Misconceptions and stereotypes imply that people who receive public assistance benefits are looking for handouts, do not want to work, or do not want better jobs. Often, though, they can lose hundreds or thousands of dollars of public assistance benefits if they take a job that earns even 10 cents an hour more. The gap between what they’ll gain as a result of higher pay, and the public assistance benefits they’ll lose, is called a External Linkbenefits cliff. As a External Linknew article in Fed Communities shows, the benefits cliff penalizes people for working towards economic self-sufficiency. People facing the benefits cliff are simply doing the math, and that math isn’t adding up.
‘Public benefits can be a lifeline for families in need, but the fear of losing them without a sure pathway to a stable, better paying job can hold people back,’ said Steven Shepelwich, senior community development advisor at the Federal Reserve Bank of Kansas City. Shepelwich is External Linkworking with other Reserve Banks to help workers navigate benefits cliffs.
External LinkPublic assistance benefits can come in many forms. The most common benefits people receive include housing, food, childcare, health care, disability support, cash assistance and tax credits. Losing public assistance benefits when their income goes up incentivizes some workers to stay in lower-paying jobs. It discourages others who are willing to work from joining the workforce.
How do benefits cliffs create issues in our economy? Follow the journey of three individuals working to overcome benefits cliffs in hopes of achieving financial stability in the latest story from External LinkFed Communities, produced in partnership with the External LinkFederal Reserve Bank of Atlanta, the External LinkFederal Reserve Bank of Boston, and the External LinkFederal Reserve Bank of Kansas City.