November 15, 2016
Table 2. Budget Math Daunting for Low-Wage Single Parents
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Working full time, year round is not enough to guarantee a middle-class standard of living. Nearly one in five working Iowa families, in fact, does not earn enough to meet basic needs. There are a number of things that could be done to help such families move into the middle class. Policies are needed to improve both the demand-side and the supply-side of the labor market. On the demand side, we need more middle-class jobs with decent wages and benefits. On the supply side, we need more workers with the education and skills needed to qualify for most good-paying jobs.
What we focus on here, however, is a set of policies called work supports that help low-wage working families survive and keep their children out of poverty, and that provide a stepping stone to a better education and a better job. We lay out a set of policies to strengthen these pathways to the middle class:
• Reform Iowa’s Child Care Assistance program to eliminate a huge disincentive called the cliff and to make it more effective as a help to parents trying to improve their skills and raise their wage level.
• Expand the Earned Income Tax Credit to provide even stronger support to low-wage workers, encourage more work effort, and keep children out of poverty.
• Expand the Child and Dependent Care Credit to cushion the loss of Child Care Assistance.
These reforms should be combined with education policies that ensure future generations of Iowans receive a quality and affordable education, from preschool through post-secondary institutions. This will require expansion of the universal preschool program, support of K-12 education through adequate funding of state foundation aid, and continued efforts to make post-secondary education more affordable by restraining tuition growth.
A family in Iowa with one wage earner and one or two children needs $39,000 to $45,000 a year just to pay for the basic costs of rent, utilities, food, transportation, child care and health care. These figures are based on basic needs budgets constructed for 10 different family types for each of Iowa’s 99 counties, and can be found in Part 1 of The Cost of Living in Iowa, 2016 Edition. From these budgets, we calculate the hourly wage needed — full time, year round — to leave the family with after-tax income equal to the cost of basic needs.
Table 1. Two Working Parents Typically Need $12-18/hr Jobs to Meet Basic Needs
Meeting the basic family needs budget for a married couple with one wage earner, and either one or two children requires a job paying from $22 to $25 per hour (if the family must purchase health insurance on the private market). Most married couple families with children in Iowa have two wage earners, however. While working hours are doubled, expenses increase substantially because of the high cost of child care. For such families, each parent needs to earn between $12 and $18 an hour, as illustrated in Table 1, depending on whether there are one, two or three children and whether one of the jobs includes family insurance coverage.
For a single parent, the budget math becomes more daunting, as child care costs must be paid out of a single paycheck. Now an hourly wage of $19 to $26 is needed, depending on whether the parent has one child or two, and whether the job includes health insurance, as shown in Table 2.
These budgets include only basic expenses; there is nothing allowed for meals outside the home, trips or vacations, entertainment, or saving for college or retirement.
Child care costs are for a licensed home; care in a licensed child care center would be higher.
Health care includes the cost of a basic silver insurance plan purchased on Iowa’s exchange, plus average out-of-pocket expenses.
Food costs are based on the U.S. Department of Agriculture’s thrifty food plan. Thus families living on these basic needs budgets would be just getting by.
How many Iowa families with at least one full-time worker earn enough to meet basic needs without any help? If you are a married couple with no children, you very likely are getting by. If you are a single parent, you’re probably not. Take-home pay for over three-fifths of the single parents in Iowa is insufficient to cover the basic needs budget. Overall, 18.8 percent of working families do not earn enough to get by (Figure 1).
For those with earnings below what is needed, the shortfall can be daunting. The average single parent family faces an annual deficit of $22,650, and for married couples with children under age 11, the average shortfall is $19,680 a year.
The reason that so many Iowans work full time, yet earn too little to support their families at a basic standard of living, is that there are simply too few jobs that pay a living wage. Half the jobs in Iowa pay less than $16.18 per hour, yet most families need to earn more than that. Figure 2 shows that only single persons, and married couples with two wage earners but just one child (or none), can get by on earnings alone at the state’s median wage.
Wages of Iowa workers have stagnated in the past decade. The median hourly wage in Iowa peaked in 2003 at $15.74 (in 2015 dollars) then declined through 2014 before ticking up to $16.18 in 2015. This stagnation has occurred even while the productivity and educational attainment of Iowa workers has continued to rise. The first 30 years after World War II saw a steady increase in productivity, rising education levels fueled in part by the GI bill and by large investments in public education, and wage levels that rose in concert. The gains from productivity were shared with workers, and a broadened and more prosperous middle class was the result.
Since 1980 productivity has continued to rise, but the connection between productivity and wages has been broken, in large part because of the long decline in the bargaining power of workers. While productivity rose 68 percent from 1979 to 2015, real wages rose only 9 percent. Meanwhile, the minimum wage has failed to keep pace with a rising cost of living and remains well below a living wage.
With half the jobs in Iowa paying less than what many families need to meet a basic needs budget, how do those families get by? Some do without health insurance, and then risk medical indigency or bankruptcy. Some rely on friends or relatives for child care. Some simply do without. But many families get help closing the gap from one or more work support programs:
• Food assistance (the Supplemental Nutrition Assistance Program, or SNAP, formerly known as Food Stamps)
• The Low Income Home Energy Assistance Program (LIHEAP)
• Child Care Assistance (CCA)
• Public health insurance: Medicaid and hawk-i (Iowa’s child health insurance program)
• Subsidies for the purchase of health insurance through the Affordable Care Act (ACA)
• Tax credits: state and federal Earned Income Tax Credits (EITC), state and federal Child and Dependent Care Credits (CDCC), and the federal Additional Child Tax Credit.
Not included in this list is TANF (Temporary Assistance for Needy Families) because it does not really function as a work support: any significant amount of earnings results in loss of eligibility. We also do not include public housing, because the coverage rate is so low (only about 25 percent of those income eligible actually receive public housing benefits) and waiting lists so long, it does not really function as an effective support.
Figure 3 shows the maximum value of available work supports for a single parent with one child (age 3 to 5) at various hourly wages (assuming full-time work), starting at the current minimum wage. It should be stressed that it would be unusual for a family to actually benefit from all available supports; the scenarios below are the best possible. All these programs have participation rates (the percent of eligible families actually using the program) below 100 percent, and well below that for some, including one of the most important: Child Care Assistance.
Figure 3. How Work Supports Decline as the Hourly Wage Rises
Single parent working full time, one preschool child
* Total family earnings, less: payroll and income taxes before refundable credits.
Benefits in some programs taper off as income increases: food assistance and the EITC are notable examples. This is clear in the shrinking value of these programs as the hourly wage increases. For the health care programs, Medicaid is replaced by ACA subsidies once wages approach the median, then they too disappear, while hawk-i benefits continue.
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.
If we consider all work support programs except Child Care Assistance, it can be seen from Figure 3 that the family’s total resources are always higher the higher the wage. It always pays to get a better job, or to work more hours. (Program eligibility is based on total earnings, not the hourly wage, so working more and earning a higher wage have the same effect on eligibility). The most striking effect, however, is the abrupt loss of the most valuable work support, CCA. For this family, CCA disappears at a wage of $11.15, at which point the family’s net resources — earnings plus program benefits — drop by a little over $4,600. This “cliff effect” will be explored in more detail below.
For a married couple with two children, both parents working full time, a similar cliff leaves the family with resources well below the basic needs level until the hourly wage reaches $15.00 (Figure 4). Food assistance and the EITC both disappear at a relatively low hourly wage. Child Care Assistance is lost when both parents earn more than $8.45 per hour, at which point the family loses over $8,000 in resources.
Figure 4. Work Supports Available for Married Couple
Both work full time, two children (one age 4, one age 6-11)
A more realistic picture of the role of work supports in bridging the gap between earnings and the basic needs budget would take into account the actual utilization of each program. Of all the families who meet the eligibility requirements for a program, only some fraction will actually participate and receive benefits, for a variety of reasons — failure to comply with reporting requirements, lack of awareness of the program, a belief that one is not eligible, or a reluctance to receive public assistance. In the case of public housing there is simply insufficient funding for all who are eligible. For child care assistance, the parent may not be able to find a provider in the area who will accept the state’s reimbursement rate, which is well below the current market rate for many providers.
For most programs there are Iowa-specific estimates of these participation rates, though most are out-of-date:
• SNAP: 88 percent (2010) 
• EITC: 79.6 percent (2013) 
• Medicaid and hawk-i: 89 percent (2013) 
• CCA: 32 percent (2001-2003) 
• LIHEAP: 38 percent (2004) 
Most work supports end well below income needed to meet basic needs because they are tied to outdated definitions of poverty, not to a realistic measure of a living wage. Figure 5 shows the relation between a basic-needs income needed to support families and. the official poverty line.
Figure 5. Official Poverty Level Is Well Below Income Needed to Meet Basic Needs
Source: The Cost of Living in Iowa, 2016 Edition, Part I: Basic Family Budgets
The family supporting income for families with children in Iowa ranges from 2.3 to 3.0 times the official poverty guideline for their family size (considering households with all adults working, and without health insurance from an employer or from a public program). Yet eligibility for most work support programs is tied to a ratio of income to the poverty level below the family supporting level. As shown in Table 3, this ratio is below 1.7 for several important work supports, and reaches a ratio consistent with basic needs only in the case of hawk-i and ACA subsidies. This means families stop accessing essential work supports, such as assistance for food, utilities and child care, before they are able to meet their basic needs through employment alone.
Table 3. Most Programs Cut Off Eligibility Before Family Supporting Income Level is Reached
Note: For all families, these figures are for the case where all adults work full time. The ratio of family supporting income to FPG (Federal Poverty Guidelines) ranges from a low that applies to a family with health insurance from the employer, to a high for a family purchasing health insurance on the private market. Eligibility ceilings for the EITC and for ACA premium subsidies were calculated from the authors’ cost of living policy model based on program rules. The program eligibility ceilings in all cases are not dependent on the work status of the parents, but the ratio of family supporting income to FPG is lower for married couples with only one working -- 1.1 to 2.3 (not shown here).
*The eligibility ceilings for ACA subsidies are deceptive; for example, for a single parent with two children, annual benefits fall to zero at 250 percent of poverty; then when the children lose hawk-I benefits (at 302 percent of poverty), the family is once again eligible for premium subsidies, but the amount falls to less than $500 annually at 350 percent of poverty before disappearing at 375 percent of poverty.
Food assistance is a vital support for Iowa working families. Although SNAP benefits disappear at 130 percent of poverty, they play an important role in helping to fill the basic needs gap for the lowest income households. As of July 2016, 377,379 Iowans in 177,424 households received food assistance. The average benefit per recipient was $112 per month, or $237 per household.
Some programs, like the EITC, gradually reduce benefits as income increases, so when the eligibility ceiling is finally reached, there is no drastic loss of benefits. Other programs produce a cliff effect when income rises just above eligibility: the loss of benefits is substantial, creating a penalty for earning more. The figures below illustrate how the loss of benefits from various programs affects a family’s net resources: earnings after taxes, plus benefits. When food assistance (SNAP) or adult Medicaid is lost, the two-earner couple with two children experiences a reduction in resources of $1,100-$1,400. But the loss of CCA eligibility pushes the family over an $8,165 cliff.
Figure 6. Child Care Assistance Produces a Large Cliff Effect Compared to Other Benefit Programs
How net resources change as earnings increase for a two-earner couple with two children, ages 4 and 7
For a single parent with one preschooler, the cliffs are less pronounced because the benefits are scaled to a two-person family rather than a four-person family. Still, the loss of child care assistance produces far and away the largest cliff: $4,600. And for this family, even if they participate in all possible assistance programs, their net resources never approach the basic needs budget amount even at the state median wage level of around $16.00.
Figure 7. Child Care Assistance Produces a Large Cliff Effect Compared to Other Benefit Programs
How net resources change as earnings increase for a single parent with one preschool age child
Funding and eligibility for SNAP and LIHEAP are entirely federal. In the remainder of this report we focus on four work support programs where the state of Iowa plays a major role in determining eligibility and/or benefits: health insurance, child care assistance, the state earned income tax credit, and the state child and dependent care tax credit.
The Iowa version of Medicaid expansion (called the Iowa Marketplace Choice Plan) took effect in January 2014. The expansion raised the eligibility ceiling for adults from 100 percent to 138 percent of poverty, in effect pushing the cliff effect — sudden loss of Medicaid benefits — to an income level 38 percent higher than before. For children, eligibility now extends to 167 percent of poverty.
The Affordable Care Act provides two kinds of assistance for those not eligible for Medicaid. Premium assistance pays a share of the cost of qualifying insurance plans purchased on the private market (most often through the state’s health insurance exchange), and is available for families with income up to 400 percent of poverty (though the formula results in a loss of benefits well below that income level for some families, given the cost of health insurance in Iowa). Cost sharing pays part of out-of-pocket expenses (co-pays and deductibles) for those with income below 250 percent of poverty.
For a married couple with two children (a preschooler, and one age 6-11), the parents lose Medicaid when family income reaches 138 percent of poverty, or $33,465 (the equivalent of each parent earning about $8.05 an hour). But instead of facing a benefit cliff in the form of a $9,575 sudden loss of health benefits, the parent can now purchase insurance on the private market with subsidies and faces an additional expense of only about $1,435, the ACA subsidies covering the remainder. The ACA in effect reduces a significant program cliff by 85 percent (Figure 8). Those ACA subsidies then taper off quite gradually.
Figure 8. How Health Insurance Programs Interact in 2016
Married couple with two children, both parents working
For a single parent with one child, the parent loses Medicaid at an hourly wage of $10.60. The ACA then kicks in with subsidies of about $3,470 for the purchase of adult insurance, which offsets 78 percent of the loss of adult Medicaid benefits (Figure 9).
While children lose Medicaid eligibility at 167 percent of poverty (for example, a single parent with two children earning $15.70 per hour), the hawk-i program immediately takes over with a similar level of benefits, and continues up to 302 percent of poverty. For single-parent families, ACA subsidies provide little or nothing beyond the point where eligibility for hawk-i is lost (see Figure 9). While premium subsidies are available for families earning up to 400 percent of poverty, for a single parent with one child the cost-sharing formula is such that the family’s expected contribution toward premiums (which is 9.5 percent of income once income exceeds 300 percent of poverty) is nearly equal to the cost of health insurance in Iowa, so little subsidy is provided. While this leaves a significant cliff, amounting to about $4,000 for loss of hawk-i benefits for one child, it occurs at a high enough level of income — three times the poverty level — that families are better able to accommodate the loss.
Figure 9. How Health Insurance Programs Interact in 2016
Single parent with one pre-school age child
For married couples with children, on the other hand, the ACA subsidies help to cushion the loss of hawk-i benefits because the premium subsidies continue beyond the eligibility ceiling for hawk-i (Figure 8). This is the case for couples with either one or two children living at home, and with either one or both parents working full time. For such families, the cost of health insurance in Iowa exceeds the required contribution under the ACA formula. That married couples receive ACA benefits beyond hawk-i eligibility while single parents do not reflects the substantially higher cost of insuring two adults, who are considerably more expensive to insure than children. Cost thus exceeds the expected family contribution by a wide margin.
The expansion of Medicaid has provided health insurance for thousands of Iowans and almost certainly has driven down the percentage of Iowans without insurance. Combined with premium subsidies under the Affordable Care Act, Iowa families no longer face the large Medicaid benefit cliffs that once acted as a significant disincentive to earning more.
Iowa’s Child Care Assistance (CCA) program covers the cost of child care for working parents with incomes below 145 percent of poverty, with modest co-pays required for those with income between 100 percent and 145 percent. As the family budgets illustrate, child care costs are a major financial barrier for those who have children below the school age and who are working to support themselves. For low-wage workers, CCA can be the most significant work support available to them.
While wages have stagnated, child care costs have continued to rise. Between 2011 and 2016, the average cost of child care in a licensed home in Iowa increased 13 percent, while the cost of care in a licensed child care center rose 25 percent. Over that same period, the federal poverty guidelines, which determine eligibility for child care assistance, rose just 9 percent.
Many of the families who are income-eligible for CCA do not take advantage of the program. There are several reasons: Some may be able to rely on family members such as grandparents for child care, some may be unable to find a child care provider in the area who is willing to accept the state reimbursement rate, while others may simply not know that they are eligible for the program or are unwilling to accept public subsidies. While the state reimbursement rates have periodically been raised (most recently in 2013), they remain well below the actual cost charged by many child care providers. Providers are not allowed to collect the difference between the subsidy and their usual rate from the parents. Instead, they must either accept the child at the lower rate, or refuse to accept subsidized children. Of the 6,913 child care programs in the state as of July, 2016 (centers, preschools, registered and unregistered homes), 1,761 (a quarter of the total) did not accept subsidized children.
Iowa has one of the lowest eligibility ceilings in the country. As of 2015, only ten states cut off eligibility for CCA at an income level below 145 percent of poverty. In 28 states, the threshold was over 170 percent , including 17 states with a ceiling of 197 to 306 percent. In three additional states the rate exceeded 240 percent in some portions of the state. It is clear from the family basic needs budgets that Iowa eliminates child care assistance at an income well below what a family needs to get by, which is two to three times the poverty level.
The cliff effect in Iowa’s CCA program is severe. A parent deciding whether to find a job that pays more per hour or to work more hours per week could find herself facing a dilemma: The higher earnings could push her over the benefit cliff so that getting the better job would make her family worse off. However, an important reform took effect in July of 2016: eligibility is now determined annually rather than monthly. This means, in effect, that a family receiving CCA whose income then rises above the eligibility ceiling can continue to receive CCA for another year. The cliff effect is thus delayed, giving the family some time to make adjustments. In some cases, the child will age out of child care within that year. In others, however, those adjustments will still be hard to come by.
The situation facing a single parent with one pre-school child is illustrated in Figure 10. Here we show the best-case scenario: the family participates in every program for which it is eligible. All other work supports gradually taper off, approaching zero as the family nears the level of resources needed to meet basic needs. But Child Care Assistance disappears completely when the hourly wage hits $11.15. The result is a sudden drop in family resources of $4,617. The family’s child care costs (after child care assistance and the child care credits) go from 5 percent of income to 27 percent.
The red line in Figure 10 shows how that cliff could be eliminated. First, eligibility is raised, in this example, to 200 percent of poverty. Second, a substantially more aggressive co-pay schedule kicks in once family income exceeds the current ceiling at 145 percent of poverty. A family’s required co-pay is based on family income and the number of “units” of child care, where a unit is a half day. Under the existing schedule, the co-pay or fee per unit rises by 25 cents each time income increases to the next step in the schedule. With our more aggressive co-pay schedule, the fee bumps up 70 cents instead of 25, an amount that is sufficient to increase the co-pay and taper benefits nearly to zero before they disappear.
The single parent with one child must cover 18 percent of child care costs at 145 percent of poverty (an hourly wage of $11.15). Under our alternative schedule, this share gradually rises to 79 percent as the hourly wage increases from $11.15 to $15.30 per hour (just below 200 percent of poverty). At $15.35, CCA ends. Federal and state child and dependent care credits remain, however, leaving the family to cover 83 percent of costs.
With these reforms in place, the family just above 145 percent of poverty now still pays a portion of child care expenses, but their share (after child care assistance and child care credits) amounts to just 6 percent of income, instead of 27 percent under existing law. This percent gradually rises until, at 200 percent of poverty (where CCA disappears), the family’s net child care costs consume 20 percent of income.
Figure 10. How the Child Care Assistance Cliff Could be Eliminated
Single parent with one child: Effect of raising eligibility to 200 percent of poverty and adopting higher co-pays
Moderating the cliff effect in the CCA program is an important policy reform to ensure that working families in Iowa do not face a severe disincentive to getting a better job or working more hours. Parents earning just a dollar over minimum wage should not be faced with the prospect of making their family substantially worse off by bettering their work situation. Figure 10 shows that raising eligibility and instituting a higher co-pay replaces the cliff with a gradually declining benefit and greatly reduces the disincentive effect.
At an hourly wage of $14.05, a single parent with two children loses all child care assistance currently in Iowa. However, the federal and state child and dependent care tax credits make up for a small part of that loss. Federal law allows parents to deduct 20 percent of child care costs from their taxes; the credit begins to phase out at income levels above $75,000. The Iowa credit starts at 75 percent of the federal credit, and this percentage declines as income increases, and disappears when income exceeds $45,000. The total amount of the two credits for the case of the single parent with two children is $1,607 at the point where CCA is lost, and rises to a maximum of $2,160.
The credits do not eliminate the cliff effect. A single-parent family with two children that increases earnings from $14.00 per hour to just over that amount will go from having 93 percent of child care costs covered by child care assistance and the credits, to having just 19 percent of the costs covered, as shown in Figure 11. As income rises further, the federal and state credits increase to a maximum level of 25 percent of child care costs.
Figure 11. Child and Dependent Care Credits Compensate Slightly for Loss of Child Care Assistance
Single Parent with Two Children age 6-11, Statewide Average
The federal Earned Income Tax Credit (EITC) and its Iowa counterpart supplement the earnings of low-wage workers through the income tax. The federal credit is a fixed percentage of wages (and the percentage is higher the more children in the family) until earnings reach a certain level, at which point the credit begins to phase out. The gradual phase-out is shown in Figures 3 and 4; there is no cliff effect with the EITC as benefits eventually taper to zero. The state EITC is 15 percent of the federal credit. Both the federal and state credits are refundable; if the family owes no income tax, they will still receive the full value of the EITC as a refund.
Many Iowa families with children pay state income tax even though they owe no federal tax; this includes many families with income below the federal poverty level. The EITC allows low income
Iowans to earn more before owing any state tax. It also helps to fill the gap between earnings and the after-tax income required to meet basic needs. The federal and state earned income credits together lifted out of poverty more than 62 percent of Iowa taxpayers in 2009 whose income fell between $15,000 and $24,999. In 2013, about 210,500 Iowa households benefited from the EITC; they represented 15 percent of Iowa tax filers.
The EITC has proven to be an effective and efficient way to help low-wage workers make ends meet, particularly parents with dependent children. Recent research has shown that the EITC increases the work effort of recipients significantly by raising the rewards from work and making it more feasible for families with children to pay child care and other expenses necessitated by work. Furthermore, the beneficial effects last beyond the time when families actually receive the credit (which is only a year or two at a time for the majority of families). The research found that women’s wages rose more in later years as a result of the EITC and they were less likely to rely on cash welfare assistance, while the children of EITC recipients were healthier as a result, had better school performance, and earned more as adults. These latter research findings are consistent with earlier research showing the lifetime benefits accruing to children who are lifted out of poverty.
 In 79 percent of all married couple families in Iowa with children under 18 living at home, both parents were in the labor force, according to American Community Survey data for 2010-2014.
 The Urban Institute’s Safety Net Almanac, at http://safetynet.urban.org/safety-net-almanac/snap/Graphic-Display.cfm?GraphicID=12
 U.S. Internal Revenue Service, EITC Central, at http://www.eitc.irs.gov/EITC-Central/Participation-Rate
 Kaiser Family Foundation at http://kff.org/medicaid/state-indicator/medicaidchip-child-participation-rates/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D These estimates are prior to Medicaid expansions under ACA.
 Elaine Ditsler, Peter Fisher, and Kristi Lohmeier, Bridging the Gaps in Iowa, Iowa Policy Project, June 2007. www.iowapolicyproject.org/2007docs/070626-BTG_Report.pdf. National estimates indicate that 28 percent of children eligible under state rules receive child care assistance. See U.S. Department of Health and Human Services, Office of the Assistant Secretary of Planning and Evaluation, “Estimates of Child Care Eligibility and Receipt for Fiscal Year 2009.” ASPE Issue Brief, December 2012. http://aspe.hhs.gov/hsp/12/childcareeligibility/ib.shtml#childcare3
 FY2004 State LIHEAP Household Reports.
 USDA, Food and Nutrition Service, Supplemental Nutrition Assistance Program (SNAP), at http://www.fns.usda.gov/pd/supplemental-nutrition-assistance-program-snap
 The cliff amounts represent the reduction in the family’s net resources — earnings after payroll and income taxes, plus program benefits — resulting from a 5-cent increase in the hourly wage, equivalent to a $100 increase in annual income.
 While premium subsidies are available for families earning up to 400 percent of poverty, for a single-parent with two children the cost-sharing formula is such that the family’s expected contribution, which is 9.5 percent of income once income exceeds 300 percent of poverty, exceeds the cost of health insurance in Iowa, so no subsidy is provided.
 Statewide average child care rates from Iowa Child Care Resource and Referral, State of Iowa Data Sheets for July 2011 and July 2016. http://iowaccrr.org/data_publications/2011/ The percentage increases in rates for infants, toddlers, 2-year-olds, 3-year olds, and 4- and 5-year-olds were averaged.
 According to one estimate, only 32 percent of those eligible participated; see footnote 5.
 Reimbursement rates were last increased in July 2013 to just under the 75th percentile of the rates for child care that prevailed in 2006. Given the cost increases that have occurred in the 10 years since 2006, reimbursement rates are well below the 75th percentile in 2016.
 Iowa Child Care Resource and Referral, State of Iowa data sheet, July 2016, at http://www.iowaccrr.org/data_publications/
 Karen Schulman and Helen Blank. Building Blocks: State Child Care Assistance Policies, 2015. National Women’s Law Center, Washington, D.C. https://nwlc.org/resources/building-blocks-state-child-care-assistance-policies-2015/. In Colorado, Texas and Virginia, the threshold varies across the state, and in some areas exceeds 240 percent of poverty.
 The federal credit is non-refundable, and therefore has a limitation equal to tax liability. As income rises, the limit will rise (because tax liability rises) and the credit will rise, even though the credit before the limitation is the same. The Iowa credit is refundable, and is calculated as a percent of the federal credit before the limitation. The credit starts at 75 percent of the federal and the percentage declines as income rises.
 Zhong Jin and Bob Rogers, “Iowa’s Earned Income Tax Credit.” Tax Credits Program Evaluation Study, Iowa Department of Revenue, February 2012. http://iowa.gov/tax/taxlaw/EITC2011.pdf
 The Brookings Institution, Washington, D.C., EITC Interactive. https://www.brookings.edu/interactives/earned-income-tax-credit-eitc-interactive-and-resources/
 Chuck Marr, Chye-Ching Huang, and Arloc Sherman. “Earned Income Tax Credit Promotes Work, Encourages Children’s Success at School, Research Finds.” Center on Budget and Policy Priorities. Revised April 15, 2014. http://www.cbpp.org/cms/?fa=view&id=3793
 Marr, Huang, and Sherman.