Iowa Business Council Competitive Dashboard: Labor shortage remains state’s biggest economic challenge

It may seem like an old refrain, but the song remains the same: Iowa’s greatest economic development challenge lies in its ongoing labor shortage. That’s just one of the key findings in the Iowa Business Council’s 2024 Competitive Dashboard report, unveiled in a virtual news conference Feb. 28. “Workforce continues to be the limiting factor in terms of the potential of our economy,” said Phil Jasper, IBC chair and president of Raytheon, one of the state’s largest employers. “We're effectively tapped out on our workforce. While Iowa maintains a top six position in labor force participation rate (nationally), it has not effectively changed from last year. The good news is that Iowa continues to outpace the national average on its labor force participation rate. But (pairing) that participation rate with our very low unemployment rate continues to feed the urgency of retaining more population and, honestly, recruiting new Iowans into our state.” According to the Iowa Business Council Competitive Dashboard report, Iowa’s population grew in the past year by just 7,438 residents, or 2.3%, from 3,193,079 in 2022 to 3,200,517 in 2023. While Iowa’s net overall migration increased by almost 1,500 individuals, the state continues to rank 34th nationally in that category, and the state’s five-year population change was just 1.4% in 2023, ranking 30th nationally. “We continue to rank 31st in total population,” Mr. Jasper said. “As we have said for years now, Iowa’s population needs to grow in order for business to expand and provide opportunities for the next generation of Iowans. Growing our population is an absolute must. IBC continues to be a strong advocate for comprehensive immigration reform at the federal level while also partnering with the state and other organizations on marketing opportunities for Iowa careers and business opportunities.” IBC president Joe Murphy acknowledged that immigration reform, in particular, has become a “politically charged issue, “ both statewide and nationally, noting that the IBC prefers a politically neutral approach. “We see our role as stating the facts and stating the need in an unemotional and non-political way,” he said. “The simple fact is, as Phil mentioned, we need to grow our state's population, and one of the best ways to do that would be through legal immigration means, and that’s involving increased visa expansion and expedited processes for those individuals that are in the waiting period. There are a number of common-sense areas that we can engage on and are engaging on, but we really view our role to lower the rhetoric, lower the temperature, take the politics out to the extent that we can, and just talk about the business need for why we need more individuals in our communities (and) among our businesses.” The report also focused on expanding the state’s work-based learning programs. Mr. Jasper noted that the number of Iowa school districts providing high school work-based learning opportunities increased from 121 in 2020 to more than 370 in 2023. “We believe that continued efforts on work-based learning focusing on registered apprenticeships, quality pre-apprenticeships and high school internship programs has the potential to substantially grow our talent pipeline well into the future,” he said. “That is also why we're strong supporters of the recent work based learning legislation that has updated the definitions to provide more structure and rigor while also providing critical funding for our school districts to implement these programs in partnership with Iowa businesses.” Mr. Murphy also stressed the importance of work-based learning programs, including through efforts such as the IBC’s Business Education Alliance (BEA). “Updating the definitions on those work-based learning requirements, what those categories might be to be included in work-based learning, really is about priming the future pipeline for our Iowa companies at that high school level and making sure that they have access to high-quality experiential learning opportunities within Iowa's workforce that provides them a leg up on entering that workforce, either immediately after high school if that's their desire, or going into a two-year or four-year program,” Mr. Murphy said. “But having that experience at the high school level really is important, not only to get them exposed to career opportunities in our state, but to begin to apply that stickiness to our workforce and our labor economy here in Iowa.” The overall report highlighted successes and challenges in five key areas, including:

• Economic growth: Iowa’s gross state product rose more than 9.5% to $238.3 billion in 2023, up from $216.9 billion in 2022. Median household income rose by 6%, from $65,600 in 2022 to $69,588 in 2023, a figure enhanced by Iowa’s low cost of living (fifth nationally) and affordability (sixth nationally). The state also has a 68.1% labor force participation rate, ranking sixth nationally, but that rate, compared with unemployment of just 2.9% in 2023, continues to provide workforce constraints. The IBC has also urged the Iowa General Assembly to adopt the Major Economic Growth Attraction (MEGA) program in Iowa, which allows Iowa to compete nationally to recruit new industries and jobs to the state. The program provides incentive opportunities for projects that invest more than $1 billion in Iowa while concentrating on core Iowa industry competencies including advanced manufacturing, biosciences, and research.
• Education: Iowa’s proficiency rates in reading and math experienced no statistical change during the COVID-19 pandemic, while most states experienced declines in those metrics. In addition, Iowa has achieved its Future Ready Iowa goal of having 70% of Iowans with some sort of post-secondary education and training. Child care also continues to be a top priority, Mr. Murphy said. “Making sure that people and families have access to high-quality, affordable child care is really important,” he said. “So we’re looking at ways to lower costs for child care centers, so that they can provide more for their employees to make sure that they stay in that workforce, and so that more slots are readily available for Iowa's communities, making sure that the infrastructure is available through building upgrades and updates.”
• Governance: The state’s bipartisan income tax reform package, signed in 2022, has resulted in the state becoming “more competitive from a tax perspective (and) was long overdue in both the individual and corporate tax structures,” according to the report. “The changes will lead to business expansion, population retention, and a more stable and equitable tax system. Given the exceptional financial strength of the state, the opportunity exists for further action with respect to tax competitiveness.” The changes led to improved competitive national rankings for both individual tax climate (from 40th nationally in 2022 to 22nd in 2023) and corporate tax climate (from 34th nationally in 2022 to 29th in 2023).
• Health and wellness: The number of active primary care providers, a new metric in this year’s report, helped Iowa’s health care competitiveness rise from 31st nationally in 2022 to 26th in 2023.. However, statewide obesity rates remain a concern, and the number of mental health providers remains low. “Iowa Business Council efforts in recent years have highlighted this reality, and the organization continues to seek partnerships while advocating the need for increased public investment and opportunities to increase mental health providers in the state,” the report says. “Increasing the supply of mental health professionals in Iowa while also enhancing public mental health investment mechanisms will directly benefit the state’s business climate, communities, and schools, thereby positively affecting Iowa’s economy.”
• Demographics and diversity: In addition to the state’s workforce issues, Iowa’s ethnic diversity remains low at 17.2%, ranking 45th nationally, and showed little improvement from 2022. And the state’s median age climbed to 38.9 in 2023, ranking 17th oldest nationally. “Population growth has the potential to be the main economic driver for the next decade,” the report says. “Policy decisions must be made with the perspective of increasing Iowa’s population to sustain and enhance economic opportunity for future generations.”

The Iowa Business Council Competitive Dashboard report, prepared by the IBC annually since 2011, is intended to serve as “a tool for policymakers and business leaders to use when making sound economic decisions.” The Iowa Business Council, founded in 1985, is a nonpartisan business association with 22 members from Iowa companies which collectively employed more than 160,000 Iowans in 2023. Those companies had a combined annual payroll of $9.9 billion, investing more than $3.2 billion in capital investment and more than $2 billion in research and development. READ THE FULL REPORT: