The Cliff Effect: When work doesn't pay

October 26, 2012

See part two of Sarah's story, here.

(Note: Sarah's name changed for privacy.)

Warsaw, Indiana isn’t quite a small farming town, where everyone knows everyone. But it’s far from a bustling city, where you can be anonymous. The buildings downtown have brick storefronts and its biggest claim to fame is being the “orthopedic capital of the world.” In this tiny, mostly white town, there’s a neighborhood people offhandedly call their “ghetto.”

That’s where Sarah lives, in a cheap rundown apartment.

Sarah is a single mother supporting two kids with the help of TANF, a program more commonly known as welfare. In the '90s, welfare was reformed with the stated goal of encouraging self-reliance and independence. In many ways, Sarah is a model of how welfare has moved people into jobs.  But if welfare has a bigger goal, of getting people out of poverty, then Sarah, like many others, is a portrait of what’s gone wrong.

Sarah’s apartment is tidy – shoes in a line by the door, cereal boxes lining the shelves. Everything has its place, except for a giant pile of papers on the kitchen table. The papers include a form for her food stamps and a late notice from Medicaid. Sarah nervously pulls on her dark ponytail as she sorts through her benefits.

“Welfare is a sticky situation," she said. "They want to give you just enough so you can’t get anywhere. It’s just like a fish aquarium. You need bottom feeders.”

Stuck in the rut of welfare

Sarah works a part-time, minimum wage job at a childcare center. It's like half the jobs in the nation, which don’t pay enough to move families like Sarah’s out of poverty. This is what Sarah means when she said we need bottom feeders -- that low-paid work has to be done by someone.

Sarah said to get a good job, she’d need more education. She went to college to study graphic design, but the field has drastically changed in the 16 years she’s been out of school. Besides, her original $3,000 student loan has ballooned into a $5,000 loan that she can’t pay off.  But many other people on welfare haven’t gone to college at all. And once they’ve fallen behind in their education, it’s hard to catch back up.

One of the big changes to welfare in the '90s was something called “Work First.” It's a goal to move people off benefits and into a job as quickly as possible. No matter what that job is. If they don’t, they lose their benefits. College doesn’t count as work. And very few welfare recipients go into any sort of job training. So the jobs they can find quickly usually pay poorly.

“I’m trapped,” Sarah said.

Asking for help

Even with the part time job and TANF, Sarah still can’t make ends meet. So on Wednesdays she goes to a local church, where families can get basic household supplies like laundry soap. She gets there early, to save a place in line. In the past, she’s had to wait hours just to find they’ve run out of supplies.

Sarah’s neighbor is also in line. It’s her first time coming to anything like this and she seems a little shy. But Sarah’s guiding her. She said at first it’s embarrassing to ask for help and free things, but you have to concentrate on how it will help your family.

A volunteer smiles as she opens the door to where the supplies live. The instructions are very specific. Sarah can choose three big items, but she can’t get laundry soap or dish soap at the same time. Some items she can only get every five weeks. Other items, like diapers, she can get as often as she needs.

One of the women working at the closet is Sue Hickman. Everyone seems to know her name.

Hickman works as a family nutritional specialist, helping poor families eat well. But it’s clear she does more than nutrition education. A man tells her he needs steel-toed shoes for his new job, so she calls a local store to get a pair donated.  A mother gives her a jacket her son has grown out of and Hickman passes it along to someone she knows can use it.

Hickman met Sarah through her work here, but since then they’ve become close friends.

“I’ve gotten to know her in many different ways," Hickman said. "Lots of struggles.”

She added that the single biggest struggle for Sarah has been the inability to keep some government benefits, especially childcare, after she reaches a very low income threshold.

For example, last spring Sarah got a job at a local deli. She was excited to work full time. But once she had the income, the government started reducing her benefits. First they decreased her food stamps. Then they took away TANF. Finally, she lost child care benefits. At that point, keeping the job seemed impractical.

“Well if you make $7.25 an hour and you work 40 hours a week. You only bring home, what? $250," Sarah said. "If your daycare expense is $200, you only get $50. What about gas? So it was costing me more to have a job than I was making. I was having to pay them to let me have a job.”

What Sarah experienced is called the "Cliff Effect."  It’s when a person is on welfare, gets a job and as her income goes up, she starts to lose benefits. The Indiana Institute for Working Families recently released a report about the impact of this effect. 

Hickman said she has seen this in many of the mothers she serves. One woman was working at a retail store, but made minimum wage so she still qualified for benefits. 

“But then she was forced into mandatory overtime,” Hickman said. “And I think it was nine dollars over the limit and she lost her food stamps. And they sent her a (notice) that if she continued to go over, she’d also lose the vouchers for her childcare.”

Hickman said she knows the stereotype of welfare moms -- women who are lazy or selfish, who refuse jobs and instead live off the government. But when you factor in childcare, gas, and the loss of benefits, you can see how work can sometimes be expensive.

Hickman said it’s a logical choice for a mother to refuse a raise or extra hour.

“They’d be better off if they didn’t work," she said. "But the ones I am seeing don’t want that. They want to teach their children this is not a way of life.”

The only way out of the cycle is for these moms to find a job that pays well enough to lift them above the poverty line. But those jobs are hard to come by without a good education. And in addition to good pay, single moms need jobs with family leave.

For example, that mother who worked at the chain store:

“(She) ended up losing her job, because her kids got chicken pox," Hickman said. "And so she was out of work. No one to take the kids. Daycare wouldn’t take them so she could go to work. So she lost her job and then she lost daycare, so (she was) starting all over again.”

Making ends meet

Sarah and her neighbor friend leave the soup kitchen and pack into Sarah’s big burgundy van. The gas gauge is on empty.

Sarah has run out of gas four times in the last two weeks. But she has a plan this time. She has trash bags full of aluminum cans. We turn into the local scrap metal center. Sarah said that selling cans is always a back-up when people need extra money. She added that her other back-up is garage sales. Sarah said she “had four yard sales and made like $1200 this summer.”

Sarah loads the cans into a big machine that weighs them. She gets $7. She shrugs. At least it’s enough for that day’s gas.

In a small town, having a car is essential for getting to work. But sometimes it’s a huge liability, too.

“If I got into an accident, I’d be in trouble,” Sarah said. “I lost my license once for three months for driving without insurance. I’ve only had insurance once. I had to take the Girl Scout troop somewhere once so I go insurance for that month and that was it.”

After Sarah has run her errands she goes back home. Her day isn’t done yet. She still has forms to fill out and calls to make. She is three days late on filling out a form for Medicaid. Her daughter has expensive medication for a range of mental health issues.

Sarah said managing her benefits is like another full time job. And the consequences if she doesn’t get the benefits are big. It hurts her children.  And they already have the deck stacked against them. 

Read more about that, in part II of Sarah's story.