The Cost of Living in Iowa | Policy recommendations

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No matter our ZIP code, color or upbringing, every Iowan deserves the opportunity to thrive and provide for their household. Despite this common value, our highly unequal economic system produces a situation where 1 in 6 working households can’t meet even an exceptionally frugal household budget on full-time wages. Public policy choices over decades have eroded the earning power of workers and funneled financial success to the wealthiest Iowans.

Here are key state and federal strategies to help shift the tide and empower families to not just survive, but thrive. These recommendations reflect a range of ambition; some should be immediately actionable (and are parts of state or federal legislation that have at various points come close to passing); others will require time and effort to build the evidence base and political will.

A promising approach to keep testing: Guaranteed Basic Income

At a time when wealthy people and corporations are getting wealthier, advocates for working people are seeking efficient, streamlined policy solutions to make sure all families can cover essentials.

An area of promise is guaranteed income. One form of guaranteed income with a long track record of effectiveness is refundable tax credits, most notably the Earned Income Tax Credit and the Child Tax Credit. Researchers have presented strong evidence for the benefits of the credits, which lift millions of Americans above the poverty line each year.[1] Since workers can claim the credits when they file their taxes, uptake of the credits among eligible households is quite high.

Another form is Guaranteed Basic Income. GBI provides money, typically on a monthly basis, to families based on their household income. Compared with tax credits, which except for a period during the pandemic, are received once a year, GBI essentially moves up the timing of the support to help people cover needs — such as food, utilities, shelter, diapers, clothing and education — as they arise. Rather than going into debt to cover costs and using tax refunds to pay off balances, GBI offers the chance to avoid the debt in the first place, preventing exorbitant interest charges and battered credit scores.

GBI further differentiates itself from other forms of assistance by its streamlined administrative processes and offering stable financial support without imposing extensive eligibility verification requirements.

A GBI pilot program in Iowa, administered by the UpLift initiative, is currently in progress across Warren, Dallas and Polk counties. This initiative targets 110 low-wage individuals, providing a monthly stipend of $500 for two years. After the pilot concludes, researchers will publish results about the program’s effectiveness. 

Eligibility for the program is determined by age, residency and household income criteria, with participants required to be at least 18 years old, residents of specified counties, and earning a household income at or below 60% of the area median income. To qualify, a household income for a family of four cannot exceed $59,100. For a family of three, annual income cannot be more than $53,190, and for a family of two, $47,280.[2] 

Comparable programs around the country, such as SEED (Stockton Economic Empowerment Demonstration) in Stockton, California, are returning promising results, including increased full-time employment and a reduction in income volatility among participants.[3]

It is a non-punitive approach that locates poverty as a systemic issue, not locating individuals as the source of the problem as many other programs and rhetoric do. GBI is an especially promising approach in rural areas, where economic challenges persist and poverty rates exceed the national average. GBI acts as a safety net for low-wage people who do not earn enough to meet basic needs and contributes to rural economic growth and well-being by addressing relative wage constraints.

Piloting Guaranteed Basic Income in Iowa signifies an important step towards helping people build financial security. As results from Iowa’s pilot program and other GBI programs across the nation are analyzed, lawmakers should keep a close eye on GBI as a promising policy solution for our highly unequal economic system.

Key policy priorities to help families get ahead

Expand and strengthen tax credits            

Tax credits are an important strategy to help families bridge the gap between their wages and a basic budget. They have a proven track record of keeping children out of poverty, rewarding work and compensating for regressive elements of our tax structure, such as sales and property taxes.

Federal

• Expand the Child Tax Credit so it resembles its structure during the pandemic, when it lifted millions more American children out of poverty.

• Expand the Earned Income Tax Credit (EITC) for low-paid working adults not raising children in the home.

Iowa

• Double the state EITC from 15% to 30% of the federal credit and expand it to include some childless adults who are now ineligible due to their age.

• Establish a state Child Tax Credit, as 14 other states including Minnesota have done.

Ensure access to affordable health insurance

Comprehensive, affordable health insurance has short- and long-term benefits for working Iowa families — and their budgets. Insured people are healthier and better able to participate in the labor force, and are less likely to get swamped with high medical bills.

Federal

• Make permanent the enhanced premium tax credits for health insurance purchased on the ACA marketplace that have made ACA plans much more affordable. They are currently scheduled to expire at the end of 2025.

Iowa

• Help eligible Iowans maintain Medicaid and CHIP coverage by using enrollment processes that accurately assess eligibility without unnecessary red tape.

• Extend Medicaid eligibility for pregnant people from 60-days to 12-months postpartum to assure continuity of care for new parents as they recover and navigate parenting and work.

Limit what families pay for child care

Iowa has one of the nation’s highest rates of labor force participation among parents of young children. Yet child care costs, which in some cases rival college tuition, can make working difficult or impossible. Lowering what families spend on care is an essential strategy to help stretched parents get to work and get ahead.

Federal

• Invest more in Child Care Development Block Grants, the main source of child care subsidies, and pursue other proposals to limit the share of income families pay for child care.

Iowa

• Increase the Child Care Assistance family entrance eligibility income level for Iowa’s program to at least 185% of poverty.

Assure families have resources for food

We all need adequate food to learn, work and thrive. Having enough to eat is linked to better child development, higher educational attainment and increased lifetime earnings.

Federal

• Expand Community Eligibility, which allows low-income schools to provide free school breakfast and lunch to all students, decreasing administrative work and reducing stigma.

Iowa

• Participate in Summer EBT, which provides food benefits to low-income families with school-aged children when schools are closed for the summer.

• Make state investments in food securing, including food banks serving families who may not quality for SNAP and in Double Up Food Bucks, which stretches family budgets by doubling the value of SNAP dollars spent on fresh fruits and vegetables.

Protect workers’ rights to unionize and bargain collectively

Iowa workers should have the right to negotiate for higher compensation and safe working conditions. Strengthening collective bargaining gives workers more say in improving their wages and work environment.

Federal

• Pass the PRO Act to help restore workers’ ability to organize and negotiate for better pay, benefits and working conditions.

Iowa

• Restore collective bargaining on a broad range of issues to Iowa public-sector employees. Public-sector bargaining rights should be an example for the private sector.

Increase the minimum wage

The minimum wage sets a floor — a bare minimum — for what workers must be paid. Increasing the minimum would move thousands of Iowa workers over, or at least closer to, a basic-needs budget. The increase would help not just those workers getting a raise up to the new minimum, but thousands more who earn just above the new minimum who would get a raise as employers adjust overall pay scales.

Federal

• Raise the minimum wage to at least $15 per hour, then index it based on median wage, and eliminate the subminimum wage for tipped workers.

Iowa

• Raise the minimum wage to at least $15 per hour, then index it based on median wage, and eliminate the subminimum wage for tipped workers.

• Restore local governments’ ability to raise the minimum wage above the state floor when local conditions warrant.

End wage theft and worker misclassification

Iowa workers should always take home the pay and benefits they earn. Enforcing wage and hours laws and eliminating the misclassification of workers improves fairness in the workplace, promotes an even playing field between competing companies and prevents business tax evasion. 

Federal

• Increase funding for federal wage theft and misclassification enforcement, especially in partnership with state departments.

Iowa

• Reform the Wage Payment Collection Law and administrative rules to strengthen penalties for businesses that violate wage and employment laws.

• Hire more wage and misclassification investigators to enforce wage payment law, root out worker misclassification, and efficiently serve workers who have been wronged.

Raise reimbursement rates to boost care workers’ wages

Workers in the caring economy, including those in child care and a variety of health care settings, perform essential services but are among the lowest paid — even as families needing care struggle to pay for it. The underlying economics of these fields are so strained it requires robust public-sector investment to fill the gap.

Federal

• Include provisions to increase the pay of early care and education workers in federal initiatives to help families afford child care.

• Increase Medicaid reimbursement for Home- and Community-Based Services to improve the pay of direct-care workers.

Iowa

• Increase Child Care Assistance reimbursement rates paid to Iowa providers to the federal standard.

• Regularly adjust Medicaid reimbursements for services by direct-care workers so they earn at least a basic-needs wage.

Give marginalized groups access to equal opportunity

For decades, our state’s policies have prioritized the accumulation of wealth for white communities at the expense of others. Many of the universal policies identified here will have disproportionate benefit for communities of color, but fully addressing Iowa’s lopsided economy must acknowledge the historical roots of inequality and promote targeted, data-informed solutions that give all Iowans the opportunity to thrive.

Federal

• Integrate racial equity assessments into the legislative process to ensure lawmakers consider potential impact of proposed policies and practices on communities of color.

• Develop rural revitalization initiatives addressing unique economic challenges and allocating resources to infrastructure, health care and education.

Iowa

• Integrate racial equity assessments into the legislative process to ensure legislators consider potential impact of proposed policies and practices on communities of color.

• Develop rural revitalization initiatives addressing unique economic challenges and allocating resources to infrastructure, health care and education.

• Establish community investment initiatives that target low-income communities, providing access to credit with low rates and reduced consideration of credit scores and collateral.

• Repeal restrictions on training and discussion of racism that have had a chilling effect on how state agencies analyze the effects of policies and practices on communities of color.  

 

[1]    Center on Budget and Policy Priorities, “Policy Basics: The Earned Income Tax Credit.” April 2023. Retrieved from www.cbpp.org/research/policy-basics-the-earned-income-tax-credit 
[2]    “Eligibility Criteria.” UpLift: The Central Iowa Basic Income Pilot. Retrieved from https://upliftiowa.org/about/eligibility-criteria/ 
[3]    Saadia McConville, “Guaranteed Income Increases Employment, Improves Financial and Physical Health.” March 2021. Stockton Economic Empowerment Demonstration. Retrieved from www.stocktondemonstration.org/press-landing/guaranteed-income-increases-employment-improves-financial-and-physical-health