The Herald Bulletin

Morning Update

Community

November 24, 2012

COLUMN: Low salaries need supplemental benefits

ANDERSON, Ind. — “You are working at a $7.50 an hour job and get a 50-cent raise, but lose your food stamps … and you still need $16 an hour to live. I am seeing this more often.”

This comment was made earlier this month during a discussion by the Community Access Network (CAN) partners.  Everyone nodded in agreement.  Those around the table spend their days fielding requests for assistance to keep on the heat, put food on the table, and pay the rent.

The comment described a situation documented in a recent report by the Indiana Institute for Working Families, “The Cliff Effect: One Step Forward, Two Steps Back.” It describes the impact on low income working families that even a small increase in salary can have when it leads to sudden termination of essential benefits such as Supplemental Nutrition Assistance Program (SNAP, commonly known as food stamps), child care subsidy and public health care.

The report holds up the Earned Income (EITC) and Child Care Tax Credits as examples of policies that work. According to the Brookings Institution, “The EITC alone is responsible for raising 6.6 million people out of poverty, including 3.3 million children.”

Specific examples for Indiana are included with a clear chart of the impact on a single parent with two children earning $10 per hour. This annual household income of $20,800 falls short of self-sufficiency by more than $19,000 without supports; by more than $12,000 with tax credits only, but stays in the red by $4,685 with SNAP, public health insurance and childcare subsidy. However, as this parent works up the income ladder toward a more self sufficient wage, there are several points where even a 50-cent raise results in thousands of dollars in lost household income supports.

The report concludes that policies with a sudden income cut-off create a situation where people who are working harder become economically worse off.  It also makes specific recommendations for state policies that can help more people achieve and sustain self sufficiency.  The report is available at www.unitedwaymadisonco.org. Click on financial stability/additional resources.  There is also a short video that outlines the issue in just over two minutes at www.incap.org/cliffeffectreport.html.

The working poor are a growing population in Indiana, according to a recent report in The Indianapolis Star (Indiana’s income gap is among the fastest-growing, indystar.com). Indiana ranks sixth in the nation in greatest income inequality between richest and poorest households, a trend that began more than 30 years ago but has accelerated in the past decade.  Indiana is one of seven states where the average income of the poorest households fell during this time. At the same time, the average income for the top households grew 57 percent.

Our financial stability partners understand the effects of these policies because we see them every day.  It is why our financial stability work targets low income working households – those that are working, but are not earning enough to be self sufficient without supports.  However, we can’t fill the gap created by the cliff effect, so it’s important to help everyone understand how policies can and should build bridges to self sufficiency.

Nancy Vaughan is president of United Way of Madison County Inc. Her column appears the fourth Sunday of each month. She can be reached at n.vaughan@unitedwaymadisonco.org or 608-3061.

 

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