What is the “welfare cliff?” Why is it important?
a large magnitude of support. The potential sum of welfare benefits can reach $47,894 annually for single-parent households and $41,237 for two-parent households. Welfare benefits will be available to some households earning as much as $74,880 annually.
Welfare cliffs are significant and can trap families. A single mom has the most resources available to her family when she works full time at a wage of $8.25 to $12 an hour. Disturbingly, taking a pay increase to $18 an hour can leave her with about one-third fewer total resources (net income and government benefits). In order to make work “pay” again, she would need an hourly wage of $38 to mitigate the impact of lost benefits and higher taxes.
The system is inequitable. A minimum wage increase to $10 an hour would push a household where both parents work for minimum wage over the welfare cliff. They would suffer a net loss in household resources of about $9,000 as reduced government benefits more than cancel out the higher wages.
The welfare state in many respects (not all) is a trap. Once under the wing of Uncle Sam it is hard to get out. Indeed for many people it may be irrational to get out. (When factoring things in simple dollar terms. It may be rational to cut government dependence when considering other factors.)
And as should be noted when talking about the welfare state, corporations and other large interests are often on welfare too.