In the United States, the safety net for low-income individuals and families comes in the form of public benefits programs. These programs, including Medicaid, SNAP (Supplemental Nutrition Assistance Program), housing assistance, and childcare subsidies, play a vital role in providing essential support to those in need (National Conference of State Legislatures, 2022). However, there is a hidden challenge within these systems known as the “public benefits cliff” that often hinders individuals as they strive to improve their financial situations. I did not understand until I interned as a Public Benefits Research intern at an organization where I focused on state policies and strategies, particularly childcare access, in a bid to mitigate the “public benefits cliff.”

Understanding the Public Benefits Cliff

According to Anderson et al. (2022), “public benefit programs have the potential to help stabilize families when their income drops and can provide support as parents enter or reenter the workforce.” The public benefits cliff refers to a situation in which a small increase in income can result in the abrupt loss of eligibility for one or more public assistance programs. Simply put, an individual or a family loses a certain public benefit because of as small as a $1 increase in wage or salary, even though that $1 or small increase cannot cover the public benefit they lose. This phenomenon occurs because these public benefit programs often have strict income limits. As a result, individuals and families find themselves in a precarious situation where earning more income may leave them worse off financially due to the loss of crucial benefits. Imagine striving to become financially independent by putting in more work that allows for an increase in your pay, but then there’s a recursion; you lose your public benefit and become more financially stranded.

 

Implications of the Benefits Cliff

• Work Disincentive: One of the primary consequences of the public benefits cliff is that it can create a disincentive for individuals to seek higher-paying employment or work additional hours. The fear of losing essential benefits can discourage upward mobility (Fahe, 2022).
• Financial Instability: Sudden loss of benefits can lead to financial instability, pushing individuals and families further into poverty and making it even harder for them to escape the cycle.
• Limited Opportunities: The benefits cliff can trap individuals in low-wage jobs, preventing them from pursuing education or training that could lead to better-paying careers.
• Health and Well-Being: Loss of healthcare coverage, often tied to employment and income, can have severe implications for the physical and mental health of affected individuals and their families.

 

Potential Solutions

Addressing the public benefits cliff is a complex task, but there are potential solutions to mitigate its negative effects:

• Gradual Phase-Out: Reforming benefit programs to gradually phase out assistance as income increases rather than an abrupt cutoff could encourage people to earn more without the fear of losing all benefits at once.
• Benefit Recalculation: Consider recalculating benefits on a more frequent basis to account for changing income levels. This would ensure that benefits align better with individuals’ current circumstances.
• Improved Coordination: Better coordination among different assistance programs and agencies can help identify individuals who may be impacted by the cliff and provide targeted assistance (Headrick et al., 2022).
• Support Services: Offer additional support services, such as job training, childcare assistance, and healthcare subsidies, to help individuals transition to higher-paying jobs.
• Education and Awareness: Raise awareness among recipients about the benefits cliff and provide guidance on financial planning to navigate potential income increases effectively.

The public benefits cliff is a complex issue that affects many low-income individuals and families in the United States. While public assistance programs are essential for providing a safety net, the cliff effect can inadvertently create barriers to financial stability and upward mobility. By exploring and implementing potential solutions, we can work towards a system that encourages economic self-sufficiency while still providing necessary support to those in need. Addressing the public benefits cliff is a step toward creating a more equitable and just society for all. In a bid to mitigate the public benefits cliff, one of the tools that I utilized was the Federal Reserve Bank of Atlanta’s Career Ladder Identifier and Financial Forecaster (CLIFF) tools: CLIFF Snapshot, CLIFF Dashboard, and CLIFF Planner. Each tool is customized to fulfill the specific requirements of individuals at various phases of their careers. Our collaborative effort can help individuals and families build self-sufficiency. THE MORE WE LEARN!!!

Tell me and I forget, teach me and I may remember, involve me and I learn. — Benjamin Franklin

Image source: Pedro Perez and Circles Canada

Sources:

Anderson, T., Coffey, A., Daly, H., Hahn, H., Maag, E., & Werner, K. (2022, January 11). Balancing at the edge of the cliff. Urban Institute. https://www.urban.org/research/publication/balancing-edge-cliff

Headrick, G., Ruth, A., White, S. A., Ellison, C., Seligman, H., Bleich, S. N., & Moran, A. J. (2022). Integration and coordination across public benefit programs: insights from state and local government leaders in the United States. Preventive medicine re

ports, 31, 102077. https://doi.org/10.1016/j.pmedr.2022.102077

Introduction to benefits cliffsand public assistance programs. National Conference of State Legislatures. (n.d.). https://www.ncsl.org/human-services/introduction-to-benefits-cliffs-and-public-assistance-programs

The benefits cliff: Eliminating barriers to transitioning off public benefits. Fahe. (2022, July 28). https://fahe.org/the-benefits-cliff-eliminating-barriers-to-transitioning-off-public-benefits/