If you’re on public benefits and get a pay raise, you might encounter a benefits cliff. This is a sudden loss of benefits when your earnings cross an eligibility threshold.
Benefits cliffs can leave individuals worse off financially and, at a community level, disincentivize career advancement, harm employee retention, and limit workforce participation.
This article summarizes our recent Community Conversation on who is impacted by benefits cliffs, how they discourage upward mobility, and what programs are working to provide solutions.
Our panelists emphasized that addressing the benefits cliff requires cross-sector collaboration and a human-centered approach:
- Moving from public benefits to financial self-sufficiency requires more than simply making more money.
- Successful transition programs include a personalized support team and financial literacy education.
Table of Contents
Who is impacted by the benefits cliff?
Although the benefits cliff most directly impacts low- to moderate-income workers receiving public assistance, its effects extend to employers, the economy, and government spending.
Those directly impacted by benefits cliffs include:
- Hourly workers whose wages are near the benefits threshold, especially hospitality, retail, healthcare support, and childcare workers
- Entry-level workers trying to achieve long-term career advancement
- Single parents and parents with young children who would lose the ability to work if they lost childcare support
The benefits cliff can also cause businesses to struggle with employee retention and workforce shortages. A 2019 survey of Ohio business owners found that one in five Ohio businesses had experienced personnel issues due to workers’ concerns about losing benefits.
The benefits cliff indirectly affects government spending, tax revenue, and the economy. Because the benefits system discourages upward mobility, low-wage workers can become trapped in long-term reliance on assistance programs. This is costly for government budgets and reduces workforce participation, tax revenue, and consumer spending.
How does the structure of public benefits discourage upward mobility?
The structure of the public welfare system makes it difficult to break out of low-wage work. The net loss of resources that can occur when coming off public assistance acts as a barrier to upward mobility.
Three key structural factors contribute to this problem:
- Income cut-offs that are lower than survival needs
- Benefits that end abruptly instead of tapering off (benefits cliffs)
- Confusing systems where different benefits have different eligibility rules and are administered by different agencies
Our panelists emphasized the need for collaboration and human-centered design to address the complex challenges presented by the transition off benefits. They highlighted three current programs and tools aimed at helping workers achieve financial self-sufficiency.
When does assistance end?
In theory, public assistance ends when someone earns enough to cover essential living expenses. In practice, the income required for long-term self-sufficiency is much higher than the cut-offs dictated by state governments.
For example, the United Way household survival budget estimates that in 2022, a Cuyahoga County family of four needed $71,148 to be self-sufficient. In 2022, some Ohio public assistance programs ended at 130% of the Federal Poverty Level, or $36,075 for a family of four.
Thanks to internal research and external advocacy, the state recognized that this abrupt cut-off was a barrier to getting off public benefits. In October of 2024, Ohio implemented a gradual taper of some benefits up to 200% of the Federal Poverty Level. While a significant improvement over the earlier policy, a family of four will still lose all support over $15,000 short of United Way survival budget estimate.
Three approaches to addressing the benefits cliff
A holistic government approach: Ohio's Benefit Bridge
Ohio’s Benefit Bridge Pilot takes a holistic, human-centered approach to helping workers transition off public assistance. Recognizing that financial independence involves more than just wages, Benefit Bridge seeks to provide wrap-around support for the transition.
The core of Benefit Bridge is a care team of a peer mentor with lived experience, a case worker, and individualized support such as a mental health counselor. The care team model came from community-based research in the program’s design phase. Participants reported that lack of a support system was the biggest barrier to successfully transitioning off benefits.
Financial literacy classes are a second key element of the program. They help people bridge the gap with career planning and tools to promote long-term financial stability.
Participants receive monetary and non-monetary incentives to encourage progress in the program. Benefit Bridge is currently a pilot in 13 Ohio counties, including Cuyahoga County, and has seen positive results for those who complete the 18-month program.
How research models can help: The Federal Reserve Bank of Atlanta CLIFF tools
The public benefits system is notoriously complex, with different benefits administered by separate agencies and structured around different requirements. The confusion and uncertainty over when a wage increase will trigger benefits loss acts as a deterrent to career advancement.
To address this problem, the Federal Reserve Bank of Atlanta has designed the Career Ladder Identifier and Financial Forecaster (CLIFF) tools. This set of tools models the complex interaction of public benefits, taxes, and tax credits with career advancement to help people plan a career move away from public benefits.
The CLIFF tools help assess the long-term financial implications of a new career, predict when a worker will experience a benefits cliff, and map out individualized details of a career move.
Because of the variation in benefits requirements, benefit amounts, and wages across the country, CLIFF tools must be customized by location. Demo versions are available online, and organizations can request access to the full suite.
Getting employers involved: The Cuyahoga County Workforce Funders Group
The benefits cliff is one piece of the larger challenge of connecting workers to sustainable careers. Improving regional employment outcomes benefits communities, businesses, and government, but achieving it requires collaboration from all sectors. Enter the Cuyahoga County Workforce Funders Group, founded in 2018 by a coalition including the United Way of Greater Cleveland.
A case study of how benefits cliffs discourage career advancement
It’s widely understood that benefits cliffs deter low-wage workers from accepting raises, promotions, or training opportunities. Researchers at the Federal Reserve Bank of Atlanta wanted to know just how long it would take for a single mother on benefits to see net financial gain from advancing up the career ladder.
They created a hypothetical career journey for “Leia” from entry-level certified nursing assistant (CNA) to licensed practical nurse (LPN) to registered nurse (RN). They found that, despite salary increases, she would be worse off in the short and medium terms due to increased taxes and lost benefits. After each upgrade in certification, she would get a better hourly wage but experience an overall loss in resources.
It would take eight years for Leia to see a net benefit from moving up the career ladder. In the long term, becoming an RN would make her much better off financially. But for a person in Leia’s position, the long wait to see a financial benefit and the loss of resources along the way are almost insurmountable roadblocks to pursuing an advanced career.
This sector partnership supports programs in Cuyahoga County such as Workforce Connect and the Manufacturing Advocacy and Growth Network (MAGNET). Through employer engagement, these workforce programs help businesses become more aware of how the benefits cliff affects their employees and workforce.
Our Community Conversation panelist Jack Schron Jr., President and CEO of Jergens, Inc., is an active member of the manufacturing sector partnership. He described considering benefit income thresholds when setting wages for certain positions at Jergens to create a smoother career ladder for employees and improve employee retention.
Mr. Schron also shared that the benefits cliff and its effects can be surprising to other employers. They are difficult to identify and address because privacy laws prohibit employers from asking about benefits status and because of the difficulty in building trust. Although Ohio has launched an employer-based program to tackle benefits cliffs, it has struggled to take off due to mistrust of the system.
Get involved in public policy advocacy
Ohio has made strides in improving the structure of public benefits in recent years, and public policy advocacy has played a key role.
Ohio’s first Economic Mobility Advocacy Day is coming up on March 19, 2025. Hosted by the Economic Mobility Alliance Ohio, legislative priorities that will be discussed include:
- Creating a refundable state Earned Income Tax Credit
- Increasing Publicly Funded Child Care eligibility to 200% of Federal Poverty Level
- Securing continued funding for the Benefit Bridge pilot program
United Way of Greater Cleveland staff will be participating in the Advocacy Day. Learn how you can get involved here.
