What Iowa Can Tell Us About Full Employment

This morning, the Labor Department announced that the national unemployment rate ticked up to 4 percent in June for good reasons, as hundreds of thousands more Americans sought work. For the first time in recorded history, the number of job openings is higher than the number of people looking for a job. That has raised hopes that wage growth might finally begin to pick up, with employers bidding more to attract new workers and offering raises to retain their existing staff.

Full employment—that magical economic state, in which everyone who wants work has it, and at a good wage too — finally seems to be near. In much of Iowa, it already is. Out of every 100 people who want a job, 98 or 99 have one. The rate of wage growth has doubled of late, and businesses are scrambling to find workers. “It does feel like things are a little different in the last year,” Elisabeth Buck, the president of the United Way of Central Iowa, told me. “Businesses are getting a little desperate.”

In that, Des Moines and the surrounding area stand as an example of what might be coming for the national economy, both good and bad. Full employment has a remarkable way of improving the lives of low-wage workers and drawing new individuals into the labor force. But it also exposes the scars that even a very hot economy is unable to heal.

Around the country, and especially in central Iowa, the low unemployment rate has slowly but surely tipped the balance of power away from employers and towards workers, who here in the Hawkeye State have been able to demand higher wages, better working conditions, more generous benefits, training programs, and myriad other perks. “From a per-capita [population] perspective, we are the fastest-growing metro in the entire Midwest,” said Mary Bontrager, an executive at the Greater Des Moines Partnership, a regional economic-development group. “In terms of GDP, we’re outpacing every other Midwestern metropolitan area.”

Competition for workers has gone crazy, Joe McConville, who co-owns a popular chain of made-from-scratch pizza restaurants, told me. “At almost every restaurant that I’ve worked at, you always had a stack of applications waiting,” he said. “You’d call somebody up and half the time they're still looking for an extra job. That’s not happening anymore.” He said he faced a “black hole” in terms of finding more experienced twenty-something employees, and that to compete he has paid out higher wages and added vacation days.

More than that, Iowa’s tight labor market has forced employers to offer training, reach out to new populations of workers, and accept applications from workers they might not have before—expanding and up-skilling the labor pool as a whole as a result. “Their attitude really seems to be changing,” said Soneeta Mangra-Dutcher of Central Iowa Works, a workforce-development nonprofit. “They are looking at populations differently, who they should be looking at when they have jobs to fill, or people being screened out for things that really don't have an effect on the job.”

Among those seeing more success getting hired are the formerly incarcerated. When the jobless rate is high, most businesses refuse to look at applications from individuals who have spent time in prison—even for non-violent offenses, or for incidents that might have occurred years and years earlier. That was what Clifford Salmond found after being released a few years ago. “I couldn't find a decent job because of my background and my past. I've had alcohol problems, drug problems, incarceration problems,” he told me while he ate breakfast at a local McDonald’s. “Once I got that behind me, I still found finding employment pretty hard.” He found work washing dishes, but became unemployed again after the restaurant he was working at closed down.

But his daughter connected him with a training program, which he completed. In time, that led to a position at a factory in Des Moines. “I take the raw rubber and I break it down,” he explained. “I send it over to be [combined] in a machine with fabric. That leaves the machine, and goes to the tire builders, and they build the tire.” He said the work was hot, dirty, and physically exhausting, but still that he loved the job, where he now earns $21 an hour, as well as health benefits.

Younger and older workers have also found more success, labor experts in central Iowa said. Businesses are accepting applications from high-schoolers and retirees who want to come back to work—and are providing on-site education and accommodations like flexible schedules too. Mollie Frideres is the human-resources director at Green Hills Retirement Community in Ames, just north of Des Moines. The company normally hires a number of Iowa State students interested in healthcare, she told me. But of late, it has found that the good economy has meant fewer undergrads need a job. It has raised wages, but still found itself short.

Thus, it has started a program with the local high school, Frideres said, training the workers the business needs. The teenagers require a little more hand-holding, given that they are less experienced and perhaps a little less mature than college kids, Frideres told me. “We are in the process of developing some classes or training programs on social skills or soft skills for them,” she said. “You know: What is professionalism? What are our expectations?” But they had filled the gap, she said.

Younger workers with more or harder barriers to the workforce were finding more luck, too. “What I’ve seen in the past two years is employers really forcing—and I really mean it when I use that word—forcing themselves to be more nimble,” said Laurie Phelan, who heads Iowa Jobs for America’s Graduates, or iJAG. It is an initiative that seeks to prevent drop-outs and help students transition to work, aimed at kids who have grown up in poverty. She said businesses were more willing “to grow their diversity IQ, and to look at their expectations for education and their willingness to spend time in mentoring and shepherding this new young workforce into their world.”

Refugee and immigrant workers—including those with literacy or language challenges, or a lack of credentials—were also getting drawn in and picked up. “A little over a year ago, I hired a woman that focuses on this kind of high-touch service,” Bontrager told me. “She has 40-some clients we’re working with, specifically on helping them work through some of their barriers, whether that's going back and recertifying in something [here in the United States], or working on the language skills, or working on how to present themselves—their resumes, how to interview. All of those kinds of things. Companies are really being very receptive to taking a little more time, if you will, in the hiring process.”

The fierce competition for hiring has led to both a drop in the unemployment rate and a rebound in the prime-age employment-to-population ratio in Iowa. It has also raised the specter of labor shortages, with businesses simply unable to find experienced workers to fill their positions. “There are not a lot of welders sitting around looking for work. The construction trades, the roofers, the framers, the dry-wallers,” said Dan Culhane, the president of the Ames Chamber of Commerce. “Those are [workforce] challenges that Ames and Story County and Des Moines face.”

Some analysts have started warning about the same issue happening nationally, in some cases in pretty overwrought terms. The “number one problem [for businesses] is finding qualified workers,” Mark Zandi, the chief economist at Moody’s Analytics, said in a statement this week. “At the current pace of job growth, if sustained, this problem is set to get much worse. These labor shortages will only intensify across all industries and company sizes.”

Yet the experience of towns like Ames and Des Moines show that such “labor shortages” might be due to insufficient wages and crummy working conditions—not an unwillingness of workers to switch industries or improve their skills for a job. The trucking industry is instructive here: Trade groups have argued that it is facing a shortfall of 51,000 workers, yet businesses have not yet shown much willingness to cut hours, boost pay, and improve conditions to lure workers in. Indeed, across the economy, companies have shown a remarkable unwillingness to boost wages, with growth barely keeping pace with inflation even as the unemployment rate has dropped to 4 percent.

Low wages continue to be an extraordinary problem preventing workers from connecting with a good job and keeping potential employees on the sidelines—in Iowa and across the country. “Even though we’re such a low unemployment state, we are also low-wage state,” Buck of the United Way said. “People think that when you have a state or a community that has low unemployment, that everyone's doing great. That is not the case. We still have about 34 percent of central Iowans who are not making enough to be financially self-sufficient.”

The state has relatively low housing costs, unlike in many big cities and coastal areas. But the steep and rising cost of child care has proven particularly daunting to young workers, single mothers, and families with multiple kids, experts said. “There are are a couple of companies here that do have child care on site, though I don’t think it’s easy to get your kids in there,” said Julie Fugenschuh, the executive director of Project IOWA, a training initiative for local workers. (That is where Salmond found his leg-up into the jobs market.) “But there’s still this cliff, around $13 or $15. If you are making less than that, you can’t take a job. And we are not seeing too many companies go over it.”

Plus, though central Iowa’s low jobless rate has helped workers of color, less-educated workers, younger workers, and others who face discrimination in the labor market, it remains true that it is the best-off that have done the best. Growth and low unemployment are not a cure for inequality, and it would take years and years and years of full employment to restore financial security to the middle class and to boost the fortunes of the poor. “There are many people who are working multiple jobs and are still living in poverty here,” Fugenschuh told me. “The unemployment rate is really not a number that says we're doing super great.”

That is even more true for the economy as a whole, with hundreds of thousands of workers still choosing not to join the labor force and wages still flat—as the White House has kicked off a trade war and interest rates have started to rise, no less. Full employment stands to help, but only in time.