The Persistence of Benefit Cliffs: A Behavioral Look at a Policy Problem

The Persistence of Benefit Cliffs: A Behavioral Look at a Policy Problem

Benefit cliffs occur when earning slightly more — through a raise or extra hours — leaves people worse off because they lose government benefits. Many economists believe these cliffs can be “smoothed out” through better program design. But this view overlooks a critical factor: human psychology. To truly address benefit cliffs, policymakers must move beyond formulas and graphs and consider how people actually think, feel, and behave. In some cas…