Atlanta Fed explores benefits cliffs impacting low income families' career advancement

The Workforce Development Board meeting held on August 22, 2025, focused on the critical issue of benefits cliffs and their impact on low-income working families in Tennessee. The session began with a presentation on the concept of benefits cliffs, which occur when modest wage increases lead to the loss of public assistance programs, ultimately leaving families financially worse off.

The speaker shared a personal anecdote from their time as Florida's childcare state administrator, illustrating the dilemma faced by a parent who, after receiving a small wage increase, risked losing significant childcare subsidies. This example highlighted the broader implications of benefits cliffs, which can deter individuals from accepting job promotions or new employment opportunities due to fear of losing essential assistance.

The meeting also addressed research conducted by the Atlanta Federal Reserve, which revealed that nearly 38% of low-income families in Alabama had declined job offers due to concerns about losing public assistance. Additionally, a survey of HR directors in Florida indicated that 33% of employers had encountered situations where employees turned down promotions for similar reasons.

The discussion emphasized the long-term consequences of benefits cliffs, which can hinder career advancement and economic mobility for low-income families. The Atlanta Fed has developed tools to help families understand the financial implications of job changes and to navigate the complexities of public assistance eligibility.

One specific tool presented was a dashboard designed for individuals like Simone, a single parent in Memphis aspiring to become a licensed practical nurse. The dashboard illustrated the financial outcomes of remaining in a minimum wage job versus pursuing a nursing career, highlighting the potential for increased earnings and the impact of losing public assistance benefits.

The meeting concluded with a call to action for stakeholders to collaborate on solutions that address benefits cliffs, aiming to support low-income families in achieving economic stability and career advancement. The discussions underscored the importance of understanding the barriers to labor force participation and the need for effective strategies to mitigate the challenges posed by benefits cliffs.