News from the Noteworthy by Opportunities for Otsego
‘Benefit Cliff’ Has Unintended Results
This article will focus on employment in Otsego County as part of the Opportunities for Otsego Inc. Community Needs Assessment. Employment in Otsego County is a blend of historical traditions, evolving industries and community-driven efforts. Overcoming seasonal fluctuations, retaining young talent, and navigating the aftermath of the pandemic are challenges that the county faces to ensure a prosperous and sustainable future for its workforce. Wages play a significant factor in the growth and attractiveness of our community for the future.
On average, the median income in Otsego County for all households, from 2017 to 2021, was $55,675. For practical purposes, let’s frame this in terms of living wages. A living wage is defined as the amount of income a household or individual needs to earn in order to support their family if they are the sole provider and are working full time. Currently, the general worker minimum wage in upstate New York is $14.20 per hour, except for fast-food workers employed at chain restaurants with more than 30 locations, whose minimum wage was increased to $15.00/hour on July 1, 2021. Beginning January 2024, the New York State minimum wage will be raised to $15.00 per hour. In 2025 and 2026, the minimum wage will increase by an additional $0.50 in each year, after which the state’s minimum wage would increase at a rate determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers for the Northeast Region.
Despite these increases, many minimum-wage workers in Otsego County cannot afford basic family expenses (e.g., food, childcare, healthcare, housing, transportation, broadband) plus all relevant taxes. According to the 2023 Massachusetts Institute of Technology Living Wage Calculator, only a household with two working adults and no children living in Otsego County could sustain themselves on the current minimum wage.
The mandated yearly bump in hourly wages helps to address the rising cost of living; however, this has unintended consequences for workers receiving publicly-funded benefits such as food, childcare, housing assistance, and the Earned Income Tax Credit. Eligibility for public benefits is often means-tested, therefore small increases in earned income could cause low-income families to lose some or all of their essential public benefits, leaving them worse off despite earning more. This phenomenon, coined the “Benefit Cliff,” often traps families in poverty instead of lifting them out of it.*
Opportunities for Otsego Inc. has constituents that are negatively affected by the Benefits Cliff, as the income eligibility requirements for programs is below the minimum wage in New York, despite the fact that minimum wage earners still need to rely on these services to get by. Unfortunately, without broad regulatory changes, populations in states with higher minimum wage requirements risk being underserved and families will continue to struggle.
*Koball, H., Growing Pains: How Benefit Cliffs Can Derail Government Support, 05.12.2021 (https://spotlightonpoverty.org/spotlight-exclusives/growing-pains-how-benefit-cliffs-can-derail-government-support)
Dan Maskin is the chief executive officer of Opportunities for Otsego Inc.