The Cliff Effect

Issue 8.37

September 16, 2022

The Cliff Effect

AN EMPLOYER'S PERSPECTIVE TO THE

BENEFITS CLIFF AND THE WORKFORCE

Social safety net programs—for example, food, child care, and housing assistance—provide critical financial support to low- and moderate-income families and help individuals to meet their basic needs while they advance in their careers. However, a significant barrier to career advancement occurs when employment income rises above the income eligibility thresholds for these safety net programs. In these situations, career advancement opportunities may not pay off. Instead, they can result in the family being financially worse off or financially no better off than before the wage increase. In popular terms, we call the first situation—being financially worse off—a benefits cliff, and the second situation—being financially no better off—a benefits plateau. These losses can discourage career advancement, increase financial insecurity, and affect employer efforts to attract and retain talent. Read more >

DELAWARE EXAMPLE

The figure illustrates how benefits losses affect a hypothetical worker with two children (ages 2 and 5) living in Kent County. The worker receives several public assistance programs to help make ends meet: food assistance, healthcare assistance for the worker and her children, child care subsidies, and the Earned Income Tax Credit. The red line represents an important metric called net resources, which are calculated as the sum of employment income and public assistance minus basic household expenses and taxes.* The figure shows how net resources change as the worker’s income rises from just over $0 per year to $100,000 per year. Learn more >

Demo the Atlanta Fed's Career Ladder Identifier and Financial Forecaster tool >

Developing Delaware

Delaware has a growing, vibrant economy comprised of many diverse industries—agriculture, fintech, manufacturing, warehousing, bioscience and more. Learn about the most exciting and innovative development projects happening in each county at our Developing Delaware Conference on October 13. Register >

NONPROFIT SPOTLIGHT

BOY SCOUTS OF AMERICA DEL-MAR-VA COUNCIL

Exponential advancements in technology, coupled with society’s increasing acceptance of working from home, has unfortunately delegated soft skills to the backburners in our current workforce. In lieu of developing people skills, professional relationships now often rely on email exchanges, with younger generations opting for a lone-survivor mentality. Hard skills may get you the job, but communication, teamwork, and people skills are the foundations of a successful career. The need to introduce and foster these qualities during a child’s formative years weighs heavily upon us now more than ever before. Boy Scouts of America (BSA) addresses this need through its experience-based programs.