The Welfare Cliff, a.k.a. the Low-Wage Trap

Pretend you are a poor, single parent of two in Chicago, earning $12 an hour, working full time, and determined to do what is best for your family. And suppose your employer, impressed with your work, offers you training for and promotion to a new job paying $15. Should you take the offer?

It sounds like a no-brainer, but it’s not.

That’s from an article cross-posted last week by Learn Liberty and FEE.

My friend Prof. Jeremy Horpedahl posted this clarifying comment in a Facebook discussion:

“This is real, and important. But crucial edit: both the absolute size of the benefits and the biggest cliff (at $15/hour) are because of housing assistance. Most poor people don’t receive housing assistance:
And the second big cliff at $18/hour is due to the loss of childcare subsidies. So it primarily applies to families whose children are too young to be in school.
With those caveats, this is clearly a bone-headed way to assist the poor.”

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