NEWS

For some on the South Shore, higher pay means less money

As minimum wage rises across the state, some find themselves in an in-between as they are disqualified from public programs but unable to afford basic needs without them.

QUINCY — South Shore residents who turn to Quincy Community Action Programs for guidance in making ends meet sometimes face an unexpected predicament: Despite working more hours and getting a slight raise, they wind up with less money in their pockets.

Many of these people don’t make enough money to fully cover the cost of housing, food and child care, so they rely on public benefits to fill the gap and stay afloat. The hope is that, as these workers make more money, they will need less public assistance.

But Beth Ann Strollo, chief executive officer of Quincy Community Action Programs, said increases in pay often trigger cuts to public benefits. The value of the lost benefits may outweigh the income gains — sometimes drastically — creating what experts call the “cliff effect.”

That causes workers to feel reluctant to try to earn more money, such as pursuing a promotion or accepting a raise, in fear that they will end up worse off, despite getting a larger paycheck.

“These are the difficult decisions people are making: Do they accept a job with a 50-cent-an-hour pay increase? Do they take on more hours?” Strollo said. “They’re coming to us for guidance, and there are no easy tools available to figure this out. … This is a real issue for the 10,000 households we serve.”

Quincy Community Action Programs is a non-profit organization dedicated to reducing poverty by helping families on the South Shore reach their educational and economic goals and achieve financial stability. The nonprofit offers job training, early childhood education, financial coaching and helps families connect with state and federal social programs, among other things.

The state’s minimum wage increased last month from $12 to $12.75 per hour as part of a bill state lawmakers passed in 2018 to gradually raise the minimum pay from $11 to $15 by 2023. California, Connecticut, Illinois, Maryland, New Jersey and New York also have statewide laws that will eventually increase the minimum wage to $15.

BY THE NUMBERS

Today, there are about 687,000 people in Massachusetts who live below the federal poverty line

Families of four have to make about $24,900 per year to be below the federal poverty line

Roughly one in every 10 people in Massachusetts, about 10 percent, are below the poverty line

The poverty rate for children is about 13.5 percent

Source: MassBudget.org

The Massachusetts Budget and Policy Center estimates that the wage hike affects 420,600 workers, including many who are employed in the food service and retail sectors.

Experts say raising the minimum wage is a good thing overall and a step toward closing the ever-growing pay gap between America’s rich and poor because it often triggers a chain reaction and wages go up for all workers.

But because of the implications, social service agencies say it’s more complicated than calling it a definite win for the state’s most vulnerable workers.

“It’s helping people in a lot of ways, but at the end of the day, they don’t have more money,” said Kristen Schlapp, chief operating officer of Quincy Community Action Programs. “Many clients say, ‘Why can’t I make this work for my family if I’m making more?’ It’s really startling and they feel it’s their fault, but it’s not them, it’s the way the system works.”

Strollo and Schlapp said government programs that provide benefits for food, housing, health care, energy assistance and child care are complex and constantly changing. Eligibility varies, particularly between federal and state programs, and benefit levels differ. For example, the Supplemental Nutrition Assistance Program, commonly known as food stamps, tapers eligibility, while other programs have hard cutoffs.

“People who are just over the income eligibility often still need the benefit,” Strollo said.

Schlapp put together a sample budget for a single parent with one preschool-aged child and a full-time job whose pay increased from $12 to $12.75 in January. After taxes and withholdings, that parent would receive $1,325 more per year in pay, but would suffer decreases in food stamps, energy assistance and state and federal earned income tax credits, while paying more for public housing and child care.

So despite the pay increase, that parent working 40 hours per week at minimum wage would end 2020 with $360 less income than last year.

The federal Personal Responsibility and Work Opportunity Reconciliation Act, passed in 1996, requires most parents receiving cash assistance and all childless adults receiving food assistance to work.

Strollo said more than 90 percent of the agency’s clients who are eligible to work are doing so, but the “cliff effect” makes low-income workers feel they are doing more for less.

“It creates a disincentive to work, and I know some people don’t want to hear that, but it’s a fact,” Strollo said.

The Massachusetts Institute of Technology offers a living wage calculator that shows the hourly rate someone must earn to support himself or herself and their family. According to the calculator, a single parent with one child needs to make $31.30 per hour in Norfolk County. For a single person, the living wage is $15.19 per hour.

A report commissioned by the Massachusetts Association for Community Action points to challenges that state residents face as they struggle with Massachusetts’ high cost of living.

The report states that many families with incomes double the federal poverty level — about $51,500 a year for a family of four — may struggle and fall into a category of “near poor.” A quarter of Quincy’s residents are considered poor or near poor, and as many as 24 percent of the city’s renters spend 50 percent or more of their income on rent each month.

 
While she took home nearly $14,000 more due to her job, her loss of benefits, including Social Security Income and transitional aid, and increased expenses meant she ended up with $414 less in disposable income.
 
“We’ve seen this issue for a long time, and it’s not just about minimum wage,” Strollo said.
 
Randy Albelda, a professor of economics and senior research fellow at the Center for Social Policy at the University of Massachusetts Boston, said the government decades ago structured support programs in a way so that when people earn more, they get less.
 
Albelda said some programs, such as Medicaid, have steep cliffs – once people earn a certain dollar amount they no longer qualify – and other programs have “rolling hills,” where benefits drop in increments
 
Single parents are the most susceptible, Albelda said, and it makes any change in employment scary and risky. Albelda said she and Susan Crandall, director of the University of Massachusetts Boston’s Center for Social Policy, have been working with the state to try to develop a calculator where families could plug in numbers to figure out what a raise or increased hours would mean for them.
 
“If it means losing your child care or housing subsidy, it creates a whole new insecurity in your life,” she said. “I think in the long run you want to get more money, but in the short run it’s a lot of uncertainty.”
 
Albelda said the real long-term solutions include universal child care and affordable housing, but restructuring programs would at least help.
 
“These programs are really intended for people who didn’t have much earnings, and now we’ve said, ‘go out and earn,’ but the programs haven’t been restructured to support that,” she said. “There is a mismatch in philosophy.”
 
By Jessica Trufant
The Patriot Ledger

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