Veering Away from the Cliff Effect

Nov 15, 2016

The nonprofit Iowa Policy Project is out with the third part of its 2016 study on the cost of living in the state.This one focuses on the public support systems in place to assist low-income working families.

The report by the research director at the Iowa Policy Project, Peter Fisher, identifies so-called “cliff effects” within low-income assistance programs. These occur when a families higher wages result in the loss of public support. He says, for example, Child Care Assistance disappears at 145 percent of the poverty level.

“There are only ten states in the country that have an eligibility ceiling lower than Iowa at 145 percent of poverty," Fisher says. "So we’re on the low end of things there.”

Fisher says this means a single parent with one pre-school child would lose benefits while making $11.15 an hour. He suggests policy makers in Iowa raise the eligibility cutoff for Child Care Assistance.

“What if you went up to 200 percent of poverty, which a lot of states are at," he says. "And then increase the co-pay, in affect doubling it when you get up to 200 percent.”

Fisher says losing this public financial support discourages parents from looking for higher paying jobs.