The Benefits Cliff: Why some people can’t afford to get a raise

The Benefits Cliff:
Why some people can’t
afford to get a raise

Minimum wage hikes may not benefit families

if they lose more in public benefits

By Amber Wright, Development and Marketing

 

At the Foodbank, we often see people come through our Drive Thru for food while still dressed in work attire. They are employed, but still struggling to put food on the table after paying the bills. For many, paychecks just aren’t stretching far enough.

One solution that could alleviate this problem is to raise the federal minimum wage, which does provide a boost in income for workers earning the minimum wage. However, the issue is more complicated than it may first appear due to the way many public benefit programs are structured.

One issue, known as the “benefit cliff,” hurts most the workers making the least. This is where a person gains a small increase in income, which then causes them to lose some benefits from programs such as the Supplemental Nutrition Assistance Program (SNAP), Section 8 housing vouchers, or other programs.  Employees can feel trapped by the system because wage increases do not actually improve their financial situation.

While there isn’t significant growth in their paycheck, they can suddenly find themselves with substantial bills for things such as housing, childcare, medical bills, grocery bills and more. They may now bring home less money overall because their paycheck is taxed, whereas their benefits were not. This financial predicament can be triggered by a pay increase as small as 25 cents an hour.

For example, imagine a working family is receiving SNAP benefits as well as Section 8 housing assistance. The head of household barely qualifies for SNAP assistance, and their employer offers them a $1.50 hourly raise, which would make them ineligible for SNAP and Section 8. If this household loses their Section 8 status, they will have to reapply to the program — which has average wait times up to 8 years depending on the city, according to the Center on Budget and Policy Priorities – if their wages or hours are cut in the future.

At 40 hours a week, a $1.50 raise would only add $240 to the total monthly income before taxes. The Dayton Housing Authority last reported an average pay out for section 8 housing assistance in the area at $588 per month. That is $348 more than the increase in wages, even without factoring in taxes or the dollar amount lost with SNAP benefits.

Single parent families can be hit the hardest. Not only do they struggle with rent and basic utilities, but they are also confronted with rising childcare costs, school fees and extra mouths to feed – all on a single income. In cases like this, they often rely on public assistance to survive.

It’s not surprising that many people will turn down a raise, promotion, or extra hours/overtime to avoid this financial nightmare. It may seem like a paradox, but many people find that they can’t afford to get a raise.

Legislators and advocates are discussing solutions to this cliff effect. One idea that is already practiced in a few sectors is to taper benefits gradually instead of cutting off all assistance at once. Benefits would decrease at the same rate as wages increase, or even a little less as an added incentive to excel at work. This would provide a smoother transition to self-sufficiency in smaller, more manageable steps.

Another idea is combining the various benefit programs into a combined filing process, which would not only make applying quicker and easier for applicants, but also allow better insight into how these benefits work together in relation to recipient’s wage and other circumstances.

Currently, most public assistance programs are granted with their own separate requirements, such as documents proving eligibility, employment, or ongoing employment applications. Some programs may also require regular appointments with a case manager, attending job training or other classes. For someone needing or receiving multiple benefits, this can be difficult to juggle along with work, children, and household responsibilities.

The benefit cliff is already a problem many people face without changes to minimum wage, but we must consider how raising it might further exacerbate the issue. Each state implementing its own standard complicates things further.

The federal minimum wage is set at $7.25/hour, but on January 1st Ohio’s jumped 50 cents to $9.30/hour, which is higher than all but one adjacent state. Michigan also raised theirs with the New Year to $9.87/hour, while Kentucky, Indiana and Pennsylvania remain at the federal minimum $7.25/hour. West Virginia kept theirs the same at $8.75/hour.

Some funding programs have already gone several years without considering factors such as these into the equation. According to the Congressional Research Service, the Temporary Assistance for Needy Families (TANF) is a basic block grant providing public assistance that has not been adjusted for changes such as population increase, inflation, or minimum wage hikes since it began 25 years ago. Adjusted for inflation, in fiscal year 2021, the TANF basic block grant was worth 40% less than its value in fiscal year 1997.

However, there are existing practices that do provide earning incentives. SNAP is one of the programs structured to ease the transition off public assistance. A “benefits phase-out” slowly decreases benefits as income grows so that the financial support doesn’t disappear all at once. The current rate allows recipients to bring home a higher total income even as their benefits decrease.

The SNAP program also shows preferential treatment to earned income over unearned income, such as social security or cash assistance. A family whose net income from employment matches that of a family only on assistance will be granted greater funds as an incentive to work.

Raising the federal minimum wage has the potential to aid many families in the United States, but it is not a simple fix. We also must ensure our public benefits programs are structured to support growth, incentivize work, and help families meet their basic needs as incomes increase.

2022 Minimum Wage by State

Alabama $7.25 / hour
Alaska $10.34 / hour
Arizona $12.80 / hour
Arkansas $11.00 / hour
California $14.00 / hour
Colorado $12.56 / hour
Connecticut $13.00 / hour
Delaware $10.50 / hour
Florida $10.00 / hour
Georgia $7.25 / hour
Hawaii $10.10 / hour
Idaho $7.25 / hour
Illinois $12.00 / hour
Indiana $7.25 / hour
Iowa $7.25 / hour
Kansas $7.25 / hour
Kentucky $7.25 / hour
Louisiana $7.25 / hour
Maine $12.75 / hour
Maryland $12.50 / hour
Massachusetts $14.25 / hour
Michigan $9.87 / hour
Minnesota $10.33 / hour
Mississippi $7.25 / hour
Missouri $11.15 / hour
Montana $9.20 / hour
Nebraska $9.00 / hour
Nevada $9.75 / hour
New Hampshire $7.25 / hour
New Jersey $13.00 / hour
New Mexico $11.50 / hour
New York $13.20 / hour
North Carolina $7.25 / hour
North Dakota $7.25 / hour
Ohio $9.30 / hour
Oklahoma $7.25 / hour
Oregon $12.75 / hour
Pennsylvania $7.25 / hour
Rhode Island $12.25 / hour
South Carolina $7.25 / hour
South Dakota $9.95 / hour
Tennessee $7.25 / hour
Texas $7.25 / hour
Utah $7.25 / hour
Vermont $12.55 / hour
Virginia $11.00 / hour
Washington $14.49 / hour
West Virginia $8.75 / hour
Wisconsin $7.25 / hour
Wyoming $7.25 / hour
Puerto Rico $8.50 / hour
District of Columbia $15.20 / hour
Federal $7.25 / hour

 

Source: Minimum Wage Rates by State 2022 (minimum-wage.org)


Client Story: Charlene

Client Story: Charlene

By Emily Gallion, Grant & Metrics Manager/Advocacy Manager, and Caitlyn McIntosh, SNAP/Outreach Lead

Client interview by Katie Heinkel, Mobile Pantries and Data Entry Assistant

Staff at The Foodbank recently had the opportunity to talk to Charlene, a Foodbank client, at our on-site Drive Thru Food Pantry.

Charlene, who is 62, attended The Foodbank’s Drive Thru March 25 to pick up her Commodity Supplemental Food Program (CSFP) box. She brought her neighbor, who is also enrolled in the program, to pick up her box as well.

CSFP, also known as the Senior Food Box program, is a United States Department of Agriculture program that distributes food to low-income seniors so that they can have a balanced, healthy diet. The Foodbank facilitates food distribution for this program, which is administered by the Ohio Department of Job and Family Services.

Food assistance is especially important to older adults, who are at higher risk for complications related to food insecurity. Food insecure seniors are more likely to underutilize prescribed medications, face limitations in activity, and experience chronic health conditions.

Charlene has been enrolled in CSFP for two years now. She said she likes everything that comes in the box, but her favorite is the block cheese, which she said makes good grilled cheese and mac and cheese. In addition to the items in the box, which are primarily shelf stable, The Foodbank distributes bonus food items on days we host our CSFP distributions.

She said she was at the Drive Thru to make sure she had enough food for herself and the kids. Currently, she has four people living in her household, and she is living on a fixed income. She has a total of 7 grandkids.

“You’ve got to do what you have to do when you have kids,” she said.

Charlene said she likes using The Foodbank’s Drive Thru because it is convenient. Because staff places the food in clients’ vehicles, she doesn’t have to worry about getting out of the car and carrying groceries.

This was our Drive Thru’s original purpose: to provide an accessible way for CSFP clients, many of whom have mobility challenges, to pick up their food boxes. Over time, the purpose of the Drive Thru has expanded to include disaster relief and more widespread food assistance, but we still host weekly CSFP Drive Thrus.

Charlene encouraged everyone who needed help with food to seek it out.

“Don’t be ashamed, because everyone needs help,” she said. “Times are hard, and we are all here in the same boat, so you don’t have to be embarrassed.”

In March, The Foodbank distributed 973 CSFP boxes in Montgomery and Greene County. To qualify for this program, you must be over the age of 60 and have an income at or below 130% of the federal poverty line. To check if you qualify and to obtain an application, visit http://thefoodbankdayton.org/needfood/.

Questions? Contact Program Manager Katie Ly at (937) 461-0265 x33 or Kly@thefoodbankdayton.org.


How our Drive Thru Food Pantry became critical to our disaster relief strategy

 How our Drive Thru Food Pantry became critical to our disaster relief strategy

During the pandemic, our Drive Thru has provided a low-contact way for us to offset increased need and partner agency closures

By Emily Gallion, Grant & Metrics Manager/Advocacy Manager, and Caitlyn McIntosh, SNAP/Outreach Lead

JoAnn, who has been visiting The Foodbank’s Drive Thru Food Pantry for two years, says receiving food has helped her stretch her budget and avoid grocery shopping. She has been saving money after being the victim of identity theft earlier this year.

“I didn’t even get my social security check, she said. “I probably would’ve gotten evicted. I didn’t have enough to pay.”

JoAnn, a senior enrolled in our Commodity Supplemental Food Program, is one of over 100,000 people served in our Drive Thru in 2020. The Drive Thru has seen unprecedented numbers due to the COVID-19 pandemic.

When our Drive Thru pantry was constructed in 2018, it began as an accessible means for our seniors to pick up their monthly Commodity Supplemental Food Program (CSFP/Senior Box) boxes without having to get out of their car. 

While its purpose has evolved since then, the Drive Thru is still open Thursdays for seniors who are enrolled in the program to pick up their boxes. As this is a federal program administered by The Foodbank, these distributions are not open to the general public. To see if you qualify, visit www.thefoodbankdayton.org/needfood.

The Foodbank’s Drive Thru Food Pantry is funded with the generous support of the Center for Disaster Philanthropy and the Dayton Power & Light Foundation.

The Turning Point

The value of the Drive Thru as a disaster relief tool first became apparent after 15 tornadoes ripped through the Dayton area, displacing thousands of people and causing widespread property damage. Over 4,000 people applied for federal disaster assistance in Montgomery County.

Strikingly, the storm hit areas already affected by poverty. In Trotwood, where at least 1,800 residents of an apartment complex were displaced, over 25% of the population lives below the poverty line. At least 750 homes in Trotwood were still vacant as of November 2020.

The day after the storm, we were able to immediately open the Drive Thru to provide aid to people affected. It became a one-stop-shop for people to both drop off donations and pick up the supplies and food they needed. This is where we really started to see the Drive Thru’s potential in supporting our disaster relief efforts.

In the month of June 2019, immediately following the storm, we were able to keep our Drive Thru open five days a week to meet the increased need in our area. We served a total of 9,085 people that month.

A New Type of Disaster

Unknown to us, the tornado outbreak would prove to be a trial run to a more widespread crisis: the COVID-19 pandemic. 

When food insecurity rates jumped due to the pandemic, we were able to expand the days our Drive Thru was open to four days per week. These distributions are naturally low-contact and easy to adapt to emergency needs. 

Because the Drive Thru is attached to our warehouse, we need minimal notice to host a food distribution. This was especially critical at the height of the pandemic as only 70 of our 116 partner agencies remained open and serving food. 

We also learned an important lesson about our Drive Thru. While the Drive Thru is intended to supplement the hard work of our partner agencies, people experiencing food insecurity for the first time often come directly to us. Where appropriate, we encourage our direct service clients to call our emergency hotline to be referred to a local pantry that can better serve their needs.

Due to this tendency, the percent of households that were visiting a Foodbank program for the first time was upwards of 70% at some of our Drive Thru distributions.

Drive Thru attendance is still higher than it was this time last year. Note: 2019 increases from June to August are due to the Memorial Day tornado outbreak

Currently, our Drive Thru is open Mondays and Wednesdays from 1-3 pm. As our hours are subject to change, especially during holidays please refer to www.thefoodbankdayton.org/needfood.

If you wish to visit our Drive Thru, please bring a photo ID and understand that you must be living at or below 200% of the federal poverty limit (230% during COVID) to receive food. The most up-to-date eligibility guidelines can be found at the bottom of this page.

Our Drive Thru has proven time and time again to be our most reliable means of getting food on the tables of our community. It has allowed us to provide a sense of security and reliability to families during tornadoes, a pandemic, and everyday emergencies like a higher than usual heat bill.