by David N. Bass
Contributor, Carolina Journal
It’s no secret that many North Carolinians rely on governmental assistance programs to make ends meet. But they often get caught in something called a “benefits cliff” that disincentivizes them from looking for more meaningful work and gaining independence.
Benefits cliffs occur when an individual, family, or household experiences a sudden, steep loss of government assistance as their income increases. This net loss perversely undermines the natural desire to earn more income because it takes a huge pay bump to overcome the cliff. The unintended consequences of a benefits cliff can be devastating—trapping individuals and families in a cycle of poverty.
Examples of this Catch-22 situation are far too common. Joyelle was a single mother of four who always paid her rent on time and made ends meet. But she was forced to flee an abusive relationship and live in public housing. Despite these challenges, she graduated from school and was offered a full-time job. Joyelle turned to shock when she soon realized that her new salary put her over the poverty line and she would lose her subsidized housing allowance—forcing her to pay nearly $1,000 a month in rent. After falling off this benefits cliff, Joyelle was forced to move but couldn’t afford to rent an apartment rent—even with her salary increase.
And then there’s Frankie, who became a high-achieving military veteran after overcoming the challenges of being a teenage mother. Along the way, she also faced an abusive relationship that forced her to flee and seek government assistance and transitional housing, which was unsafe, unsanitary, and humiliating for her. While waiting for available childcare and a pathway to affordable housing, she made the excruciating decision to turn down a $70,000 per year job placement because she also desperately needed support from government programs to survive.
While neither Joyelle nor Frankie ever thought they would be failed by the very system meant to be a safety net, it’s clear that well-intentioned policies with benefits cliffs often prevent people from getting off public services. Many people make just enough to not qualify for services, but not enough to make up for the services lost in extra income.
Here in North Carolina, a single mom with two kids who receives benefits and makes $14.25 per hour—and whose annual net income is $24,325—would lose $7,796 in benefits for a mere $0.25 per hour increase in pay. In this case, her benefits cliff is so steep that she would need to nearly double her hourly wage to $29.75 to generate the same net take-home pay at the lower hourly wage plus program benefits.
Clearly, this is a daunting gap for just about anyone to close overnight. The system pushes hard-working North Carolinians into government dependency instead of empowering them to grow their careers, income, family, and overall self-sufficiency.
So what can we do to fix the benefits cliff problem?
As it currently stands, state and national government assistance is fragmented into a hodgepodge of dozens of programs that comprise “the system.” These programs have different—and often competing—goals, with inconsistent rules and overlapping recipient groups.
This complicated system is more than just a nuisance. For program participants, the misalignment between safety-net programs and welfare-to-work initiatives is often a confusing and detrimental barrier to a better life. Often, they must resubmit the same information multiple times for multiple programs with the aide of multiple caseworkers. This disconnect fosters despair and keeps them in a cycle of poverty—as every hour spent navigating the system is an hour not spent looking for ways to escape it.
Given this grim reality, a rather obvious step forward to fixing the cliff problem is to combine and consolidate welfare programs into a “one door” model like the state of Utah successfully implemented in 1997. In this framework, human services are integrated with workforce services to provide recipients with a single program to work through. In this scenario, a person seeking program assistance is connected to a single point of contact, whose job is to help them find the services and support they need to get back on their feet. The point of contact is an advocate and ally who helps the recipient achieve their goals.
Another example can be found in Missouri, where state lawmakers recently passed legislation addressing public assistance provisions that entrap program participants by punishing work and perpetuating dependence on the government. This new law modifies cliffs to enable residents to more easily earn additional income by easing the loss of benefits in the Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP) and child care subsidy programs for families that lose income eligibility for these programs. Specifically, it creates a transitional benefits program using a sliding scale that steps down benefits until the household reaches 300 percent of the poverty level or 85 percent of the state median family income.
Although narratives surrounding public assistance are often used to advance political agendas, stakeholders on both sides of the political aisle agree that safety nets are essential for catching those who are falling. And all agree that safety nets should never be a destination.
The good news is that the vast majority of North Carolinians don’t want to depend on long-term government assistance. They also think that work is the best way to escape poverty. Given this, it should be our goal to remove every barrier to opportunity, including obstacles to work.
It’s time to stop funding poverty and start finding solutions to fix benefits cliffs. North Carolina should follow the lead of both Utah and Missouri in fixing the benefits cliff problem so our poor and working-class program participants can experience the dignity and opportunity of work.