Message from the President

This is a challenging subject for someone who is my age, gender, and race to write about. But it’s a real problem out there. Tell me what you think— I’d welcome your feedback and edits. Thousands of Delawareans receive social transfer payments from the government each month. These funds help those needy families that are struggling financially to afford housing, food, utilities, child care, health care, and more. Many of these same neighbors are employed but have low incomes. Recently, some employers reported that some of their lower paid employees, when faced with promotion opportunities and the potential for higher income, refuse the promotions and better wages because that raise will make them ineligible for some of the state services they have used to cover household or family expenses. This reaction is quite logical. If you make $35,000 a year and were offered a $6,000 raise to $41,000, you might lose some of the state subsidies you had relied upon before and now must finance yourself because you are financially ineligible for further benefits. Welcome to the benefits cliff.

For full disclosure, I have never received these sorts of subsidies at any time in my life, so my ability to relate with those who live these realities is near impossible. However, I have been involved in policy development my entire career and understand the pressure to help the neediest among us while prudently managing public trust and tax dollars. And there is more to this. Just about all of us have moved more than once in our lives and know what a pain that can be. For families, moving is an even bigger deal. You might have to find your kids new schools, maybe even before- and after-school care too, learn new commuting patterns, and more. The disruptions are real and enormously challenging even in the best of circumstances.

Few lower wage employees are going to qualify for jobs with big jumps in income. It’s unlikely you will move from $35,000 annually to $50,000 or $60,000 in a single promotion and net more income even after covering what was subsidized before. That’s the conundrum. I also wonder if there is a psychology around the predictability of life, even at those lower wages where families are in a known rhythm and taking a promotion is risky because what if it doesn’t work out? What if you don’t like the new position or boss or get let go? The Federal Reserve Bank of Atlanta has done research on the benefits cliff, and this is something we at the State Chamber will be looking at more closely too.

This is complicated. But if we are going to help move employees from where they are to where they desire to be, the larger “we” may have to solve some knotty issues to help more people be willing to take that promotion.