Getting a raise or landing a better paying job sounds like great news, especially if your income is low enough that you need additional support to meet your family’s basic needs. But that pay increase comes with a big catch for families who use programs with income thresholds – programs such as the Supplemental Nutrition and Assistance Program (aka food stamps), Medicaid Children’s Health Insurance Program, child care assistance, Temporary Assistance for Needy Families, and Section 8 housing subsidies.
With the aim of supporting Missouri families who need it most, programs and subsidies are designed with income qualification thresholds. But those programs disregard the in-between spaces where an individual or family is improving, but not yet making enough to cover all of their most basic needs, and may not be quite stable enough to stay there. Making as little as 15 cents more per hour (around $24/month) can cost families hundreds of dollars in monthly benefits, putting them in a significantly worse financial situation than if they would not have taken the pay increase. This is called going over a benefits cliff.
Solving the benefits cliff is necessary for healthy families and a healthy economy. For working families, specifically families making between $13 and $17 per hour, the way the income thresholds work today can mean one day you have support getting food on the table, healthcare, and stable housing. Then, you are offered a promotion or a raise, but saying yes means your family is no longer eligible for those programs.
The benefits cliff effectively punishes upward economic mobility. It’s one step forward, and a lot more than two steps back.
I recently watched this 3-minute video for one story of how that can play out for a small family. It was a good explanation, highlighting how it can often take at least a decade to make up for the loss in net income. But it didn’t touch on one aspect of the dilemma – rational decision-making. No matter how strong a person’s values or work ethic may be, if the decision to advance their career would result in the removal of food security, childcare, healthcare, and more, it feels quite rational – though painful, difficult, and demoralizing – to remain underemployed or stuck in low wages.
Our policies should be seeking to support Missouri families. This includes improving economic mobility through good wages, maximizing employment opportunities, AND humane, effective social safety nets. The concept of the benefits cliff is antithetical to all of those ends. Policy changes like those currently being considered in the Missouri legislature (SB 82 and HB 719) can reduce the benefit cliff by phasing out benefits gradually as income increases, providing pathways for working families to thrive.
The economic impact on others is also significant. I’m referring specifically to Missouri business’ struggles to find qualified people for open positions, as well as state spending. Providing transitional benefits removes unnecessary barriers on the pathways for individuals to move up and into many open positions. Better employment and higher wages will increase tax contributions statewide and reduce tax-payer funded supports in the long term. More directly put, this will allow Missouri to recover hundreds of thousands of taxpayer dollars over the course of a person’s lifetime. Individuals, business, and local economies all win.
Poverty is complex. It is rare that there are easy solutions. But this is one of those rare times. The benefits cliff is an easy-to-understand problem with a simple solution: transitional benefits. Missouri’s lawmakers have the option right now to create steps that will keep a family stable while they are working to improve their financial situation. Empowering families to create long-term positive change in their lives is a win for all of us. There is something each of us can do right now to help end the benefit cliff in Missouri. As stated above, Senate Bill 82 and House Bill 719 are moving through the legislative process. Currently, SB 82 has passed the Senate and is in the House, and HB 719 is nearly ready to be debated and voted on by the House, thus it is a perfect time to contact your member of the House of Representatives. You can find your Representative HERE. We encourage you to contact them and ask them to please vote Yes on both SB 82 and HB 719. Your advocacy can make a difference!