At a campaign stop in North Carolina last month, Vice President Kamala Harris suggested that efforts to combat price gouging are needed to help poor and middle-class households. But a new research report shows that government transfer benefits are contributing to the financial burdens and limitations of low-income households.
The report from the Georgia Center for Opportunity highlights how social safety-net programs, while providing a baseline of support, may inadvertently deter low-income workers from seeking higher-paying jobs due to the “benefits cliff.”
The report, titled “Workforce Engagement: A Missing Link in Understanding Income Inequality,” examines how programs like food stamps, Medicaid, and housing subsidies create barriers to long-term financial independence.
The benefits cliff occurs when a small increase in wages results in a significant reduction or loss of government benefits, leaving workers with a net loss in income. This phenomenon discourages individuals from pursuing career advancements and higher-paying jobs.
The report emphasizes that these safety-net benefits can create disincentives for the lowest-paid workers to move up the economic ladder. After adjusting for taxes and transfer payments, the bottom quintile has nearly the same net income as the second quintile, despite earning almost four times less. This is primarily due to the higher level of government support received by the former group.
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