Strengthening Pathways to the Middle Class:

The Cost of Living in Iowa

Strengthening Pathways to the Middle Class:

The Role of Work Supports

Make a few cents more per hour, or add hours or a second job, and you might just find you have fewer resources to meet the basic needs of your family. Peter Fisher and Lily French shine a spotlight on this problem in Part 3 of The Cost of Living in Iowa, 2014 Edition.

The report examines 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. As Fisher and French note in the
executive summary, a low-wage single parent of two loses Child Care Assistance, one of those work supports, as she progresses toward the state’s median wage (about $15.60 an hour). Pennies more in pay per hour can put a family thousands of dollars in the hole as other resources vanish — known as a “cliff effect.”

We lay out a set of policies to strengthen these pathways to the middle class:

• Reform Iowa’s Child Care Assistance program to eliminate its huge “cliff effect” and to make this support more effectively help parents trying to improve their skills and raise their wage level. See the graph below for the effect on a single parent with two kids in Iowa.
• 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. Now at 15 percent of the federal credit, expanding to 29 percent would better reflect the ratio of state to federal income tax for individuals.
• Expand the Child and Dependent Care Credit to cushion the loss of Child Care Assistance and to help those unable to use the Child Care Assistance program despite a small improvement in 2014.

wage rise

The reforms noted above should be combined with education policies that ensure future generations of Iowans receive a quality and affordable education, from preschool through post-secondary institutions — all requiring investments and commitment through state policy.

This new report is provided in the context of earlier reports this year —
Part 1, Basic Family Budgets, and Part 2, Many Iowa Families Struggle to Meet Basic Needs. These reports established no-frills, basic-needs household budgets for seven different family types in every county in the state, and showed how 1 in 6 families did not meet those budgets.

See our latest report,
Part 3, Strengthening Pathways to the Middle Class: The Role of Work Supports, or read the executive summary or news release.

Thank you for your interest in the Iowa Policy Project and the issues we take on.
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