Iowa workforce shortage persists months after state ended extra jobless aid

DES MOINES — A shortage of willing workers was an issue even before COVID-19 spread to Iowa, but the pandemic has made it far worse.

With policy changes to unemployment benefits yet to result in a boost to workforce numbers in Iowa, businesses continue to search for ways to fill jobs and to keep employees they already have — many now raising wages, offering bonuses and adding perks.

The federal government made an additional $300 per month in unemployment benefits available to help ease the financial pain of workers displaced during the pandemic. Some states — including Iowa — moved quickly to eliminate those benefits months before they were set to expire, saying the extra money was leading people to choose to collect unemployment checks rather than return to work.

But since those states stopped the extra aid, the workforce shortage remains. Workforces in the 25 states that maintained the extra federal benefits until the program expired in September have seen better workforce growth than the states that ended the extra benefits early, according to an analysis of state-by-state data by the Associated Press.

“Policymakers were pinning too many hopes on ending unemployment insurance as a labor market boost,” Fiona Greig, managing director of the JPMorgan Chase Institute, which used bank account data to study the issue, told the AP. “The work disincentive effects were clearly small.”

In Iowa, Gov. Kim Reynolds cut off the extra benefits effective June 12.

“Now that our businesses and schools have reopened, these payments are discouraging people from returning to work,” she said at the time.

But there has not been a significant increase in the state’s workforce or a dent in the worker shortage since then. Since June, Iowa’s labor force participation rate has remained essentially flat: it was 66.6 percent in June and 66.8 percent in September, according to state data.

Only 6,500 more people were working in Iowa in September than were in June, according to state data. That’s less than one-half of 1 percent of the total state workforce of nearly 1.6 million. The state’s unemployment rate --- 4.0 percent --- also was the same in September as it was in June. And the number of unemployed Iowans in September (66,100) was virtually identical to what it was in June (66,600), according to state data.

Reynolds’ spokesman said the decision to cut off extra federal unemployment benefits was one element in the governor’s effort to address the state’s workforce shortage. The spokesman also noted the number of working Iowans has increased two of the past three months, and said the number of Iowans seeking employment through state workforce development offices has increased 190 percent. The state is seeing “some of the lowest number of initial unemployment claims in 20 years,” he said.

“Iowa’s workforce shortage is a complex issue and the governor is focused on developing and implementing comprehensive strategies to resolve it. Ending (extra federal unemployment) enhancements was just one way to encourage individuals to return to the workforce in the near term,” spokesman Alex Murphy said in an email. “The bigger opportunity is transforming the unemployment process to a re-employment system which is already underway at (Iowa Workforce Development).”

He is referring to recently announced changes to Iowa’s unemployment process, including requirements that Iowans receiving aid conduct more job searches and work one-on-one with a state official to try to get hired.

“These types of solutions will help meet our goal of more Iowans working,” Murphy said. “We want to be sure no Iowan who is receiving unemployment benefits unnecessarily remains on the sidelines. We can’t sustain our highly touted economic recovery based on temporary enhancements.”

Whether those changes are more effective than previous moves remains to be seen as employers across Iowa continue to deal with a worker shortage.

“Iowa is in the midst of the most acute workforce shortage in a generation,” said Joe Murphy, executive director of the Iowa Business Council, an organization of top executives from the 22 largest employers in Iowa. “While this has been a concern for businesses for years, the pandemic has pushed this to crisis levels in many industries.

“At the root of this situation is Iowa’s lack of population growth. We need to recruit more people to Iowa from high-cost states, retain more of our graduates, and work with our federal delegation to pass comprehensive immigration reform," Murphy said.

Ron Corbett, the Cedar Rapids Metro Economic Alliance’s vice president of economic development, also said Iowa’s slow population growth is an issue, forcing companies to get creative to attract workers.

“Companies are trying to take remote work concepts and utilize people from outside the area,” he said.

As people have found that working from home frees up their time to spend on other priorities, employers often have began to shift to some form of remote work permanently, or offer a hybrid between a physical and remote work environment, Corbett said. This expands the laborshed to all corners of the United States or sometimes even beyond the country’s borders.

But in Cedar Rapids, an industrial city with many manufacturing jobs, not all employers have the option of offering remote work, Corbett said. Food servers or nurses, for instance, have to be physically present to work.

Corbett said more companies in the city than not are now paying well above $15 an hour — turning what once seemed like a longshot dream among Democratic officeholders into reality as employers compete for workers.

Corbett pointed to UnityPoint Health boosting its minimum wage to $15 an hour, and Mercy Medical Center & MercyCare Community Physicians following with a minimum wage hike to $15.25 an hour in December 2020.

But now that most businesses have raised their wages to compete, those pay bumps don’t “give a competitive advantage,” Corbett said.

Employers might then turn to other incentives, such as signing or referral bonuses. Corbett said he has seen some bonuses totaling $2,500 from area companies, which then might encourage workers to tell their friends and acquaintances about the perks.

Marion Economic Development Corporation President Nick Glew said the organization just recently put out a survey to its business partners, trying to identify any common skill gaps in workforce applicants.

“Our idea was, are there any consistent shortcomings as far as training is concerned?” Glew said. “Could we partner with Kirkwood (Community College) and leverage (American Rescue Plan Act) dollars to help upskill the workforce?”

But Glew said the responses he has been hearing are the issues aren’t about training. “The responses have been, ‘We just can’t get bodies to walk through the door for these jobs,’” he said.

He said he thinks part of the reason for workforce shortages has to do with baby boomers retiring due to the pandemic.

“I think there’s a fair amount of that population that worked before the pandemic, but they could have retired before,” he said. “But the pandemic happened and they just didn’t come back. And that’s a large portion of the labor force. We knew these challenges would come, but it just came faster than we expected.”

As companies are navigating what return to work looks like for their staffs, employees want policies that promote flexibility, said Tom Banta, vice president of the Iowa City Area Development Group. Wage increases are also part of the discussion, he added.

"On the lower end of that hourly scale, those rates have gone up 30 to 40 percent in some cases, if not higher,” Banta said. “There’s certainly wage increases as one solution to this.”

Banta said his group primarily works with interstate commerce companies, and the conversation has largely focused on retention.

Employers including CRST and the University of Iowa are working to engage employees who might be looking at other opportunities, Banta said. Retention is “increasingly more important,” he said.

Target has focused on retention, offering flexibility and more hours to its current employees. The company also announced an initiative to offer workers free undergraduate and associate degree programs.

Josh Schamberger, president of Think Iowa City, said his son started working at Target in June. He worked part-time over the summer and now weekends during the school year, and has received two retention bonuses and an increase in pay during that time.

Banta said the goal is to have approaches be proactive.

“I'm optimistic that we're going to find our path forward, but it's likely not going to be any one item,” Banta said. “It's going to be a combination of a number of different things, and we're going to be learning as we go.”

Some experts have said early retirements during the pandemic have contributed to the nation’s workforce shortage. But not all employers in Iowa are seeing that.

At UnityPoint Health-Waterloo, there wasn't a rash of early retirements affecting the workforce, said spokesperson Carson Tigges, noting it was about the same as in years' past.

"There may be a narrative that individuals who are close to retirement are choosing to accelerate that and leave health care due to the pandemic, but we don't have any data that supports that," Tigges said.

Teachers and school district staff in that area also weren't leaving en masse. Cedar Falls Community School District spokesperson Janelle Darst said the district had "not seen a change in the number of early retirements," while Waverly-Shell Rock Superintendent Ed Klamfoth also said he had seen "no change" in the early retirement rate there.

At long-term care facilities, which bore an early brunt of the COVID-19 pandemic, early retirements among the workforce didn't seem to factor in. That was true even for the larger facilities, like Western Home Communities in Cedar Falls, according to spokesperson Linda Bowman.

At NewAldaya Lifescapes in Cedar Falls, Chief Executive Officer Millisa Tierney said there were a few planned retirements since the pandemic's arrival but she hadn't seen any increased early retirements "at this time."

Nonetheless, finding employees to replace those leaving was something NewAldaya struggled with, as have other companies.

"The increasing challenges of workforce shortage, as we move from pandemic to endemic, further burdens our team members and the organization," Tierney said.

Gage Miskimen, Marissa Payne and Izabela Zaluska of The Gazette and Amie Rivers of the Waterloo-Cedar Falls Courier contributed.