Economy Matters

Brittany Birken never thought her name would be in the same sentence with Janet Yellen's.

Alex Ruder didn't think so either.

When Ruder learned he and Birken had won the Federal Reserve System's Janet L. Yellen Award for Excellence in Community Development, he was doing dad stuff, not fancy economics stuff. Ruder was wrangling his two kids into a kayak on a north Georgia lake.

But the names of Birken and Ruder will forever be linked to Yellen, the former regional Reserve Bank president, Fed chair, and now Treasury secretary.

Directors and principal advisers in the Atlanta Fed's Community and Economic Development (CED) department, Birken and Ruder received the Yellen Award at a November 16 dinner at Fed headquarters in Washington, DC. The award recognizes individuals who have demonstrated superior leadership, achievement, and contributions in fulfilling the Fed's systemwide community development mission and responsibilities.

Birken and Ruder were honored for their roles in building and sustaining the Atlanta Fed's Advancing Careers for Low-Income Families initiative. The initiative, which started in 2019, helps low-income workers surmount benefits cliffs that occur when a wage earner who receives multiple public benefits—such as the Supplemental Nutrition Assistance Program (SNAP) or Medicaid—earns more income but comes out worse off because they exceed income-eligibility thresholds for those benefits and thus lose access to them.

The Advancing Careers team early on concluded that by penalizing people for earning additional money, benefits cliffs constitute a punitive marginal tax on many workers who can least afford it. Basically, a benefits cliff means for each extra dollar earned, a person loses $3 or $4 in public benefits.

Atlanta Fed research shows that it can take a decade or more for the additional income to exceed the lost benefits. So, not surprisingly, many low-wage workers might decide not to acquire new skills and earn more—the benefits cliff dissuades them from gaining new skills or climbing a career ladder.

Finding ways to mitigate benefits cliffs is important for workers, employers, and governments. A key finding from the Advancing Careers research is that investing public resources to mitigate benefits cliffs saves communities money in the long run. Public benefits outlays are ultimately reduced as workers pursue career paths that allow them to stand on their own financially and maintain employment. Plus, research shows that tax collections rise as more citizens earn family-supporting incomes, pay income taxes, and consume more goods and services.

A research-engagement-research virtuous cycle

A couple of factors distinguish the Advancing Careers initiative, Birken and Ruder said. For one, the enterprise is designed to deliver and is delivering tangible, real-world results. Second, the program is a true collaboration among community and economic development specialists, research economists, and the Atlanta Fed's Regional Economic Information Network staff who gather intelligence from business leaders. Those groups sometimes approach policy issues differently.

The Advancing Careers core team, in fact, includes five staffers each from the Reserve Bank's CED and Research groups.

The Advancing Careers initiative traces its roots to a pair of economic research projects. One was analyses Atlanta Fed's CED staff did on understanding how workers make career and training decisions based on the expected financial return of jobs. Separately, Fed economists and outside collaborators had estimated effective marginal tax rates that result from various situations including benefits cliffs.

Dave Altig, chief economic adviser at the Atlanta Fed and a founder of the Advancing Careers initiative, had previously collaborated with the authors of the marginal tax research and figured that work would dovetail nicely with the Bank's nascent workforce development project.

"The whole Advancing Careers initiative started by having these two pieces of research and putting those ideas together," said Altig, who was Atlanta Fed research director when the initiative started. "Then we moved into doing something actionable with that research."

Altig called that process an "Atlanta Fed approach, which really does integrate research with the real world and what's going on in the real world."

The Advancing Careers initiative embodies a circular strategy that serves to continually refine the work: research informs community engagement that CED staff do with outside partners, which in turn generates grist for more research based on results of the engagements, which then improves future engagement efforts, and so on.

"The key," Ruder said, "was identifying a distance between what the research was saying and the actual practice in the field, and then really trying to fill that gap."

Tools to scale cliffs

Specifically, many labor market economists had studied the labor supply effects of public assistance programs. Meanwhile, social policy researchers had explored the effects on individuals and families of losing access to public assistance programs.

But a piece of the puzzle was missing. Although general knowledge of benefits cliffs was widespread among experts, there were no instruments available to determine when workers were likely to encounter cliffs in the course of their career decision-making, which workers might encounter them, and how the cliffs might vary by characteristics such as family size and geography, Birken explained.

Those nuances are critical. Differences in living costs among locales clearly matter, and states and municipalities use varying eligibility standards for public benefits. As a result, cliffs happen at different points on a career path and with differing severity in different places.

"Nobody had developed tools to help people identify exactly when cliffs might occur within a given career pathway and then figure out how to navigate around them," Birken said.

Now someone has.

The Advancing Careers team built a set of tools that crunch numbers resulting from the interaction of career advancement with public benefits, taxes, and tax credits. Three core tools—CLIFF Snapshot, CLIFF Dashboard, and CLIFF Planner—are each designed to meet a client's needs at different career stages.

Underlying those tools is the Policy Rules Database, or PRD, which functions as a sort of open-source operating system that incorporates eligibility criteria for public benefits in all 50 states and the District of Columbia. Because of its open-source nature, workforce development professionals and researchers can use the PRD as a basis to fashion their own customized tools.

Many agencies and nonprofits across the country are using the CLIFF tools to help workers, workforce development counselors, and policymakers identify and mitigate cliffs. One notable recent example comes from Florida. The state's legislature in 2023 unanimously passed a law expanding eligibility standards for a publicly funded children's health insurance program, or CHIP. Starting in 2024, families can earn up to 300 percent of federal poverty level income—up from the previous threshold of 200 percent—and qualify for CHIP.

Florida officials used the CLIFF tools to clarify that the health insurance program was indeed creating benefits cliffs for many Florida workers. For some families, the 200 percent income cutoff meant that a modest wage increase could send annual health insurance premiums soaring from about $240 to more than $3,000.

The eligibility expansion can increase families' net financial resources as their earnings rise and, in the long run, better position those families to build self-sufficiency and wealth, the Advancing Careers team figures.

The CLIFF tools helped Florida policy makers marshal objective information to inform their thinking about the issue and ultimately led them to pursue the policy change. (The Atlanta Fed did not lobby for the policy shift. By statute, the Fed is not allowed to lobby elected officials.)

The Advancing Careers team is also working with Washington, DC, officials on an ambitious five-year study of city efforts to eliminate benefits cliffs. Basically, Washington is assessing the effectiveness of its cliff-mitigation strategy by comparing outcomes for project participants with those of a separate group trying to navigate cliffs on their own.

The core of the DC strategy is a "hold harmless fund" that aims to offset a low-wage worker's loss of a public benefit. For example, if someone loses eligibility for $100 a month in SNAP benefits, the DC pilot would then seek to reduce rent or some other essential monthly expense by $100. A September CED discussion paper concludes that the DC project will, in fact, soften the financial blow of benefits cliffs for low-income families.

Projects like those in Florida and Washington demonstrate the concrete benefits of the Advancing Careers initiative, which is part of the Atlanta Fed's broader strategy of promoting economic mobility and resilience.

For their part, Birken and Ruder would rather talk about the work than the award.

"It's a wonderful affirmation of the work that's happened, and it's motivating for the work we have ahead of us," Birken said. "We're lucky to be honored, but it's been a big team effort. A lot of people share in this with us."

Ruder described the honor as a culmination of five years of work by a large group at the Atlanta Fed, across the Federal Reserve System, and with outside partners. "It's great that the award recognizes the research-to-engagement translation that we're doing," he said.

Charles Davidson

Staff writer for Economy Matters