Report: 11.6% of Iowans 'underemployed' in slowest recovery to date

Underemployment and wage stagnation are the lingering effects of the 2008 recession in a recovery that is taking longer than any in the past, a new report says.

The Iowa Policy Project issued those findings this week in its annual State of Working Iowa report, a statistical study of income and employment data with policy recommendations.

Iowa's political leaders have long pointed to the state's unemployment rate - which has been hovering around 6 percent - as an indication that Iowa's economy is faring better than those of most states. While Iowa's recession was milder in unemployment terms than the other states experienced, the report said Iowa's one of the few states that have seen inflation-adjusted wages fall over the past decade for all income categories.

The percentage of Iowans who are 'underemployed' was estimated at 11.6 percent and the share of unemployed Iowans out of work for at least six months has tripled to over 33 percent from before the recession.

Underemployment is a more inclusive measure than the unemployment rate, according to report co-author Noga O'Connor. She said the unemployment rate captures only those who have actively been seeking employment in the preceding four weeks. The underemployment rate includes the unemployed, discouraged workers who want a job but no longer are actively searching, and workers who have involuntarily had their hours cut to part-time.

"It's a better reflection of what's really going on in the labor market," O'Connor said. "It's even greater than that (the calculated underemployment rate) because there are things we can't measure, like people who are working below their educational level."

Iowa would have to add 3,000 jobs per month for the next three years just to bring employment back to pre-recession levels, the report said, making for the longest economic recovery since in the period since reliable tracking of employment data.

Underemployment in Iowa ranked sixth lowest nationally in 2010, the report said. But the rate of long-term unemployed in Iowa has risen at the same rate as the rest of the nation from 2007 to 2010.

Report co-author Peter Fisher said the loss of manufacturing jobs is one of the major reasons for Iowa's wage stagnation problems. While most of the jobs lost have been in manufacturing, most of the job gains during the recovery period have been in lower-paying sectors such as hospitality.

 The average annual pay for jobs added during the recovery is $32,990 versus $38,850 for jobs lost during the recession, the report said.

The report recommends Iowa's minimum wage be raised and indexed to inflation, and spending on education and infrastructure be sustained in order to attract and keep private employment.

 The federal government also needs to spend more on economic stimulus, Fisher said, adding that workers facing stagnant wages and high underemployment won't provide the spending the economy needs to accelerate.

"Otherwise," Fisher said, "we're looking at a recovery that's years away."