Why Nonprofits Should Care and What to Do

Why Nonprofits Should Care and What to Do

Why Nonprofits Should Care and What to Do

mother and baby
Key Takeaways:
  • Welfare cliffs and marriage penalties are discouraging people from work and forming families.
  • The cliffs and penalties may mean that our clients are locked into poverty for much longer than they would be otherwise and despite our best efforts.
  • GCO has created a platform that allows anyone to see when a particular family can expect to experience benefit cliffs as they earn more money through work. 

Important Link: BenefitsCliff.org

 

If you work in a nonprofit serving the poor, you need to know that the government benefits your clients receive are likely discouraging them from working or forming a family, two things that research shows could lift them out of poverty the fastest. 

This is an especially tough problem for nonprofits, like GCO, that work to get their clients into good-paying jobs and strengthen their family relationships.

What’s going on?

These disincentives to work are often called “welfare cliffs” and the disincentives to family formation are called “marriage penalties.” Essentially, “cliffs” are generated any time a person receiving government benefits gets a raise at work that causes them to lose more in benefits than they will earn in additional income from the raise. These same individuals can face a similar financial penalty IF they decide to marry. In many cases, they will lose more in benefits than their spouse is able to provide in new income to the household.

While you would think (hope?) cliffs and penalties are rare, they are not. Instead, they are baked into the structure of nearly all welfare programs and many of the cliffs are severe. It’s also important to know that welfare recipients don’t face a single cliff or a single penalty, but they face cliffs and penalties at a number of different points as they have additional income from working or through marriage.

Why does it matter?

For nonprofit leaders, the cliffs and penalties may mean that our clients are locked into poverty for much longer than they would be otherwise and despite our best efforts. For workforce development nonprofits, cliffs could be the underlying reason why your clients don’t pick up additional work hours when they are offered or seem less than excited when they are offered a good promotion. In extreme cases, clients may quit jobs that seemed like a perfect fit simply because they panic when they learn they may lose a major benefit – like housing or childcare.

For nonprofits trying to help strengthen family relationships, marriage penalties may be driving behavior that is otherwise inexplicable, like seemingly happy couples refusing to marry or live in the same home. These dynamics can lead to stress for the couples affected and to a sense that a parent (usually the father) has abandoned the family when, if the system would allow it, he would be in the home. In these cases, children pay the biggest price.

What can you do about it?

Fortunately, we have created a platform that allows anyone to see when a particular family can expect to experience benefit cliffs as they earn more money through work. For nonprofits working with these families, you now have a tool (available for 10 states, with two more on the way) that will allow you to help your clients plan for the future. In some cases, knowing when cliffs are likely to happen will allow your clients to seek a larger raise that will help them bypass or leapfrog a cliff. In other cases, maybe the answer is seeking additional training or certifications that will get your client into a different payscale entirely – one that avoids the cliffs.

In the coming weeks, we will be adding a tool that will allow users to see the impact of penalties on couples who decide to marry. We will also be incorporating a solutions tool that will allow anyone to see how reforming our government benefit programs can actually eliminate cliffs and penalties entirely, giving recipients every reason to pursue work and form stable households.

For GCO, it is this last point – reforming the system – that remains the ultimate goal. In the meantime, we are looking for ways to mitigate the harm caused by the welfare system, so that as many people as possible can escape the system and break cycles of poverty now.



The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.

Could guaranteed basic income replace the welfare system? | Daily Citizen News

Could guaranteed basic income replace the welfare system? | Daily Citizen News

In The News

Could guaranteed basic income replace the welfare system? | Daily Citizen News

Georgia is the latest state to experiment with something called a “guaranteed basic income.” It will be interesting to see if these pilot projects can avoid the same pitfalls as the welfare system they’re intended to supplement — and might be better off simply replacing.

The premise of the guaranteed basic income is that there should be a minimum level of income for all Americans. Those who fall short with what they earn from their job would receive a monthly supplement funded by taxpayers…

My friends at the Georgia Center for Opportunity have done as much work on this particular topic as anyone I know. They call the traps built by our system “welfare cliffs,” because of the sudden, sharp drop people experience when they take a small financial step forward.

Could guaranteed basic income replace the welfare system? | Daily Citizen News

An Opportunity Roadmap For Poverty Relief | The Georgia Virtue

In The News

An Opportunity Roadmap For Poverty Relief | The Georgia Virtue

The South is the fastest growing region in the country. The pull of our warm winters, friendly people, and low cost of living has drawn millions over the last few years. However, an old foe that we have attempted to fight for decades continues to afflict our people.

Rampant, inescapable poverty has been a staple of urban and rural areas in the South for generations. Government has long purported to be the solution to this problem, but after years of government programs and promises of a better tomorrow, our fellow man continues to be stuck in the cyclical nature of poverty. The status quo and government solutions have failed…

It’s time to change focus and realize that while our safety net programs are well intentioned, they often act as snare nets trapping people in poverty with no means to escape. Safety net programs should catch people when they fall and put them back on their feet. The Pelican Institute for Public Policy has joined together with the Texas Public Policy Foundation (TPPF) and Georgia Center for Opportunity (GCO) to forge a new path forward to bring poverty relief to our friends and neighbors, beginning now.

Basic Income is the Wrong Solution for Atlanta’s Poor

Basic Income is the Wrong Solution for Atlanta’s Poor

Basic Income is the Wrong Solution for Atlanta’s Poor

Hope and help is the only true solution.

Originally posted on RealClearPolitics.

Three hundred Atlanta residents are poised to receive $500 per month for a year, no strings attached. It’s part of a nationwide “basic guaranteed income” experiment largely bankrolled by Twitter founder and former CEO Jack Dorsey.

To qualify for the pilot program, residents must be 18 years or older and have a maximum income of 200% of the federal poverty threshold ($53,000 for a family of four). The ultimate goal is to gauge how the guaranteed payments impact residents’ economic, mental, and physical health.

 

The Alliance for Opportunity is focused on a mission to reduce those in poverty by 1 million over the next 10 years.

A noble mission with failed outcomes

The mission of this pilot is laudable in attempting to help lower-income Atlanta residents during particularly trying times. But there are reasons to proceed with caution. A significant reason is how these payments could provide a perverse incentive that would discourage people from finding work or moving up the economic ladder. 

Ultimately, we believe there is a better way forward that supports dignity and opportunity for those in need. The mission should be to empower lower-income earners to attain a better life.

For Atlanta to make a real difference in seeking innovative solutions to providing poverty relief, the city must focus on giving those in need opportunity, not simply pity. Most people living in poverty want to provide for their families, get ahead, and live dignified, self-sufficient lives.

In 2020, the poverty rate in Georgia was 21.3%. Major welfare programs in the Peach State in September 2021 had around 3.9 million residents enrolled.  

A key is to improve opportunities to work while giving greater flexibility to our neighbors. This can be done in changing how they may use their temporary government assistance payments to meet their current needs while setting them up for self-sufficiency later. 

 

Exploring Empowerment Accounts

One innovative idea that would do just that are Empowerment Accounts.

These accounts would provide safety net funding to certain eligible recipients on a debit card. To qualify, people would need to be working, training, or being educated while meeting with a community case manager. The program also includes a financial literacy and savings component that paves the way for recipients to pay for long-term needs. 

Atlanta leaders could test these Empowerment Accounts in a pilot project, funded at first by philanthropists.

Why are Empowerment Accounts a better solution than basic guaranteed income?

Their primary benefit is that they treat each recipient as an individual with a long-term upward trajectory. We must help the impoverished through immediate aid, but the best long-term solution to poverty is through creating incentives and opportunities for work. This combination of work and community support will help build the hope and social capital too often lost with the current safety net system.

If implemented on a state or even national scale, Empowerment Accounts would also provide a crucial reform to our flawed safety-net system. 

They would condense and replace the overstretched, wasteful programs into one consolidated, more effective program. By reducing bureaucratic bloat and streamlining payments, more resources would go to needy families while fostering eventual financial independence.

Another benefit of Empowerment Accounts over the current safety-net system is that they would eliminate burdensome benefit cliffs when current programs end. Safety net recipients are often discouraged from earning an additional dollar because the cliffs often trap them in a system they yearn to escape. As a solution, Empowerment Accounts funding would taper over a specified period and any savings would stay with the recipient, helping with the problem of a benefit cliff.

The goal of Atlanta’s basic income experiment is commendable, but as with so much in the charitable and welfare sectors, it is misguided. It oversimplifies the struggles of low-income Georgians and falls well short of providing a comprehensive way forward — which should be centered around providing a path to self-sufficiency.

This was originally posted on RealClearPolitics.

 

GCO launches anti-poverty policy site as part of Alliance for Opportunity project

GCO launches anti-poverty policy site as part of Alliance for Opportunity project

GCO launches anti-poverty policy site as part of Alliance for Opportunity project

Alliance for Opportunity announces new policy roadmap to reduce poverty

The Georgia Center for Opportunity launched a resource that provides key policy recommendations for reducing the number of people in poverty as part of their newly formed Alliance for Opportunity project. The recommendations are based on creating generational transformation in Georgia, Louisiana, and Texas, but the policy implications can be applied nationally as well. On the website, policymakers will see an explanation of how the safety net is failing, the path forward, and practical policy options that state leaders can act on now to advance a comprehensive and transformative safety-net reform.

The Alliance for Opportunity is a collaborative initiative between the Texas Public Policy Foundation (TPPF), the Pelican Institute for Public Policy (Pelican Institute) in Louisiana, and the Georgia Center for Opportunity (GCO). It is designed to promote solutions and build the political will to present and advance a comprehensive and compelling plan for reform to alleviate poverty by allowing people to find work and opportunities that will lead to a flourishing life.

 

The Alliance for Opportunity is focused on a mission to reduce those in poverty by 1 million over the next 10 years.

According to 2020 federal Supplemental Poverty Measure numbers, Georgia had 1,383,000, Louisiana had 869,000, and Texas had 3,601,000 residents in poverty.

The goal of the Alliance for Opportunity is that over the next 10 years, we reduce the number of people in poverty (defined above) by 20% in each state. That means 1 million people out of poverty: 276,600 people in Georgia, 173,800 people in Louisiana, and 720,200 people in Texas.

“We couldn’t be more thrilled with this new online portal that will be the go-to place for policymakers to find solutions to the most pressing poverty issues in our culture today,” said Randy Hicks, president and CEO of the Georgia Center for Opportunity. “Simply put, the U.S. safety net needs a paradigm shift. Our low-income neighbors deserve to move out of dependency, find lasting self-sufficiency, and flourish. The status quo is unacceptable.”

You can read the full press release from the Alliance HERE.

 

Could inflation be a persistent problem for the foreseeable future?

Could inflation be a persistent problem for the foreseeable future?

Could inflation be a persistent problem for the foreseeable future?

couple - inflation empty wallet

The CPI is up over 7% over last 12 months

Today, the U.S. Bureau of Labor Statistics announced that in December the Consumer Price Index (CPI) rose 0.5% on a seasonally adjusted basis. The CPI is up 7% over the last 12 months, not seasonally adjusted. That is the largest 12-month increase since 1982.

inflation graphic

Georgia Center for Opportunity’s take:

 “Pundits are breathing a sigh of relief after the latest CPI numbers landed because they weren’t worse than expected, but optimism may be misplaced,” said Erik Randolph, GCO’s director of research. “The problem is that we’ve established a new floor for prices that likely won’t go down in the coming years. Those impacts are most acutely felt in the areas that hit the pocketbooks of the lower income the hardest, such as food, rent, and energy. Now, it’s more important than ever to avoid pumping more stimulus into the economy that will only worsen the problem. Doing so could make inflation a year-in, year-out persistent problem for the foreseeable future.”