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Guaranteed Income and Avoiding the Benefits Cliff
August 29, 2022
In 2020, over 37 million people in the United States lived in poverty. Many made ends meet by accessing benefit programs that provide help targeted for—and restricted to—specific needs, such as food, child-care, health insurance, or housing. While these programs are critical for covering many families’ basic needs, they are not flexible, meaning if a household needs less food one month, they are not able to leverage their food benefits to cover, say, a childcare-related expense. Guaranteed income (GI) is a type of program that differs from existing public benefit programs in one key way: It provides a flexible monthly cash payment directly to recipients to use as they see fit—whether that be to cover housing, childcare, food, or other household expenses.
Ideally, GI cash payments would supplement and support existing benefit programs rather than replace them, helping to fill in the gaps left by those other programs. However, due to current eligibility requirements for many benefits programs, receipt of GI may mean a family is unable to receive another targeted benefit, such as housing assistance. As cities and states across the country experiment with GI as a supplement to the existing social safety net, a critical question we need to understand is: How do GI programs interact with the existing network of benefits?
GI Can Impact Eligibility for Government Benefits
All current government benefits programs are “means tested,” that is, limited to certain income brackets and require recipients to show that they remain below the program’s specific income and assets cap.i When a person’s income or assets exceed those caps, either their benefits are cut off entirely (a “benefits cliff”) or reduced proportionally. As a result, receiving guaranteed income might threaten a participant’s receipt of other benefits, assuming their other income sources remain constant. An additional problem exists if a participant decides to save some of their income, for example to create an emergency savings account. Building savings in this way could also mean losing access to their benefits. Programs that have such income and asset caps include Housing Choice Vouchers (Section 8), Supplemental Nutrition Assistance Program (food stamps), Social Security Disability, TANF (Temporary Assistance for Needy Families), childcare vouchers, Earned Income Tax Credit, and child-care benefits. Recipients may also receive various state tax credits and other temporary assistance programs with caps, such as energy assistance programs.
However, some participants may still decline GI, since certain benefits may be harder to re-qualify for if lost. For example, initial results from the Stockton Economic Empowerment Demonstration (SEED) in Stockton, California, found that individuals receiving Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) were more likely to decline GI since qualifying for SSI/SSDI is notoriously difficult.ii
Navigating the Impacts
GI pilot programs have been addressing this challenge by offering benefits counseling so that participants are able to assess the impact of receiving GI on their existing benefits. For example, the Federal Reserve of Atlanta has created a tool to help GI program staff provide such counseling. Some GI pilots also establish a Hold Harmless Fund. These funds will reimburse a participant for any benefits loss due to receiving GI. Other states have provided some exemptions which allow GI recipients to continue receiving certain benefits.
As we look across the many different GI pilots in operation currently, a key consideration to address is how the benefits qualification criteria influences GI program participant decision-making and overall well-being. Understanding the considerations and trade-offs participants make would help practitioners and policymakers decide where to prioritize benefits exemptions at the state and federal level for any federal or state-level pilot programs. Such insights will also help better design benefits counseling to meet the needs of GI participants.
Additionally, since the GI programs are usually time-limited pilots, participants may be subject to a benefits or income cliff at the end of the pilot. Participants may have questions about how to make ends meet or need help with accessing benefits lost during the pilot program. As we learn how participants fare at the end of a pilot, program designers may want to consider offering GI exit counseling.
Closing the Gaps
As policymakers consider state-wide and federal GI pilot programs, researchers can contribute by building a clearer understanding of the interactions between existing benefits and GI. Funders and public entities can support a robust learning agenda that takes into account the varied state benefits policies and seeks to understand the range of participants’ experiences and perspectives. The findings will enable both pilot programs and longer-term permanent programs to enact appropriate benefits exemptions, or work within the existing benefits program frameworks that are still so important to so many.
i Income is usually calculated through the overall household income. Assets are calculated as any savings, retirement, or other tangible wealth held by the household. ii Castro-Baker, A. Martin-West, S., Samra, S. and Cusack, M. 2020. “Mitigating loss of health insurance and means tested benefits in an unconditional cash transfer experiment: Implementation lessons from Stockton’s guaranteed income pilot.” Population Health 11 (2020) 100578