Note: The Cliff Effects calculator contained here was updated in May 2021 to add Medicaid expansion for adults and updated poverty levels for 2021.
The Oklahoma Policy Institute released a December 2020 report on how federal and state assistance programs and tax credits help support families who need them. A previous article described these programs and how essential they are to thousands of Oklahoma households. Because public benefits are so complex and interconnected, OK Policy introduced a benefits simulator that provided data for that report. In this piece, we will show how the simulator works, how families can use it to make decisions about applying for and retaining benefits, and how we can improve the assistance programs these families need.
OK Policy’s simulator is a menu-driven Microsoft Excel worksheet in which users input details about a family to see how assistance programs help them at various hours of work and hourly wages. Users can also decide which assistance programs and tax credits they want to consider or choose all options to see all the help they could receive. The simulator then provides a detailed analysis, both in graphs and data, showing how much assistance a family could receive per month from each assistance program. Additionally, it shows how benefits can change as their work schedule or hourly wage changes. This tool can be invaluable for Oklahomans who want to better judge available assistance for themselves and their families. It also can be a useful tool as they advocate for a stronger, more robust social safety net for themselves and other Oklahomans who need it.
The simulator helps find out what assistance is available and for how long
Some people who could benefit from public assistance never apply, and many who do apply have to think long and hard about it for many reasons. First, the application process is complicated. Families face a bewildering number of agencies, applications, and requirements to actually get the help they need. They also have to overcome the stigma of utilizing assistance. Additionally, many don’t know they could get help. The simulator can familiarize users with program options and help them weigh the costs and benefits of applying before doing so.
The simulator can help low- and middle-income families — and those who work with them, such as a family member, an advocate, a food pantry, or a state worker — address three key questions: 1) what benefits is the family eligible for? 2) how much might they receive?, and 3) what will happen if their income goes up?
We’ll answer the first two questions for a single parent who is not currently working and has a newborn child. The simulator graph for this person is here and the data are here. These start at the left with the adult not working at all. In that case, they show the family could qualify for SNAP, Medicaid, Temporary Assistance to Needy Families (TANF), and housing assistance. While housing assistance could provide $867 monthly in this case, it’s important to remember that most people who are homeless or housing insecure don’t receive housing assistance because the programs are so poorly funded. If the household got housing assistance, they would have $2,775 monthly in total resources, and would be able to live, but with little margin for error.
As to the third question, once a family has assistance, even small income changes can alter the available assistance. Assume the new parent is ready to work part-time, earning $10 hourly, and needs child care. Reading across the graph to the right, we see that total resources (earnings plus assistance) grow when they work 5 or 10 hours a week and then fall dramatically at 15 hours per week when the parent loses eligibility for Medicaid. Fortunately, that cliff will be eliminated when we fully expand Medicaid this year. Once the adult is working, the family is eligible for child care subsidy, which will pay the full cost of child care at low income levels. The federal and state earned income tax credits encourage work by increasing as the parent moves from 5 to 35 hours a week. Still, the parent has to work 25 hours a week just to have more resources than when not working at all. Even at 40 hours per week, total resources are only $500 more than when not working at all, because the family loses adult Medicaid coverage and TANF altogether. All other assistance falls gradually as income rises.
Looking at the data table, someone seeking assistance might decide to apply for Medicaid, housing, and food stamps. Whether to seek TANF is a tough question. This benefit is small (Oklahoma has the seventh lowest benefit in the country) and the family exceeds the income eligibility once the parent works 15 hours a week. Given TANF’s extensive requirements and limited assistance, families may decide not to apply. The family might make a different decision if the state made two simple changes in its TANF program, as recommended in our report. The family would have higher benefits when the parent starts working and they would see some benefit until the parent worked full time at $11 per hour.
The simulator helps us understand if assistance is meeting our policy goals
Public assistance is designed to serve many purposes, but the most important must be to sustain families struggling to survive. So it’s important to know what it takes for an average family to subsist. MIT calculates a living wage that includes all the typical costs a household faces, depending on number of earners and children, and then converts it to an hourly wage necessary to cover those expenses by working full time. Since our simulator calculates monthly earnings and resources, we’ve converted MIT’s work to a monthly income requirement. MIT includes county-level cost of living estimates, so our simulator can drill down to local levels. In Washita County, for example, an adult who works full time and supports two children needs $4,890 a month ($28.21 hourly) to pay all the household expenses. This is well above the poverty line ($1,777 a month, or $10.25 hourly) and about four times what the adult would earn at the current minimum wage of $7.25, or $1,257 a month.
We can use our simulator to address some questions about this family to determine if assistance is meeting important goals.
First, do assistance programs support the family adequately? The figure below indicates the best answer in this case is “almost.” At minimum wage, even qualifying for every available assistance program does not fully bridge the difference between the parent’s earnings ($1,213 monthly) and family expenses ($4,890 monthly, shown in the black dotted line near the top of the graph). In this scenario, they fall nearly $1,000 below what is needed to support the family. If fully implemented, Medicaid expansion is expected to close this gap starting later this year. As the parent’s wages grow, resources with earnings and assistance eventually reach self-sufficiency at $16/hour. But the cliff effect is illustrated when the wage rises from $19 to $20 per hour and the family loses Medicaid coverage for children.
Second, do assistance programs encourage parents to earn more money? The chart shows that’s not the case here. While the parents earn more, they will experience a decline in assistance for food, housing, child care, and the earned income tax credit; their taxes take a larger share of the earnings as well. Look for example, at the difference between earning $7 and $10 an hour. Gross earnings rise by $520 monthly (from $1,213 to $1,733), after-tax earnings increase by about the same amount ($558), but total resources available to the family only increase by $453. The difference is even greater moving from $10 to $15 hourly; gross earnings increase by $867 a month, but the total resources for the family only increase by $302, barely a third of the increased earnings. This plateau effect is even greater for two-earner families, particularly when the adults are married, while childless adults do see a larger share of each new dollar they earn.
Third, is increasing assistance the only way to help families meet all their expenses? No. Increasing the minimum wage would be one path. The chart below compares resources and expenses at three wage levels, the current minimum wage of $7.25 hourly, the $11 hourly minimum wage in Arkansas, and the $15 hourly minimum wage that many other states are phasing in.
The orange bars show the family’s gross monthly earnings at each wage level, the gray bars show the net cost of assistance less taxes, and the dotted line shows expenses the family must cover, as reported by MIT. Not surprisingly, higher minimum wages allow families to cover all their expenses and at less cost to the government. With more than 750,000 Oklahomans receiving some kind of assistance, total annual savings from a higher minimum wage could exceed a billion dollars.
How the simulator works, where to get it, how to use it
Users start the simulator by pulling up a menu and entering data about the family and assistance they want to consider. These inputs result in a table (shown below) that reflects all the inputs necessary to get a full picture for the family.
The simulator gives accurate estimates of assistance because of the level of detail it collects on family members. Users input marital status, number and age of children, and any disabled members of the family. They input the county of residence, which affects assistance for housing and for Affordable Care Act health insurance premiums. Income is determined by entering each adult’s hours worked and/or hourly wage, and any unemployment benefit. These inputs would also include information for a non-custodial parent paying child support. Users can then select which assistance programs they receive or wish to consider. (If a user checks a benefit for which the family isn’t eligible, the simulator won’t show any assistance from that source.) The table keeps any data that’s been input so it’s easy to go back and change choices of assistance programs or any changes in family composition or income.
Every time the user inputs family and program data, the simulator produces two charts, one showing how resources change when wages change and one showing what happens when working hours change. Each chart provides three key pieces of information at every level of wages or hours worked:
earned income, calculated from input hours and wages,
after-tax income, after paying any federal and state income taxes due as well as receiving child and child care tax credits, and
total resources, which add income from child support and unemployment as well as value of assistance programs to after-tax income.
Users can find a more detailed guide on how to read the charts here.
While the simulator appears intimidating at first, the reader only needs to follow its input menus and read its charts. Using the tool does not require mastery of the complex processes and calculations that underpin Oklahoma’s social safety net. We believe the simulator can be useful to those who may need assistance, whether they currently participate in these programs or want to know how their resources may change as their lives change. It also can be used by those in state offices, schools, and non-profits who play the vital role of connecting families with the resources they need.
Information is power. We believe all of these potential users should have the power to understand how these systems can interact with the aim of building more economic security for all Oklahomans. We also believe and hope that some will use simulator results to advocate for better assistance programs, whether for themselves, family members, neighbors, or customers.
Those interested in joining that effort are welcome to download the Microsoft Excel-based simulator here and a very brief set of instructions here. We’re also interested in feedback and ideas for improvements, which can be emailed to the author. We plan on updating and expanding the simulator as time and resources allow, potentially even creating an online version. OK Policy welcomes suggestions that can help make this tool serve as a resource to Oklahomans.
Assistance programs work, and we can make them work better
More than a million Oklahomans need assistance and tax credits to approach or reach a level at which they can adequately house, feed, clothe, and care for their families. Public policy must sustain and improve these essential programs. Our full report includes steps Oklahoma can take to do just that. A future article will describe those improvements and lay out a framework for achieving them.