If you’re like most Americans, you believe that with hard work and perseverance, anyone can work their way from the bottom of our socioeconomic ladder to the middle, if not the top.
And surely, by now you’ve heard that poor people in the Charlotte region have a harder time doing that than in many other major cities. You’ve probably also heard that there’s a Charlotte-Mecklenburg Opportunity Task Force and other efforts to attack this problem.
But here’s a disturbing fact you might find less familiar: We don’t truly encourage poor people to work their way up from the bottom of the ladder. In fact, we actively discourage the poor from making the long, slow slog from minimum-wage worker to white collar professional.
And now, no doubt, you think I’m making this up. But it’s true.
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Here’s what happens for low-wage workers striving to move up. At some point, as they get more skills and training and gradually start earning more, they see such dramatic cuts in food stamps, child care subsidies and other benefits that it actually makes more financial sense – in the short term, anyway – to turn down a higher-paying job.
Social service workers call it the “benefits cliff.” It is a powerful killer of the American Dream. Sadly, most people don’t even know it exists.
Officials with Goodwill of the Southern Piedmont, who help train and place low-wage workers in new jobs, have seen it happen so many times that they’ve pulled together a “benefits cliff calculator” showing exactly how and when people decide that taking the next rung up the ladder is actually a financial step down.
For instance, say there’s a married couple with two kids, the youngest of whom is 4. Let’s say one parent makes $8.50 per hour, or $1,473 a month, and the other brings in another $2,000 per month.
Goodwill says their income falls far short of a true living wage in Charlotte, which is just over $5,000 per month for a family of four. They qualify for at least $1,122 in monthly public benefits, including subsidized school lunches, WIC benefits for children who are nutritionally at-risk, Medicaid, child care subsidies and the federal Earned Income Tax Credit.
But what happens if the $8.50-an-hour parent takes a $13-an-hour job? The family loses those benefits, even though that worker needs $18.50 an hour, working full-time, to lift the family to the living wage threshold. In the process, the family’s total monthly income from all sources falls by $342 when you factor in the lost benefits and the $13-an-hour job.
That’s the benefits cliff.
One man’s story
Octavious Young, whose struggles I wrote about this spring, knows all about it.
After spending most of his life barely getting by, he figured a construction apprenticeship might be his ticket to the middle class – or at least out of the run-down rental home where he’s killed two snakes.
The job with R.J. Leeper Construction certainly seemed an improvement over the $9.50-an-hour, 20- to 25-hour per week job he had with a Lowe’s Home Improvement store. The single father of two moved up to $9.75-an-hour, full-time if he wanted.
But he found that more actually added up to less. Officials with the SNAP program (as the food stamp program is officially known) killed his $480 per month allotment.
Further complicating things, the apprenticeship didn’t go well. Most of the subcontractors he was supposed to learn from spoke Spanish. He didn’t. He appreciated owner Ron Leeper’s attempt to help him, but he couldn’t see himself reaching a living wage anytime soon.
“That wasn’t working,” he told me recently. “I need something I can start a foundation on, not come to a dead end.”
The math dictated his next move. He dropped the apprenticeship and got back on food stamps. Now he’s looking for a part-time job again, and hoping to finish his GED through classes at Goodwill.
What can we do?
Before you criticize Young’s decision, put yourself in his shoes. Would you have put your children through the immediate financial pain (and hunger) to pursue a long-term goal that looked so uncertain? I can’t say I would have, given those circumstances. I would have looked for another way, as he is.
“This notion that people are not making good decisions is really not accurate,” said Michael Elder, Goodwill’s CEO. “The decisions they are making are actually good ones, based on the reality they’re facing.
“Then the issue becomes how do we help people bridge that (benefits cliff)? What can we do from a policy perspective?”
Slashing public benefits is not the answer. Those programs meet real needs. And nobody’s getting rich. The benefits in our examples here still leave families far short of what a real living wage provides. We do, however, urgently need to step benefits down more gradually as incomes rise, so people aren’t incentivized to give up on upward mobility.
Goodwill officials say Seattle and Cincinnati are among the communities that have taken a comprehensive, long-term look at this problem. It’s past time we did so in Charlotte, too.
Eric: 704-358-5145; firstname.lastname@example.org