LIMA — Families depending on the social safety net may not benefit when a modest pay raise pushes their income above benefit eligibility requirements. The counter-intuitive phenomenon is often described as the “benefits cliff” — the sudden loss of food assistance and other benefits helping low-income workers as their income rises.
Joe Patton has seen this dynamic unfold time and time again during his 25 years with Job and Family Services: Workers turn down raises or ask to stay below full-time hours to avoid losing their benefits, which may be worth more than the raise itself.
“I know that as things drop off, that’s what’s keeping people from wanting to go to work,” Patton said.
So Patton, now the director of Ohio Means Jobs and the Job and Family Services divisions in Allen County, helped devise a pilot program to see if emergency aid and cash incentives could help workers who lose their Supplemental Nutrition Assistance Program benefits, more commonly called food stamps, keep their current jobs rather than retreat back to public assistance.
More than a year into the pilot — known as the Employment Incentives Program — Patton thinks he may have a solution to the benefits cliff.
Is the program a success?
An estimated 40 people have registered to take part in the Employment Incentives Program since its inception in 2018, with only several drop-outs.
Patton says the incentives seem to be working.
“They’re staying in the job,” he said. “What typically would happen is they would take the job and drop out, but the incentives are keeping them in, working.”
The incentives are a monthly contribution toward an account the participant earns upon completion of the program, with up to $2,500 available to those who stick with the program for the full 18 months. Because the first four months are often the hardest, Patton explained, incentives start high and gradually decrease to encourage participation in those early months.
The program also offers vouchers for immediate needs, such as rent or transportation, to temporarily fill the benefits gap.
Patton believes the up-front costs of his program, which he estimated at $4,000 per person, will yield long-term savings as more people transition off public assistance into higher-paying jobs.
The goal is for participants to be earning $17 to $18 per hour by the end of the 18-month program, based on salaries offered by local manufacturers.
Tracy Thomas, 38, of Lima, signed up about three months ago when a caseworker noticed Thomas’s food benefits would be phasing out soon. She now receives a weekly gas voucher and is earning monthly savings incentives she’ll receive once she completes the program.
Thomas has been here before, about five or six years ago, when she first transitioned off public assistance. But an unexpected job loss last year put Thomas, a married mother of two, in a tough position: She had to reapply for benefits.
She’s now working two jobs, one as a production worker at Bob Evans and one as a part-time state-tested nursing assistant, a position she holds to keep her license current in case of an economic downturn.
While Thomas is hopeful she’ll eventually earn that $17 to $18 per hour, the memory of the last time her benefits phased out lingers.
“It was really difficult,” she said. “It was like, okay, you’re making X amount of money now, so that’s the end. You’re not getting any more assistance. So it’s like, what am I going to do now? It was hard, but I eventually made it through.”
“But I think with this program,” Thomas said, “it gives you that little bit of time where you can put a little bit to the side to help you progress. I think it does benefit you in that way.”
How common is the ‘benefit cliff’?
SNAP benefits, like other income-based programs, phase out as household income rises.
A single parent of two working 20 hours per week at the minimum wage, for example, is eligible for $505 in SNAP benefits, $255 in cash from Ohio Works First (a companion to Temporary Assistance for Needy Families, or TANF for short) as well as Medicaid and childcare vouchers each month, according to Job and Family Services data analyzed by the Ohio Chamber Foundation.
If that parent were to work full-time at $12.50 an hour, the Chamber analysis found, they would no longer qualify for TANF, and their SNAP benefits would decrease to $193 per month. And if that parent’s income rose a bit higher to $27,729 (130% of the federal poverty level), she would no longer be eligible for food assistance or childcare vouchers.
“A lot of them are making a decision like you or I would,” Patton said. “You’re going to look at your money, and you’re going to look at your benefits, (job) convenience and hours. They’re saying, ‘Yeah, it doesn’t pay to make that jump up here.’ We’re trying to make it pay.”
The number of families in Allen County relying on food stamps or SNAP benefits has been in decline since 2012. In December 2012, nearly 8,000 Allen County families depended on SNAP, compared to 5,500 in June 2019, according to Allen County Job and Family Services.
“The illusion is, well, everyone’s sitting over here on welfare doing nothing, and for the most part I don’t think that’s the case,” Patton said. “Most of them are working, but they’re working under-capacity.”
Learning the basics of budgeting
Key to the Employment Incentives Program’s success, Patton says, are the financial literacy and job coaching elements.
Participants are encouraged to adopt an “envelope system,” a budgeting method in which each dollar earned is allocated to a specific purpose.
“That gets rid of the impulsive spending problems that get our customers in trouble,” Patton said. “That’s where I saw a lot of our customers would falter because they’d get a job, do good for a month or two, then (we’d hear) ‘My car broke down, I’ve got a flat tire.’”
Those minor mishaps, Patton says, often evolve into broader crises in which clients miss work for days or weeks at a time, resulting in termination.
Even budgeting for food is an issue.
Families relying on SNAP often reserve their cash – whether it be Temporary Assistance for Needy Families benefits or a paycheck – for everything but food. There are limits on what SNAP can purchase. Food is okay, but diapers and other necessities are off limits. The result is families who treat cash as a commodity and are thus reluctant to allocate scarce cash to pay for food once those benefits are gone, Patton explained.
“If you’re not prepared for that — suddenly I’ve got to pay cash for food — it’s just a different mindset,” he said.
Agencies around Ohio have already taken notice.
The Ohio Chamber Foundation hosted a panel discussion this summer about the benefits cliff, which highlighted the pilot program as one possible solution.
“If we find that there is a long-term benefit to it that other folks would like to take it up, we can get some of the regulations and rules changed,” said State Rep. Bob Cupp, R-Lima, who helped get the incentives pilot approved. “Does it move people from assistance to full-time employment? Is it bringing more people into the workforce? Is it bringing more people to get the skills they need? We’re looking at all of those things.”
It’s too early for Cupp to make that determination, but the state representative said he is impressed with what he’s seen thus far.
“People think it’s a great idea and understand the welfare system is designed to support people. In far too many cases it’s acting as a ceiling,” Cupp said.
The pilot will continue for at least another year, after which Patton hopes he’ll have enough evidence the incentives model works to persuade state officials to develop a statewide version of the incentives program.
Reach Mackenzi Klemann at 567-242-0456.