The Cost of Losing Child Care Assistance in New Mexico

Everyone should have the opportunity to work hard and achieve family economic security. And hard work should also be rewarded, but some policies are insufficient and inadvertently keep hard-working parents from climbing the economic ladder. Hard-working families with fewer resources may need work supports to help them cover basic necessities like food, child care, or health care until these families can be financially self-sufficient. But some of these work supports have an inherent flaw known as the cliff effect. The cliff effect occurs when an increase in income is enough to disqualify a family from receiving a work support but is not enough to cover the cost of the lost benefit. Thus, with the cliff effect, wage increases are not always equivalent to an improved financial situation and can actually leave families worse off than they were when they qualified for those benefits. Fortunately, there are simple solutions to this problem.