Big Meat, Small Towns: The Free Market Rationale for Raising Iowa’s Minimum Wage

Jun 03, 2016

Raising the pay floor

This was an excellent summary of packing house history. And if one really delves deep, one can learn how the meat packing industry bled their workers and communities as they reacted to the IBP revolution. While the farm crisis was heading to its peak, the meat packing industry was rapidly transforming. Unions were busted, concessions were granted, and ultimately, uncompetitive packing firms closed all across Iowa. Then Iowa subsidized the IBP as it expanded across the state in Perry, Waterloo, and Columbus Junction. Iowa and local government seem ripe for picking again with the Prestage gambit that failed in Mason City, but is still alive and well pitting Franklin County against Wright County. [This is a run-on paragraph because if I hit enter, it submits the comment] The need to boost base pay in lower-paying manufacturing (not just packing houses) is clearly evident. Though average earnings in, for example, Storm Lake are around $46,500 (includes wages, salaries, and benefits), the starting pay is just $13.50 or so an hour climbing to maybe a $1 more after 6 to 9 months. And then the worker stays there with only overtime opportunities driving up pay. Boosting the minimum wage puts pressure on this pay floor and creates earning competition across a range of other jobs, to include food services and construction trades. It doesn’t significantly ease the monopsony, but it surely helps workers at the bottom of the pay scales.

The Jury Is In: Impact of Iowa Business Property Tax Cuts

May 31, 2016

Ah but what to do about that darned ag valuation formula

This was a good, in the weeds, explanation of what happened, why, and what to expect. Having studied the genesis of the previous property tax system with its joined-at-the-hip rollback treatment of both ag land and residential property, I still am amazed at the disconnect between farmland profitability (basically its annual rent value) and the taxes paid on that land. Remember, ag land taxes are paid by the owner who increasingly is not actively farming the land. Ag land property taxes are sacred territory that no sane legislator will ever tread. The exceptions and allowances are too numerous to mention beyond the favorable treatment afforded land extends to confinement operations.

Decomposing Farm Financial Stress – It Ain’t the ‘80s, But There’s Cause for Concern

Mar 18, 2016

P.S. Age is important, too

I didn’t post the number above, but age of operator is important, as would be expected. Younger farmers will have had less time to accumulate assets relative to their obligations. Below are some relevant numbers, regardless of farm size, controlling for the age of the farm operator.

Debt-to-asset ratios for:

All Iowa farms 13.2%
Operators 34 years or younger 31.4%
Operators 35 to 44 years of age 27.4%
Operators 45 to 54 years of age 20.1%
Operators 55 to 64 years of age 11.9%
Operators 65 years or older 5.8%

In Iowa, in 2014, a little more than two-thirds of farm operators were age 55 or older, and both of those groups have debt-to-asset ratios below the overall state average.

Dave Swenson

Sorting Through the Job Creation Shenanigans of Politicians and Special Interests

Jan 09, 2016


Good God! This is not how economic impacts are parsed.

Ethanol refining does not create corn farmers and it does not create fuel distributors. This is not how economic impacts are calculated by academics. It is, however, how economic impacts are imagined by trade groups and by politicians.

At best, a 100 MGY ethanol plant supports a total of 150 jobs. This display would not pass muster in an econ 101 class.

If this is what you believe, you are grievously misinformed.

Sorting Through the Job Creation Shenanigans of Politicians and Special Interests

Jan 05, 2016

A correction and more comments.

First, a correction. My current model says, using my methods, that ethanol production explains about 1.4 percent of state net GDP in 2014.

No one is talking about altering the current demand for corn from Iowa’s ethanol plants. Those plants and their linkages to the state’s economy are baked in for the near future. There is no impending loss to the state’s producers, as they would have us suppose whenever EPA makes marginal changes to allowable production levels. There is no crisis on the horizon beyond the propensity of U.S. farmers to drive themselves out of business by over-producing (which is good news to ethanol producers and to animal feeders).

As to a repeal of the RFS, I do not think that is in the offing, but if it were the case, then ethanol would have to compete on price vis a vis oil. There are many mandated state blends plus oxygenate requirements. There would still be a lot of “mandated” demand. The industry would have to find its own correct size. There’s nothing wrong with that, especially when the industry has had major market protection for a decade.

Lastly, the Soviet Grain embargo DID NOT CAUSE THE FARM CRISIS. The embargo started in January 1980. Over the course of that year, Iowa corn prices rose from $2.34 a bushel in January to $3.14 a bushel by December of 1980, and then to $3.20 a bushel in April of 1981 when Reagan repealed the embargo. Average annual prices in 1980 were $2.60 a bushel compared to $2.25 a bushel in 1979. And calendar year prices in 1981 were 9.2 percent higher than the embargo year. This is one of the largest canards still surviving. Farmers’ decisions and their complicit lenders caused the farm debt crisis, not Carter, not the embargo. It was a land price bubble of, at the time, fantastic proportions. And economists would not justify the land prices given net incomes — but like the housing bubble, it fed on itself until it popped.

Sorting Through the Job Creation Shenanigans of Politicians and Special Interests

Jan 05, 2016

The RFA's numbers are not defensible

When I calculate the net gain to the state’s economy as a result of ethanol production, I have to take the economy as it is, not how I imagine it to be. Ethanol producers need inputs, of which the main one is corn. When we estimate the impact of ethanol in Iowa, though, we do not count the corn production if we are counting fairly as the corn (crop production) was already here and the ethanol factory located advantageously to existing supply– the factory was, for lack of a beter term, opportunistic. That said, then, we look to the net boosts in state productivity (GDP) associated with the production of ethanol as an export sale or as a fuel import substitute. The industry buys a range of inputs, and the workers at the ethanol plant and in all of the supplying industries (except corn farmers) convert their incomes into household spending. When I sum all of these activities up, I get the amount of Iowa’s economy explained by the ethanol industry. The amount that would be lost were the industry to up and disappear.

The ethanol industry does not, when multiplied through, explain 3.5 percent of state GDP. At best the industry accounts for a shade less than 1 percent. The entire manufacturing sector of Iowa considering all multiplied through consequences using input-output methodology explains about a quarter of the state’s GDP. But net gains to the state as a consequence of the ethanol industry’s existence (again, net of the crop production) is likely less than 1 percent (or it was last time I measured it).

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