Benefit Cliffs and Plateaus: When Higher Wages Don’t Always Result in Higher Incomes
PHI has released the latest issue in its #60CaregiverIssues public education campaign: Benefit Cliffs and Benefit Plateaus: Do Higher Wages Result in Higher Incomes for New York City’s Home Care Aides? This study examines a unique problem facing many home care aides and other low-income workers: a higher wage doesn’t always translate to a higher income when public benefits play a role.
To explore this phenomenon, PHI examined how the increase in minimum wage in New York City impacts public benefit eligibility for home care aides, and in turn, their overall incomes. For this study, PHI defined total income as the combination of wages and the cash value of public benefits.
PHI’s new study shows that in certain circumstances benefits are structured as they’re intended: as an aide’s wage increases, or as they work more hours, their overall income increases. Unfortunately, this is not always the case.
In some cases, benefits decrease more than wages increase, which creates a benefit cliff where the aide’s total income decreases. And in other instances, benefits decrease at the same rate as wages increase, which creates a benefit plateau where the aide’s total income remains the same. In short, due to benefit cliffs and plateaus, an aide’s total income doesn’t always increase when they work more hours or their wage increases.
Although this study focused on New York City, the findings highlight an important issue facing many low-income workers nationwide. An increase in the minimum wage is only part of the solution for ensuring that home care aides and other low-income workers can make ends meet.
“Policymakers need to explore how to restructure our public benefit system so that earning a higher wage and working more hours results in a higher income,” said Allison Cook, PHI’s New York Policy Manager.
Watch the benefit cliffs and plateaus slideshow here.