Policymakers at the national level looking for ways to strengthen economic opportunity too often fixate solely on expanding government programs. Instead, they should embrace a simple goal: eliminating barriers faced by people striving to improve their situation. Removing work disincentives in the social safety net is the best place to start.
A clear example of this kind of disincentive is the benefits cliff: a circumstance in which a raise or a new job can trigger a disproportionately large reduction in safety net benefits, making the household worse off.
In an episode of Sutherland Institute’s Defending Ideas show, a former safety net participant told me about her experience of earning just $20 more on a paycheck, which led to a reduction of $600 worth of medical benefits.
Aside from the shock to household stability, such experiences can create the impression that accepting work opportunities — such as a job offer, a raise, or working more hours — is not actually worthwhile for a family.
According to the Georgia Center for Opportunity’s benefits cliffs calculator tool, a Utah single mother of two could typically start to see these “cliffs” between $25,000 and $35,000 in annual earnings, or about $12 to $16 per hour.
Policymakers should consider this problem in the context of the workforce shortage across the nation. For example, the U.S. Chamber of Commerce reports that in Utah, for every 100 open jobs, there are only 44 available workers.
When I worked for the Salt Lake Chamber of Commerce, I would often hear from employers about their struggles to find labor. Positions that required no previous experience or advanced training and paid roughly two to three times more than other entry-level minimum-wage jobs would often remain unfilled.
People striving to improve their economic situation are hungry for opportunity, and employers facing labor shortages are eager to give it to them. Removing work disincentives in the safety net is an important step toward solving both of those problems.
Policymakers should first look to the states as engines of innovation and reform. State-based successes in this arena are already well founded, exemplified by Utah’s “One Door” model, which I’ve written about previously. The fact that other states are hungry to replicate Utah’s successful model — and Congress has the opportunity to support them — indicates that state-level flexibility to address constraints on upward mobility should be viewed as an asset.
Congress and the current administration should explore other avenues to grant states additional opportunities to innovate and empower residents to escape poverty through sustained, meaningful work. This could take the form of block-granting more funds with state-based flexibility, greater openness to approving waiver requests from states pursuing innovative pilot programs, or refining the eligibility criteria in coordination with state and local leaders, such that safety net program participants “roll off” benefits as their income increases rather than facing a sudden drop.
Fixing benefits cliffs has the dual advantage of putting earned success through work within reach of more people eager to leave the safety net behind and achieve self-sufficiency while removing another barrier that may be contributing to the nation’s workforce shortage.
If the president and Congress are serious about crafting an economic agenda that preserves America as the land of opportunity, they must rally around a vision of social safety net reform that rewards work, fosters innovation, and empowers the millions of people eager to provide a better life for their families to do so.
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Nic Dunn is vice president of strategy and communications and host of Defending Ideas for the Sutherland Institute, a nonprofit public policy think tank based in Salt Lake City.
