One of the challenges we hear about often from employers and others in our work as CareerForce Workforce Strategy Consultants is the benefits cliff and the negative effect it has on employee recruitment and retention. The benefits cliff refers to the point at which a small change in income means a fast and sometimes unexpected reduction of certain economic supports that the family needs for economic stability. Low-wage employees may not want to take on additional hours or additional responsibility because the additional wages may push them over that tipping point, meaning they will lose more in health care, child care and other subsidies that they will make up in higher wages.
At a recent Regional Economic Indicators Forum (REIF) breakfast in Duluth, Monica Haynes, Director of the Bureau of Business and Economic Research for the University of Minnesota – Duluth presented information about the benefits cliff to local business, economic development and community leaders. Director Haynes and her team, consisting of Nathan Brand and Tommy Olafson, identified that a single parent with two children earning $26,000 annually in Northeast Minnesota and receiving economic support would have to earn approximately $45,000 annually without support to have the same level of economic stability. The benefits cliff may be different in different parts of Minnesota – and the U.S. – because of differences in cost of living and support program policies.
This benefits cliff research project was initiated last year when Director Haynes was approached by Shawn Herhusky, CareerForce Workforce Strategy Consultant for Northeast Minnesota, about working on a project combining labor market information provided by DEED’s Regional Labor Market Analyst, Cameron Macht, with information from the Children’s Defense Fund’s Economic Stability Indicator.
Director Haynes and her research team members developed data visualizations that show the location of the benefits cliff for an example family, overlaid with wage information from Northeast Minnesota. This research was first shared at the REIF breakfast and later shared with local CareerForce leaders along with Leading CareerForce partners, including the City of Duluth Workforce Development Board, Northeast Minnesota Office of Job Training and others to highlight the issues surrounding the benefit cliff.
You can see an article by Cameron Macht and me about the benefits cliff and some national and local proposals to try and address it in the March 2020 issue of Economic Trends Magazine.