Leap Fund’s Karen Schoellkopf details the 'benefits cliff' problem - Generocity Philly

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Nov. 3, 2020 12:48 pm

Leap Fund’s Karen Schoellkopf details the ‘benefits cliff’ problem

Why would a worker turn down a promotion with a wage increase? Because wages aren't the full story, said the Fund's CEO, at the Forum on Justice and Opportunity last week.

Karen Schoellkopf, the founder and CEO of Leap Fund.

(Screen capture from online forum)

In her opening salvo at Episcopal Community Services’ Forum On Justice & Opportunity last week, Leap Fund’s Karen Schoellkopf laid down a hypothetical about a single mother named Tanya who, working at a fast-casual restaurant, turns down a raise.

Tanya is a model employee — a cashier who excels at her position, earning a promotion to supervisor complete with a $1.50 per hour increase in pay. At first glance, the tale is a bootstrapper’s version of the American Dream.

But, as Schoellkopf explained to the Forum’s virtual audience, wages fail to tell the entire story. Tanya earns a $900 child care benefit based on her income. And while a raise might not cause her to lose it, the inability to know for sure forces her to decline the opportunity.

In Schoellkopf’s words, Tanya faces the confounding problem of the benefits cliff hiding in plain sight.

A slide from the presentation on benefits cliffs. (Screen capture)

“What’s happening to Tanya is actually happening to workers across the country,” said Schoellkopf, describing the wide-ranging implications of benefits cliffs. “And this is the hidden next level math that they’re guessing at, and coaches across the country are trying to help clients navigate, with zero information from the government or community-based organizations or legislators.”

Amid a global pandemic, a tense and partisan presidential campaign, and another police shooting of an African American man bringing demonstrators to the front lines, Schoellkopf used her slot on day four of the forum to focus on the country’s most vulnerable people. In her hour-long presentation, she detailed the benefits cliff problem, along with coaching solutions and a new calculator pilot program put forth by her organization.

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Founded by Schoellkopf, who’s also the CEO, Leap Fund is an award-winning organization focused on solving the Cliff Effect, or the benefits cliff problem. In simple terms, the Cliff Effect occurs when an increase in wages causes workers to lose public benefits due to what Schoellkopf called, in her primer for the session, a flawed benefits system.

The Fund built a couple of tools to help workers avoid the cliff.

A calculator predicts when individuals will hit the cliff, while a financial vehicle developed by the group allows workers to defer income, giving them time to earn back what is lost in benefits.

“The main thesis at Leaf Fund is that there is a group of folks that are affected by benefits cliffs that will actually hit the cliff, and there’s a much larger group of people that are affected by fear of hitting the cliff,” Schoellkopf said. “It’s hard to know how many people actually hit benefits cliffs. For example, the Department of Labor doesn’t track how many people turn down jobs or more hours or raises.”

Lack of data is what pushed the Fund to launch its calculator pilot program. With 10 coaching organizations from across the spectrum, including financial, employment, workforce development training coaches, social workers, and more, the Fund set about collecting data on benefits cliffs via interviews, surveys, and more.

The program, which took place between March and August of this year, allowed coaches to use the new calculator to explain better and work through the Cliff Effect with workers and clients.

The data the Fund collected was enlightening. According to their research, around 50% of workers were aware of benefits cliffs, while one out of four clients made employment decisions based on the Cliff Effect. And while coaches themselves first thought the calculator would be cumbersome, they soon learned it was a practical tool, only adding 10 to 15 minutes to client sessions.

But the added benefits were immeasurable.

The Fund found that coaches reported the calculator helped with various situations, including illuminating benefits cliffs, showing client eligibility for benefits such as SNAP, and even assisting workers with anxiety and stigma. According to the findings, using the calculator impacted client decision-making in a variety of positive ways.

“Some people don’t want the stigma of being on benefits,” said one coach, according to Schoellkopf’s presentation. “But when they see the numbers put in a budget, that’s where reality sets in for them and it’s a powerful visual.”

A slide from the presentation on benefits cliffs. (Screen capture)

What the Fund wasn’t expecting when launching a pilot program this year was a global pandemic.

But, like so many others in the age of COVID-19, the New York-based organization adapted and used the opportunity to learn more about their stated mission. Schoellkopf told the virtual crowd at the forum that the novel coronavirus changed client coaching, and brought new fears to the forefront for workers.

While a global pandemic is a difficult time to run a pilot program, as Schoellkopf noted, it’s a much more difficult period for unemployed and under-employed individuals.

Low-income clients are concerned about everything from food to rent to childcare and more, causing coaching appointments to become triage sessions. As the Fund found during the pilot program, coaching time with clients is now shorter due to virtual sessions, and clients are both lonely and scared.

“One of my clients is a mom of three and her childcare shutdown for a while — does she go to work and bring her child to someone else?” asked one coach in the pilot program, according to what was shared at the forum. “Clients are making these hard parenting decisions, weighing work, childcare, and making the best decision for their family to keep them safe.”

Working remotely due to COVID-19 has changed how everyone functions in the professional space these days, while placing the benefits cliff problem front and center. Coaches now have an opportunity to work with new clients while streamlining the work they perform. Still, in the end, the benefits cliff problem won’t be solved until the system itself is fixed.

“We a-thousand-percent support policy change,” Schoellkopf told the crowd at the forum. “I have gone to literally everyone and said ‘put us out of business.’ We should not exist. The policy needs to change.”

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