Benefits Cliff Research

Benefits Cliff Studies & Research

While the exact number of people facing this issue has not been fully documented, it is a nationwide problem and multiple studies have been done to warn of the consequences. Benefits cliffs disproportionally burden Black and Hispanic families. Some of the most compelling reports include Benefit Cliffs and Plateaus: When Higher Wages Don’t Always Result in Higher Incomes (PHI: New York, 2017); When Work Supports Don’t Support Work (NCCP: Missouri, 2011); The Cliff Effect: One Step Forward, Two Steps Back (Indiana Institute for Working Families: Indiana, 2012); and the 2021 publication Cliff Effects in Allegheny County (UMass Center for Social Policy, 2021).

The Ohio State Chamber of Commerce Research Foundation (July 2019) has found that 20% of Ohio businesses have workers facing (or fear facing) a benefits cliff. The U.S. Chamber of Commerce Foundation (September 2022) also studied benefits cliffs’ effects on workers, and employers (blog summary | research brief). Leap Fund’s 2022 findings uphold similar findings from the public benefits recipient perspective, showing that close to 50% discovered that they will hit a benefits cliff through Leap Fund’s tool. For 63% of clients who already knew about benefits cliffs, the fear of hitting a cliff drastically impacted their decision making, including turning down a raise or more hours to avoid losing public benefits.

Leap Fund partnered on a research brief with The Financial Health Network, Neighborhood Trust Financial Partners, and The ICA Group to speak with home care workers in New York City about how the state’s scheduled wage increases might impact their benefits eligibility – and their financial health overall.

The U.S. Department of Health and Human Service is thinking about benefits cliffs as tied to marginal tax rate (which, while it doesn’t encompass the entirety of the problem, is important to note: about a quarter of lower-income workers effectively face marginal tax rates of more than 70% when adjusted for the loss of government benefits), and University of Wisconsin - Madison’s Institute for Research on Poverty’s has a great exploration for Understanding Benefit Cliffs And Marginal Tax Rates. The Federal Reserve Bank of Atlanta has published a detailed exploration called Benefits Cliffs and the Financial Incentives for Career Advancement: A Case Study of the Health Care Services Career Pathway, and Health and Human Services has published Navigating Benefits Cliffs in HPOG (Health Professional Opportunity Grants). Extensive research has been done by folks over at UMass Boston’s Center for Social Policy (particularly this brief that details what benefits cliffs look like for different family types and benefits combinations, as well as which benefits see a cliff and when, on pg 56). The Women’s Fund of Cincinnati has released an updated Benefits Cliff study for 2020, and we’re also watching this microsite that highlights benefits cliffs in Forsyth County, North Carolina. Additionally, the Urban Institute published Characteristics of Families Receiving Multiple Public Benefits, which can be helpful in understanding public benefits intersectionality. The National Conference of State Legislatures has also documented Addressing Benefits Cliffs.

Supplementally, a Federal Reserve report details how 40% of Americans don’t have $400 in savings to weather an unexpected financial hardship, and a recent survey shows that nearly 1 in 3 American workers run out of money before pay day. And don’t miss out on the United Way’s ALICE (Asset Limited, Income Constrained, Employed) work, which contextualizes why the Federal Poverty Measure does not address many household budget constraints, and touches on the macro landscape that creates benefits cliffs in the first place.