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Earlier this month, the Ohio Department of Job and Family Services announced it was expanding eligibility for SNAP benefits, the program formerly known as “food stamps.”
This may come as a surprise to those who follow state politics in Ohio, which I assume most who read the Ohio Capital Journal do. But the expansion is aimed toward fixing a problem that people across the political spectrum are worried about: the “benefits cliff.”
The benefits cliff is the buzzword (“buzzphrase?”) used to describe a prevalent problem in policy design. A means-tested program focuses its funds on low-income households. This often means limiting eligibility based on income. For instance, a cash assistance program could limit eligibility to households with incomes under 150% of the federal poverty line.
The problem with a strict cutoff, however, is that it creates incentives on either side of the cutoff that can significantly impact work decisions. For instance, if your family gets $250 a month in means-tested cash assistance and you are offered a $100 raise that will make you ineligible for that assistance, you have a good reason to turn down that raise.
Similarly, if you earn income just over the eligibility threshold, this provides an incentive for you to cut hours to gain eligibility. If you are at the cliff, you don’t want to jump off. If you are at the bottom of the cliff, you want to get back on top.
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When I was in graduate school, I did my capstone project on this problem. I recommended nonprofits aiming to ameliorate the problem of the benefits cliff provide cash to families that eases off as families make more income. Unfortunately, the now-closed research firm I worked with declined to share this information with the client it was prepared for, saying this analysis was not relevant to the client’s work.
Luckily, the Ohio Department of Job and Family Services is now proving them wrong. With their new expansion of the SNAP program, the Department is providing what they are calling a “sliding scale” of benefits that extend from the previous cliff of 130% of the federal poverty line to 200% of the federal poverty line. This means basically all low-income households will be eligible for SNAP benefits, with households closer to 200% of the federal poverty line receiving lower amounts than those at 130% of the federal poverty line and below.
The benefits cliff is a policy problem of our own making. Well-designed policies can eliminate cliffs. This does not eliminate incentives: households will still have some incentive to not take raises, promotions, or more hours due to lower benefits being provided as income increases. But eliminating the cliff will make the incentives much less drastic.
This is a great example of government working. People in the business community and poverty advocates both saw this as a problem with the system. Policymakers were willing to come to the plate and make the resources available to solve much of the problem. Ohio’s benefit system will be more efficient because of this. In a time when it is easy to be cynical about what government can do, let’s applaud a clear win when we have one.
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