What is the Benefit Cutoff Cliff?

This is an income amount when you earn slightly more income, but you are worse off.

Getting a raise… working more hours… getting a part-time job… These are all exciting events! Or they should be.

For many people, they are something to be dreaded because they will leave you and your families in a worse financial position. 

Many government assistance programs lower the provided support or stop giving any support when a family’s income crosses a certain line. This means that the family has more income but is paying a much higher cost for things that were supported previously, which makes them poorer.

These supports may include:

• Childcare subsidies – Ontario is working towards a $10/day daycare rate, but it is a long way from this being realistic and available. Subsidies that make childcare affordable and attainable are based on income and family size. In Ontario, families earning between $20,000 – $40,000 pay 10% of their income above $20,000 toward childcare costs. Families earning over $40,000 have contribution rates of 30% on income above that threshold. 

• Health benefits – In Ontario, families receiving Ontario Works (OW) and Ontario Disability Support Program (ODSP) receive healthcare support for prescription drugs, medical supplies, and travel for medical appointments. When that family’s work income reaches a level that makes them ineligible for OW, they are no longer eligible for healthcare support. They may be granted Extended Health Benefits, but those have a timeline. If a family has a high cost of healthcare and their healthcare benefits are cut off, they face significant hardship covering their household expenses and healthcare expenses. The healthcare support for those receiving ODSP works slightly differently. Do you accept a better job or keep your family’s access to prescription drugs and necessary medical supplies?

• Housing subsidies – Rent Geared to Income (RGI) housing program subsidies are based on income levels. If someone’s income meets or exceeds a certain threshold, they start to pay a market rent rate. The rise from RGI to market rent can be more than the rise in income. This can throw off a family’s entire household budget, making them unable to cover the increased rent and other essentials. 

• Canada Child Benefit – The monthly Canada Child Benefit payment can be up to $666 for a child under six and $562 for a child 6-17 years old. These maximum amounts are for families with net income below $37,486/year. The reduction is 13.5% for families with incomes between $37,487 and $81,222/year. For families with net annual incomes of $81,222, there is an additional reduction of 5.7%. This is one example of a benefit reduction. Similar things happen with other tax benefits and credits. 

• Energy Assistance Program – Provincial energy assistance programs make heating and electrical costs more affordable for families. In Ontario, we have both the Ontario Electricity Support Program (OESP) and the Low-income Energy Assistance Program (LEAP). Eligibility for these is based on income, and eligibility ends at specific income levels that vary by household size. If someone earns slightly more than the eligibility level, they may not be able to stay warm in harsh winters or keep their electricity paid up. 

Navigating and managing these various cliffs can be extremely difficult and have real-life, significant impacts on the incomes of our neighbours, friends, families, and ourselves. Understanding the complexities of these systems is more than a full-time job. When we see our neighbours struggling, and we are struggling, let’s give one another grace as we are all navigating some level of this complexity.