Economist: Iowa needs new policies to save rural areas

Iowa farm with barn, silo and tractor
Farms like this one near Des Moines, Iowa, are expected to benefit from approval of the U.S.-Mexico-Canada agreement, Iowa elected officials and business leaders say. (Photo by Joe Raedle/Getty Images)

The latest round of poor-to-average ratings for Iowa in a key business index is more evidence that Iowa has struggled economically after recovering from the last recession, an Iowa State University economist said. 

But two key business-group leaders said a group of bills in the Iowa Legislature, combined with local programs and possible changes in Congress, could shake Iowa out of steady average ratings in areas important to business. 

The Iowa Business Council last week released its latest Iowa’s Competitive Dashboard. The analysis of how Iowa stacks up nationally in various metrics again ranked the state poor in demographics and diversity. The state was deemed average in economic growth, education and workforce, governance, and health and wellness.

ISU economist David Swenson said most of Iowa’s growth has come in just four markets: Des Moines, Iowa City, Ames and Dubuque. But rural areas and mid-sized cities such as Clinton, Mason City, Spencer and Fort Dodge are seeing weak growth to population losses. While metro areas recovered completely and grew modestly after the last recession, rural areas have struggled to do the same, he added.

So for Swenson, the biggest thing that needs to be done in reaction to the Iowa Business Council report is to stop the bleeding. “I’ve been doing this for decades and what I’m most interested in is stabilizing because the mid-size cities and the nonmetropolitan areas are the ones that are struggling the most. If we can’t do more on a policy basis to stabilize those communities, which are employment centers, I believe that rural decline is going to accelerate.” 

Joe Murphy, executive director of the Iowa Business Council, which represents Iowa’s largest employers, said he saw the status quo results of the latest analysis as a plus in a way. That’s because Iowa’s productivity stayed steady amid stiff challenges from a struggling ag economy, tariffs, and trade wars. 

“There wasn’t a lot of movement up or down over the last year,” Murphy said. “In taking a holistic view, that is not necessarily a bad thing.” 

Murphy said the task now is to support legislation already pending at the Statehouse that would trim taxes, improve child care assistance and expand the workforce, and to encourage congressional action to make it easier to increase the immigration of skilled workers.

For example, Gov. Kim Reynolds’ proposal to increase spending on Future Ready Iowa to $20 million, a gain of $4 million, would help, said Murphy. That money would help pay for student scholarships and grants for employers to come up with innovative ways to expand local workforces.

“We look at the federal immigration system as an opportunity where Iowa can have an impact” in changing visa laws, and IBC plans to increase its lobbying in the nation’s capital in that area, Murphy said. 

Making the business climate more competitive will be important, too, Murphy said. “Businesses want to expand here. We have some work to do on the business climate front,” he added.

Jay Byers, CEO of the Greater Des Moines Partnership, said part of the answer to improving the statewide business climate will be adding attractions such as the proposed downtown Des Moines whitewater courses, part of a broader Central Iowa water trails plan. 

“Maybe the most effective thing is placemaking,” Byers said. “People are making their decision on where to live first, then finding a job.”

Byers said other positive developments include bipartisan discussion of advancing Iowa’s Water and Land Legacy, or IWILL, which would use a sales tax increase to pay for improvement in conservation, water quality and outdoor recreation. 

Byers noted that the Greater Des Moines market has been among the fastest-growing, on a percentage basis, across the Midwest in the past decade. Part of that is because the capital city and suburbs have seen their foreign born population rise at twice the national average rate. 

Statewide, immigration has been important in a state that has struggled to add population for a century. “But for immigration, our state would have lost population,” Byers said. “Our metro has been growing robustly.”

Both Murphy and Byers called for immigration reform that takes the emotion out of an issue that is crucial to filling the staff rosters of companies in Iowa, home to one of the nation’s lowest unemployment rates. 

“We have a very antiquated immigration system,” Byers said. “We need a modern immigration system that reflects today’s economic needs.”

Here is a look at some of Iowa Business Council’s recommendations in the new report:

Economic Development: Increase spending on the State Housing Trust Fund and the Workforce Tax Credit programs.

Education and workforce: Increase support for Future Ready Iowa, as well as private internships, externships and apprenticeships.

Governance: Build partnerships to support better workforce housing, child care and mental health resources.

Health and wellness: Support efforts to attract and retain primary care physicians. 

Demographics and diversity: IBC’s public-private Choose Iowa Committee set a goal of increasing Iowa’s net migration by 100,000 by 2025. Policy initiatives are expected this year.