Losing Ground: The Cliff Effect

Last Updated by RMPBS News Staff on

The measures passed by Congress and signed by President Bill Clinton in 1996 “to end welfare as we know it” were heralded as a ticket to economic self-sufficiency. The poor would be encouraged to enter the workforce and eventually leave all welfare assistance behind.

In this Colorado-based scenario, a single working parent with two children is shown breaking even with a combination of wages and work support benefits that include child care assistance, food stamps, Medicaid and income tax credits. However, as the parent’s earnings rise, she begins to lose benefits, with child care assistance the largest by far.
The cliff effect occurs when even a modest increase in income leads to a complete termination of a benefit and a large net loss to the family.

But for most of the tens of thousands of working poor families in Colorado, the vision of self-sufficiency is illusive

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