Essay on The Cliff Effect

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The Cliff Effect
Pushing the Lower Class into Dependency!

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Rebecca Gray - April 11, 2014


THE CLIFF EFFECT - REBECCA GRAY

ECO 202

1

Introduction!
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Income Inequality is the unequal distribution income across the various participants in

an economy. What comes to mind for many when considering income inequality is the idea of fairness. It is generally considered unfair if the rich have a huge control over the economy or if people from various demographics do not earn money equally or fairly for their job. For something that seems as though it should be black and white when looking at income inequality there is actually a lot of gray area and debate over the topics of causes and solutions for income inequality. Income inequality does exist and is a problem, there is no denying that or making that up. What people can make up or decide is their own perception and opinions towards income inequality. I believe that not all income inequality comes from discrimination, but that a significant amount of the inequality comes from external forces discouraging people from improving their economic status. !
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Problems exist when there is a large difference between expectations and reality. When

one thinks of America, what typically comes to mind is a vision of well paying jobs available to those who will work hard, financial gain and opportunities to get ahead with hard work, an equal opportunity for every single person to get ahead, and help from society if someone is in a rough patch of life. However, because of a concept known as the cliff effect, the reality of many of the opportunities in America, especially those of the working poor, tends to contradict the expectations many have in their mind. The cliff effect also makes the idea of income inequality much more of a relevant issue. Although there is no straight-forward answer as to why income inequality exists, there is no denying the the cliff effect is a contributing factor.!

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What is the Cliff Effect?!
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The cliff effect is often times the single greatest barrier to self-sufficiency for low

income citizens and families. Because of eligibility for public assistance programs including the Supplemental Nutrition Assistance Program (SNAP) and the Child Care Development

THE CLIFF EFFECT - REBECCA GRAY

ECO 202

2

Fund (CCDF) being based on income, a person’s eligibility can change if there income situation changed (Derek Thomas). Benefits of these programs phase out as a persons earnings increase. From a government agency’s perspective, a person’s needs for these benefits become lowered when they are given a raise or become able to earn additional income. For that reason, typically when someone earns more money, benefits stop immediately rather than gradually which is why it is known as the cliff effect and not the benefit phase out effect. The unintended consequences of these policies mean that a family may become worse off with a higher income than they were before. These policies, although great for taking the benefits from underclass citizens, are hurting the working poor and act as a deterrent to economic mobility.!

The Cliff Effect and The Underclass!
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A common, ignorant, misperception is that those on public assistance are people that

don’t want to work or better their lives. That is not the reality for the majority of people receiving public assistance. The perception that people have is actually that of the underclass.
The underclass citizens are those who are not working, do not plan on or want to start working, and live off of public assistance (Patrick Buchanan). The underclass and the working poor differ drastically as the working class are actually trying to better their life for themselves and their family. They have the motivation to try to get better for themselves. An easy way to think about the two would be that the underclass are not working towards an
“American Dream”
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