Many public assistance programs require recipients to be engaged in paid work or other employment-related activities a certain number of hours to receive benefits. Typical activities include private- or public-sector employment (subsidized or unsubsidized), job seeking, community service, internships, apprenticeships and educational programs. These requirements can vary by state and program.
Exemptions to work requirements are another variable. Qualifications, such as caring for a young child, having a disability or enrollment in school or a training program, could exempt a recipient from work requirements.
State Policy Strategies and Considerations
In 2019, NCSL partnered with the federal Administration for Children and Families and the W.K. Kellogg Foundation on a project titled, “A Whole Family Approach to Jobs: Helping Parents Work and Children Thrive.”
The program worked with the six New England states and brought together public- and private-sector stakeholders from workforce development, human services, early childhood, education and other policy areas. State leaders developed program, policy and system solutions to help parents achieve greater economic stability through employment, while supporting their children’s well-being and optimal development.
This partnership identified five overarching policy strategies for states to consider. All are related to benefits cliffs.
1. Mapping Benefits Cliffs
One of the first steps in addressing benefits cliffs is to understand where and how they happen. A financial self-sufficiency standard is defined as the income necessary for a family to meet its basic needs without public or private assistance. Some states use 200% of the federal poverty guidelines; however, most have taken a more nuanced approach and factor in the cost of living by geography, household size and ages of children.
Benefits calculators help caseworkers and families receiving benefits identify cliffs on an individual or family level and understand how income increases could impact their benefits. By illuminating how employment-related income impacts public supports, benefits calculators help families make informed decisions related to their family well-being, especially when paired with career coaching and access to workforce training and education. They also help frontline employees and government officials understand the interplay of benefits and income. The results help identify cliffs, as well as the policy or practice levers that could be pulled to prevent or mitigate the cliff effect.
2. Aligning Eligibility Levels
Lack of understanding and transparency related to program eligibility thresholds is a major reason families experience a sudden reduction or complete loss of benefits. For some programs, eligibility is set by federal statute and is fixed. For others, states have the flexibility to define eligibility through income and asset definitions. States have looked at options to lessen the impact of federal policies and allow for asset development. These include increasing the asset limit for families receiving TANF or SNAP; disregarding a defined amount or type of income, increases in income for a limited time or the value of vehicles owned; aligning rules across programs; and broad-based categorical eligibility.
3. Making Work Pay
Work supports are policies and programs that help people experiencing barriers to work enter and succeed in the workforce. The most common work supports are tax credits, child care and pathways to work, career and self-sufficiency. Many family-support programs, especially child care, do double duty as work-support programs.
Federal and state tax credits (e.g., earned income tax credit or child tax credit) can help offset a decline in public benefits. States can create refundable or nonrefundable state tax credits to supplement what is available through the federal government. A nonrefundable tax credit means a taxpayer gets a refund only up to the amount owed. A refundable tax credit means taxpayers can receive refunds that exceed the amount of tax owed.
To help workers move to higher-wage jobs, states can identify high-growth occupations and opportunities for wage progression and the relationship to benefits cliffs, then develop strategies to smooth wage transitions. Numerous states have mapped career pathways, enabling students and workers to see how they can progress step-by-step to higher-wage, higher-skilled occupations.
4. Increasing Economic Security Through Asset Development
Unexpected situations, such as an emergency car repair or lost wages due to caring for an ill family member, lay bare the precarious financial situation of many families receiving public assistance. In response, states are exploring ways to help families develop financial assets and begin to lay the groundwork for greater economic security for themselves and their children.
Escrow accounts enable families to build assets by accumulating funds as the participant’s income increases. These accounts allow a certain portion of increased income to be deposited into a savings account without impacting benefits or services. Deposits are sometimes matched by federal grants, state appropriations or local philanthropy.
Individual Development Accounts allow low-income individuals to save money for education, starting a business or buying a home. The accounts are operated by community organizations or state or local governments. Personal investments are matched by community organizations through grants from the federal government and other sources.
5. Fostering System Changes in the Public and Private Sectors
The Whole Family Approach to Jobs workgroup on benefits cliffs emphasized the importance of culture and systems change to create greater economic opportunity for families. In the private sector, employers play a critical role in illuminating how benefits cliffs limit employment and career advancement for workers, and therefore also constrain business growth. In the public sector, and in organizations using public funds, understanding how cliffs constrain opportunity can help systems work with families more effectively.
To learn more about these policy strategies, read Moving on Up: Helping Families Climb the Economic Ladder by Addressing Benefits Cliffs.