What is the Cliff Effect?

The Cliff Effect occurs when assistance programs like childcare subsidies and Medicaid remove benefits faster than people can earn enough income to replace them. By not pro-rating the exit ramp to these programs, the government creates a financial crisis for people as they earn more income.

The image on this page shows the story of Tammy and what happened to her because of the Cliff Effect.

Tammy had a better job and was making more money, but was worse off financially?

Yes. Unfortunately, when Tammy worked hard and received her raises, she lost her other resources and was worse off financially.

Where is Tammy now?

Tammy continued working hard because she was motivated and wanted to succeed in her career. Unfortunately, as she kept accepting raises, her resources and benefits continued to drop. This happened until Tammy made $20 per hour.