Here's what you need to know about benefit cliffs, how they impact North Carolinians

At some income levels, an increase in earnings can do more harm than good.

Individuals who face situations like this are on a benefit cliff — when a slight increase in earnings results in a steep decrease in welfare benefits.

Families or individuals may become ineligible for benefits they previously received, such as housing choice vouchers or child care subsidies, when their income passes a certain threshold. 

Many of these public benefit programs have hard cut-offs, meaning a small change in income can be the difference in receiving a benefit or being denied.

Benefit cliffs can make it difficult for workers to progress in their careers and cover short-term needs since they must decide whether to take a raise or if the loss in their benefits would outweigh any gain.

“The benefits cliff is a very clear example of what happens when we don't design policies really effectively,” Logan Rockefeller Harris, a senior policy analyst at the N.C. Budget & Tax Center, said.

According to United Way, a community-building organization, those most impacted by benefits cliffs are ALICE households: Asset Limited, Income Constrained and Employed. These households make too much money to be considered in poverty, but not enough to live comfortably. 

In 2018, almost 30 percent of the population of North Carolina were ALICE households.

One of the steepest benefit cliffs is caused by losing child-care assistance. 

The average cost of infant care is 35 percent more expensive than in-state tuition at UNC, according to the Benefits Cliff Community Lab, an organization that aims to create solutions to benefits cliffs.

The Benefits Cliff Community Lab aims to create solutions to benefits cliffs and focuses on educating employers and employees about benefit cliffs and how to avoid them. 

“When people are experiencing benefits cliffs, we really want to encourage them to start having a conversation with their employer to figure out what those possible solutions are,”  said Justin Taylor, who is the stakeholder engagement manager Goodwill Industries of the Southern Piedmont's Benefits Cliff Community Lab.

In North Carolina, if parents are employed and have an income under 200 percent of the poverty level, they are eligible for child-care assistance for their children under six years old. Those receiving child-care assistance are currently required to pay 10 percent of their income for child care, which is 3 percent above the number recommended by federal guidelines.

Kate Hanson, the founder and executive director of Meals4Families, said researching how to apply for public benefits and enroll in these programs is difficult enough for families. Adding on the challenge of deciding whether they can accept a raise based on complicated calculations makes the process even more confusing, she said.

“It’s not only unrealistic, but it’s also unjust to place the burden of figuring all that out on a family or individual that is experiencing need,” she said.

Harris said the programs enacted during the COVID-19 pandemic — such as the expansion of child tax credit — showed what could be done to combat poverty.

“What the federal government did actually showed what we could be doing all the time if we were really making a choice to address financial security and try to end poverty in our communities,” she said.

Harris said policy solutions could include adopting a working family tax credit and local childcare subsidy programs where those with higher income are eligible.

@AllieSadoff

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