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It seems like it should be common sense: When you provide a benefit only up to a certain, hard income level, it creates a cliff that gives a strong disincentive for a person to try to earn more.
The Ohio Department of Job and Family Services recently took steps away from that approach and a panel of economists strongly agreed with the move.
Previously, Ohioans were eligible for the state’s Supplemental Nutrition Assistance program, or SNAP, only if they earned 130% or less of federal poverty guidelines. For a family of four, that’s $40,560.
Earlier this month, the Department of Job and Family Services adjusted that, stepping down food stamp benefits along a sliding scale until a family is making 200% of federal poverty guidelines, or $62,400 for a family of four.
“Fear of losing food benefits can be a deterrent to taking a new job, working more hours, or even accepting a promotion,” ODJFS Director Matt Damschroder said in a statement announcing the change. “Instead of an all-or-nothing approach, we are creating a sliding scale that encourages people to earn more by slowly reducing their benefits as their income grows. This provides an incentive to accept promotions and pay raises knowing they won’t immediately lose benefits.”
A panel of Ohio economists appear to heartily agree, according to a survey that was released on Oct. 28. They were asked about “benefits cliffs,” or providing them at a certain level then abruptly cutting them off once an income threshold is reached.
Asked if benefit cliffs “caused by strict income requirements for public benefits create significant barriers to career advancement for low-income workers,” all 19 economists agreed, according to the survey conducted by Scioto Analysis.
“People make an economically rational decision, at least in the short run, to turn down raises or promotions that result in loss of a much more significant public benefit,” Bill Lafayette of Regionomics said in the comments section of the survey.
The economists were somewhat more mixed when asked if the changes enacted by ODJFs would “lower barriers to work for low-income people.”
Thirteen agreed, while six were uncertain or had no opinion.
“Eliminating the ‘benefits cliff’ is an efficient policy that reduces disincentives to work,” wrote Kevin Egan of the University of Toledo. “Moreover, it is a fair policy change to gradually reduce SNAP benefits so no households find themselves in such an unfair position.”
But Kay Strong, an independent economist, said barriers to work extend well beyond facing benefits cliffs.
“Barriers to work for low-income workers don’t occur solely on the supply side of the market,” she said. “Employers create barriers through their choice of workers, scheduling of workers, and willingness to assist employees over and around occasional personal obstacles that hinder workers.”
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