Most Iowa wages have stagnated. But the rich keep getting richer.

Kevin Hardy
The Des Moines Register

When her coworkers ask her to join them for a lunch out, Katelyn Hobin often declines, choosing to pinch pennies where she can. 

A Des Moines social worker, Hobin never expected to be rich: She earned a liberal arts degree from a private college and entered a notoriously low-paying profession. 

But she also never expected to find herself here.

Katelyn Hobin and her husband Grant sing during choir practice at Westminster Presbyterian Church in Beaverdale Thursday, Nov. 16, 2017. They both work part-time jobs as section leaders in the choir.

At 32, she's still paying off student loans. Both she and her husband, Grant, a teacher, have part-time jobs in addition to their full-time careers. They've put off buying a home, electing to rent a duplex instead. And they have postponed having children until they feel more financially secure.  

The couple believe something has fundamentally changed in Iowa for families whose hard work and education once placed them solidly in the middle class. They feel like they're working against a system that is fixed against them, where the rich keep getting richer, and working people struggle to keep their heads above water. 

"It’s something that cannot continue and keep a middle class," Hobin said. "The middle class is just going to disappear."

Data bear out that middle-income Iowans have seen their wages stagnate since the late 1970s. And while Iowa and the Midwest have long been places with smaller gaps than the nation as a whole between the upper echelon of earners and average workers, income inequality continues to widen here, too, the latest data show.

"Our economy is marked by long-term patterns of wage stagnation, income inequality and declining job quality," Colin Gordon, a senior research consultant at the Iowa Policy Project, wrote in a recent study on jobs and wages. "For working Iowans, recovery from the Great Recession has been agonizingly slow."

Iowa's unemployment rate has reached near-record lows, hitting 3 percent in October. But Iowa has seen a rising mix of low-wage jobs and part-time and contract work. Some experts predict little relief for a middle class increasingly pinched by stagnant wages and rising prices.

Dan White, president of the UAW Local 94, which represents workers at John Deere Dubuque Works, says his 1,300 union members have some of the best-paying jobs in Dubuque. He believes they have a bright future, with room for advancement. Yet they struggle against rising prices to maintain their lifestyle.  

"I think everybody struggles all the time," White said. "What is the middle class anymore?"

'A long and destructive decline'

For Hobin, the Des Moines social worker, things have gotten better over the years, but not by much.

She and her husband both work part-time jobs as section leaders in the choir at Westminster Presbyterian Church in Beaverdale. She also instructs Zumba lessons, and her husband teaches community music classes.

They're saving for a down payment to someday buy "a very modest ranch home" in Des Moines. But they don't think they'll ever earn enough to afford a home in Ankeny, where her husband teaches.  

Grant and Katelyn Hobin at choir practice at Westminster Presbyterian Church in Beaverdale Thursday, Nov. 16, 2017. They both work part-time jobs as section leaders in the choir.

She's certain that the tiny amount they sock away into retirement accounts isn't enough.

Her employer recently assigned her a heavier workload, but no raise. And now, with changes in Iowa's collective bargaining laws, she's unsure whether she and her husband can count on the incremental raises he has received as a public school teacher.

Their circumstances match the overall pattern for Iowa workers, who have seen small raises that barely keep pace with inflation.  

In 2016, Iowa's 1.5 million workers earned a median hourly wage of $16.04, meaning half of all workers earned more and half earned less. 

When adjusted for inflation, 2016's figure is little changed since 1979, when the median wage was $15.91 per hour, according to an analysis by the Iowa Policy Project.

That means a typical wage earner working 40 hours per week for a full year would have seen a real increase of only $270.40 over a 37-year span.

Gordon, the research consultant at the Iowa Policy Project, believes fundamental changes in the nature of Iowa jobs are at least partly to blame.

While jobs in health care and financial services continue to grow, traditionally high-paid manufacturing jobs continue to decline. Iowa's factories employ 38,000 fewer people than they did in 2000, according to the Bureau of Labor Statistics.

At the same time, Iowa employers continue adding low-wage jobs as well as contingent and contracted positions, said Gordon, a University of Iowa professor who researches American public policy and the political economy.

And Iowa has a higher-than-average share of part-time employment and persisting rates of underemployment, according to Gordon's analysis.

In the Iowa Policy Project's latest State of Working Iowa report, Gordon wrote that Iowa's wage picture is complicated by a lack of higher-paying jobs when compared to other states. And pay for jobs in many professions like teaching and nursing lags behind national averages.

Gordon warns that recent policy decisions like nixing local minimum wage hikes and limiting public employee bargaining rights will further damage the middle class.

"The jobs picture, by almost any measure, is not encouraging," Gordon wrote in his study. "We have seen a long and destructive decline across the last generation."

Income inequality worsening

Nationally, income inequality has been growing for decades. But the uneven recovery from the recession further widened the gap, according to research from the left-leaning Economic Policy Institute.

Between 2009 and 2013, the average income of the nation's bottom 99 percent grew by 0.7 percent. The average income of the highest 1 percent climbed 17.4 percent, capturing a whopping 85.1 percent of the national income growth, EPI found.

Iowa traditionally scores well in income equality when compared to other states, ranking as sixth-best in 2016 by the Gini coefficient, a statistical measurement used by the U.S. Census Bureau to gauge income distribution.

Grant and Katelyn Hobin stand for a portrait during choir practice at Westminster Presbyterian Church in Beaverdale Thursday, Nov. 16, 2017. They both work part-time jobs as section leaders in the choir.

But Iowa's income gap is widening. When adjusted for inflation, the bottom fifth of earners saw practically no growth in household income from 2006 to 2016, a Des Moines Register analysis of census data found. The poorest 20 percent saw household incomes inch up from $13,798 to $13,848 in 2016 dollars — less than one half of 1 percentage point.

Conversely, the top 20 percent of Iowa households saw their average income shoot up 12 percent in real terms over the same period, increasing from $155,764 to $177,612.

For the very richest, the top 5 percent of households, inflation-adjusted household incomes improved by 16 percent, from $262,251 in 2006 to $311,070 in 2016.  

But that doesn't necessarily spell disaster for the middle class, said Drew Klein, state director of Americans for Prosperity, an advocacy group funded by the family that operates Koch Industries.

In fact, the census data do show income growth for Iowa families in the middle three brackets, of 3 percent to 9 percent.

"I don’t know that the fact that the rich are getting richer necessitates that the middle class is getting poorer," he said.

Yet he understands the view that the economy is rigged.

Iowa's tax system has helped create a "two-tier society" that has picked winners and losers through policies like tax credits for big corporations, he said.

"It is rigged in favor of those that are politically connected," he said. "And it is stacked against the small business owner and the average worker."

What can Iowa do?

John Stineman, executive director of the Iowa Chamber Alliance, said data about stagnant wages and income inequality spell out the need to address the state's so-called skills gap. That's the idea that workers are not properly trained to fill current jobs.

"We have to have a concerted effort to continue to equip our workforce with skills that are marketable and that can really provide them and their families upward mobility," he said. 

Stineman doesn't think the skills gap is the sole reason for growing wage inequality. But he said the state needs to double down on programs that work to "upskill" Iowa's workforce to meet the changing demands of employers. 

"Clearly, we have some folks who have really not partaken in the slow and long economic recovery from the recession," he said.

Elisabeth Buck, president of United Way of Central Iowa, said wages are only one factor to consider when weighing economic health. What it costs to buy food, pay rent and cover medical bills is just as important, she said. 

United Way's ALICE study last year found that nearly a third of Iowans don't earn enough to afford basic costs of living on their own.

While the ranks of the very poor aren't growing, the number of Iowans considered self-sufficient decreased from 68.2 percent to 65.2 percent from 2009 to 2015. 

"What's growing is the working poor," Buck said. "These are people who are working one, two, three jobs trying to get by, really wanting to get ahead and having the same dreams you and I have."

Buck noted that many of the jobs Iowa Workforce Development predicts will see the most growth over the coming years — such as retail workers, laborers and home health aides — pay less than $15 per hour, on average.

Buck said nonprofits like United Way have the tools to improve skills and ultimately incomes. But if the issue is ignored, the results will affect the entire community, she said. 

"It's going to hamper us for economic growth," Buck said. 

Iowa's income inequality: What tax returns show

Iowa tax returns give evidence to the state's growing income gap.

From 2010 to 2015, the number of Iowans reporting adjusted gross incomes of $1 million or more jumped 65 percent.

In 2010, 5,031 individuals were in that bracket, according to an Iowa Department of Revenue annual report. That group claimed a cumulative adjusted gross income of $32.4 billion. While representing only 0.2 percent of the 2 million Iowans filing returns, that group was responsible for 30 percent of the state's total adjusted gross income. 

By 2015, 8,325 Iowans reported gross incomes of $1 million or more, according to that year's report. Over five years, individuals in that bracket saw total earnings increase to $54.8 billion — growth of nearly 70 percent. And the slice of the state's total adjusted gross income that this group claimed grew to 37 percent.

Meanwhile, the number of Iowans claiming gross incomes of $40,000 to $99,999 climbed by about 23 percent. That group's share of the state total's gross income, though, fell from 28 percent in 2010 to 26 percent in 2015.

Workers from Mortenson Company attach a wind turbine blade to its rotor before it's lifted by a crane and placed on the wind turbine tower at MidAmerican Energy Company's Century wind farm on Wednesday, Nov. 8, 2017, in rural Blairsburg.

One worker's story: Fighting to hold on to the American dream

Ed Wessel rises at 3:30 each weekday morning and commutes 70 miles from his south side Des Moines home to help build a wind farm near Blairsburg. 

Wessel, a 49-year-old union construction laborer, describes the work as physically straining: Some days he mans a jackhammer for 10 or 12 hours. 

For his labor, he earns $27 per hour, including a $2-per-hour boost to make up for the commute.

A 15-year construction veteran, Wessel said he received an 80-cent hourly raise this year, or 3 percent on his base wage. He says incremental raises hardly keep up with the rising costs of basics like gas and groceries. Just look at the price of hamburger in the meat case, he said.

"If you’re making $50,000 or below, you’re pretty much poor," he said. "You live, but that’s it."

Still, Wessel knows things could be worse.

He said he previously struggled with alcoholism and homelessness. Now, with steady wages, he's purchased a modest three-bedroom home. He and his wife, who works on a factory line, have reliable vehicles.

In the past few years, he's improved his credit score by several hundred points. He worries about how his family would fund an unexpected cost like a furnace repair, but he's also been able to invest in upgrades to the home they bought in March.

"I guess it’s the perspective you have. My American dream is, 'I got it right now,'" he said. "My American dream is a place to have with my wife and dogs and a steady job to pay my bills."

About this project

Installments of Changing Iowa will publish about once every six weeks. The project will also include:

COMMENTARY: Do you have ideas for addressing issues raised in the series? Write a letter to the editor or pitch an op-ed column, 500 words or less, to engagement and opinion editor Lynn Hicks, lhicks@registermedia.com, 515-284-8290.

OTHER IDEAS? News Director Annah Backstrom is the coordinating editor for the project. Send her your ideas and comments to abackstrom@registermedia.com, 515-284-8065.

WHAT’S NEXT: Iowa's aging population. If you’d like to comment on this topic, contact Iowa columnist Kyle Munson at kmunson@registermedia.com, 515-284-8124.