At some income levels, an increase in earnings can do more harm than good.
Individuals who face situations like this are on a benefit cliff — when a slight increase in earnings results in a steep decrease in welfare benefits.
Families or individuals may become ineligible for benefits they previously received, such as housing choice vouchers or child care subsidies, when their income passes a certain threshold.
Many of these public benefit programs have hard cut-offs, meaning a small change in income can be the difference in receiving a benefit or being denied.
Benefit cliffs can make it difficult for workers to progress in their careers and cover short-term needs since they must decide whether to take a raise or if the loss in their benefits would outweigh any gain.
“The benefits cliff is a very clear example of what happens when we don't design policies really effectively,” Logan Rockefeller Harris, a senior policy analyst at the N.C. Budget & Tax Center, said.
According to United Way, a community-building organization, those most impacted by benefits cliffs are ALICE households: Asset Limited, Income Constrained and Employed. These households make too much money to be considered in poverty, but not enough to live comfortably.
In 2018, almost 30 percent of the population of North Carolina were ALICE households.
One of the steepest benefit cliffs is caused by losing child-care assistance.