Benefits cliffs refer to a situation in which a small increase in income leads to a significant reduction or complete loss of government benefits, which can create a disincentive for individuals to increase their income through work. The biggest drivers of Arkansas’s benefits cliffs are the Supplemental Nutrition Assistance Program (SNAP), the Medicaid program, and the Arkansas Child Care Assistance Program (CCAP).

In each of these areas, as an individual’s income increases, their eligibility for certain benefits drops off faster than an increase in income can support. The result is a net reduction in their overall income.

Arkansas’s Most Common Benefits Cliffs

In the state of Arkansas, there are several benefits cliffs that individuals may encounter as they earn more income.

Arkansas’s SNAP Cliff

One of the biggest sources of cliffs is the Supplemental Nutrition Assistance Program (SNAP), which provides food assistance to low-income households. In Arkansas, the income limit for SNAP is 130% of the federal poverty level. If an individual's income increases above this threshold, their SNAP benefits may be reduced or eliminated entirely.

Arkansas’s Medicaid Cliff

Another program that can create benefits cliffs in Arkansas is Medicaid. Medicaid provides healthcare coverage to low-income individuals and families. In Arkansas, the income limit for Medicaid is 138% of the federal poverty level. If an individual's income increases above this threshold, they may no longer be eligible for Medicaid.

Arkansas’s Child Care Assistance Cliff

The Arkansas Child Care Assistance Program (CCAP) provides financial assistance to low-income families for child care expenses. If a family's income increases above the program's income limit, they may lose their eligibility for CCAP.

Benefits cliffs can create a disincentive for individuals to increase their income, as the loss of benefits can outweigh the financial gains from earning more. This can trap individuals in poverty and make it difficult for them to become self-sufficient. To address this issue, policymakers in Arkansas and other states are exploring ways to reduce or eliminate benefits cliffs, such as gradually phasing out benefits as income increases or increasing the income thresholds for eligibility.

Business Impact of Arkansas’s Benefits Cliffs

There is limited data on how benefits cliffs specifically impact employers in Arkansas. However, it is generally recognized that benefits cliffs can have negative effects on both employees and employers. Addressing this issue is important for creating a more stable and productive workforce in Arkansas.

Arkansas Cliffs and Workforce Productivity

When employees face benefits cliffs, they may be less motivated to increase their income through work, which can lead to a less productive workforce. Additionally, employees who lose benefits may experience financial instability, which can lead to increased absenteeism, turnover, and decreased job satisfaction.

Arkansas Cliffs and Employee Retention

Benefits cliffs also make it difficult for employers to retain workers who will lose benefits as their income increases. This situation forces employers to grapple with increased turnover costs and reduced productivity.

Furthermore, in industries that rely heavily on low-wage workers, employers may struggle to attract and retain workers due to the low wages and the potential for benefits cliffs. This can lead to labor shortages and increased competition among employers for a limited pool of workers.

Policy Approaches to Arkansas’s Benefits Cliffs

Welfare reform efforts in Arkansas have focused on the state's Temporary Assistance for Needy Families (TANF) program, which provides cash assistance to low-income families with children.

In 2015, Arkansas passed a law requiring TANF recipients to participate in job training or other employment-related activities for at least 20 hours per week. The state also established a drug testing program for TANF recipients, which was implemented in 2017, but later halted due to legal challenges.

In 2017, Arkansas also implemented a policy that terminated TANF benefits for families who had received assistance for 24 months or more, regardless of whether they were still in need. This policy was challenged in court and ultimately struck down as unconstitutional.

More recently, in 2021, Arkansas passed a law that requires TANF recipients to submit to periodic eligibility checks, including verifying their income and assets, as well as meeting other eligibility requirements. The law also increases penalties for TANF fraud and requires recipients to report changes in their circumstances more frequently.

Overall, Arkansas has been active in implementing policies aimed at reducing the number of people receiving TANF benefits and encouraging recipients to become self-sufficient through work or job training. However, some of these policies have faced legal challenges and criticism from advocates who argue that they are too punitive and may disproportionately harm low-income families.

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