Fix the Benefits Cliff in North Carolina
Benefits cliffs are keeping North Carolinians trapped in poverty.
It’s time to give them the opportunities they deserve.
Imagine working hard for a raise only to find that it makes you financially worse off. This is the harsh reality of encountering a benefits cliff.
For more than 1 in 10 North Carolinians in poverty, benefits cliffs stand in the way of economic opportunity and a better life.
What Is a Benefits Cliff in North Carolina?
A benefits cliff—also referred to as a “welfare cliff”—occurs when an increase in income triggers an immediate, substantial loss of government assistance. Even a pay raise as small as $1 per hour can cause a cliff.
For most North Carolina households, typical pay increases aren’t enough to cover the loss in benefits and achieve financial independence right away. But most government programs are not structured to allow a gradual decrease in benefits while households grow their income.
Which Programs Are the Biggest Drivers of North Carolina’s Cliff Problem?
Low-income individuals and families in North Carolina most often experience a benefits cliff in these programs:
- The Childcare Subsidy Program: This cliff occurs when families earn income that’s too high to qualify for the subsidy, but they don’t yet make enough to afford childcare on their own.
- The Medicaid Program: This cliff happens when families earn too much to qualify for Medicaid, but they can’t afford private health insurance.
- The Food Stamp Program: Families and individuals hit a cliff and lose all food assistance when they reach an income that is above the eligible limit for SNAP benefits.
Who Is Hurt by Benefits Cliffs in North Carolina?
There are nearly 1.4 million North Carolinians living in poverty, and anyone seeking to break out of poverty will eventually hit a benefits cliff.
The risk is especially high for people near the poverty line who qualify for safety net services but are most likely to pursue steady employment and promotions.
In these situations, people often feel they have no choice but to turn down better jobs because they would have to face significant financial insecurity in the short-term. As a result, this broken system unfairly holds people back from getting ahead and pursuing opportunities that match their desires for a meaningful career and a better life.
The Impact of North Carolina’s Benefits Cliffs
14th
North Carolina is the 14th poorest state in the nation.
1.3M
In North Carolina, 1.3 million people live below the poverty level.
388,000
388,000 of North Carolina’s children are impacted by child poverty.
14%
Fourteen percent of North Carolina residents earn incomes below the federal poverty level.
The Real World Impact of Benefits Cliffs
AMANDA, 26-year-old single mother of two kids
Amanda’s Cliff:
$1 per hour pay increase = $2,000 loss in benefits
If Amanda accepts a raise of $13.52 to $14.52 per hour, her family will lose nearly $2,000 in essential benefits.
How to Fix the Cliff in North Carolina
The best way to reduce benefits cliffs is to reform North Carolina’s welfare programs so that government assistance gradually phases out as a person’s income increases. This approach empowers more people to improve their financial situation over time without being held back by the fear and hardship of losing essential benefits all at once.
Key Steps to Fix the Cliff
Fund a transitional benefit program so that SNAP and TANF recipients can have their benefits phased out as income increases.
Addresses cliffs in the childcare subsidy program by creating a scale of step-down payments.
Become one of the first states to use federal waivers and a pilot program to fix program design flaws, especially in SNAP and the childcare subsidy, that are causing the benefits cliff problem in the first place.
Resources for Reform
BenefitsCliffs.org
This calculator empowers policymakers, employers, and nonprofit service providers with data to forecast benefits cliffs and inform policies to minimize their impact on hardworking North Carolinians.
Solving the Food Assistance (SNAP) Benefits Cliff
This report is an overview of the benefits cliff problem in the Food Assistance (Food Stamps) program. It includes key steps that Congress, state policymakers, and state agencies need to take to eliminate SNAP benefits cliffs and help more households achieve self-sufficiency faster.
