Facing both low unemployment and mounting workforce problems, Ohio businesses are casting an eye toward the “benefit cliff.”
That figurative precipice is the point at which at worker earns too much money to qualify for public-assistance programs that help with basic needs such as food and housing, child care and medical coverage.
The Ohio Chamber of Commerce Research Foundation said a recent survey found nearly 1 in 5 businesses had experienced issues with hiring, promoting or increasing wages for employees because of concerns that the extra income would result in the loss of some form of public assistance.
“Unfortunately, I think that number is not surprising,” said Justin Barnes, executive director of the chamber’s research foundation.
In a report released this month, the organization urged public officials to consider ways to address eligibility cutoffs, citing a pilot program under way in Allen County that provides publicly funded financial incentives for low-wage workers to stay on the job as their incomes rise and benefits reduce or phase out.
“This is obviously a workforce issue for the state,” said Barnes, who said workers are turning down pay raises, quitting jobs or not taking them in the first place because of potential benefit-cliff effects. “That leaves workers frustrated because they feel trapped by the system. It also frustrates employers.”
But some advocates for the working poor say the chamber’s focus on the benefit cliff just underscores the extent to which wages and benefits have eroded over the past several years, with the gap between paychecks and the cost of living growing wider. They question the extent to which taxpayers should be called on to make up the difference.
“Ultimately these are employers making money off of this. It’s not a community service,” said Hannah Halbert of Policy Matters Ohio, a liberal think tank.
Policymakers “have allowed our wage floor to fall so far below what it takes to survive that it’s opened up a larger gap between what we provide through the social safety net,” Halbert said. “There is a pretty straightforward way to fix this if we want to — they can raise wages and smooth these cliffs.”
In 2018, six of Ohio’s 10 most-common jobs paid a typical full-time worker less than $26,000 a year, according to Policy Matters. Adjusted for inflation, the median Ohio worker earns 43 cents less per hour today than in 1979.
Policy Matters advocates for raising the state minimum wage, which is indexed to inflation and now stands at $8.55 an hour, to $15 by 2023. “Once you get past that, most people are earning enough that they’re better off,” Halbert said, even if some of their benefits phase out.
Many public-assistance programs already have eligibility tiers. Still, the cliff can come up swiftly and hard for low-wage workers, especially those who need help with child care or medical coverage.
The chamber of commerce survey did not ask about wages, so Barnes could not speak to the pay levels at which employers had the most difficulty.
Nationwide Children’s Hospital, which is in the process of raising its minimum wage to $15 an hour from $10, told employees that they could decline the pay increase if they determine it would affect their public benefits.
So far, no one has, spokeswoman Gina Bericchia said. The health system announced the increase this year and said it will bring about 1,800 workers to the $15-per-hour level, and give raises to another 2,000 now at that rate.
Officials say living-wage jobs are the goal in Allen County, where the Department of Job and Family Services got state approval to start a pilot program last year that offers up to 18 months of financial incentives to public-assistance recipients who keep jobs as they phase out of benefit programs.
The program is being championed by the Lima/Allen County Chamber of Commerce and is described in the Ohio Chamber of Commerce Research Foundation’s report on the benefit cliff.
“This isn’t subsidizing low wages,” said Joe Patton, director of the Allen County Department of Job and Family Services. “We’re connecting people with employers. When you talk about the taxpayer money, this is a $5,000 investment to get somebody off public assistance, maybe for good.”
Of approximately 35 participants — most of them women receiving Supplemental Nutrition Assistance Program benefits — just four have dropped out, Patton said. The program is designed to set aside up to $2,500 for the worker to receive after 18 months, plus help along the way with rent, utilities, car repairs or other needs as benefits reduce.
“We’re aiming high,” Patton said, by placing participants in good jobs and offering intensive case management. One worker saw her hourly pay rise to $17 from $11, though most increases have been smaller.
“Job and Family Services has, for many years, been a very transactional agency,” he said. “We need to be more transformational.”
Discussions about benefits for the working poor, including earned-income and child-care tax credits, are important, said Lisa Hamler-Fugitt, executive director of the Ohio Association of Foodbanks. But the conversation can’t end there.
“I try to say it as plainly as possible,” Hamler-Fugitt said. “How is it that we have a record stock market, corporations posting record profits, yet more people standing in food-pantry lines in this state than during the Great Recession? I see it with my own eyes. And that tells me we have an economy that isn’t working for everyone.”