The forces bearing on the economic fortunes and economic opportunities of working Iowans are relentless: stagnant wage growth, declining job quality, starkly higher costs for family basics like health care and education, labor standards that are slipping or evaded altogether, a loss of voice and bargaining power in the workplace, and meager or poorly-designed social policies. All of these problems were exacerbated as the recession lingered — which not only made it harder for working (or unemployed) Iowans to get by, but also served as a pretext for many state policy makers to press budget-slashing austerity and drastic forms of deregulation as the only viable solutions.
This is a destructively shortsighted path. It is a “low-road” agenda — of lower taxes, scant public services, minimal wage and hour standards, and “right-to-work” labor policies — that has been aggressively promoted by business groups and by the American Legislative Exchange Council as the only route to prosperity. But all the available evidence suggests such claims are false. Aggressive tax cutting and labor-bashing policies politically marketed as “pro-business” have no demonstrable impact on business investment or location decisions. And they have consistently failed to confer competitive advantage, higher growth or relative prosperity on the states that have pursed them. Indeed, very nearly the opposite is true. Such policies, on balance have yielded lower rates of job growth, lower per-capita and median incomes, and higher rates of poverty.
To the degree that state policies can shape state-level economic growth and opportunity, the race to the bottom on taxes, regulation, public services, and labor standards does more harm than good. What does matter to employers and investors, after all, is the broader economic infrastructure — including the quality of public goods and services and the education and skills of the local labor force.[i] Alongside its paeans to “right to work” and promises that “Iowa’s corporate income tax may be reduced or eliminated” through various credits and incentives, Iowa’s economic development literature goes on to list — as the state’s principal competitive virtues — all the things that those uncollected taxes pay for: infrastructure, public safety (“a genuinely great place to live, work, play, and raise a family”), public health, good schools (“the very foundation of Iowa’s thriving economy is its top educational institutions”), and public recreational resources.
We have sounded this note before. Indeed, every annual installment of The State of Working Iowa has concluded with a roughly similar set of policy prescriptions. These recommendations — raising the minimum wage, expanding the state EITC, tying economic development policies to explicitly “high-road” criteria, ensuring decent investments (and the revenues to pay for them) in education, raising the income thresholds for work supports, enforcing labor standards, and respecting workers’ bargaining rights — have the same organizing principles:
- First, make work pay. Iowa working families who are struggling are in that situation not due to a lack of effort or initiative. In fact, Iowa has the highest rate of labor force participation in the country. A full-time worker should be able to support a family, but almost a quarter of Iowa families with at least one full-time worker do not earn enough to provide the family with a basic standard of living.. This basic goal can be accomplished in a number of ways — by raising the floor under wages with a higher minimum or more expansive EITC, or by making it possible for workers to raise it themselves at the bargaining table.
- Second, invest in the future. There are no winners in the shortsighted game of chasing private investment with tax breaks and low labor or regulatory standards. Indeed, even the recipients of this largesse would be better off in the long run if states competed on quality rather than costs. The differences that ultimately matter in state policy are the long-term investments in education and infrastructure.
For an assessment of this reasoning, and state-by-state record, see Peter Fisher, Selling Snake Oil to the States: The American Legislative Exchange Council’s Flawed Prescriptions for Prosperity (Iowa Policy Project/Good Jobs First, December 2012); and Amy Hanauer, “So-Called Right to Work”: A Literature Review (Ohio Policy Matters, March 2012); Josh Bivens, A Bad Answer to the Wrong Question (Economic Policy Institute, 2011).
For a look at what it takes to make ends meet in each county in Iowa, see IPP’s latest Cost of Living in Iowa report. The report details how much families must earn in order to meet basic needs, and underscores the importance of public work support programs. It also details how many working Iowa families fall below a minimum cost of living threshold.
[i] See “10 Ways to Rebuild the Middle Class for Hard Working Americans,” from the National Employment Law Project and others, for a policy road map toward better jobs and a more robust and sustainable economy.