Iowa cost of living report: Child assistance program needs cushion

CEDAR RAPIDS - With the topic of minimum wage in the Iowa spotlight, a new report argues that simply raising the pay for Iowans isn't enough.

The third and final cost-of-living report released Tuesday by the non-profit Iowa Policy Project (IPP) states that while most low-wage assistance programs are designed to taper off as users make more money, child-care assistance comes with a substantial 'cliff effect.”

Eligibility for Iowa's Child Care Assistance program drops off at 145 percent of the federal poverty level - just under $12,000 for an individual and a little more than $20,000 for a family of three.

Peter Fisher, research director for IPP, said that for a single parent with one preschool child, child-care assistance vanishes when the parent makes $11.15 an hour. That makes for a net loss of about $4,600 a year.

'Child-care assistance, on the other hand, is a huge factor and a huge disincentive to getting a better job,” Fisher said.

According to the report, a family with one wage earner and one or two children needs to make between $39,000 and $45,000 a year to cover basic costs of rent, utilities, food, transportation, child care and health care.

Nealy 19 percent of working families do not earn enough to meet the basic needs threshold, Fisher said.

'When you look at these various work-support programs and compare them to the basic needs budget level ...

, the basic budget that families actually need to get by is two to three times the federal poverty level,” Fisher said. 'What we find in these programs is the majority end benefits well below twice the poverty level.”

The report suggests reform to Iowa's Child Care Assistance program to eliminate the cliff disincentive, expand the Earned Income Tax Credit and Child and Dependent Care Credit to encourage more work effort, and cushion the any loss of child-care assistance as wages increase.

'The changes that (Fisher) is recommending in this paper do things to really help make work pay, so you are encouraged to get a better job or you're not discouraged from taking a pay raise or even getting a second job,” said Mike Owen, IPP executive director. 'The first priorities are making sure their kids are taken care of and encouraging them to reach for the middle class.”

IPP's first cost-of-living report, released in April, found that a single Iowa resident must make at least $13.16 an hour - almost double the state minimum wage of $7.25 an hour - to meet basic living expenses.

The project's second report, released in June, stated nearly 19 percent of Iowa working households do not earn enough to meet basic needs without public support.

Meanwhile, local governments have taken on minimum wage discussions to address such matters.

Linn, Polk and Wapello counties this year joined Johnson County - which passed the state's first countywide minimum wage ordinance last year - as counties with their own wage thresholds.

But while both items are connected to Iowans pay, both need to be addressed, IPP's Owen said.

'The point is, we need to fix both of these issues,” he said.

Find the full report on iowapolicyproject.org.