The blog of the Urban Institute
January 11, 2022

Benefit Cliffs Underscore the Need for a Stable, Accessible Social Safety Net

January 11, 2022

A parent’s role is to provide their children the emotional and material support they need to thrive. But some struggle to meet their children’s’ financial needs through low-wage jobs. These families often turn to public assistance programs to help fill the gap.

However, securing public assistance doesn’t guarantee stability. If a family’s earnings increase while they are enrolled in assistance programs, they may face a benefits cliff. In other words, they would lose a large share of benefit support relative to new earnings and may even be worse off financially than before their earnings increased.

These changes in benefits can be difficult to predict. Adding complexity, parents whose earnings rise might begin to owe state and federal taxes, or tax credits might boost income. These tax changes are also hard to predict.

Our new study of Temporary Assistance for Needy Families recipients in Colorado, Minnesota, and New York highlights parents’ challenges as they consider working more because of benefit instability. Their experiences show that parents with low incomes need more stability and certainty in their benefits as they work more to support their families.

  1. Income from earnings alone is not enough for many parents of young children to afford their families’ basic needs.  

    Working parents we interviewed explained that benefits help make ends meet. Barriers such as a lack of higher education credentials and difficulty pursuing these credentials as a single parent prevented them from securing a job that would pay enough to support their families without supplemental income. This typically led them to take low-paying, inflexible work.   
     
    Several reported it was difficult to keep jobs that lacked scheduling flexibility and did not accommodate their caregiving responsibilities. This made income from their earnings unreliable, making income and other core services from benefits even more critical.     

    I finished high school. I even have some college.… It’s not like I don’t have any education. They want you to have a degree, basically. Then the money to get there is—it’s hard to find the funding. Do you want student loans?…You’re going to have that bill hanging over you. If I’m a single mom, that’s almost impossible on top of everything else. In Colorado, the cost of living is very high.… What I’m qualified, really qualified, to do right now would not support us.

    —Mother from Colorado

     For many families with low incomes, earnings alone did not cover large but necessary life expenses, like child care and housing. Because housing subsidies and child care assistance are limited and most income-eligible families do not receive them, these expenses can be a great hardship.
  2. The benefits and tax systems are confusing, and it can be difficult for families to anticipate how changes in earnings will affect the supports they receive. 

     How earnings affect benefits is complicated. Earnings can influence child care costs and taxes, and the extent of these changes can vary widely depending on a family’s specific situation. Many parents are doing their best to support their children while experiencing fear, anxiety, and confusion about how voluntary or involuntary changes in their earnings (PDF) may affect their benefits. 
     
    Parents had even less understanding of how refundable tax credits—which can offset taxes owed and are delivered as a tax refund—would affect their income. Though tax programs account for more federal dollars distributed to families with children than any other category of federal programs supporting children, working parents generally did not consider how tax refunds would change if their work hours or earnings changed. Many regarded a tax refund as a surprise bonus. Parents also found it hard to budget for an annual tax payment when they were looking for an immediate solution to current financial hardships.

Honestly, I have absolutely no idea. I see the [earned income tax credit] or whatever that tax credit—I always see it. I’ve heard of it, but I have no idea.… I filed taxes because I knew I made enough, and so I really just don’t know much of anything about it, honestly.

—Mother from Minnesota

  1. Families often can’t stabilize their budgets through work because their benefits are uncertain.  
     
    Though most parents said they would prefer to earn more money from work (rather than not working and having secure benefits), they also feared losing critical supports, like housing, child care, and food assistance. These benefits provide critical resources for families with low incomes in the face of unstable jobs and large expenses.  
     
    Many parents described weighing how to support their families without knowing if they could rely on benefits. Sometimes, this meant parents who’d been hesitant to work would have if they had known they would continue to receive some critical supports.

[In] New York, everything is a lot of money, so the food [assistance] is nice. The cash we get is $145… twice a month, so $145 doesn’t go far at all for shampoo, all your toiletries, mailing stamps, living, if your kids need shoes. It doesn’t go far at all. I feel like I need more money anyway, so I’ll probably just—I think getting a job would be better, but it would be tough because then they take away the food [assistance] and the—yeah, it’s scary because you don’t know what they’re going to take.

—Mother from New York

As federal policymakers consider large-scale changes to the social safety net, families’ needs should be top of mind. They could consider paying out monthly tax credits, which research shows helps stabilize families’ finances; making child care more universally available and affordable; and making other benefits more accessible and benefit levels predictable.

When parents have clear information and consistent income, they can feel confident they are acting in the best interests of their families as they navigate work, education, and meeting their families’ basic needs.


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