Opinion: Work matters, but removing assistance penalties for working also matters

The Colorado General Assembly session ended last month with mixed success for efforts to assist the state’s low-income, working families. Lawmakers approved measures to curb skyrocketing property taxes and utility costs, expand paid sick leave, and protect tipped wages, but failed to pass bills to control rents, limit evictions and mandate a fair work-week.

Many pro-worker priorities arguably suffered from a scattershot approach to law-writing, attempting (but largely failing) to capitalize on solid Democratic majorities. To prevent disaster for Colorado families, next year’s session must focus on the lower income brackets: families that are working, but losing access to benefits crucial to keeping them above the poverty line.

The issue: Minimum wages and benefit eligibility structures are dramatically out of sync with our state’s spiraling cost of living. More and more families are falling into poverty as a result, despite one or more household adults holding down a full-time job.

Minimum wages have rightly drawn lawmakers’ attention in recent years, gradually increasing from $8.31 per hour in 2016 to the current $13.65 statewide, and to $17.29 in Denver. While significant, these increases still fall well short for most single-parent families: in Denver County, the self-sufficiency standard for a family with one adult and one preschooler is $33.08 per hour.

Safety net programs – such as food and energy assistance, access to Medicaid, along with housing and childcare subsidies – exist to pick up the slack. Many require recipients to work to maintain eligibility, with the long-term goal of helping recipients move up the pay scale so they eventually no longer require subsidies. Most people who receive subsidies are employed.

But that’s not the whole story. 

Eligibility is further determined by income thresholds. Though the minimum wage is set at a local level, the qualifying thresholds for benefits are based on Federal Poverty Level Guidelines. These guidelines assume that food is one-third of each household’s costs and that all other expenses fit within the remaining two-thirds. Developed in the 1960s, the guidelines  do not account for rising healthcare and housing costs or other changes in household costs, such as technology.

Though certainly well-intentioned, Colorado’s minimum wage growth has outpaced annual cost of living adjustments made to the Federal Poverty Level Guidelines. This is leading workers to experience “benefits cliffs” – the sudden and total loss of benefits because their income exceeds the amount allowed to qualify for public benefits, even though that income is still less than the self-sufficiency standard.

In other instances, minimum wage increases do not change eligibility, but the assistance is reduced. Some benefits require workers to pay a percentage of their incomes. For example, Section 8 vouchers for housing require tenants to pay 30% of their income for rent. Under this formula, if you earn more, you pay more.

The net result in both cases — the loss of benefits, or the requirement to devote a larger amount of earnings to housing — the net result is a decrease in household income. In these instances, many low-wage workers are better off earning less, creating a disincentive to work.

I have witnessed the demoralizing effects of benefits cliffs. I watched as a woman receiving $150 per month in food assistance to help support her four children was cut to $25 per month because her minimum-wage job (at the time about $8.00 per hour) paid her too much. In her first moments of despair after learning of this cut, she wondered why she was working so hard to change her life. As a former drug dealer who had spent time in federal prison, she clearly remembered how her past ill-gotten income allowed her to easily support her family. But she knew that was not the future she wanted for herself or her family.

There is dignity in work that does not exist by merely surviving on public assistance. This is why work requirements matter. But changing systems that disincentivize work also matters.

As long as there is a gap between self-sufficiency and the amount earned by low wage workers, they will continue to need assistance even as they move up the pay scale. We must make work worth it. When used well, public assistance can supplement household incomes for the short-term to help families make ends meet while low wage workers maintain employment and move up the pay scale. Outdated benefits testing from the federal government works against local efforts to incentivize employment for the most vulnerable workers.

The real path to economic mobility is persistent employment, education, and training. If our systems help people maintain employment, eventually they will require less support as they move out of poverty. 

Tamra Ryan, of Denver, is the Common Sense Institute Coors Economic Mobility Fellow and CEO of the Women’s Bean Project, a social enterprise providing transitional employment in its food manufacturing business to women attempting to break the cycle of chronic unemployment and poverty.