The Cliff Effect happens when people who receive assistance, like help with childcare, healthcare through Medicaid, or food assistance, increase their income through hard work, perhaps by getting a raise at their job. While it might seem like a step forward, this increase in earnings can unfortunately make them ineligible for these crucial benefits.

Instead of gradually reducing support as income grows, these programs often cut off benefits abruptly, leaving individuals and families in a difficult position where they are no better off, or sometimes even worse off, than they were before increasing their income. It’s like reaching a financial “cliff” where progress is suddenly halted, making it challenging to achieve true financial independence.

The Cliff Effect occurs when a slight income increase abruptly cuts essential benefits like childcare or food assistance, often leaving individuals worse off than before.

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.