Mitigating the Benefits Cliff: A Linchpin for Economic Recovery
From Spotlight on Poverty and Opportunity
The economic recovery policy solutions advanced by President Biden – from racial and climate justice to the minimum wage to clean energy jobs – depend on a functioning safety net coordinated with employment. But the cliff effect – also known as the benefits cliff – produces a major stumbling block in the path to economic mobility. The cliff effect occurs for low-income families when small increases in income result in a reduction or a loss of essential public benefits. As a result, families do not have the resources required to meet even basic needs and employers are stymied in their attempts to hire and promote employees.
While pandemic-related efforts are focused on emergency support and reemployment, in the long run, economic mobility ought to be at the forefront of the recovery plan. The cliff effect must be mitigated to achieve meaningful wage progression for the nearly 23 percent of Americans who rely on means-tested public benefits – a likely growing number given job losses from the pandemic.