Simulating Cascading Effects of State Policy Changes

• In Event: State-Level Policymaking and Hardship among Families with Children

Abstract

The social safety net provides crucial support for families, with resources from cash and in-kind transfers more than doubling the available resources for minimum wage workers in most all states. However, state and federal policy components interact complexly. Benefit cliffs occur when increased earnings or benefits result in decreasing total resources. Marriage penalties occur when individuals would have more resources available independently than jointly. Our study employs a microsimulation to examine two research questions, with particular interest in identifying benefit cliffs and marriage penalties: 1) How did states policy changes observed during the study period change total resources and associated benefits? and 2) What is the impact of potential policy changes in 2025 on total resources and associated state benefits?

Our simulation – the Policy Impact Calculator – demonstrates the total value of resources from the safety net over time for low-income families with different earnings and compositions. The simulation includes four state policies with rigorous causal evidence demonstrating their impact on child and family well-being: 1) minimum wage; 2) paid family and medical leave; 3) child care subsidies; and 4) income tax and tax credits. Federal nutrition benefits (SNAP & WIC), tax liability, and tax credits are also included in the model, because these federal benefits vary due to state policy choices examined herein. The study sample includes 306 state-year observations, comprised of 50 states and the District of Columbia (DC) over six years (2020-2025). A team of policy analysts at the Prenatal-to-3 Policy Impact Center at Vanderbilt University, who track legislative activity across the 50 states and DC, compiled the data.

Between 2020 and 2024, Missouri had the largest percentage gain in resources for a single minimum wage worker, with resources more than doubling and rank increasing from 51st to 24th. This was due to multiple state policy changes, including a minimum wage increase from $9.45 to $12.30 per hour, the enactment of a 10% refundable state earned income tax credit (EITC), and decreasing out of pocket child care costs for families receiving a child care subsidy. In addition to these observed changes, we simulate the impact of potential state policy changes singularly and in combination to increase state minimum wage, implement a new or more generous state EITC, cap out of pocket child care costs, and provide paid family and medical leave benefits for various model families.

Authors

• Cynthia Osborne, Vanderbilt University
  Non-Presenting Co-Author

• Alexandra Haralampoudis, Vanderbilt University
  Presenting Author