Iowa wages are going up, finally. Here's what it means for your wallet

Kevin Hardy , Tim Webber | The Des Moines Register

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By many accounts, the economy is booming.

Stock markets have climbed to record highs. Unemployment — particularly in Iowa — is sinking to its lowest levels in nearly two decades. And thousands more Iowans are working than in previous years.

But how much are Iowa workers benefiting from the robust economy?

New evidence shows that while wages are rising, inflation is eating up much of that growth. As a result, many workers' spending power is stagnant, and the lowest-paid workers may even be losing ground.

Data shows only Iowa's highest-paid workers are seeing significant wage growth.

"I think in Iowa and nationally the big story of the last 18 months is that the economy is booming without bringing up wages," said Colin Gordon, a senior research consultant at the Iowa Policy Project.

"That’s especially true in Iowa, where we’ve got an unemployment rate that’s hovering below 3 percent, but it doesn't seem to be giving workers much bargaining power with wages."

Here's a closer look at how the economy is performing in Iowa and the U.S. — and how it affects you.

Iowa's unemployment rate reaches 18-year low

In July, Iowa's unemployment rate hit an 18-year low of 2.6 percent. Only North Dakota had a lower rate.

The 1.64 million working Iowans in July represented an increase of 13,200 workers over the previous year, according to Iowa Workforce Development.

Since July 2017, Iowa has added 19,000 jobs, with more than half of those gains at factories statewide.

Indeed, Iowa now has more advertised job openings than people on the unemployment rolls.

That dynamic has left employers across the spectrum — from fast-food establishments to advanced manufacturing facilities to financial service firms — scrambling to hire and retain workers.

Related: What have Iowa's candidates for governor said about the workforce?

National wages can't keep pace with inflation

From July 2017 to July 2018, real average hourly earnings for U.S. workers (wages adjusted for inflation) fell 0.2 percent, according to the Bureau of Labor Statistics.

BLS reported that the average workweek increased over that time, pushing real average weekly earnings up by 0.1 percent — from $370.99 in July 2017 to $371.38 this July.

Yes, Iowa wages are going up — finally

Iowa's median wage reached $17.27 in May 2017, according to the Bureau of Labor Statistics. That was up from $16.72 in May 2016.

But after adjusting for inflation, that wage gain equates to just 23 more cents an hour — or an extra $9.20 over a 40-hour work week.

Gordon, who is also a University of Iowa professor and researches American public policy and the political economy, says Iowans are finally seeing wage recovery from the Great Recession.

"That puts us about where we were before the recession," said Gordon. "You see a bit of recessionary recovery, but you’re not seeing wages being bid up much by low unemployment."

The truth is that wage stagnation has plagued Iowans' paychecks for decades.

In a recent report on wages, Gordon concluded that wage growth "is essentially flat for all but the highest-wage workers" in Iowa.

Gordon blames a low minimum wage — Iowa's minimum has remained at $7.25 per hour since 2007 — and declining union bargaining influence for holding down wages.

Consolidation in some industries also makes labor markets less competitive. That's particularly true in rural areas, which have been losing people and jobs for decades.

"In small, non-metro rural settings, maybe the only low-wage jobs available are at Hy-Vee or Walmart," he said. "If you have one dominant employer, there's no competition for wages."

More: This map shows the stark reality of rural Iowa's population loss

But Kevin Erickson, regional vice president of the staffing firm Robert Half, said wages seem to be improving in central Iowa after years of low unemployment.

"As we’ve come out of softer times, wage inflation has not kept up with the demand for talent," he said. "But I'd say that gap is narrowing literally every week for us."

His company recently released a survey that found half of Des Moines-area workers felt they were underpaid. But he expects some of that is driven by perception as workers see their colleagues entertain multiple job offers and move from job to job for higher wages.

In this market, Erickson said employers must pay more.

"It's actually happening real-time in the market," he said.

Iowa incomes at a crawl

When Iowa State University economist Dave Swenson analyzed state earnings data in 2017, he declared it a "disappointment."

This year, he sees some brighter news: Iowans' average weekly wages improved last year when adjusted for inflation. But only by .08 percent.

"On average, there is some rise in pay beyond inflation, but not much, especially given the very low unemployment rates in much of the state," Swenson said. "I guess I would call it an expected result, given the overall stagnation in much of the state’s rural economy and the depressed farm sector."

More: These are the fastest-growing jobs in Iowa — and how much they pay

Swenson said a generation of retiring Baby Boomers is also likely affecting earnings data across the board.

"A lot of the people exiting the labor force are people like me, people in their 60s," he said. "They're in their peak earning years and the people replacing them are going to be earning a lot less."

The most recent data on Iowa's household incomes shows families are struggling to keep up with the rising costs of consumer goods. In 2016, the average Iowa household earned $59,094, compared with $60,156 in 2013, according to Federal Reserve Economic Data.

More: Nearly 40 percent of Iowans can't afford the basics — and the problem is only worsening

Iowa's rich continue to accumulate wealth

While income and wage data seem to improve, those averages can mask trends on opposite ends of the earning spectrum.

In other words, low- and high-income wage earners aren't seeing the same benefits.

Bureau of Labor Statistics data shows the top 10 percent of Iowa earners saw their real wages increase more than 12 percent since 2001. Conversely, the bottom 10 percent of wage earners only realized a 2.5 percent increase over that time.

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

Reports from the Iowa Department of Revenue reflect a similar trend.

In 2016, 8,710 Iowa tax filers reported adjusted gross incomes of more than $1 million. While they represent about half of 1 percent of all the state's tax filers, those Iowans pulled in about 36 percent of the state's total personal income.

That figure was up from about 30 percent in 2010, according to revenue department data.

Over the same time period, the share of income going to the bottom half of Iowans — those reporting incomes of $40,000 or less annually — shrank from 22.5 percent in 2010 to just over 8 percent in 2016.

The bottom line? Iowa's economy may be surging, but your bottom line probably isn't feeling it.

At least not yet.