-year-old, a 4-year-old and a child between 6 and 11 years.
The family has expenses for clothing, phone service and basic household maintenance items.
Property taxes are included in rent; sales taxes in spending.
Workers are employed full time and year-round; income consists of wages and salaries. Payroll taxes are paid on all income, and federal and state income taxes and credits are calculated assuming the standard deduction. The family uses all available credits and exemptions.
Differences in cost across Iowa counties can be dramatic. Monthly child care expenses for a preschooler, for example, ranged from a low of $451 to a high of $1,043. Monthly rent for a two-bedroom apartment ranged from $739 to $1,063. Iowa’s metropolitan areas generally have the highest rents and the highest child care costs. As such, Johnson, Story and Polk counties have the highest costs for families with children. Rural counties tend to have the highest health care costs and higher transportation costs due to longer commutes.
Overall, the cost of living is lower outside of metropolitan areas, because slightly more expensive transportation and health costs are offset by substantially cheaper rents and child care.
It’s too soon to capture the effects of the pandemic, inflation on working families
Analysis here relies on 2015-2019 data from the American Community Survey. We do not yet have a full picture of how Iowa families fared in the past two years, given the complex effects of high unemployment, shifting employment patterns, child care and school issues that hindered labor force participation, rising wages, and the many forms of federal pandemic assistance in 2020 and 2021.
The median wage in Iowa grew from $17.84 in May 2018 (the figure used in the previous Cost of Living Report) to $19.19 in May 2020, an increase of 7.5 percent (see Figure 3 for self-sufficiency wages relative to the Iowa median and minimum wages). This income growth in part explains why a lower share of Iowa families had incomes below the basic-needs budget compared with the report’s previous edition. In addition, inflation averaged just 1.5 percent from 2018 to 2020.
The situation changed dramatically in 2021, with inflation from March 2021 to March 2022 reaching 8.5 percent. This recent high inflation is not reflected in our household budgets. And while the strong wage growth from 2018 to 2021 outpaced inflation by a substantial margin, this is no longer the case. As a result, the situation facing Iowa families in 2022 is almost certainly more precarious than what is reflected in this report.
Minimum wage is not enough; sometimes median wage is not, either
Self-sufficiency wage for selected family types compared with Iowa median and minimum wage
The best way of looking at this analysis is to think of it as how Iowa families would fare if 2021 had been a “normal” year. Measuring the effects of these pandemic years on the cost of living and family self-sufficiency will have to await the next edition of this report.
The gap between what some working households earn and what they need is significant
Among the thousands of Iowa families who do not earn enough to meet basic needs, the gap between what they earn and what it would take to meet the basic budget can be daunting. Single-parent families, for example, on average face an annual gap in excess of $16,000 between their after-tax earnings and basic-needs budget (Figure 4). Among all households not meeting a basic-needs budget, the gap is over $14,000. Iowa families are working hard, but wages have not kept up with costs and productivity.
Single-parent families face the biggest gap
Average statewide gap between earnings and basic-
needs budget, selected household types
Racial disparities are pronounced
Iowa is a largely white state, so it is no surprise the vast majority of the households with earnings below the self-sufficiency level — nearly 75,000 out of 85,800 — are white (Figure 5). But this obscures marked disparities by race and ethnicity.
Iowans of color have been excluded from the economic prosperity that is generated by their contribution to the state’s economy. Due to long-standing discrimination in housing, education and employment, Black workers in particular are over-represented in lower-paid occupations, which are also less likely to offer health coverage, paid sick leave or retirement benefits.
Most households with earnings below self-sufficiency level are white
Number of working households that earn to little
to meet a basic-needs budget, by race and ethnicity
Working households of color are less likely than white ones to be able to meet a bare-bones, basic-needs budget. One in 3 working households headed by Black Iowans and 1 in 4 Hispanic/Latinx-headed working Iowa households had incomes below the self-sufficiency level, compared with just 1 in 7 white working households (Figure 6).
Households of color are overrepresented among working households that can't meet basic needs
Percentage of working households that earn to little to meet a basic-needs budget, by race and ethnicity
Black workers in the Midwest face specific challenges with roots in a loss of (primarily union) manufacturing jobs. Employment gains and protections for Black workers in the Midwest grew during the mid-19th century due to growing union density, a booming economy and civil rights laws. These trends were followed by economic decline, a decline in union density and erosion of antidiscrimination law enforcement.
Many budget components have gotten more expensive
Since our last Cost of Living in Iowa report in 2019, the costs of some components of the family budgets have increased substantially (Figure 7). Among the biggest increases were for child care, rent, food and household expenses. Health insurance rates declined between 2019 and 2022, despite the pandemic. Overall, the cost of living rose 10 to 11 percent for families with children, and about 6 percent for younger singles living alone.
Work supports help bridge the gap
Because working full time, year-round does not guarantee even close to a middle-class standard of living, families with low-wage workers typically rely on work supports to bridge the gap between income and expenses. Programs like SNAP (food assistance), Child Care Assistance, and the Earned Income Tax Credit (EITC) help low-wage working families survive, keep their children out of poverty and provide a pathway to better education and better job opportunities.
Most of these supports base eligibility and benefit levels on a ratio of income to the federal poverty level (FPL). The FPL for a family of three in 2021 was $21,960. A self-sufficiency wage in Iowa is about 200 percent to 250 percent of, or twice to 2½ times, the official federal poverty guideline (Figure 8).
Official poverty level understates what it takes to get by
Annual income required to meet a basic-needs budget versus federal poverty level, by household type
Not only does the official poverty rate in Iowa vastly understate the extent of economic hardship, but many of the programs intended to alleviate that hardship fall to zero well before a family earns enough to meet basic needs on their own (Figure 9).
Here are deeper looks at two different families to highlight both value and limits of work supports.
First, take a single parent with a 2-year-old. The federal poverty level for this family of two is $17,420. But earnings alone fall far short of meeting bare-bones basic needs for this family unless it has income that far exceeds the minimum wage (Figure 10A). Meeting the basic-needs budget with no assistance beyond tax credits requires an annual income of $44,749, or 260 percent of FPL.
Figures 10A and B
Work supports are crucial, but still fall short for many low-wage working households
Combined resources from wages and work supports, single parent with one child
The EITC, child tax credit and child and dependent care credits are essential for this family. They were especially helpful during the pandemic year of 2021, when they were boosted by provisions of the American Rescue Plan Act (see below). Medicaid, Hawki and insurance premium assistance under the Affordable Care Act also play a vital role. Those two sets of work supports — tax credits and public insurance options — enable the family to reach self-sufficiency when the hourly wage exceeds $22. But the other forms of assistance — child care assistance, food assistance (SNAP), and energy assistance (LIHEAP) — phase out well before this family can meet basic needs.
The loss of benefits when income exceeds the eligibility ceiling — often called the “cliff effect” — is most pronounced for Child Care Assistance between wages of $12.50 and $15 an hour. It is important to note this is a cliff for people when they first apply for CCA, not an ongoing cliff for those already receiving it (sidebar, below).
Second, consider a married couple, both working full time, with two children, one age 4, the other between age 6 and 11 (Figure 10B). Again, refundable tax credits and public health insurance or subsidies allow the family to reach self-sufficiency by the time each parent earns over $17 per hour. And once again, CCA, food assistance and LIHEAP disappear well before the family is self-sufficient.
Combined resources from wages and work supports, married couple with two young children
*Total family earnings less payroll and income taxes before refundable credits
Federal pandemic support was critical for low-wage working families in 2021
The federal child care credit and child tax credit were especially helpful in 2021 because of boosts to each from the American Rescue Plan (ARP). For working families with children, the self-sufficiency wage would have been much higher without these extra benefits. The ARP temporarily increased the child tax credit by $1,600 for every child under 6 — from $2,000 to $3,600 — and by $1,000 for every child between 6 and 17 — from $2,000 to $3,000. For the first time it was fully refundable. That meant a filer could use it to reduce the tax they owe to zero, and then receive a refund from the IRS for any credit remaining.
The ARP increased the maximum child care expenses eligible for the child and dependent care credit from $3,000 to $8,000 per child, for up to two children. The credit previously ranged from covering 35 percent of eligible expenses (for those with incomes under $15,000) to covering 20 percent of eligible expenses (for those with incomes over $43,000). The expanded credit covered 50 percent of eligible expenses for those with income under $125,000, and then the percentage covered declined as income increased. And for the first time it was refundable.
Without the ARP tax credit enhancements, an extra 6,800 Iowa households would have fallen below the basic-needs threshold in 2021. The proportion of families with incomes too low to meet basic needs would have been 16.0 percent, instead of 14.8 percent. For single parents, the share with incomes too low to meet basic needs would have been 48.4 percent, instead of 45.8 percent. For those who remained below the threshold, the average gap between what they earned and what they needed to earn to meet basic needs would have been $2,000 higher.
All these expanded benefits expired Jan. 1, 2022. It remains unclear if Congress will reinstate any of them in some form.
Child Care Assistance remains out of reach for many
This study assumes families use all available work supports, but in practice that’s challenging. Child Care Assistance has a particularly low take-up rate. In Federal Fiscal Year 2016, CCA served only 24 percent of Iowa children eligible based on the state’s eligibility criteria at the time, and only 9 percent of children who were potentially eligible if the state adopted more generous eligibility parameters allowed by the federal government.
Iowa has failed since then to increase its CCA entrance eligibility level, still 145 percent of poverty and among the nation’s lowest. It has, however, allowed families, once on, to continue to receive CCA when their earnings rise above the eligibility cap. This good if limited option known as CCA Plus removes the penalty — loss of child care help — for working more or getting a better job. CCA Plus served 8 percent of children receiving child care subsidies in an average month in State Fiscal Year 2021.
CCA still excludes families who make even a dollar more than the cap when they first apply. This makes it especially hard for those entering the work force making $15 to $20 because they qualify for no help with child care, even though they earn far below what they need to get by.
Although the state has raised CCA reimbursements in recent years, it still generally pays below market rates, making it difficult for providers — who themselves often earn too little to meet a basic-needs budget — to accept CCA children.
And CCA operates within the broader, stretched child care industry. Even if a family qualifies, they must find a provider willing to accept it, who has an open slot, during the right hours, in an accessible location, with programming and practices acceptable to the family.
Iowa families are working hard, but wages have not kept up with costs and productivity. There are strategies to turn the tide. Continue here to view the report's Living Wage Agenda.
 Geographic comparisons are limited by Census geography. To calculate the share of families with income below self-sufficiency we must rely on American Community Survey data by Public Use Microdata Area (PUMA). Most of the 24 PUMAs in Iowa span several counties, often with urban and rural counties included in the same PUMA.
 Colin Gordon, “Race in the Heartland: Equity, Opportunity and Public Policy in the Midwest.” October 2019. Iowa Policy Project. Accessed at http:iowapolicyproject.org/2019docs/191010-Race%20in%20the%20Midwest-Int.pdf
 U.S. Department of Health and Human Services, “U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs.” Accessed at https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines/prior-hhs-poverty-guidelines-federal-register-references/2021-poverty-guidelines. Note: Federal poverty guidelines — often referred to as the federal poverty level, or FPL — do not take into account regional differences in basic living expenses and were developed based on typical spending patterns of more than 50 years ago. The 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 guidelines, child care has become a major expense for most families, and today a far higher percentage of women are in the labor force. In our budgets, child care accounts for nearly one-fifth of a household’s budget for many families with preschool children.
 Rebecca Ullrich, Stephanie Schmit & Ruth Cosse, “Inequitable Access to Child Care Subsidies, CLASP, April 2019. Accessed at https://www.clasp.org/sites/default/files/publications/2019/04/2019_inequitableaccess.pdf
 Iowa Council on Human Services, “State Fiscal Year 2023 Budget Submission: Improve Iowans’ Employment and Economic Security.” Updated September 9, 2021. Accessed at https://dhs.iowa.gov/sites/default/files/6_Improve_Iowans_Employment_Econ_Security.pdf?090920201406
About this report
This is the 8th edition of the Cost of Living in Iowa, produced originally by the Iowa Policy Project and now by Common Good Iowa. Explore state and local data and appendices.
Peter Fisher is Common Good Iowa's Research Director. He holds a Ph.D. in economics from the University of Wisconsin-Madison. Peter is professor emeritus of Urban and Regional Planning at the University of Iowa, where he taught for over three decades.
Natalie Veldhouse is a policy advocate who advances food and income security. She received a Master's in Social Work from the University of Iowa. She has worked in food pantries and schools and conducted health, education and social science policy analysis and research.