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The Iowa Policy Project
20 E. Market Street, Iowa City, Iowa 52245
(319) 338-0773
www.IowaPolicyProject.org
Authors and Acknowledgments
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I%;+$#@%&#!/7!JG/&/@)G!I%?%2/;@%&#K!#(%!"#+#%!/7!L()/K!+&1!#(%!H/,+!M:.)&%..!3/:&G)2<!N).!$%;/$#.!+$%!
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The Iowa Policy Project
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Preface
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&%%1.!2%?%2!(##;4ZZ,,,<)/,+;/2)G-;$/O%G#</$'ZBCDE6%.%+$G(ZDEC_CET3LaT*+$#B<(#@2<!5().!
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+&1!G()21$%&![0%1)G+)1!+&1!(+,9T)\K!;$%@):@!+..).#+&G%!+&1!G/.#T.(+$)&'!7/$!(%+2#(!)&.:$+&G%!
;2+&.!:&1%$!#(%!V77/$1+A2%!3+$%!VG#K!#(%!a/,TH&G/@%!N/@%!J&%$'-!V..).#+&G%!*$/'$+@![aHNJV*\K!
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1%;%&1%&#!G+$%!#+F!G$%1)#.![3I33\<!!
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)&G/@%!$%G%)?%1!7$/@!,/$9!7/$!@+&-!H/,+!7+@)2)%.K!+&1!#(%!bG2)77!%77%G#.c!#(+#!()&1%$!#(%!
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7+@)2)%.!+&1!#(%)$!+A)2)#-!#/!@%%#!A+.)G!&%%1.<!
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The Iowa Policy Project
20 E. Market St. • Iowa City, Iowa 52245 • (319) 338-0773
www.IowaPolicyProject.org
October 2016
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Strengthening Pathways to the Middle Class:
The Role of Work Supports
!
The Cost of Living in Iowa — 2016 Edition, Part 3
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By Peter S. Fisher
!
Introduction
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8/$9)&'!7:22!#)@%K!-%+$!$/:&1!).!&/#!%&/:'(!#/!':+$+&#%%!+!@)112%TG2+..!.#+&1+$1!/7!2)?)&'<!>%+$2-!
/&%!)&!7)?%!,/$9)&'!H/,+!7+@)2)%.K!)&!7+G#K!1/%.!&/#!%+$&!%&/:'(!#/!@%%#!A+.)G!&%%1.<!5(%$%!+$%!+!
&:@A%$!/7!#()&'.!#(+#!G/:21!A%!1/&%!#/!(%2;!.:G(!7+@)2)%.!@/?%!)&#/!#(%!@)112%!G2+..<!*/2)G)%.!+$%!
&%%1%1!#/!)@;$/?%!A/#(!#(%!1%@+&1T.)1%!+&1!#(%!.:;;2-T.)1%!/7!#(%!2+A/$!@+$9%#<!L&!#(%!1%@+&1!
.)1%K!,%!&%%1!@/$%!@)112%TG2+..!O/A.!,)#(!1%G%&#!,+'%.!+&1!A%&%7)#.<!L&!#(%!.:;;2-!.)1%K!,%!&%%1!
@/$%!,/$9%$.!,)#(!#(%!%1:G+#)/&!+&1!.9)22.!&%%1%1!#/!d:+2)7-!7/$!@/.#!'//1T;+-)&'!O/A.<!!
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#(%!@)112%!G2+..4!
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,/$9%$.K!%&G/:$+'%!@/$%!,/$9!%77/$#K!+&1!9%%;!G()21$%&!/:#!/7!;/?%$#-<!
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5(%.%!$%7/$@.!.(/:21!A%!G/@A)&%1!,)#(!%1:G+#)/&!;/2)G)%.!#(+#!%&.:$%!7:#:$%!'%&%$+#)/&.!/7!
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)&.#)#:#)/&.<!5().!,)22!$%d:)$%!%F;+&.)/&!/7!#(%!:&)?%$.+2!;$%.G(//2!;$/'$+@K!.:;;/$#!/7!eTDB!
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What Does it Take to Get By?
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Table 1. Two Working Parents Typically Need $12-18/hr Jobs to Meet Basic Needs!
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Table 2. Budget Math Daunting for Low-Wage Single Parents
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How Many Iowa Families Come up Short?
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;+$%&#.!)&!H/,+!).!)&.:77)G)%&#!#/!G/?%$!#(%!A+.)G!&%%1.!A:1'%#<!L?%$+22K!DE'E!B#%8#2$!4-!54%F)26!
-./)0)#*!74!24$!#.%2!#24A6+!$4!6#$!C1![=)':$%!D\<!!
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An Economy of Low-Wage Jobs
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A+.)G!.#+&1+$1!/7!2)?)&'K!).!#(+#!#(%$%!+$%!.)@;2-!#//!7%,!O/A.!#(+#!;+-!+!2)?)&'!,+'%<!N+27!#(%!O/A.!)&!
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#(+#!/&2-!.)&'2%!;%$./&.K!+&1!@+$$)%1!G/:;2%.!,)#(!#,/!,+'%!%+$&%$.!A:#!O:.#!/&%!G()21![/$!&/&%\K!
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;%+9%1!)&!BCCR!+#!gDW<_X![)&!BCDW!1/22+$.\!#(%&!1%G2)&%1!#($/:'(!BCDX!A%7/$%!#)G9)&'!:;!#/!
gDE<D^!)&!BCDW<!5().!.#+'&+#)/&!(+.!/GG:$$%1!%?%&!,()2%!#(%!;$/1:G#)?)#-!+&1!%1:G+#)/&+2!
+##+)&@%&#!/7!H/,+!,/$9%$.!(+.!G/&#)&:%1!#/!$).%<!5(%!7)$.#!RC!-%+$.!+7#%$!8/$21!8+$!HH!.+,!+!
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)&?%.#@%&#.!)&!;:A2)G!%1:G+#)/&K!+&1!,+'%!2%?%2.!#(+#!$/.%!)&!G/&G%$#<!5(%!'+)&.!7$/@!;$/1:G#)?)#-!
,%$%!.(+$%1!,)#(!,/$9%$.K!+&1!+!A$/+1%&%1!+&1!@/$%!;$/.;%$/:.!@)112%!G2+..!,+.!#(%!$%.:2#<!!
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5.6#*!+.*!C##2!C%4F#2K!)&!2+$'%!;+$#!A%G+:.%!/7!#(%!2/&'!1%G2)&%!)&!#(%!A+$'+)&)&'!;/,%$!/7!
,/$9%$.<!8()2%!;$/1:G#)?)#-!$/.%!E^!;%$G%&#!7$/@!D]_]!#/!BCDWK!$%+2!,+'%.!$/.%!/&2-!]!;%$G%&#<!
0%+&,()2%K!#(%!@)&)@:@!,+'%!(+.!7+)2%1!#/!9%%;!;+G%!,)#(!+!$).)&'!G/.#!/7!2)?)&'!+&1!$%@+)&.!,%22!
A%2/,!+!2)?)&'!,+'%<!!
!
Current Work Supports: An Overview
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8)#(!(+27!#(%!O/A.!)&!H/,+!;+-)&'!2%..!#(+&!,(+#!@+&-!7+@)2)%.!&%%1!#/!@%%#!+!A+.)G!&%%1.!A:1'%#K!
(/,!1/!#(/.%!7+@)2)%.!'%#!A-i!"/@%!1/!,)#(/:#!(%+2#(!)&.:$+&G%K!+&1!#(%&!$).9!@%1)G+2!)&1)'%&G-!
/$!A+&9$:;#G-<!"/@%!$%2-!/&!7$)%&1.!/$!$%2+#)?%.!7/$!G()21!G+$%<!"/@%!.)@;2-!1/!,)#(/:#<!M:#!@+&-!
7+@)2)%.!'%#!(%2;!G2/.)&'!#(%!'+;!7$/@!/&%!/$!@/$%!,/$9!.:;;/$#!;$/'[email protected]!
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Figure 3. How Work Supports Decline as the Hourly Wage Rises
Single parent working full time, one pre-school child
* Total family earnings, less:
payroll and income taxes
before refundable credits.
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Figure 4. Work Supports Available for Married Couple
Both work full time, two children (one age 4, one age 6-11)
*Total family earnings, less:
payroll and income taxes
before refundable credits.
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Figure 5. Official Poverty Level Is Well Below Income Needed to Meet Basic Needs
!
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Source: The Cost of Living in Iowa, 2016 Edition, Part I: Basic Family Budgets
!
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+1:2#.!,/$9)&'K!+&1!,)#(/:#!(%+2#(!)&.:$+&G%!7$/@!+&!%@;2/-%$!/$!7$/@!+!;:A2)G!;$/'$+@\<!j%#!
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!
Table 3. Most Programs Cut Off Eligibility Before Family Supporting Income Level is Reached
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!
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 $500 annually at 350 percent of poverty before
disappearing at 375 percent of poverty.
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+..).#+&G%![">V*\!/$!+1:2#!0%1)G+)1!).!2/.#K!#(%!#,/T%+$&%$!G/:;2%!,)#(!#,/!G()21$%&!%F;%$)%&G%.!+!
$%1:G#)/&!)&!$%./:$G%.!/7!gDKDCCTgDKXCC<!M:#!#(%!2/..!/7!33V!%2)')A)2)#-!;:.(%.!#(%!7+@)2-!/?%$!+&!
g^KDEW!G2)77<^!!
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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
!
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.G+2%1!#/!+!#,/T;%$./&!7+@)2-!$+#(%$!#(+&!+!7/:$T;%$./&!7+@)2-<!!"#)22K!#(%!2/..!/7!G()21!G+$%!
+..).#+&G%!;$/1:G%.!7+$!+&1!+,+-!#(%!2+$'%.#!G2)774!gXKECC<!V&1!7/$!#().!7+@)2-K!%?%&!)7!#(%-!
;+$#)G);+#%!)&!+22!;/..)A2%!+..).#+&G%!;$/'[email protected]!#(%)$!&%#!$%./:$G%.!&%?%$!+;;$/+G(!#(%!A+.)G!&%%1.!
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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 pre-school age child
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Medicaid, Hawk-i, and the Affordable Care Act
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Figure 8. How Health Insurance Programs Interact in 2016
Married couple with two children, both parents working
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!
!
!
!
++!
Figure 9. How Health Insurance Programs Interact in 2016
Single parent with one pre-school age child
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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
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!
Child and Dependent Care Credit
!
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!
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
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Earned Income Tax Credit
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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.
B!The Urban Institute’s Safety Net Almanac, at http://safetynet.urban.org/safety-net-almanac/snap/Graphic-Display.cfm?GraphicID=12
R!U.S. Internal Revenue Service, EITC Central, at http://www.eitc.irs.gov/EITC-Central/Participation-Rate !
X Kaiser Family Foundation at http://kff.org/medicaid/state-indicator/medicaidchip-child-participationrates/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D !These estimates are prior to
Medicaid expansions under ACA.
W!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
E FY2004 State LIHEAP Household Reports.
7 USDA, Food and Nutrition Service, Supplemental Nutrition Assistance Program (SNAP), at http://www.fns.usda.gov/pd/supplementalnutrition-assistance-program-snap
8 The cliff amounts represent the reduction in the family’s net resources — earnings after payroll and income taxes, plus program benefits
— resulting from a five 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 costsharing 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.
10 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, two year olds, three year olds, and four
and five year olds were averaged.
11 According to one estimate, only 32 percent of those eligible participated; see footnote 5.
12 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 ten years since 2006, reimbursement rates are well below the 75th percentile in 2016.
13 Iowa Child Care Resource and Referral, State of Iowa data sheet, July, 2016, at http://www.iowaccrr.org/data_publications/
DX!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.!
DW 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.
16 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
D_!The Brookings Institution, Washington, D.C., EITC Interactive. https://www.brookings.edu/interactives/earned-income-tax-credit-eitcinteractive-and-resources/ !
D^ 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 !
D]!Marr, Huang, and Sherman.
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