Cliff Effect

What is the biggest barrier to getting out of poverty? The Cliff Effect.

Circles USA identified the cliff effect as one of the primary barriers to economic self-sufficiency. The cliff effect occurs when a family begins to earn above the limits set by the state and becomes ineligible for subsidies on food, housing, child care, and other benefits. For five years, Circles USA has been conducting research and developing tools to better inform individuals in poverty and policy makers.

In 2018, in conjunction with New Mexico First’s legislative platform, Circles USA completed a commissioned report with case studies and policy proposals for the state of New Mexico.

“When we have this discussion about moving people out of poverty, it’s really important to understand what we mean by that. Are we moving them above the federal poverty line, or are we really moving them to a self-sufficient life?”
— Meghan Cummings, executive director of Women’s Fund at Greater Cincinnati Foundation

Tools

Circles USA and our team of consultants have conceptualized the following tools.

For families, the Cliff Effect Planning Tool could estimate losses in state and federal assistance programs in relation to income increases. Therefore, individuals can more effectively plan for losses in benefits while they continue to generate more earned income, in order to bridge the gap to economic independence.

For policymakers, the Cliff Effect Mitigation Cost Effectiveness Calculator could predict how a program or policy change will affect the target population. For example, childcare assistance rules could be changed to pro-rated subsidies more evenly as people increase their income, but under what conditions? Would coaching and/or an information campaign be needed for a group to take advantage of the change and pursue opportunities for more earned income?

Cliff Effect planning tools predict losses in five major assistance programs for 18 different levels of income.

Recommendations

For Poverty Reduction Labs or Circles chapters interested in mitigating the cliff effect, Circles USA suggests the following process.

Deputize one person affiliated with Circles as the project leader. A dedicated staff position can coordinate development of the tools, fundraising, and advocacy efforts in your state.

Identify an ally within your local Department of Human Services. The key to creating these tools is having a government leader who appreciates Circles USA’s mission and is willing to participate in conversations about assistance program formulas.

Engage a professional coding team within your state to program the tools. A local coding team can be a technical ally to explain what is needed to state government agencies and may be able to leverage resources from the regional software development community.

Additional resources available for download:

Contact us for more information on the Cliff Effect.