The Center for Public Policy Priorities sent me a link to an amazing new tool for calculating the impact of "work supports," those public program benefits designed to assist hard working, low-income people, such as child care assistance, health insurance, the Earned Income Credit, food stamps and other public resources.

The "Family Resource Simulator" will allow you to find out and create customized graphs illustrating how family resources and expenses change as earnings increase, taking into account public benefits. A project of the National Center for Children in Poverty at Columbia University, with help from the Center for Public Policy Priorities, the tool is very enlightening.

The goal of the National Center for Children in Poverty’s (NCCP’s) Making “Work Supports” Work project is to promote policies that make work pay for low-wage workers and their families. Millions of parents work full-time, year-round and yet struggle to provide even minimum daily necessities for their families. Government “work support” policies—such as earned income tax credits, child care subsidies, health insurance, food stamps, and housing assistance—can help. These benefits encourage, support, and reward work, helping families close the gap between low wages and the cost of basic needs.

But federal and state policies often fail to adequately support low-wage workers. In practice, few families receive all of the benefits for which they are eligible, and even multiple supports are often not enough to enable working families to make ends meet. Moreover, work supports are typically means-tested, and families tend to lose benefits before they can get by on earnings alone. In some cases, small increases in earnings can trigger sharp reductions in benefits, leaving families no better off—or even worse off—than before. Thus workers can find themselves penalized for working and earning more.

NCCP’s Making “Work Supports” Work project is guided by the principle that a comprehensive work support system should accomplish two goals:

1. Provide adequate family resources. If parents work full-time, their earnings, combined with public benefits, should be sufficient to cover basic family expenses.
2. Reward advancement in the workforce. When parents’ earnings increase, their families should always be better off.

In collaboration with state and national partners, NCCP assesses state and federal work support policies and identifies and promotes policy reforms. Using a tool called the Family Resource Simulator (see box), we examine the complex interactions among earnings, benefits, and basic expenses—and we model alternative policies that better support low-wage workers and their families.

Work support policies vary significantly across states—and sometimes across localities within states. But low-wage workers face similar challenges throughout the country. The following pages highlight major findings from the Making “Work Supports” Work project and point the way toward policy solutions.

NCCP’s Family Resource Simulator is an innovative, web-based tool that calculates the impact of federal and state work supports on the budgets of low- to moderate-income families. The Simulator provides a concrete illustration of the effectiveness of current policies in rewarding and encouraging work. NCCP also uses this tool to model potential policy reforms. Family Resource Simulators are currently available, or under development, for 17 states—including more than 90 localities—and the District of Columbia. State Simulators include Alabama, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Michigan, New York, Pennsylvania, Texas, and Washington.

The Basic Needs Budget Calculator—which will soon be publicly released—is a related tool that shows how much a family needs to make ends meet without the help of work supports.
Key Findings

1. A Low-Wage Job Isn’t Enough to Make Ends Meet

It takes considerably more than full-time earnings from a low-wage job for families to make ends meet. Consider, for example, a single parent living in Chicago with two children, one preschool-aged and one school-aged. This family needs an annual income of about $36,000 to afford minimum daily necessities (see Figure 1). But even at the highest state minimum wage in the U.S.—which is about $8 an hour—a full-time, year-round job brings in less than half of that amount.

Moreover, $36,000 covers only a very bare-bones budget of housing, food, child care, health insurance, transportation, and other necessities. It does not cover out-of-pocket medical expenses, enrichment activities, entertainment, or other expenses that improve a family’s quality of life. It does not allow for investments in a family’s future, such as savings for a home, a child’s education, or a parent’s retirement. And it does not provide any financial cushion to withstand a crisis.

2. Work Supports Can Make a Critical Difference

Work supports can make a tremendous difference in the lives of low-income families. Figure 2 provides a breakdown of family resources and expenses for the family discussed above, assuming that the parent works full time and earns $8 an hour—or just under $17,000 a year. The first column shows that without work supports, the family faces a gap of close to $18,000 between its annual resources and basic expenses. Faced with such a gap, working parents have to make tough choices. Should they seek cheaper child care that is potentially less reliable or less safe? Live in overcrowded but more affordable housing? Or choose between paying the utility bill and seeking needed medical care?

For families struggling to get by on low wages, government work supports can help. The second column of Figure 2 shows that with full-time employment and multiple supports—including federal and state EITCs, food stamps, and public health insurance—the gap between the family’s resources and expenses shrinks significantly. Even so, however, the family faces a large annual deficit of about $7,000. With a child care subsidy in addition to the other benefits listed above, the family would have a small annual surplus left after covering basic needs (see the last column of Figure 2). This surplus of $939 could be used to pay off debt or saved for a rainy day. In practice, however, few families actually receive more than one or two of these benefits.

3. As Earnings Increase, Benefit Losses Hold Families Back

As parents’ earnings increase, they lose eligibility for work supports, making it difficult for their families to get ahead. When just a small raise leads to a significant drop in benefits—often referred to as a “cliff ”—families may even be worse off, despite increased earnings. Returning again to a single parent with two children living in Chicago, Figure 3 illustrates how net family resources—that is, resources after subtracting the cost of basic expenses—change as earnings increase.

In comparison to many other states, Illinois offers relatively generous benefits. And this example assumes that the family receives several work support benefits—including a child care subsidy—so that the parent is able to make ends meet with a full-time, $8-an-hour job. Nonetheless, as wages more than double from $8 to $17 an hour, the family experiences virtually no improvement in its financial bottom line.

• When wages reach $10.50 an hour, the family loses thousands of dollars in food stamp benefits.
• At $15 an hour, the family loses its child care subsidy. This causes a significant financial setback, and the family is no longer able to make ends meet.
• Another raise to $16.50 an hour puts the parent over the income limit for public health insurance.

Helping Policymakers Find Solutions

The Making “Work Supports” Work project identifies policy solutions to ensure that low-wage workers who work full-time can meet their families’ basic needs. To help families close the gap between low earnings and basic expenses, policymakers need to ensure that families receive the benefits for which they are eligible. And to ensure that families are always better off when they work and earn more, policymakers can increase eligibility limits for assistance and phase out benefits more gradually to soften or eliminate cliffs.

Illinois, for example, could eliminate the food stamp cliff by taking advantage of a federal option that allows states to effectively waive the program’s gross income limit. The child care subsidy cliff could be softened by increasing the income eligibility limit. Based on results from the Family Resource Simulator, Figure 4 illustrates the effects of these hypothetical reforms.

Through Making “Work Supports” Work, NCCP and its partner organizations identify state-specific solutions as well as federal reforms. Together we are working to help policymakers create a work support system that is designed to truly make work pay.

Making “Work Supports” Work is funded by the Annie E. Casey Foundation with additional support from the Seattle Foundation, the Louisiana Department of Social Services, and the Women’s Foundation of Colorado.

(Making "Work Supports" Work)