How Low-Paid Parents Navigate The Complex Financial Landscape Of Benefits Cliffs And Disincentive Deserts

Abstract

Policy makers are concerned that benefits cliffs—the phenomenon by which low-paid workers abruptly lose public benefits as their wages increase—may disincentivize work. The related concept of disincentive deserts refers to occasions when pay increases have little or no effect on a worker’s financial well-being because of the resulting gradual reductions in public benefits. Little is known about how low-paid workers navigate this complex financial terrain. Based on in-depth interviews with twenty-five low-paid parents, this article reveals that parents’ decisions about how much to work when facing benefits cliffs and disincentive deserts are based on their nuanced assessments of their currently available resources—financial, material, and emotional—of which public benefits are just one small piece. The primary driver of parents’ decision making is their ability to care for their families. In no case did they base their decisions solely on a particular wage, income level, or ability to maintain public benefits. Thus, economic modeling, which draws conclusions about the impact of public benefits policies based solely on financial resources from work and benefits, is insufficient for understanding how parents make difficult choices when time, stress, and health are also relevant factors. The article concludes with recommendations for policy makers to expand and simplify public benefits.