Advancing Careers for Low-Income Families

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Advancing Careers for Low-Income Families

This project examines how benefits cliffs reduce the financial incentive for low-income individuals to enroll in training for a higher-paying job, work more hours, or advance in their career. We offer policymakers, practitioners, and researchers a variety of resources that show both the short-term and lifetime financial gains from credential attainment for an individual and the net public savings to government when low-income individuals advance along a career path.

  • Issue Briefs

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    Benefits Cliffs as a Barrier to Career Advancement

    Leia's Dilemma

    Leia is a 25-year-old single mother of two children, ages four and six, who lives in .

    She works full-time in a low-wage job as a movie theater concessions worker.

    As a low-income working mother, Leia receives public benefits and tax credits that are necessary to support herself and her family: food stamps, Medicaid for her children, Affordable Care Act subsidies, housing vouchers, childcare subsidies, the Child Tax Credit, and the Earned Income Tax Credit.1

    Leia has decided to become a certified nursing assistant (CNA), an entry-level job in the health care field. She wants to return to school eventually, earn a more advanced credential, and get a higher-paying job.

    Does she have a financial incentive to continue up the health care services career pathway to become a licensed practical nurse (LPN) or a registered nurse (RN)?

    Leia looks at her projected net financial resources and sees a discouraging picture.2 A benefits cliff, or a loss in public benefits due to income exceeding eligibility thresholds, reduces her financial incentive for career advancement.


    Career-Advancing Policies Can Be a Good Investment for the Taxpayer

    A Policy View of Leia

    Helping Leia ascend the health care services career pathway affects government finances in two ways.

    First, higher earnings allow her to support her family with fewer taxpayer-funded benefits.

    Second, having higher earnings means Leia pays more taxes to the government.

    Combining both, how much does the taxpayer save when she advances to higher-paying occupations?

    The net public savings to the taxpayer (tax revenue minus public benefits expenditures) from career advancement are significant.

    The chart below shows the incremental gain to government (federal and state) for each occupational transition. At every stage, the taxpayer gains. In total, when Leia advances from a concession worker to an RN, the savings to the taxpayer is approximately $.3

    In summary, policies that support the advancement of low-wage workers like Leia can be a net gain for the worker and for the taxpayer.


    1. We assume Leia receives all listed public benefits and tax credits. In practice, due to waiting lists, difficulties in applying and determining eligibility, and other reasons, few Americans qualify for and receive all these benefits.

    2. Net financial resources are calculated as the sum of income and public benefits minus basic living expenses and taxes. Basic living expenses include estimates of food, housing, childcare, and health insurance based on location, household size, age of family members, and type of health insurance.

    3. These net public savings calculations are specific to the assumptions of Leia’s situation. All amounts are discounted to present value.

    For more information on The Fiscal Analyzer, see kotlikoff.net/wp-content/uploads/2019/03/Online-appendix-6-5-19-.pdf

  • Benefits Cliff Charts

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    For more information on The Fiscal Analyzer, see kotlikoff.net/wp-content/uploads/2019/03/Online-appendix-6-5-19-.pdf

  • Research

    Atlanta Fed Community and Economic Development Discussion Papers

    Benefits Cliffs and the Financial Incentives for Career Advancement: A Case Study of the Health Care Services Career Pathway
    David Altig, Elias Ilin, Alexander Ruder, and Ellyn Terry
    Discussion Paper 2020-1 (January 2020)
    Abstract | Full text Adobe PDF file format

    Articles

    John Robertson, Alexander Ruder. "Do Higher Wages Mean Higher Standards of Living?" macroblog (January 16, 2020)

    David Altig and Laurence J. Kotlikoff. "A Different Type of Tax Reform." macroblog (March 22, 2019)

  • Presentations

    David Altig: 2019 Florida Business Leaders' Summit on Prosperity and Economic Opportunity, May 23, 2019, West Palm Beach, FL

    David Altig: Investing in America's Workforce Conference, October 5, 2017, Austin, TX

  • Resources

  • Contacts

    Key Contacts

    Photo of Dave Altig
    David Altig
    Executive Vice President and Director of Research
    dave.altig@atl.frb.org
    photo of Alex Ruder, Principal Adviser, Community and Economic Development
    Alex Ruder
    Principal Adviser, Community and Economic Development
    alexander.ruder@atl.frb.org
    Adrienne Slack
    Adrienne Slack
    Vice President and Regional Executive
    adrienne.c.slack@atl.frb.org

    Team

    Stuart Andreason
    Stuart Andreason
    Center for Workforce and Economic Opportunity
    Brittany Birken
    Brittany Birken
    Community and Economic Development
    Rebekah Durham
    Rebekah Durham
    Regional Economic Information Network
    Sandra Ghizoni
    Sandra Ghizoni
    Research
    Karen Gilmore
    Karen Gilmore
    Regional Economic Information Network
    Laurel Graefe
    Laurel Graefe
    Regional Economic Information Network
    Rebecca Gunn
    Rebecca Gunn
    Regional Economic Information Network
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    Elias Ilin
    Research
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    Julie Kornegay
    Economic Education
    Karen Leone de Nie
    Karen Leone de Nie
    Community and Economic Development
    Austin McTier
    Austin McTier
    Research
    Anoop Mishra
    Anoop Mishra
    Regional Economic Information Network
    Emily Mitchell
    Emily Mitchell
    Regional Economic Information Network
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    Jason O’Rouke
    Public Affairs
    Chris Oakley
    Chris Oakley
    Regional Economic Information Network
    Shalini Patel
    Shalini Patel
    Regional Economic Information Network
    Ellyn Terry
    Ellyn Terry
    Research