Numerous welfare programs have steep benefit cliffs, where increased earnings lead to a greater loss of benefits. For example, a worker in Illinois could lose over $25,000 in benefits by accepting a raise from a $54,000 annual salary to $55,000 per year. A worker in Georgia who accepts a $1,000 raise to $25,000 per year could lose nearly $6,000 per year in SNAP benefits. These high marginal tax increases, where accepting pay raises or increasing working hours makes a family financially worse off, are a disincentive to work and mobility, leaving families feeling stuck and perpetuating dependency on government programs. A new bill in Congress aims to fix that.
Upward Mobility Act
The Upward Mobility Act, sponsored in the House of Representatives by Rep. Blake Moore (R-UT) and in the Senate by Sen. Jon Husted (R-OH), would help address this issue by allowing up to five states to create pilot Upward Mobility grants with the goals of increasing employment among beneficiaries and reducing benefit cliffs. The grants would bundle funding for several welfare programs into a single grant, including SNAP, TANF, Section 8 housing vouchers, heating assistance, childcare block grants, and more.
States could use the Upward Mobility grants to make changes to program design, delivery, operation, allocation of funding, and more, to create a welfare program that would reduce barriers to employment, opportunity, and mobility. State welfare data and grant program outcomes would be evaluated and monitored by an independent third-party evaluator. States could apply for a full Upward Mobility Grant, which would fully replace the existing antipoverty funding for those states (with funding increasing with inflation), or apply for limited scope grants and still maintain partial funding for existing welfare programs.
Reducing Benefit Cliffs
The Upward Mobility Act has several positives. First, the bill would increase dignity and opportunities for welfare recipients by reducing benefit cliffs. Benefits cliffs are a significant barrier to economic mobility and reducing welfare dependency. Over 20% of working welfare recipients admit to having turned down higher pay or taking on extra shifts due to fear of losing benefits. A survey from Utah found that over 60% of welfare recipients feel stuck in their employment situation, since earning more could trigger a benefit cliff. By allowing states to design a program that reduces the marginal tax increase imposed by a benefit cliff, the Upward Mobility Act encourages benefit recipients to realize greater employment opportunities and empowers them to reach their full potential.
Unleashing State Innovation and Bottom-up Solutions
Second, the Upward Mobility Act encourages state-level reform and innovation. For too long, the federal War on Poverty has imposed top-down, one-size-fits-all solutions that have cost Americans trillions of dollars with little improvement in poverty statistics to show for the spending. This bill empowers states to create bottom-up innovative program designs and allocations to increase opportunities and reduce barriers for benefit recipients.
And we know that states can be laboratories of democracy in welfare reform. For over 30 years, Utah has used the One-Door model of integrating federal and state funding for both welfare and workforce services, streamlining and better connecting benefit recipients to career training and opportunities. The One-Door model has helped reduce Utah’s SNAP participation rate to just 4.8% of the population, as opposed to over 12% for the U.S. as a whole. Utah also has a significantly higher labor force participation rate, and lower unemployment rate, than the rest of the country. The success of Utah’s program has garnered interest from other states looking to potentially implement One-Door policies as well.
Reducing Bureaucracy
Additionally, the Upward Mobility Act would reduce administrative costs for these welfare programs. By combining several existing programs into a single funding stream, states could reduce administrative costs and bureaucratic delays, saving money for state governments, and reducing headaches for benefit recipients and program practitioners alike.
Last year, AFP proposed combining numerous federal welfare programs into a single State Empowerment Block Grant and combining federal health programs into a single Healthy American Block Grant, allowing states greater flexibility in designing and administering welfare programs and encouraging innovation in the anti-poverty program space. While not as transformational as a State Empowerment Block Grant, Rep. Moore’s Upward Mobility Act is a step in the right direction.
Ilana Blumsack is a Senior Housing Policy Analyst at Americans for Prosperity.
