Voices’ Blog

Avoiding the “Cliff Effect” and Promoting Economic Stability for Families

Posted:  -  By: Emily Griffey

At the end of this General Assembly Session, hard-working, low-income families will have access to more financial resources than they have in a very long time. We hope that more early childhood educators, health care workers, tourism and restaurant industry workers, and others typically earning low-wages will find more money in their pockets and more security for their families this year. Living paycheck to paycheck and experiencing the toxic stress related to economic hardship is an adverse childhood experience (ACEs) that can produce additional physical and mental harm on children.

Additionally, children of color are more likely to live in economically disadvantaged families than their White peers because of the accumulation of wealth afforded by many policy actions in the history of our country. Any action our lawmakers can take to boost economic stability will provide opportunities to put children of color on a path towards equitable family incomes.

Lawmakers have taken action this General Assembly Session to make financial assistance available to more low-income families. Proposals will move forward to:

  • De-link child care subsidy enrollment from participation in the state’s child support enforcement program;
  • Enable families of where a member has a former drug conviction to receive nutrition benefits;
  • Increase the eligibility levels and assistance amounts for families receiving Temporary Assistance for Needy Families (TANF) benefits.

A point of concern with these public assistance programs is that as wages go up, assistance could drop off when families earn too much income to be eligible. For example, if wages go up from $8 per hour to $10 per hour an individual’s gross yearly earnings of $16,640 would increase to $20,800. Someone eligible for benefits below 138% of poverty, such as Medicaid, would no longer be eligible at 150% of the poverty line when earning $10 per hour. If one increases wages to take away a large chunk of public assistance, this is considered a “benefit cliff.” However, Medicaid has other tools, such as tax credits on the health care marketplace, to buffer the impact of the “cliff effect” and help individuals maintain coverage. The Commonwealth Institute provides more detail on how SNAP benefits & health insurance programs. avoid a “cliff effect”.

Child care assistance offers a buffer to the “cliff effect” through a gradual phase out provision that enables families to keep a portion of their child care assistance payment until their income reaches 85% of the state medium income, or $58,068 a year for a two-person family. As the family’s income increases, their co-payment increases and the state’s payment decreases. This type of graduated phase out enables families to have continuity of care, seek pay increases without loosing benefits, and adjust their family budgets as wages and expenses increases.

The gradual phase out policies enacted with child care assistance enables families to keep the benefits that help them work and earn more money for their families to attain wealth. We must continue to work so that no children in Virginia feel the stress of economic hardship and so their parents do also do not feel those burdens.

Read More Blog Posts