This op-ed by Vladimir Snurenco of the Center for Social Flourishing at the Acton Institute was published by The Daily Economy on 07/01/2025.
Benefit cliffs occur when earning slightly more — through a raise or extra hours — leaves people worse off because they lose government benefits. Many economists believe these cliffs can be “smoothed out” through better program design. But this view overlooks a critical factor: human psychology. To truly address benefit cliffs, policymakers must move beyond formulas and graphs and consider how people actually think, feel, and behave. In some cases, benefit cliffs may not just be hard to eliminate — they may be impossible to fully remove.
The reason why so many experts and economists worry about benefit cliffs is that we want to have a welfare system that’s not just a safety net, but a springboard. Modern-day welfare in America includes over 80 programs such as Head Start, Medicare, Medicaid, housing vouchers, food stamps, and the like. Ideally, these programs shouldn’t just catch people when they fall — they should help launch them forward. The great tragedy is when they instead work more like quicksand and hold people back. While benefit cliffs are typically analyzed as purely mathematical problems, a full understanding requires recognizing powerful psychological realities.