Benefits for Poor Don’t Discourage Work
Bill to address "benefits cliff" is based on mostly exaggerated examples.
“Benefit cliffs” in public assistance programs have suddenly become a pressing topic for legislators who contend that safety net programs penalize work and deter people from taking higher paying jobs. A new report analyzes those arguments and shows that the structure of public benefits is not the deterrent to work that some people seem to believe. It explains why eliminating benefit cliffs could hurt substantially more people than it would help.
In the Wisconsin legislature, Republican leaders have put a resolution relating to cliff effects on a fast track. Their open-ended proposal, AJR 109, would direct two state agencies (DHS and DCF) to develop plans for reducing or eliminating benefit cliffs. It was approved by a voice vote in the Assembly within a week of being introduced, without ever getting a public hearing, and it now awaits a vote in the Senate (also without a hearing).
At the national level, Speaker Paul Ryan has been calling for broad changes to safety net programs in order to avoid disincentives to work. As in the case of AJR 109, it’s unclear what changes he has in mind. That’s worrisome because one of the options is to reduce the value of benefits people currently receive, which would probably hurt far more families than those (if any) who might potentially benefit from restructured programs.
Last week the Center on Budget and Policy Priorities issued a report titled “It Pays to Work: Work Incentives and the Safety Net.” Some of the findings include the following:
- Working is nearly always substantially better from a financial standpoint than not working.
- Workers in poverty typically have a greater incentive to work more hours or at higher wages than other workers do.
- Workers just above the poverty line typically also gain substantially from working additional hours or obtaining higher wages.
- Critics’ examples assume that workers receive an unusual combination of benefits that few low-income workers actually get.
One of the odd things about the sudden urgency in addressing cliff effects is that the potential for people to hit substantial benefit cliffs has diminished in recent years. Changes in the Earned Income Tax Credit initiated by the Recovery Act have helped increase work incentives, and a large reduction in benefit cliffs stems from the Affordable Care Act. The ACA’s sliding scale subsidies for Marketplace insurance plans go a long way to ensure that people who get pay increases don’t lose access to quality insurance.
Another concern is that the resolution being rushed through the state legislature not only hasn’t gotten a public hearing, it also doesn’t include any mechanism for future public involvement or legislative oversight. Its passage could encourage the Dept. of Children and Families to significantly increase copays for the child care subsidy program, which is something DCF can do without approval of the legislature.
As I wrote in another blog post, before the legislature directs two state agencies to develop and possibly implement changes that could dramatically alter public benefit programs in Wisconsin, legislators and the public should have a better idea of what those changes will look like. Our hope is that the legislature will hold off on this proposal and develop a process that explicitly calls for public involvement and ongoing legislative oversight.