It’s no secret that many North Carolinians rely on government assistance programs to make ends meet. But they often get caught in a benefits cliff which 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 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. And the unintended consequences of this Catch-22 situation cliff can be devastating — trapping individuals and families in a cycle of poverty.
Here in North Carolina, for example, 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, therefore, is pushing hard-working North Carolinians into government dependency instead of empowering them to grow their careers, income, family, and overall self-sufficiency.
So what can be done to fix the benefits cliff problem in North Carolina?
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, recipients must resubmit the same information multiple times for multiple programs with the aid 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 consolidate welfare programs into a “one-door” model, like the state of Utah successfully implemented in 1997. Within this framework, human services are integrated with workforce services to provide recipients with a single program to work through. Here, 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 is 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% of the poverty level or 85% 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, the goal for North Carolina policymakers should be to remove every barrier to opportunity, including obstacles to work.
It’s time to stop funding poverty and find 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 opportunity of work — and the dignity that comes with it.