September 24, 2019
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.
What does it take to get by these days? This latest edition of The Cost of Living in Iowa answers this question. The report details how much working families must earn in order to meet their basic needs and underscores the importance of public work support programs for many Iowans, who despite their work efforts, are not able to pay for the most basic living expenses.
The basic-needs budgets constructed for this report represent a very frugal living standard; using costs as of 2018 (with the exception of health insurance), the budgets are based on what is needed to “survive” rather than “thrive.” This includes allowances for rent, utilities, food prepared at home, child care, health care, transportation, clothing and other household necessities. The basic budget does not include savings, loan payments, education expenses, any entertainment or vacation, social or recreational travel, or meals outside the home.
Each basic family budget applies to a particular family type — given the number of family members, the ages of the children, and the employment status and ages of the adults. This report focuses on non-senior Iowa households with a working adult.
Iowans pay differing amounts for the basic living essentials depending on where they live. A Linn County family and a Clay County family will face different housing costs, commuting times and health insurance premiums; child care costs will differ as well. Basic needs budgets are created for all 99 counties, as well as an average budget for the state.
We focus here on what it costs to get by and on how much a household must earn to cover those costs. When there is a gap between actual earnings and the costs of living, a variety of work supports and public assistance programs are available to low income households to help fill that gap, and these should not be ignored. We include here those work supports that operate through the income tax system: the state and federal earned income tax credits, the federal child tax credits, and the state and federal credits for child care costs. We assume, in other words, that households apply for and receive all such credits when they file their income taxes.
Health care is a bit more complicated. Individuals can receive health insurance coverage through an employer, on the individual market, or from one or more public programs. There are three major health care programs for low-income families: Medicaid, for adults up to 138 percent of poverty and for children up to 167 percent, hawk-i for children in families up to 302 percent of poverty, and Affordable Care Act (ACA) subsidies, which disappear between 250 and 400 percent of poverty. The ACA subsidies operate in part through the tax system as premium tax credits on the family’s federal income tax return. Like the EITC, the federal additional child tax credit, and Iowa’s Child and Dependent Care Credit, the premium tax credits are refundable — the taxpayer receives the full amount even if the credit exceeds the tax due. The excess is refunded.
Health costs in the basic needs budgets in this report represent a weighted average of costs under two scenarios: (1) The family is covered by health insurance from an employer, and so pays the average employee share of premiums in Iowa for their family type, plus out-of-pocket expenses, or (2) the family purchases a bronze plan on the Iowa exchange and pays a share of the premiums (depending on the premium assistance they would receive under the Affordable Care Act) plus average out-of-pocket expenses given bronze plan coverage. The two scenarios are weighted according to the shares of lower-income insured Iowans who receive health insurance from an employer (61.5 percent) and those who must rely on a public health insurance program (38.5 percent).
The next step in our analysis is to determine the before-tax earnings needed to ensure that the family has net resources after taxes sufficient to cover the basic needs budget.
What about other public assistance programs — Temporary Assistance to Needy Families (TANF), food assistance (SNAP, the Supplemental Nutrition Assistance Program), Low Income Home Energy Program (LIHEAP) assistance, and Iowa’s Child Care Assistance Program? These four programs are not included in this analysis because they have eligibility ceilings at too low an income level (150 percent of poverty or less) to play any role in most instances. As a family’s earnings rise, they lose eligibility for benefits before they reach the level where they can meet the basic needs budget. Most families earning what we call the “family supporting hourly wage” would not benefit from any of these four public assistance programs, or from Medicaid, even though they may benefit from the hawk-i program for their children, and from the Affordable Care Act. 
There are about 105,000 single-parent families in Iowa. For a single parent, the challenge of supporting a family with even one child is daunting, to say the least. Table 1 displays the various costs single-parent households incur in order to meet their families’ basic needs. With two children, the basic annual budget exceeds $44,000 per year, when the majority of jobs in Iowa pay much less than that.
Even with health insurance — either from an employer or with public assistance — the needed wage is over $22 an hour for the single parent with two children, and $19.50 an hour with one preschooler. This is well above Iowa’s median wage, which has yet to reach $18 an hour. At these wage levels, the family would not be eligible for Medicaid, but the children would be eligible for hawk-i if the family does not have insurance through work, and the parent could receive health insurance premium tax credits through the Affordable Care Act (ACA) that greatly reduce the cost of a bronze plan covering the parent.
Child care costs alone consume 18 to 19 percent of the single-parent’s family budget. With two children of preschool age, the share would be even higher. Data suggest that finding jobs with adequate wages for single parents is extremely challenging. This is particularly true for women, who head the vast majority of single-parent households in Iowa and earn about 79 percent of what their male counterparts earn.
These findings underscore the critical importance of expanding work-support programs that can fill in the gaps between wages and basic living expenses.
We estimate basic family budgets for five two-parent family types. First, we consider families with both parents working outside the home, and then families with one parent working and one parent at home caring for the children. In the majority of two-parent families in Iowa, both parents work full time, or close to it.
Families where both parents work
In Table 2 we illustrate the situation for families with two full-time workers: a young family with one preschooler, a family with a 4-year-old and a child age 6-11 needing care before and after school and full time in the summers, and a somewhat older family with two teenagers and a child age 6-11. While expenses are high, with two full-time workers the hourly wage each must earn is now about $14 to $16.
Here again, if the family did not have insurance from an employer, the children would be eligible for hawk-i and the parents could receive ACA subsidized insurance on the exchange.
Families where one parent works
Families with one stay-at-home parent and one child (Table 3) require, on average, 20 percent less household income than families with two working parents. This is largely because families with one stay-at-home parent do not have to pay child care costs; they also save money on transportation. However, the working parent must earn significantly higher wages than if both parents were working.
Single, childless adults require far less income to provide for their basic needs. With fewer expenses, a sustaining wage for a single adult is lower than the wage needed for supporting a family.
Rent and transportation are the largest budget items for the single person (Table 4). The required hourly wage is $13, still well above the state's meager minimum of $7.25.
We consider two married couple households with two full-time wage earners and no children living at home: a young couple (age 25), and an older “empty nester” couple in their mid-50s. Expenses are similar with one exception: Health insurance costs are 45 percent higher for the older couple.
Complete family budgets for all 99 counties for each of the 10 family types in this report can be found on the Iowa Policy Project website, www.iowapolicyproject.org. For each county, costs are compared with the statewide average and with the highest and lowest counties.
The highest-cost counties overall are Mills, Story, Pottawattamie and Harrison counties, while the four with the lowest overall basic needs budgets are Jones, Benton, Buchanan and Plymouth counties.
Differences in cost from one county to another can be dramatic. Monthly child care expenses for a preschooler, for example, ranged from a low of $458 to a high of $690, a $232 difference. Monthly rent for a two-bedroom apartment varied from $664 to $927 for a married couple with two children. The total annual basic needs budget for a family with two working parents and two children was $6,000 higher in the highest cost county compared to the lowest cost county.
Iowa’s metropolitan areas generally have the highest rents and the highest child care costs. On the other hand, the rural counties tend to have the highest health care costs, and higher transportation costs because of the need for longer commutes. Overall, the cost of living is lower outside of metropolitan areas, because the large difference in rents offsets somewhat higher transportation and health costs.
Federal poverty guidelines are the basis for determining eligibility for public programs designed to support struggling workers. However, the federal guidelines do not take into account regional differences in basic living expenses and were developed using outdated spending patterns more than 50 years ago. The calculations that compose the federal poverty guidelines assume food is the largest expense, as it was in the 1960s, and that it consumes one-third of a family’s income. Today, however, the average family spends less than one-sixth of its budget on food. Omitted entirely from the guideline, child care has become a major expense for the majority of families; nearly 72 percent of women with a child under18 are now in the labor force. Child care accounts for nearly one-fifth of a household’s budget for many families with preschool age children in our Iowa budgets. Transportation and housing also consume a much larger portion of a family’s income than they did 50 years ago. Together, these two costs account for 40 to 60 percent of the family budgets in our analysis.
Figure 1. Cost of Living is Much Higher than the Poverty Level
Considering the vast changes in consumer spending since the poverty guidelines were developed, it is no wonder that this yardstick underestimates what Iowans must earn to cover their basic needs. Figure 1 above shows that a family supporting income — the before-tax earnings needed to provide after-tax income equal to the basic-needs budget — is much higher than the official poverty guidelines. In fact, family supporting income ranges from 1.9 to 2.9 times the federal poverty guideline for the 10 family types discussed in this report. Most families, in other words, actually require more than twice the income identified as the poverty level in order to meet what most would consider basic household needs.
Since our last Cost of Living in Iowa report one year ago, some components of the family budgets have increased in cost substantially. Average housing costs in Iowa, as measured by HUD Fair Market Rents, increased about 3 percent between 2017 and 2018 for a one-bedroom or two-bedroom apartment. For those with employer-sponsored insurance, the average employee contribution to premiums rose about 20 percent for single adults, but fell slightly for family coverage. The cost of the USDA low-cost food plan rose only about 0.6 percent from 2017 to 2018. Average statewide child care costs actually fell slightly, while the cost of clothing and household expenses fell by about 2 percent. The IRS mileage rate, which reflects the overall cost of owning and operating a vehicle, rose 2 percent.
For single-parent families, the hourly wage required to provide for basic needs exceeds the wage of more than half of Iowa’s current jobs (Figure 2). Even a single person living alone needs $13 to get by, and any family with children would need well above that rate. Even childless two-earner couples need to earn well above the current minimum wage of $7.25, in fact more than the $10.10 minimum that prevailed in Johnson County until the Iowa Legislature rolled it back.
Nearly 120,000 Iowa households do not earn enough to provide for a basic standard of living without public supports beyond health insurance, despite one or more full-time wage earners in the family. Overall, 20 percent of Iowa working households meet this description in recent years, with 301,000 people living in those households. For single parents, the challenge is greater than it is for married couples with children.
In this section we provide estimates of the percent of Iowa working families who do not earn enough to meet a basic family budget without help from such work supports as child care assistance or food assistance.
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, and public health insurance in the case of families without insurance through an employer.
The estimates here are not strictly comparable with those in the 2018 edition because of changes in the methodology for estimating health care and transportation costs, as noted in the preface of this report.
The estimates presented here are based on data from the U.S. Census Bureau’s 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, 1 in 5 Iowa working households earned below the self-sufficiency level of income. Figure 3 shows a higher proportion for single persons, lower for married couples (especially those without children at home), and much higher (over 3 in 5) for single-parent families. This is consistent with research showing higher poverty rates among single-parent households, due to single household incomes, child care expenses, and generally lower educational attainment and wages.
Iowa’s more rural regions generally have a larger share of families with incomes below self-sufficiency than urban and suburban counties, though the city of Des Moines has the highest share of all: 27.5 percent. We divided the state into nine regions, based on Census “Public Use Microdata Areas.” The map in Figure 4 shows the share of households below self-sufficiency for each region.
Figure 4. Southern Iowa has Greatest Share of Working Households Below Basic Needs
Proportion of Iowa Working Households with Incomes below Self-Sufficiency Level, by Region
The city of Des Moines has the largest share of households with incomes below the self-sufficiency level (27.5 percent) compared to other regions. The region with the lowest share of such households is the area composed of the Des Moines suburbs and Ames (Polk County outside Des Moines plus the 7 counties surrounding Polk). Second lowest are the eastern metro counties: Linn, Johnson and Scott. In the remainder of the state — rural counties, plus the other metro areas (Dubuque, Waterloo, Sioux City and Council Bluffs) — the percent of families below self-sufficiency ranges from 21 to 24 percent.
Of those Iowa households with income below self-sufficiency, about 22 percent 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 households fall short of the self-sufficiency level of income? In Figure 5, 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 working households in the state with income below self-sufficiency, the average shortfall is $12,925 per year. While smaller households face a smaller gap, for married couples with children it is $15,591 and for single parents a daunting $17,176.
Nearly 120,000 working households in Iowa do not earn enough to cover a basic family budget (see Table 6). Of the 301,000 Iowans living in households with income below self-sufficiency, 26 percent were in single-parent families. These are conservative estimates 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.
Clearly work alone does not produce sufficient income to meet the basic needs of a large number of Iowa households. Such households must rely on a variety of work support programs if they are to achieve a basic standard of living. An upcoming final report for The Cost of Living in Iowa 2019 will consider a broad range of programs and the role they play in helping families make ends meet.
More female-headed working households had incomes below the self-sufficiency level (24.3 percent) compared to male-headed households (16.3 percent). Research on gender, wages, and poverty describes wage discrimination and family structure as contributing factors to this disparity (Iceland, Poverty in America).
Disparities in self-sufficiency are also apparent among racial and ethnic groups in Iowa (Figure 6). These findings align with research on poverty and income inequality, which show that the racial wage gap, segregation in employment and discriminatory housing policies have impacted economic opportunity for Iowans of color. 
Our analysis shows 49.8 percent of working households headed by African-Americans had incomes below the self-sufficiency level compared to 17.7 percent of working households headed by whites. Similarly, a larger share of Hispanic-headed working households had incomes below the self-sufficiency level (43 percent) compared to white households (17.7). While African American and Hispanic households are far more likely than white households to have incomes below the self-sufficiency level, it is still the case that a large majority (88 percent) of all those households below self-sufficiency are white and non-Hispanic.
These disparities and the policies shaping them have consequences for all Iowans. When families and communities of color face barriers to economic opportunity, we fail to reach our potential as a state. Iowa has an opportunity to acknowledge the historical roots of these disparities and enact policies to eliminate them. Investing in education, increasing the minimum wage while indexing it to the cost of living, enforcing fair housing, and expanding housing assistance would all serve to ensure more Iowans of color are able to meet basic needs.
The cost of living in Iowa continues to rise. Working families and individuals in Iowa must earn substantially above the official poverty threshold — in some cases nearly three times the poverty level — to achieve a very basic standard of living in Iowa without the help of public supports. Even with assistance from public health insurance programs, single parents must earn well above the median wage in Iowa, and married couples with children must earn more than $12 per hour, well above the current minimum wage and above recent wage proposals at the state and local level.
How many Iowa families earn below the family supporting income levels reported here? The answer to this question is provided in Part 2 of The Cost of Living in Iowa relying on the latest data on family incomes from the American Community Survey.
 The only exceptions are the married couple families with only one worker, who would be eligible for Medicaid for the adults.
 Data from the American Community Survey for 2017, U.S. Census, American FactFinder.
 This is the ratio of the women’s to men’s median annual earnings for full time workers as of 2017. https://www.aauw.org/research/the-simple-truth-about-the-gender-pay-gap/
 U.S. Bureau of Labor Statistics, “Employment Characteristics Of Families— 2018,” April 18, 2019. https://www.bls.gov/news.release/famee.nr0.htm
 Sylvia A. Allegretto, Basic family budgets: Working families’ incomes often fail to meet living expenses around the US, Economic Policy Institute (August 30, 2005).
 John Iceland, “Poverty in America: A Handbook.” August 2013. University of California Press, Third Edition.
 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 counties.
John Iceland, “Poverty in America: A Handbook.” August 2013. University of California Press, Third Edition.
 Colin Gordon, Amy Hanauer and Laura Dresser, “Race in the Heartland: Equity, Opportunity, and Public Policy in the Midwest.” Forthcoming.
 See, for example, Wilde, P. E. and Llobrera, J. (2009), “Using the thrifty food plan to assess the cost of a nutritious diet.” Journal of Consumer Affairs, 43(2), 274-304. http://onlinelibrary.wiley.com/doi/10.1111/j.1745-6606.2009.01140.x/full; davis, g. c. and you, w. (2010). “the thrifty food plan is not thrifty when labor cost is considered.” the journal of nutrition, 140(4), 854-857. http://jn.nutrition.org/content/140/4/854.full.pdf
 U.S. Dept. of Health and Human Services, Agency for Healthcare Research and Quality: Medical Expenditure Panel Survey, Insurance/Employer Component, available at: http://meps.ahrq.gov/mepsweb/index.jsp
 Kaiser Family Foundation. Average Monthly and Annual Worker Premium Contributions Paid by Covered Workers for Single and Family Coverage, by Plan Type and Region, 2018.
 This was based on a report from the Society of Human Resource Managers.
 Final Report: Analysis of Actuarial Values and Plan Funding Using Plans from the National Compensation Survey. Compiled for Office of Policy and Research (OPR), Employee Benefits Security Administration (EBSA), Department of Labor (DOL) by Actuarial Research Corporation (ARC). May 12, 2017.
 We assume that families in the Iowa Wellness Plan participate in the Health Behaviors Program and therefore avoid paying the monthly contribution.
 If Benefits equal .6 times total health costs (THC), and benefits also equal .8 times premiums, then .7 times THC = .8 times premiums, and THC = (.8/.6) times premiums, or 1.333 times premiums.
 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. IPUM
Natalie Veldhouse is a research associate with the Iowa Policy Project. She previously conducted education and health policy research with the University of Iowa Public Policy Center. As a former AmeriCorps VISTA, Natalie coordinated research efforts for the Johnson County Hunger Task Force. She holds a Master of Social Work degree and a bachelor’s degree in Ethics and Public Policy from the University of Iowa.