Study: Without more aid, Iowa’s most vulnerable will continue to feel economic pains

Even when businesses do reopen many aren't operating for as many hours, limiting what workers can earn. Some restaurants like this one in Nashville are counting on customers feeling safer eating outside. (Photo by John Partipilo for the Tennessee Lookout)

Months after the start of the COVID-19 pandemic, Iowa is still enduring unprecedented economic hardships and those who are in low-wage jobs are expected to continue enduring the worst financial consequences, according to an annual labor report by Common Good Iowa, a non-profit organization formed by Iowa Policy Project and the Child and Family Policy Center.

Without more aid, such as extended unemployment insurance or stimulus money, these Iowans are expected to continue struggling to pay for housing or even affording the most basic needs, such as food for their families, said Colin Gordon, a University of Iowa history professor and senior research consultant for Common Good Iowa.

“We have this absolutely unprecedented economic collapse where over a course of 30 weeks, since the start of this recession, we’ve had four times as many unemployment claims as the first 30 weeks of the Great Recession.”

COVID-19’s immediate financial impact on Iowa’s economy

The sudden economic crash caused by COVID-19 resulted in 444,390 new claims for unemployment insurance between early February through late August in Iowa. 

That total represents a quarter of Iowa’s February workforce pre-COVID-19.

It is also nearly four times the number of claims that were recorded during the Great Recession in 2008.

While both the Great Recession and COVID-19 have caused market volatility, there are major differences between the two — markedly, the speed that markets fell and unemployment numbers rose along with them.

As early as March 15, 13,364 food-service workers filed unemployment claims. Gov. Kim Reynolds issued an emergency declaration on March 17 ordering restaurants and bars to cease dine-in services, resulting in massive layoffs across the state as officials try to mitigate the spread of COVID-19.

“There’s been no real rebound from that,” Gordon said.

Those hit hardest in the sudden crash were employees in the hospitality industry, which lost more than a quarter of its jobs between February and July, according to Iowa’s unemployment numbers.

For up to 10% of Iowa restaurants, the economic toll of COVID-19 and the disruption it struck on their already-thin profit margins will not be a burden they can overcome, resulting in permanent closures, according to the Iowa Restaurant Association.

In April alone, Iowa restaurants lost $310 million in revenue. Individual restaurants reported an average of 70-90% lost profits.

But at the same time, while low-wage workers make up a disproportionate number of Iowans who lost their jobs, they’re also more likely to lack paid sick leave and be unable to work from home.

The result is both financial and health instability due to increased COVID-19 exposure.

Charlie Wishman, president of the Iowa Federation of Labor. (Photo submitted by Charlie Wishman)

“These are low-income individuals who don’t make a lot of money and they can’t afford to miss work when they don’t know if they have COVID or allergies,” said Charlie Wishman, president of the Iowa Federation of Labor.

Health disparities and meeting basic needs become more difficult for low-wage Iowans

Low-income families who have been hurt by the crisis face stark financial challenges, according to a survey by the U.S. Census Bureau.

Though Iowa’s unemployment and food insecurity numbers are better than surrounding Midwest states, families with children reported that in the last seven days, they sometimes or often times didn’t have enough to eat between April and July. One in six Iowa tenants were also behind on payments, according to the U.S. Census Bureau.

And while Iowa’s unemployment rates have been dropping, signaling potential improvements for the labor force, there are actually more Iowans choosing not to search for work at all, according to the study.

Since February, Iowa’s labor participation rate dropped from 70.9% to 65.6%, according to the Economic Policy Institute’s analysis of Iowa’s employment statistics and American Community Survey.

The organization contends the decline in workforce participation is the second-worst in the country, other than for Kentucky. 

One reason for the drop was Iowa’s low unemployment rate before COVID-19. But there are other factors, such as two-income households going down to one because of child care needs with school closures, Gordon said.

“What this means, in a nutshell, is that Iowa’s job market has scarcely rebounded at all from its abrupt collapse in March,” Gordon said.

Need to extend unemployment aid and institute more COVID-19 worker protections

Because Congress did not extend unemployment insurance before recessing, at the moment, the most an unemployed Iowa worker is able to earn is $300 a week, reducing the average check from $908 a week to $608 a week. This includes President Donald Trump’s $300 order, according to Common Good Iowa.

Increased restrictions from Iowa Workforce Development and the reinstated work search requirement will also create new barriers to receiving unemployment, according to the organization.

The most important thing at the moment is Congress extending and expanding the CARES Act to ensure Iowans, as well as cities and counties, have enough funds to sustain and operate programs that can help support low-income workers, Wishman said.

“Nobody’s getting rich on pandemic unemployment assistance at all,” Wishman said. “To cut that back and say it’s an incentive to get back to work, maybe in regular times that’s how the unemployment system is supposed to work but we don’t live in normal times.”

The second issue is ensuring there are enough enforced regulations to ensure that workers are safe in their environments and don’t bring COVID-19 back to their families, Wishman said.

A part of that could be accomplished by Reynolds instituting an administrative rule that sets up an OSHA standard for dealing with infectious diseases in the workplace, Wishman said. But it also would mean offering paid sick leave so workers don’t feel obligated to work when ill.

Wishman pointed to the outbreak at Iowa’s meatpacking plants earlier this year where some employees took Tylenol to disguise their fevers so they wouldn’t miss attendance.

“In order to be able to safely reopen this economy, we have got to make it so it’s safe for workers, so we don’t have these startups and shutdowns that keep happening,” Wishman said. “Worker health and safety is community health and safety.”

The COVID-19 pandemic has highlighted what Wishman said his organization has been asserting for years — more workforce protections and higher wages are needed to support and sustain the state’s workforce.

“A lot of these issues aren’t new,” Wishman said. “The’re just being exposed right now because people are paying attention.”