Benefits cliffs, also known as cliff effects, refer to situations in which an increase in income causes a significant reduction in government benefits, resulting in a net loss for the individual or family. The biggest sources of Louisiana’s benefits cliffs are the Supplemental Nutrition Assistance Program (SNAP), the Medicaid program, the Temporary Assistance for Needy Families (TANF), and child care subsidies.

Overview of Louisiana’s Benefits Cliffs Challenge

One of the main issues with benefits cliffs is that they can create a disincentive for individuals to increase their income or work more hours, as the reduction in benefits can outweigh the increase in income. For example, if a single mother on TANF receives a raise at work that puts her just above the program's income limit, she may lose all of her cash assistance, which can make it difficult to cover basic expenses such as rent and utilities.

In Louisiana, there have been efforts to address benefits cliffs through various policy changes. For example, the state has implemented a gradual phase-out of benefits for some programs, which allows individuals to keep a portion of their benefits as their income increases. Additionally, the state has increased the income thresholds for some benefits programs, which helps to reduce the likelihood of individuals losing their benefits due to small increases in income.

Despite these efforts, benefits cliffs continue to be a concern in Louisiana. Policymakers and advocates continue to explore ways to address the issue, such as more targeted benefits programs or policies that encourage work while allowing more gradual reductions in benefits. Ultimately, the goal is to ensure that individuals and families are able to increase their income and achieve economic stability without losing access to the essential support they need to make ends meet.

Business Impact of Louisiana’s Benefits Cliffs

While benefits cliffs primarily impact individuals and families, they can also have indirect effects on employers in Louisiana. When employees face benefits cliffs, they may be less likely to pursue education or training opportunities, work more hours, or accept higher-paying jobs, which can limit their ability to advance in their careers and earn higher wages. This, in turn, can lead to lower productivity and reduced economic growth for the state. 

The exact impact of benefits cliffs on employers in Louisiana is not well-documented, but there is evidence to suggest that cliffs create challenges for employers, particularly in industries with a high demand for low-wage workers. Addressing benefits cliffs may be one way to support both workers and employers and promote economic growth in the state.

Louisiana Cliffs and Worker Shortages

There is limited data on the specific impacts of benefits cliffs on employers in Louisiana, but a few studies have shed light on the issue. For example, a 2018 report by the Louisiana Budget Project found that cliff effects can create a workforce shortage, particularly in low-wage industries such as healthcare, hospitality, and retail. The report notes that when workers face a loss of benefits due to a small increase in income, they may choose to work fewer hours or not work at all, which can make it difficult for employers in these industries to find and retain employees.

Louisiana Cliffs and Employee Retention 

Another study by the National Bureau of Economic Research found that the Earned Income Tax Credit (EITC), a federal program that provides a tax credit for low- and moderate-income workers, can have positive effects on employers by increasing employee retention and reducing turnover costs. The study notes that the EITC can reduce the financial burden on low-wage workers, which can help to stabilize their employment and reduce turnover.

Policy Approaches to Louisiana’s Benefits Cliffs

Louisiana has implemented several welfare reform efforts in recent years, aimed at reducing dependence on government assistance programs and promoting self-sufficiency among low-income families. 

Overview of Louisiana's Welfare Reform Efforts 

Workforce Innovation and Opportunity Act (WIOA): In 2016, Louisiana began implementing WIOA, which provides job training and employment services to low-income individuals, including those receiving public assistance.

Supplemental Nutrition Assistance Program (SNAP) work requirements: In 2018, Louisiana implemented work requirements for able-bodied adults without dependents (ABAWDs) receiving SNAP benefits. ABAWDs must work or participate in job training for at least 20 hours per week to continue receiving benefits.

Louisiana Temporary Assistance for Needy Families (TANF) program: Louisiana's TANF program provides cash assistance to low-income families with children. In 2018, the state implemented stricter eligibility requirements and reduced the amount of time families can receive benefits from 60 months to 48 months.

Child Support Enforcement: Louisiana has adopted several measures to increase the collection of child support payments from non-custodial parents, including wage garnishment and license revocation for parents who fail to pay.

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