Advancing Careers for Low-Income Families
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
Articles
John Robertson, Alexander Ruder. "Do Higher Wages Mean Higher Standards of Living?," macroblog. January 16, 2020.
Presentations
- Benefits Cliffs and Career Choice: Understanding the Financial Incentives for Career Advancement
, AASD/NASTA Annual Educational Conference, Charlotte, North Carolina, August 26, 2019 - Benefit Cliffs: An Exploration with the Atlanta Fed
, Early Learning Coalition of Orange County and Orlando Economic Partnership, Orlando, Florida, August 14, 2019 - Workforce Development as a Driver of Economic Mobility
, "Evening with the Fed" at the Birmingham Branch of the Federal Reserve Bank of Atlanta, Birmingham, Alabama, July 29, 2019
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
- Benefits Cliffs and Career Choice: Understanding the Financial Incentives for Career Advancement
Resources
Federal Reserve System Resources
- Opportunity Occupations Monitor
- Center for Workforce and Economic Opportunity
- Investing in America's Workforce

Employer Resources
Contacts



