Illinois can learn from Massachusetts, Washington D.C. for career programs

Illinois can learn from other programs on how to prepare residents facing a benefits cliff, where low-income families are penalized for advancing in their careers.

The federal government is making it harder for individuals to experience the dignity of work because of something called the “benefits cliff.” To empower more Illinoisans to rise out of poverty, Illinois needs to smooth these cliffs.

Fortunately, there are some programs worth watching in Massachusetts and the District of Colombia that might help. Work is the best pathway out of poverty. Chicago’s poverty rate stands at 17.2%, but plummets to just 2.3% for those with full-time, year round employment.

What is a benefits cliff?

The Institute for Research on Poverty at the University of Wisconsin-Madison defines a benefits cliff as a situation in which even a small income increase triggers “a loss of public benefits equal to or greater than the dollar value of the income increase.” Benefits cliffs prevent families from making ends meet and force them to choose between less benefits or stunted professional growth.

Working parents have had to turn down promotions or new job offers that provide a pathway out of poverty because pursuing those opportunities would prevent them from giving their children a quality education or would cause them to lose their home.

Sadly, far too many poor Americans face these cliffs. Polling has found 85% of low income families or 22.5% of all Americans face the benefits cliff. In Chicago, interviews with low income mothers and child care administrators reveal many low income families are turning down increased wages and hours to avoid falling over the particularly severe benefits cliff created by state childcare and development subsidies and becoming suddenly unable to care for their children.

Fortunately, pilot programs which combine private workforce development with measured public cash transfers may prove to be examples that both Chicago and Illinois can emulate to improve backfiring anti-poverty programs.

The Cliff Effect Pilot Program by Springfield WORKS was established in 2022 to direct $1 million in state funding to help 100 Western Massachusetts families struggling with the benefits cliff achieve financial independence within three years.

The program provides up to $10,000 in supplemental cash assistance as a savings bridge when they lose assistance, allowing families to pursue opportunities that promise to make them financially independent in the long-term without fear of falling off the benefits cliff tomorrow.

Springfield WORKS builds participants’ human capital by connecting them with mentoring and employment opportunities through private sector partners eager to fill high-paying positions, paying at least $25 dollars an hour.

While the status quo ensnares the invisible hand of markets by dissuading talented professionals from staying in the labor force or working more hours, Springfield WORKS does the opposite, pulling the invisible hand forward by connecting firms and working families to form win-win relationships in which companies fill vacant positions and families are able to access the dignity of work and escape poverty.

The Springfield WORKS program is just one example of a fundamental rethinking of what our public benefits programs might look like.

Washington D.C.’s Career Mobility Action Program takes a similar approach. It invests $13 million into integrating cash transfers with career development services to help families escape poverty. It’s already generating promising data that serves as a compelling proof of concept.

Career MAP operates on three pillars:

• Household Resources: Providing a hold harmless fund of up to $10,000 dollars ensures families that would otherwise cross the benefits cliff avoid losing more in benefits than they make in wages.
• Career Advancement: Services through partnerships between the Department of Human Services and the private sector alongside providing participants with a dedicated navigator or career coach,
• Family Support: Access to financial advice and affordable childcare.

These pillars have provided promising support for those in the program. An analysis by the Federal Reserve Bank of Atlanta found that the Career MAP program has smoothed out the benefits cliff for those earning between 50% and 150% of the federal poverty line. For this group, the average participant would have lost more in benefits than they could have made by receiving a raise or working more hours. Upon enrollment, that flips. The average participant is now likely to lose only half as much in benefits cuts as they make in raised wages.

This effect continues for those above 150% of the poverty line but who still face benefits cliffs. Prior to the program, a single working parent with one toddler making $60,000 would face losing $3000 in benefits if they earned $1000 in additional income. After enrollment, that family loses far less in benefits than it gains from the same $1000 raise.

While the hold harmless fund is the primary reason for the program’s success addressing the benefits cliff, the data also shows that the program’s emphasis on career counseling and advancement has positively impacted participating families. Just one full year into the program, more than 10% of participants have found new employment while 90% of families report that they continue to use the Career MAP navigator to help them find opportunities to grow professionally. While that’s far from a perfect record, it’s a step in the right direction – especially given that the Washington D.C metro area has seen lower job growth than most major U.S. cities over the past three years.

There is a real need for a rethinking of social safety net programs here in Illinois. A recent University of Chicago study shows that Illinois is no exception to the national problem of the benefits cliff. If anything, the situation here is even worse. Take a single mother in Chicago with two children whose salary increase from $54,000 to $55,000.

Just how large is the benefits cliff they face? While that family would gain $1,000 in additional wages, they would lose more than 20 times that amount in childcare subsidies alone. That creates a disincentive for the 72,000 Illinoisans who receive subsidies to invest in skills development and career advancement.

Illinois needs to innovate and find ways to smooth out the benefits cliffs for those receiving benefits. For far too long, Illinois has been content to hand out large cash transfers without offering a helping hand to those hoping to gain in-demand skills that will continue to pay dividends even when their eligibility for benefits runs out. Depending on how they fare, the Career MAP and Springfield WORKS programs might provide a model for Illinois to innovatively smooth benefits cliffs.