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Earlier this month, the Ohio Department of Job and Family Services announced it expanded 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 people who read the Ohio Capital Journal do. But the expansion is aimed at solving a problem that worries people across the political spectrum: the “benefits cliff.”
The benefits cliff is the buzzword (“buzzphrase?”) used to describe a common problem in policy design. A means-tested program focuses its resources on low-income households. This often means limiting eligibility based on income. For example, a cash assistance program could limit access to households with incomes below 150% of the federal poverty level.
The problem with a strict boundary, however, is that incentives arise on either side of the boundary that can have significant consequences for work decisions. For example, if your family receives €250 per month in means-tested assistance and you are offered a €100 wage increase that makes you ineligible for that assistance, you have a good reason to reject that wage increase.
Likewise, if you earn an income just above the eligibility threshold, this is an incentive for you to save hours to qualify. When you’re on the cliff, you don’t want to jump off. When you get to 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 advised nonprofits that want to improve the benefit gap problem to give families money that decreases as families earn more income. Unfortunately, the now-closed research firm I worked with refused to share this information with the client it was prepared for, saying this analysis was not relevant to the client’s work.
Fortunately, the Ohio Department of Job and Family Services is now proving them wrong. With their new expansion of the SNAP program, the department is offering what they call a “sliding scale” of benefits, stretching from the previous cliff of 130% of the federal poverty level to 200% of the federal poverty level. This means that in principle all low-income households are eligible for SNAP benefits, with households closer to 200% of the federal poverty level receiving lower amounts than households at 130% of the federal poverty level and below.
The benefits cliff is a policy problem of our own making. Well-designed policies can eliminate gaps. This does not remove incentives: households will still have some incentive not to accept raises, promotions, or more hours, because lower benefits are provided as income increases. But eliminating the cliff will make the incentives much less drastic.
This is a good example of government work. Both business people and anti-poverty advocates saw this as a problem with the system. Policymakers were willing to get to work and provide the resources to solve much of the problem. This will make Ohio’s benefits system more efficient. At a time when it’s easy to be cynical about what government can do, let’s welcome a clear victory when it comes.
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