We marked an important anniversary in January, but it is not one to celebrate.
Ten years ago the Iowa Legislature increased Iowa’s minimum wage to $7.25, in advance of the increase in the federal minimum wage to that level the following year. It has remained there ever since. Iowa minimum wage workers have gone 10 years without a raise.
A year ago, local officials were putting Iowa on a path to boost the wages of a large share of its low-wage work force to something over $10.00 an hour. Supervisors in five counties enacted countywide minimum wages set to phase in over two or three years. Three of those counties — Polk, Linn and Johnson — together accounted for a third of the work force in the state. About 85,000 workers stood to benefit from higher earnings when the minimum wages were fully phased in, in those three counties and in the counties surrounding them.
Then in April the Legislature and then-Gov. Terry Branstad nullified all those ordinances, earning Iowa the distinction of being the first state to actually reduce the wages of its residents.
Iowa’s county “laboratories of democracy” were not allowed to make their own decisions about the welfare of workers within their borders. But we can learn much from the experience of one of those counties, Johnson, where the experiment in local minimum wages had already advanced to the third step of a scheduled phase-in.
The Johnson County minimum wage was higher than the state’s for 17 months, from November of 2015 to April 2017, including three months at $10.10, before the state pre-empted it. Over 160 local businesses, mostly restaurants, have since agreed to maintain that wage despite no longer being required to by law.
A task force created by the Johnson County Board of Supervisors tracked the effects of the minimum wage. The task force recently released a report by two of its members, myself and John Solow, professor of economics at the University of Iowa. We looked at trends in employment, unemployment, weekly earnings, number of business establishments, and retail sales, in Johnson and three comparison counties, for 10 years before the minimum wage increase up until the middle of 2017.
We found that the higher minimum wage raised the average weekly earnings of workers in the hospitality sector of the county economy measurably. That sector includes restaurants, bars, hotels and motels, and accounts for about one-sixth of the jobs in the county, including a large share of workers affected by the minimum wage.
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Some worried employers would cut hours to reduce costs. We found no evidence of that. However, any reductions that may have occurred were more than offset by the higher hourly wage, leaving workers in the hospitality sector with more total earnings every week.
Others predicted a loss of jobs and increasing unemployment. We found no evidence of such effects. Total employment continued to rise as the minimum wage was increased, at much the same rate as in the comparison counties. The unemployment rate continued to fall. Jobs in the retail and hospitality sectors continued to increase, at a pace similar to the other counties. The number of retail trade establishments and the average retail sales did not appear to be affected by the wage increase.
What Johnson County demonstrated was that a higher minimum wage can boost the earnings of workers without harming the local economy. The state should take note — and also learn from other states.
Twenty-nine states now have a rate that exceeds the federal, including all but one of the states surrounding Iowa. In 18 states, workers just got a raise because the state minimum is indexed to inflation. Meanwhile Iowa’s low-wage workers continue for the 10th year to see their wages eroded by inflation, with no relief in sight.
• Peter Fisher is research director of the nonpartisan Iowa Policy Project in Iowa City. Contact: firstname.lastname@example.org