The benefits cliff refers to the design of some public benefit programs that discourages individuals and families from increasing their income. In current form, families lose benefits if they earn above a predetermined income level. By working a few more hours per week, receiving a modest raise, or adding a second income earner, families can end up foregoing substantial amounts in cash benefits, food assistance, or childcare subsidies. Because of this, families can become worse off financially despite increases in pay, which undermines the goals of economic independence and financial stability.
As a network committed to economic mobility and independence, the Alliance has added the benefits cliff to our two-year policy agenda, which will be released in the coming months. Cutting off access to critical assistance discourages parents from working more hours, accepting raises, and joining the workforce. These unintended effects trap families in government programs longer than necessary, costing taxpayers. The benefits cliff also fosters a suboptimal business climate. As businesses struggle to fill vacancies and add shifts at this time of record-low unemployment, they do not need policies in place that diminish the number of individuals entering the workforce, taking promotions, and working more hours.
Fortunately, solutions and ideas abound for addressing the benefits cliff. Policy ideas that are modeled after the Earned-Income Tax Credit, for example, allow benefits to taper off, rather than abruptly go away as a family earns more. Some proposals, discussed here and here, ensure continued access to benefits, without regard for income increases, if the family is also enrolled in another government program. A few states have implemented policies that discontinue the practice of using assets, like cars and even savings accounts, to justify reducing benefit levels. Finally, some policies allow social workers to ignore a portion or percentage of the family’s income when calculating benefit amounts, leading to more benefits even at higher levels of income.
The Alliance looks forward to shining a spotlight on the stories of our members and finding solutions to this longstanding challenge that affects low-income families, community-based organizations, government agencies, and the business community. We believe that the answer is to design our public benefit programs with a slope, rather than a cliff, easing families off assistance over time, rather than kicking them off overnight. By allowing families to maintain access to some benefits as they attain increased economic independence, our public policy infrastructure will encourage upward mobility and help create vibrant, healthy, and resilient communities.
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