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I was first introduced to the “cliff effect” three years ago. The Women’s Foundation of Colorado (WFCO) uses the term to (and I’m quoting myself here) “describe how public support systems create ‘cliffs’ where a small increase in income leads to the total loss of a benefit, sometimes leaving families worse off financially than before.” Translation: A woman in fiscal year 2011 (the most recent data available, saying 83 percent of Temporary Assistance for Needy Families recipients were female) who is offered a promotion at work may be reluctant to take it because the bump in pay could make her ineligible for child care assistance, food stamps, or other assistance. More often: She agrees to the position without realizing the net negative impact it will have on her family and financial situation. “If you take the 50-cent raise and then lose those supports prematurely, you end up with a life of dependence instead of independence,” says WFCO president and CEO Louise Atkinson.
Things have changed in the years since I was first introduced to this issue: The minimum wage in Colorado is now $8 per hour (as opposed to $7.36). A single parent living in Denver County with a preschool-age child now needs to earn $42,245 annually to be considered self-sufficient; that’s an increase of about $2,000 since 2011. (According to the Colorado Center on Law and Policy, an advocacy group, the self-sufficiency standard is how much a family must earn to meet its basic needs.) According to the WFCO, half a million people in the state are living in poverty, and “women with children have the lowest median family incomes of all family types at $26,705,” well below what they need to stand on their own.
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But improvements are evident also. Today, Governor Hickenlooper will sign three bills into law that focus on the cliff effect and the high costs of child care in the state:
- Colorado Child Care Assistance Program Changes (HB14-1317): This creates, among other things, what Atkinson calls a “graduation of payment,” so when a woman takes that raise or promotion, she doesn’t lose her benefits outright. Instead, her copayment schedule is gradually increased as her salary grows so she is able to wean off public assistance more effectively and with less disruption to her life and her family.
- Colorado Child Care Assistance Program Cliff Effect (SB14-003): This strengthens a 2012 bill (SB22) that created a pilot program to offered a sliding scale (similar to the above legislation) for child care work supports by directing funding to help counties cover costs related to running a program. (According to the WFCO, child care can account for nearly half of a single woman’s income.)
- Income Tax Credit for Child Care Expenses (HB14-1072): This offers a child care expenses tax credit for residents with a federally adjusted gross income of $25,000 or less, which allows them to receive refunds they weren’t able to in the past.
All three are steps toward the WFCO’s ultimate goal of eliminating the cliff effect from our lexicon. “It takes time, but we feel like we’re making really good progress,” Atkinson says. “Long-term it really is better for the state of Colorado because then more women are contributing and getting on their feet and less work supports are being paid. They’re taking care of their families. They’re increasing their earnings. It’s really a huge benefit for our Colorado women and also for the state.”
—Image courtesy of Shutterstock