As we see low wage jobs finally getting a much needed pay increase and talks of minimum wage raising nationwide, the concern over the Benefits Cliff is still a focal point that needs to be addressed.
The Benefits Cliff is the point when marginal increased income results in a significant loss of government assistance such as SNAP, childcare, healthcare, etc. This point is a catch-22 for low income earners trying to get out of poverty. It’s a disincentive to progressing one’s life! The brief video below from the Indiana Community Action Association provides a quick overview of how this plays out in their state.
In my state of Ohio for example, a wage of about $13.50 per hour can cost a single parent with two children their food stamps, also known as SNAP benefits, which total to about $2,500 per year. A wage of about $15 per hour, which we are now seeing in many job postings as well as the governments proposed minimum wage discussion, can leave that same family without any childcare benefits as well. Those benefits are valued around $8,500-$9,000 per year. Finally, a wage of about $21 per hour causes a loss of Medicaid coverage for the children, leaving the parent to cover the full cost of premiums on their employer sponsored plan. The ever-rising costs of these plans has put the cost of decent family coverage at $650 or more per month.
Each of these levels of income gained results in bigger loss of assistance as shown in the chart below.
So, although the increase in wages is a great start to correcting a long overdue issue, there is still much more focus needed on how to make it a sustainable path to income equality. If you're a business leader with employees falling into these levels, it is your duty to be cognizant of how your input and decisions impact them from the Benefits Cliff standpoint. For everyone else, take time to research your elected officials both local and state especially, to know where their awareness and action plans are for tackling this issue in the immediate future!