Benefits Cliffs and the Financial Incentives for Career Advancement: A Case Study of a Health Care Career Pathway

This discussion paper on a case study from the Federal Reserve Bank of Atlanta studies the concept of benefits cliffs, which happen when earnings are offset by the loss of public benefits, resulting in a financial disadvantage to working. The study highlights a fictional young mother of two and suggests that career advancement can result in financial gain over a lifetime. Two policy interventions are discussed: a gradual child care subsidy phaseout, and transitional public benefits with asset mapping. The paper concludes that it is important for those helping low-income individuals to recognize not only their short-term barriers, but also the return to investment that career advancement can create.