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The Minimum Wage in Iowa

posted on January 17, 2007 at 4:21 PM

It has been 10 years since the federal government raised its minimum wage to the current $5.15. Back then, an hour worked would buy four gallons of gas. Today…only two.

According to the Iowa Policy Project, more than 250-thousand Iowans, about 18 percent of the workforce, earn less than $7.25 an hour, the level sought by Democrats in Congress and the Iowa legislature. But there are other challenging and more complex economic issues confronting lawmakers. Indeed, raising the minimum wage is likely the least contentious matter on the current economic agenda.

There are thousands of Iowans toiling at minimum wage, but even in the state’s poorest reaches, most workers are laboring for more money. For example, in the southern Iowa community of Melrose, the town’s commercial mainstay, the Melrose market, a restaurant and grocery, workers make more than the proposed minimum.

Darlene McLey: With the high school and college girls, it depends on their experience. If they've done it before, they can make $7 an hour and they can keep the tips. My cooks I pay $9 an hour because they know what they're doing. And it varies from $5.50 to $9 an hour.

Mundt: Melrose has seen more prosperous days, but the community is stable. Its commercial district is now owned by either the city or by a not-for-profit preservation group. Melrose may be dormant, but it’s not decaying.

Darlene McLey: My biggest customers are all the people that live in this community. They take care of us very well.

Mundt: The Melrose market is part of what economists label as the service and hospitality sector of the economy. Its clientele ranges from tourists heading for lake rathburn; hunters heading for the field; farmers, residents like the local green hat society; and even the railroad. Trains stop so crews can carry out the market’s half-pound burgers. While most Iowa business owners are not greatly concerned about a higher minimum wage, many do say they are pressured by property tax trends. To counter inflation nearly three decades ago, the legislature enacted a law restricting the growth of residential and farm property values for tax purposes to no more than 4 percent annually. The legislation required that the department of revenue make adjustments to ensure that the 4-percent limit was in place. To that end so-called rollbacks, portions of the market value of residential and farm properties, were removed from taxation. Over the course of years, the taxable share of the market value for residential property has fallen dramatically. Today two properties with the same market value, one residential, one commercial, will carry markedly different tax burdens. That is a disturbing trend to the state’s urban-based businesses, but not so much to rural entrepreneurs.

Doug McLey: It's not as bad down here for us.

Darlene McLey: There's no money here. I mean in southern Iowa, we're one of the lowest tax rated there is.

Mundt: But Doug and Darlene McLey say their area doesn’t demand much tax funding and the market value of their property is less than it might be if it were in urban Iowa. While minimum wage and commercial property tax trends are not important issues to Melrose’s main business, both owners and staff, including the town’s mayor, Christine judge, say the rising cost of health insurance could become a critical matter. Currently Melrose market employees are covered by spousal benefits. Doug and Darlene are covered by Doug’s National Guard retirement benefits. The McLeys fear the cost of health insurance could become a factor in their business’s wages, and they view it as a deterrent to those who might want to start or expand a business.

Doug McLey: I was reading one of our magazines that we usually get in our business, you know, and what it costs for health coverage and this and that, and it's terrible.

Darlene McLey: I can't imagine a whole family. That would be $500 to $800 a month. It would be as much as your house payment.

Mundt: Mayor Judge says the scarcity of jobs with health benefits is already affecting the area’s labor pool.

Judge: I worry about the younger people. I have younger, you know, young adults, and that’s one of their main considerations. And I worry about the upcoming classes. You know, heck, you can get a job, but if the benefits aren't there -- I think it's very important.

Tags: economy Iowa Iowa legislature


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