116 3rd St SE
Cedar Rapids, Iowa 52401
Can Iowa businesses use 401(k)s, other benefits as a recruitment lure?
Some Iowa employers boost wages, benefits amid labor shortage
Coffee Emporium is far from the only place for a Cedar Rapidian to get a caffeine fix.
But the baristas have something that many of their counterparts at other coffee shops in Iowa might not have — 401(k) and retirement benefits.
“It really doesn’t matter whether they’re a barista or a manager or whatever,” co-owner Abby White said. “They still have needs. They’re still human. They still at some point would like to retire and be set up for success that way.”
As demand for workers continues and Iowa’s population remains flat, some Iowa employers may either increase wages or take White’s approach and add benefits to recruit and retain staff.
Dave Swenson, an economist at Iowa State University, said he’s seen this already happen in some industries.
“We’re already seeing wages that were built up in food processing,” Swenson said. “We have seen some improvements in leisure and hospitality and especially in dining and drinking, although we don’t know if that’s because grateful diners and drinkers are much more gregarious with tips than they might have been.”
Swenson said many employees who had been willing to work for lower wages may have been laid off during the pandemic and found work in other industries.
“If they found work and the work was adequate to maintain their household and income needs, they’re not coming back,” Swenson said. “Your ability to depend on that kind of labor has gone down, and that means so does your ability to pay what you were able to pay that labor.”
Joe Murphy, Iowa Business Council executive director, has noted this trend, too, amid a labor shortage that he doesn’t believe has “ever been as bad as it is” in 2021.
“You are seeing particularly some of the hourly wages having some upward pressure on them right now,” Murphy said, “particularly in the manufacturing sector.”
He said none of the 22 Iowa Business Council members — which include executives of Collins Aerospace, Hy-Vee and Alliant Energy, among other major employers — are paying employees Iowa’s $7.25 minimum wage.
“They’re paying well beyond that,” Murphy said.
Iowa’s minimum wage has been at $7.25 since 2008. Nineteen other states and Puerto Rico also have minimum wages at or below the federal $7.25 requirement.
The $7.25 in January 2008 equates to $8.98 in January 2021 when accounting for inflation, according to the U.S. Bureau of Labor Statistics.
Four counties in Iowa — Linn, Johnson, Polk and Wapello — tried to raise the minimum wages in their jurisdictions, but an Iowa law passed in 2017 nullified those efforts.
The current “upward pressure” in hourly wages is “more acutely” affecting some businesses outside of the Iowa Business Council membership, Murphy said.
“When you look at the service industry trends, that’s really where you see that upward pressure on wages,” Murphy said.
That won’t stop the council’s members, Murphy said, from looking for new ways to entice potential workers.
“You’ll continue to see Iowa’s largest employers being creative with respect to their wages and benefits packages,” Murphy said.
‘Definitely a challenge’
Coffee Emporium’s White pointed to retirement and medical benefits as “the biggest things that helps with retention of staff.” Almost every employee participates in the benefits, White said.
“We haven’t had hardly any turnover at all at this time,” White said.
Coffee Emporium needed to hire, though, ahead of opening its second location in Coralville’s Iowa River Landing. While going through the process, White said the benefits offered were “definitely perks” for workers considering her business.
When White isn’t managing mocha orders, she does human resources consulting for other small businesses. Some of her clients, especially in the retail or food service industries, haven’t been as fortunate with hiring.
“It definitely is a challenge to recruit right now,” White said.
That might not go away in the near future, either.
“I tend to think that this will be around for a while,” Murphy said.
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