As Congress continues to debate the Farm Bill and the reauthorization of the Workforce Innovation and Opportunity Act, a critical flaw in the U.S. safety net system remains largely unaddressed: benefits cliffs.
Our research, alongside studies from the Atlanta Fed and others, highlights a troubling reality. Many vital safety net programs penalize participants for working and earning “too much” money. These benefits cliffs mean that working poor who receive even a modest raise can suddenly see important benefits like child care, food stamps, and Medicaid dramatically reduced or eliminated entirely.
The loss often far exceeds the raise that triggered it. Compounding the issue, each of these programs is typically administered by different agencies and caseworkers in most states, leaving recipients unable to get a comprehensive view of their financial situation.
The result? Many safety net recipients decide to pass up raises or work fewer hours to avoid losing their benefits. This financially logical decision is driven by the same concerns for security that any of us would have for our families.
Worse still, benefits cliffs are often too steep to overcome with a typical raise or promotion, making it nearly impossible for recipients to earn enough to escape the system. Penalizing work efforts means that working families receiving benefits are effectively locked into dependence on these programs.
Reports from frontline organizations reveal that even modest pay increases during on-the-job training can cause benefits cliffs, turning great opportunities into nightmares for the working poor.
Joyelle, for example, faced a devastating setback when her new salary disqualified her from receiving subsidized housing, making it impossible to afford rent. This “benefits cliff” forced her to move but left her struggling to find affordable housing despite her increased income. Similarly, Frankie, a high-achieving military veteran and single mom fleeing an abusive relationship, had to turn down a $70,000 per year job because taking it would mean losing her child care and affordable housing benefits.
As a country, we should be encouraging self-sufficiency and the value of work. Unfortunately, benefits cliffs severely limit the effectiveness of workforce programs like those created by WIOA. These cliffs effectively tell workers that they can earn only so much and no more. Consequently, any job-training program or certification opportunity that doesn’t dramatically increase pay – which few do – can actually leave participants worse off financially than if they had never pursued the opportunity.
Fortunately, there is a growing recognition of benefits cliffs and a push for reforms. Several New England states recently released a report on their efforts to bridge the benefits cliffs across various programs. Even in Congress, committees have heard testimony on the impact of cliffs on safety net participants. Even so, there has been precious little progress in bringing substantive reforms forward.
While it’s encouraging to see more leaders acknowledging the importance of benefits cliffs, the proposed solutions often fail to tackle the root causes. Instead, we’re seeing costly reforms that help a few but aren’t scalable. These reforms frequently extend or increase benefits, which only delay the cliffs or shift them to different families. They don’t challenge the existing system that penalizes hard work and individual initiative.
My organization has been working on this issue for years, partnering with groups across the country to advocate for systemic, state-based, and federal reforms to eliminate cliffs. We’re also working to integrate the safety net and workforce systems into a seamless, work-support program known as the “One-Door” model. Integrating workforce and safety net programs, along with addressing the factors causing cliffs in each safety net program, will create a work-support system that meets the immediate needs of the poor while preparing those who can work for gainful employment free of cliffs that sap initiative and drive dependency.
These reforms are scalable and comprehensive and can be implemented with current funding if structured appropriately. Most importantly, they will restore the incentives to work that the current system steals from the poor, restoring the dignity inherent in work at the same time. All of this is within reach if our elected leaders find the will to act.
