Key Points

• The safety net for low-income families aims to offer temporary and targeted assistance so that, among other things, work-capable individuals and families can achieve their economic goals.
• Too often, safety-net design flaws create benefits cliffs that lead people to make financially rational decisions to reject pay raises or opportunities to work more hours. 
• This report offers a roadmap for policymakers wanting to address benefit cliffs and reduce the associated work disincentives. 

Executive Summary

The US safety net should help low-income families meet their immediate needs while supporting their long-term upward mobility. Yet certain program rules—especially those that create “benefit cliffs”—often do the opposite by discouraging work and trapping families in poverty. At its core, a benefit cliff occurs when government benefits decrease too abruptly as earnings rise, leaving some recipients worse off by working more. This discourages independence through work and jeopardizes upward mobility.

This report explores how current safety-net programs in the US create benefit cliffs and outlines an agenda for reform. We propose a two-pronged strategy. First, we highlight immediate reforms that program administrators and policymakers can implement within the safety net’s existing structure to offer near-term relief to participating households. Second, we outline comprehensive reforms to reconfigure the entire system and better support work, increase efficiency, and encourage two-parent families. Together, these steps are necessary to not only reduce benefit cliffs but also create a more efficient and effective safety net.

In the first chapter, we define the concept of benefit cliffs and explain why policymakers should be concerned about their negative effects on employment. The second chapter examines individual safety-net programs and highlights how specific program rules contribute to the benefit cliff problem. The third chapter outlines immediately actionable policy recommendations that state and federal administrators and policymakers can adopt to reduce benefit cliffs within the safety net’s existing structure. The fourth chapter offers a vision for comprehensive reforms designed to create a more efficient, pro-work, and pro-marriage safety net, followed by concluding thoughts.

Addressing benefit cliffs in safety-net programs is ultimately a federal responsibility, because programs are primarily authorized, funded, and designed by federal policymakers, with states administering them under federal oversight. Sustainable solutions to the design flaws that create benefit cliffs require a substantial federal role. For these reasons, this report focuses on federal actions to address benefit cliffs while highlighting changes states can pursue within the authority given to them by the federal government. Without such reform, state-led stopgap measures may yield partial progress yet ultimately will fall short.

A common proposal to address benefit cliffs is to extend program eligibility to higher-income households so that benefits can phase out more gradually. However, the trade-offs of such an approach—especially its substantial cost to taxpayers—outweigh the potential advantages. We believe that any reform to address benefit cliffs must consider the broader trade-offs associated with expanding eligibility for safety-net programs. Therefore, we identify three broad principles that should guide safety-net reform efforts, including those to address benefit cliffs:

1. The safety net should prioritize policies that support work and marriage as a proven way to escape poverty and achieve upward mobility.¹
2. Assistance for those capable of work should be temporary and targeted, though the safety net should offer sustained support for those permanently unable to provide for themselves due to disability or age.
3. Federal and state funding for the safety net must be grounded in fiscal responsibility, reflecting the government’s duty to be a good steward of public resources.

These three principles guide the two-pronged reform approach of immediately actionable items and comprehensive reforms that we outline in this report.