Business

Ames could be nation's economic harbinger

Low unemployment, but sluggish wages and rising costs

Isabel Moctezuma, a single mom to Mia, has to keep trimming expenses. The rent on her two-bedroom apartment in Ames went up $50 per month two years ago and $30 per month last year. (Rachel Mummey/Washington Post)
Isabel Moctezuma, a single mom to Mia, has to keep trimming expenses. The rent on her two-bedroom apartment in Ames went up $50 per month two years ago and $30 per month last year. (Rachel Mummey/Washington Post)
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AMES — Isabel Moctezuma was cooking again. Now, at least, she was doing it at home, making salmon for dinner in her small apartment.

Her daughter, Mia, 8, sliced carrots next to her. Moctezuma was just off the clock and still wearing her Texas Roadhouse work shirt, which read, “I (heart) my job.” The slogan made her laugh.

Moctezuma, 39, worked this summer in the restaurant’s kitchen for $11.50 an hour, less than what she had made as a cook six years ago.

The rest of the year she worked as a cook at Iowa State University, where the pay was a little better. But she had seen the “Help Wanted” signs all over town. She’d heard how the local economy was soaring. And she’d recently applied for a supervisor’s job.

She wondered if this was her chance. It was only later, when dinner was over and with the dishes done and Mia watching TV, that she allowed herself to imagine what that might feel like.

“It would be nice to not have to worry so much,” she said.

Moctezuma lives in what might be the nation’s hottest job market — the metro area with the lowest unemployment rate, a hard-to-imagine 1.5 percent. Ames has boasted the country’s lowest annual average unemployment rate for more than two years now.

“You’re hard-pressed to feel like things aren’t really robust here,” said Dan Culhane, president of the Ames Economic Development Commission. “Everyone who wants a job has one.”

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The jobs are plentiful, but the widespread prosperity usually tied to ultralow unemployment has failed to materialize here, especially for workers such as Moctezuma. Wages have risen, but not much faster than other places. At the same time, costs such as rent have continued to rise. And other measures of economic health have failed to improve.

“It’s like we’re stuck in a belligerent doldrum,” said David Swenson, an ISU economist.

The unemployment rate is often viewed as a barometer for how the country is doing — and the places with the lowest rates usually are described as boomtowns where workers are fawned and fought over.

But what is happening in Ames highlights an experience much of the nation appears soon to confront: The economy is growing faster and unemployment is falling, yet wages barely budge. When they do, higher costs can wipe them out.

Indeed, the government reported in early August that Americans on average are making less money than they did this time last year, after accounting for inflation.

This helps explain why the expansion has felt so weak for so many — in Ames and nationwide — despite headline numbers that paint an enviable picture.

Some employers have turned to tactics other than raising wages to make their hires.

Some workers, particularly parents, struggle with employers’ increasing demands for weekend hours and just-in-time schedules. Some of the barriers to better-paying jobs are old, like Iowa’s shortage of affordable child care. Others are newer, such as lawmakers last year weakening the bargaining power of public employee unions. These all become a drag on wages, especially for low-income and middle-class workers.

“I believe that a rising tide lifts all boats,” said Rick Sanders, the Republican chairman of the Board of Supervisors for Story County, home to Ames. “But we haven’t seen that impact on lower-skill and blue-collar workers yet. I’m hoping it’s just a matter of time.”

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Swenson, the economist, said the wait has already defied conventional theory. “I don’t know why we keep waiting,” he said. “It’s been like waiting for Godot.”

GETTING CREATIVE-TO FIND WORKERS

The Ames metro area is a flourishing region of nearly 100,000 people built around a college town, just 40 miles north of Des Moines.

The Barilla pasta plant is expanding. Tech firm Workiva is growing. A steady supply of jobs flow from ISU, the National Animal Disease Center and the Energy Department’s Ames Laboratory.

But the region’s No. 1 ranking in low unemployment has challenges. Local businesses have needed to get creative to find workers.

Story County Medical Center started allowing people to drop in unannounced for job interviews. They called it “Walk-In Wednesdays.” The hospital also began offering sign-on bonuses and could add job referral bonuses. But the hospital has mostly resisted raising wages.

John Crawford, owner of Alpha Copies, started rotating the location of the “Help Wanted” signs he posted outside his two stores so they didn’t blend in with all the other job postings.

“It’s like changing the wallpaper,” he said. “People notice the changes.”

But wage increases were also not yet part of the picture.

While he expected that one day he would need to offer $15 an hour, “that’s when the economy says you don’t have 10-cent copies anymore.”

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Amid Ames’ economic prosperity, signs of duress remain — and in some cases, they are getting worse. The share of schoolchildren qualifying for free and reduced-priced lunch in the Ames metro area has risen 35 percent since 2008, twice as fast as in Iowa overall. At the same time, local demand has not fallen off at the Food Bank of Iowa. In fact, the food bank plans to open five new pantries in the Ames area soon.

The booming economy hasn’t eased the strain felt by many families, said Jean Kresse, president of the United Way of Story County. A United Way report released in June found the percentage of households struggling to afford basic needs has grown since the recession. Kresse said the problem is driven by households that earn enough to be above the poverty line yet still face low wages and rising expenses.

“There’s this whole middle ground where people are working and contributing to the economy, and they’re not fine,” Kresse said.

And Ames is becoming a more expensive place to live. The median home listing price is up 9 percent in the last year to nearly $230,000, according to Zillow. The median rent for a two-bedroom home has risen 10 percent in a year to $930 a month, according to Housing and Urban Development data — and even higher within city limits, where residents compete with ISU students. Local officials have started looking at how to develop more affordable housing.

COSTS INCREASE BUT WAGES DON’T

Moctezuma, a single mom, lives in a two-bedroom apartment. Her rent went up $50 a month two years ago. Another $30 last year.

“I got a nice letter this year saying they were going to increase it just $10,” she said.

She trims expenses to keep up. She opens windows instead of turning on the wall air-conditioning unit. Eating out is a once-a-month trip to McDonald’s. She drives an old truck that her church helped her buy.

She loves Ames. The schools are among the best in the state. Her church is here. Her auto mechanic understands when she needs to stretch out payments. She gushes about the Ames Public Library. She and Mia visit at least once a week for books and the internet.

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The Ames Public Library plays a central role in the city. In 2016, the library began offering free lunches for children three days a week during June and July. Demand was so strong that the next summer the free lunches expanded to five days a week and into August, too. This summer, the number of meals served a day has jumped by more than 10 percent.

The library is where Moctezuma conducted her summer job search. She logged on and saw more than 2,000 openings. She applied all over. Target. Hy-Vee. Restaurants. Hotels. Some wanted her for weekends or nights.

“My friends said I was too picky,” Moctezuma recalled. “But what would I do with Mia?”

The best offer came at Texas Roadhouse. It was only 30 hours a week and the pay was low.

“But I shouldn’t complain,” she said.

Her main job was still at ISU as a dining hall cook, where she’d started six years ago on the night shift, sometimes asking her boss if she could bring Mia to work with her. Child care was always a worry. While her mom worked at the restaurant this summer, Mia attended a reduced-fee day camp.

Moctezuma liked her ISU job and wanted to get on year-round. As a union member, she received regular raises, from 2 percent to almost 7 percent. She had good health insurance with no monthly premium. But that changed last year when Iowa’s Republican-controlled Legislature passed a law gutting public-sector unions. Collective bargaining was severely restricted. Large pay raises ended. Union workers got a 1 percent pay hike this year. And Isabel’s health care now costs her $80 a month.

Then, in May, she noticed a job posting for a dining hall supervisor. It was a year-round position. No more hunting for summer jobs. No weekends, either. Her boss encouraged her to apply. The job paid about $35,000 a year.

“My eyes got big when I heard that,” she said. “It would be so nice.”

She asked a church deacon for advice. John McCully, 83, was a retired ISU English professor. He’d known Moctezuma for years and treated her like a favorite daughter. He told Moctezuma to be clear in her mind about her accomplishments — her experience cooking, the compliments she’d received for how hard she worked, how well she got along with co-workers.

She remembered little from her interview. It happened so fast. Then one week passed with no word. Then another.

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The economy was booming. Signs for job openings were everywhere. Opportunity seemed to be all around her. She could see it happening for her, too. Maybe just not now.

“Someday,” she said.

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