July 6, 2016
Peter S. Fisher is research director of the Iowa Policy Project, which he helped to form as a charter member of its board of directors in 2001. He is a national expert on public finance and has served as a consultant to the Iowa Department of Economic Development, the State of Ohio, and the Iowa Business Council. His reports are regularly published in State Tax Notes and refereed journals, and he is widely quoted in the Iowa media on economic development and tax issues. His book Grading Places: What Do the Business Climate Rankings Really Tell Us? was published by the Economic Policy Institute in 2005, with an updated edition published by Good Jobs First in 2013. He also has developed a website, launched by the Iowa Policy Project, to follow up on that work, Grading the States, found at www.gradingstates.org. Fisher holds a Ph.D. in Economics from the University of Wisconsin-Madison, and he is professor emeritus in the School of Urban and Regional Planning at the University of Iowa.
Nearly 114,000 Iowa families do not earn enough to provide for a basic standard of living without public supports, despite one or more full-time wage earners in the family. Overall, nearly 19 percent of Iowa working households meet this description in recent years. For single parents, the challenge is greater than it is for married couples with children.
This is the finding of Part 2 of the 2016 edition of The Cost of Living in Iowa, building on our analysis of what it takes just to get by, for various family types. In Part 1, we constructed typical family budgets consisting of the no-frills basic monthly expenditures on rent, transportation, child care, food, health care, and household expenses needed by families of different sizes and composition in Iowa. In this report we provide estimates of the percent of Iowa working families who do not earn enough before taxes to meet a basic family budget without help from such work supports as child care assistance, food assistance, or health care subsidies.
We consider four kinds of households: single persons living alone, married couples without children living at home, married couples with children under 19 living at home, and single parents with one or more children at home. In Part 1, we presented estimates of the before-tax income required by households of these four types that would leave them with after-tax income just equal to the basic needs budget for that type of family. We call this self-sufficiency income. It is the level needed to attain a basic standard of living without the help of any work supports beyond the tax credits received when paying state and federal income taxes.
The estimates presented here are based on data from the American Community Survey, a sample of nearly 30,000 Iowa households. Since the focus of our report is on working families, we excluded senior households and those without at least one adult working full time (defined as 30 hours per week or more).
As noted above, nearly 19 percent of Iowa working households earned below the self-sufficiency level of income. Figure 1 shows that the proportion is higher for single persons, lower for married couples (especially those without children at home), and much higher (over 3 in 5) for single-parent families.
Iowa’s more metropolitan regions have a smaller share of families with incomes below self-sufficiency. In Figure 2, we divide the state into four regions. Central Iowa includes Polk County and the seven counties surrounding it (the Des Moines and Ames metropolitan areas). Eastern Iowa includes five metropolitan areas (Waterloo-Cedar Falls, Dubuque, Davenport, Cedar Rapids and Iowa City) along with the counties in between, and the counties between Linn and Johnson counties and our Central Iowa region. Northern Iowa consists of 40 largely rural counties plus the Sioux City metro area. Southern Iowa includes 32 largely rural counties plus Pottawattamie County, home of Council Bluffs. The two largely rural regions have substantially higher shares of working families with incomes below self-sufficiency.
Of those Iowa families with income below self-sufficiency, about a third earn less than half the needed amount. In other words, those families would need to at least double their current earnings to meet basic household expenses without public assistance.
How far do Iowa working families fall short of the self-sufficiency level of income? In Figure 3, we show the average size of the “basic needs gap” — the difference between actual before-tax income and the self-sufficiency level of income. Among all households in the state with income below self-sufficiency, the average shortfall is $16,455 per year. While smaller households face a smaller gap, for married couples with children it is $19,680 and for single parents a daunting $22,655.
Nearly 114,000 working households in Iowa do not earn enough to cover a basic family budget (see Table 1). This is a conservative estimate because we do not include households that contain adult relatives of the head other than the spouse, multi-family households, or single persons sharing a residence. No doubt some of those households are struggling as well. Of the 114,000 households we identified, over a quarter consist of single-parent families.
Clearly work alone does not produce sufficient income to meet the basic needs of a large number of Iowa families. Such families must rely on a variety of work support programs if they are to achieve a basic standard of living. A final report in The Cost of Living in Iowa 2016 series will consider a broad range of programs and the role they play in helping families make ends meet.
The estimates presented here are based on data for Iowa from the most recent five years of the American Community Survey (ACS): 2010-2014 released by the U.S. Bureau of Census. We excluded households where the head (or spouse) was age 65 or older, and where there was not at least one adult working at least 30 hours per week. We also eliminated certain types of households because there is no way to know whether or how income and expenses are shared within the household: those that included adult relatives of the head or spouse (adult children, siblings, aunts and uncles, parents), households that included a subfamily or more than one family, and single individuals (such as college students) sharing a residence or living in group quarters. We include families with up to six children.
For each family in the ACS sample we calculate a self-sufficiency budget depending on the ages of adults (which affects health insurance rates), the ages of any children (which determines the need for child care), total family size (which determines, along with ages of family members, the basic food budget, rent, and miscellaneous household expenses), the number of working adults (which affects transportation costs), and whether or not family members were covered by health insurance from an employer. The basic family budgets are constructed both for families with health insurance from an employer and those without. Those in the ACS sample with health insurance from an employer for all or most family members were assigned the break-even budget that assumes no need to purchase insurance on the private market.
We pool five years of data to get a larger sample in order to increase the reliability of estimates. In the table at right, we show both the estimate and the margin of error. The smaller the sub-population (a particular family type, or a particular region of the state), the smaller the ACS sample and the larger the margin of error of the estimate. That is why we do not present estimates for smaller population groups (e.g., married couples with one child vs. two children, or smaller geographic areas): The margin of error becomes too large.
 The Cost of Living in Iowa, 2016 Edition, Part 1: Basic Family Budgets. Peter S. Fisher, April 2016, the Iowa Policy Project.
 We were limited by Census geography. Since we must use the Public Use Microdata sample of the ACS, the smallest geographic area
we can identify is the Public Use Microdata Area (PUMA). There are 24 PUMAs in the state under the most recent delineation, based on
the 2010 census. Unfortunately, they do not always align with metropolitan areas, and a given PUMA can include urban counties and rural
 Steven Ruggles, Katie Genadek, Ronald Goeken, Josiah Grover, and Matthew Sobek. Integrated Public Use Microdata Series: Version
6.0 [Machine-readable database]. Minneapolis: University of Minnesota, 2015. IPUMS-USA is available at www.ipums.org
This is the fifth edition of The Cost of Living in Iowa. As before, in order to report the most current information in a timely fashion, we are releasing the 2016 edition in installments. This is Part 2. Part 1 presents complete information on the basic family budgets for ten family types and all geographic areas — 99 counties and 21 multi-county regions. Part 3 of this report will focus on work supports and how they affect basic family budgets.