Chronic unemployment is one of the major drivers of poverty in the U.S. today. For individuals employed during the majority of 36 months, the incidence of poverty is only 2.6%. Creating incentives to move into the world of work and stay has a huge impact on economic mobility.

However, for many low-wage workers, getting and maintaining employment while supporting one’s family can present an insurmountable challenge. Too often, policies aimed at helping low-wage workers with families actually disincentivize work or taking a pay increase, which makes upward economic mobility even more elusive.

In 2016, Colorado voters approved Amendment 70 to increase the state’s minimum wage to $12 per hour by 2020 and allow annual cost-of-living adjustments thereafter. The City and County of Denver thereafter implemented its own minimum wage requirement. In 2023, Colorado’s minimum wage is $13.65 per hour and Denver’s is $17.29 per hour. In 2016, prior to the amendment passing, the minimum wage across the state was $8.31 per hour. While these increases are certainly significant, they still fall well short of self-sufficiency for most single-parent families. In Denver County, the self-sufficiency standard for a family with one adult and one preschooler is $33.08 per hour.

This point is particularly important when one considers who is likely to earn minimum wage. Setting aside workers under 25 years old, vulnerable workers with barriers to employment are most likely to find themselves in low-wage jobs. These barriers included lack of a high school diploma, unskilled or low skill levels, criminal backgrounds and women living in poverty with their children. Social safety net programs such as food and energy assistance, access to Medicaid, along with housing and child-care subsidies, can help ensure a family’s basic needs are met. With inflation leading to increased food and energy costs, along with a tight housing market driving up the cost of rent, families with single-parent, low-wage earners struggle to cover even their most basic needs. For these low-wage workers, safety net programs become the way to make ends meet and allow them to maintain employment so they can move up the pay scale with the long-term goal of no longer requiring the subsidies.

Many of the safety net programs require recipients to work to maintain eligibility and most people who receive subsidies are employed. Eligibility is further determined by income thresholds. Though minimum wage is set at a local level, the thresholds for qualifying for benefits are determined based on Federal Poverty Level Guidelines (FPL). FPL was developed in the 1960s and assumes that food is one third of each household’s costs and all other expenses fit within the remaining two thirds. Today food accounts for only about 13% of Americans’ household expenses. The FPL does not account for rising health-care costs and housing or other changes in household costs such as technology.

The crunch for workers comes as Colorado’s minimum-wage growth has outpaced any annual cost-of-living adjustments made to the FPL. That is leading workers to experience benefits cliffs — losing the benefit entirely — rather than a gradual tapering that is commensurate with pay increases. In other instances, minimum-wage increases do not change eligibility, but the assistance is cut. Some benefits require workers to pay a percentage of their incomes; for example Section 8 vouchers for housing require tenants pay 30% of their income for rent.

The net result in both cases is a decrease in household income. In these instances, many low-wage workers are better off earning less, creating a disincentive to work more.

In my work at Women’s Bean Project, I have witnessed the demoralizing effects of benefits cliffs. I watched as Joanne, who was receiving $150 per month in food assistance to help support her four children, was cut to $25 per month because her minimum-wage job (at the time about $8.00 per hour) paid her too much. In her first moments of despair after learning of this cut, she wondered why she was working so hard to change her life. As a former drug dealer who spent time in federal prison, she clearly remembered how her past ill-gotten income allowed her to easily support her family. But she knew that was not the future she wanted for herself or her family.

There is dignity in work that does not exist by merely surviving on public assistance. Human dignity is not a function of wealth. It is created through purpose, intention and outcomes — outcomes each individual creates for him/herself. Dignity comes from having something to show for one’s efforts; knowing they were not a handout. This is why work requirements matter and why changing systems that disincentivize work matters.

As long as there is a gap between self-sufficiency and the amount earned by low-wage workers, they will continue to need assistance as they move up the pay scale. But rather than do more of the same, it is time to invest in solutions that have been shown to work. Earned Income Tax Credits (EITC) and Child Tax Credits (CTC) are such solutions.

EITC is a tax break for low- to moderate-income workers. To qualify, individuals must have worked in the year for which they are requesting the tax credit. Credits range from $560 for a single adult to $6,935, depending on tax filing status, income and number of dependent children in the household. EITC creates a strong incentive for non-workers to become employed. This program also has demonstrated a significant impact by reducing poverty for working families. Though the effects have not been studied as extensively, CTCs are also effective at incentivizing work. Both tax-credit programs are shown to benefit all household members. The heads of households who take advantage of this program are less educated and more likely to be women and people of color, and research suggests children in these households do better in school, are more likely to attend college and are expected to earn more as adults.

Colorado is one of 28 states, plus the District of Columbia, to offer state tax credits, as well. Legislation considered in the 2023 session at the State Capitol would increase the state’s EITC and CTC for those who qualify for these federal tax credits. Because we know the benefits of EITC and CTC, it makes sense to extend these tax credits to low-wage Colorado workers.

We must make work worth it. When used well, public assistance can supplement household incomes for the short term to help families make ends meet while low-wage workers maintain employment and move up the pay scale. Outdated benefits testing from the federal government works against local efforts to incentivize employment for the most vulnerable workers.

The real path to economic mobility is persistent employment, education, and training. If our systems help people maintain employment, eventually they will require less support as they move out of poverty.

Tamra Ryan is the Common Sense Institute Coors Economic Mobility Fellow and CEO of the Women’s Bean Project, a social enterprise providing transitional employment in its food manufacturing business to women attempting to break the cycle of chronic unemployment and poverty.