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Oregon's Working Poor: Benefits Cliff

John Rosman

This week we bring you stories of Oregon’s “working poor,”  people who are employed but still struggling to pay the bills. As people living in poverty find jobs and begin to earn a wage, they face another challenge: the benefits cliff.

For the first time in her life, Lynne Chartraw is taking a paid vacation. The single mom is spending her summer day off hosting a motley crew of teenage boys in her Bend apartment. Her two sons are here with six friends playing poker and video games.

They like to tease Chartraw.
Chartraw loves it that all these teenagers are comfortable here.

Chartraw: I found I think my new purpose over here. To be the apartment with all the bikes in the front room. Cause I always wanted to have a house with all the bikes in the front yard but now I have the apartment with the bikes in the front room.

It’s taken Chartraw a long time to get to the point where she has a home and a job with paid days off.  

Chartraw: Seven years back I found myself a single mom. And I lived in my van for a while. We basically couldn’t go to our house. I had to find myself a job and a place to live. And it was scary.

She gradually earned a college degree and landed a full-time job. She now works in a hospital, reading medical charts. She’s making the highest
wage of her life: nearly fifteen dollars an hour.

But she says she couldn’t have gotten here without help.
For years, Chartraw has received government benefits like rent subsidies and food stamps. She also receives tax credits for low-income workers. When she was in school, for example, her rent was almost completely subsidized.

But that changed soon after she graduated and got a job.

Chartraw: As soon as I got a couple of paychecks so I knew what to report I gave that to food stamps and HUD. That dropped my food stamps to zero, and my rent went up $550.

Chartraw hit what some economists call “the benefits cliff.”

Chartraw: It wasn’t like a taper off, it was like one month you get some and then one month you get zero."

Tapogna: For each additional dollar that they earn they may be paying 80 to 90 cents in some combination of tax increases and lost benefits.

That’s John Tapogna, president of Eco Northwest, an economics consulting firm in Portland.

Tapogna: As you try to move away from the Federal poverty level and toward twice the Federal poverty level or beyond, that’s where you really start to see the benefits falling off and the taxes pick up.

Chartraw says her budget is actually tighter now than it was when she was on public assistance. She’s glad to finally be earning an income. But
what would have helped her deal with the benefits cliff?

Chartraw: A heads up! The first month we’re going to take this much… and the next month we’re going to take this much--even over three months we’ll work you down to zero.

In other words, to lose benefits gradually-- more a slope than a cliff. State policy analysts are looking at how to address that issue now. But there are no concrete proposals on the table yet.  

Tapogna: The most important thing that Oregon should do right now is make sure as they think about changes in public policy that they keep this benefits cliff issue
and these marginal tax rates calculated front and center.

In the meantime, Chartaw says her sons and their friends understand that they won't always find what they want in the fridge.

Chartraw: “There was no way I was going to tell the boys you can’t come over anymore because I don’t get food stamps anymore. So we just get more creative, eat a little more top ramen. We just make it work.”  

She’s hoping to put a few dollars away for something special for her son. His eighteenth birthday is this month.

Copyright 2014 OPB

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