Atrium Health, Goodwill, Common Wealth Charlotte among groups trying to solve 'benefits cliff' issue

Published in Charlotte Business Journal on July 5, 2023.

Written by Erik Spanberg, Managing Editor - CBJ

Chris Jackson, the president and CEO at Goodwill Industries of the Southern Piedmont Inc., remembers when what is now known as the “benefits cliff” first came to his attention.

Five years ago, while interviewing clients about the challenges they face finding jobs and advancing in those jobs, people mentioned the difficulty of declining a promotion because of an offsetting, larger loss of benefits for childcare, food or housing — or, worse, accepting the step up career-wise while taking a step backward economically.

“They were explaining as they were starting to work and being offered promotions and wage increases, they were losing some access to benefits and that was causing them to make decisions like not accepting the promotion,” Jackson told CBJ.

The scenarios they described define the benefits cliff: the problem of state and federal benefits for lower-income residents drastically shrinking or disappearing altogether — the cliff in the analogy — because of a relatively modest pay gain. Employers, human services agencies and policy experts here and elsewhere have begun a two-step process to limit damage from a benefits cliff by seeking short-term workarounds that can lessen the severity of the current policies while building consensus and coalitions to push for policy changes that will bring a stair-step, gradual decline in benefits.

Goodwill, in partnership with Atrium Health, UNC Charlotte’s Urban Institute, Raleigh-based nonprofit North Carolina Justice Center, Mecklenburg County and the Federal Reserve Bank of Richmond, which includes a Charlotte branch, have started a lab project this summer to gather data and insights from employees and employers to fuel both short- and long-term policy goals.

Results and findings from the study are expected within the next year.

Jackson said the local coalition has spent the past 18 to 24 months discussing and analyzing strategies “to help mitigate this issue.” The Charlotte region, portions of South Carolina and much of North Carolina are included, he added.

The Federal Reserve of Atlanta, which has provided initial data to better define the benefits cliff, is also involved. The Atlanta Fed’s work includes an interactive tool that shows specific effects of the benefits cliff as determined by geography, age, family size, income and public assistance programs. It can be accessed on the Fed and Goodwill websites.

“We’re starting with awareness, helping people understand what the issue is,” Jackson said. “And then, hopefully, collaboratively we can work on solutions that might involve public policy as well.”

Advocates and experts said the benefits cliff has become a broader problem, in part, because of a positive trend: attention on low-paying service jobs and other occupations that have prodded companies and government agencies to increase wages — often with the unintended consequence of losing a disproportionate share of assistance, or all of it.

Donald Jonas, Atrium’s assistant vice president of social strategy and impact, told CBJ that the health-care system became interested in the benefits cliff as it realized that promotions and pay raises were causing steep public benefit losses. 

Atrium employs 39,000 people locally, making it the largest employer in Charlotte. An estimated 5,000 to 6,000 of those employees — roughly 15% — are earning $38,000 or less, Jonas said. That income level is important because that is the range where childcare subsidies fall off, a major factor in family stability and socioeconomic health.

Jonas said Atrium is conducting internal research, working with the benefits cliff lab partners, and educating company executives and board members on the challenges caused by steep, immediate drops in public assistance.

“We want to make sure that our senior leaders know that for some of our teammates they may elect not to move forward (with a promotion) because they’re smart about this and they recognize that if they lost their benefits they would have less pay in the end,” he said.

Atrium and Common Wealth Charlotte, a financial advisory nonprofit that focuses on helping low-income residents move toward economic stability, have started a pilot program to help Atrium employees learn how to calculate what changes in income will affect, and consider whether there are ways to lessen the negative impacts.

Jonas said the pilot program will consist of 30 Atrium employees to start.

“Our hope is through all of this work that this will inform the way that we do benefits and compensation down the line,” he added. “There are a variety of things we need to do on a system level and on an advocacy level.”

Goodwill and county government have started similar efforts that will be part of the benefits cliff study now underway. 

Bridget Anderson, a researcher and evaluator at the UNC Charlotte Urban Institute, said the goal of the pilot and community lab is to understand how lower-income workers can move up while minimizing lost benefits. Having more specific information on financial implications can also help workers consider whether they want to stay in a particular industry or career path.

“We are evaluating this effort to understand what outcomes (employers and employees are) seeing and see what’s working, what’s not,” she said. 

Focus groups and interviews will be a big part of the study for first-hand experiences. Employees and executives from the Atlanta Fed, Goodwill and Atrium are participating.

The pilot will likely involve a lot of trial and error as employers try to find answers while policy debates are certain to be more protracted, she added.

Carrie Cook, vice president of community development and community affairs officer at the Richmond Fed, said studies in some areas of the country have shown up to 40% of employees declining a pay increase because of the benefits cliff. The community lab project will provide insights on what those rates are in Charlotte and Mecklenburg County.

Cook said people making up to $60,000 annually can be affected by the benefits cliff.

“One of the things keeping people on the sidelines is this cliff,” she said, referring to diminished labor market participation.

Jonas, the Atrium assistant vice president, hopes that other companies will take an interest in the benefits cliff as the study and other discussions continue.

“It would be easy to put your head in the sand and hope things get better and tell people to soldier on,” he said. “We’re really trying to diagnose the issue as best we can and come up with better internal policies and interventions but also think externally.”