TODAY   |  May 25, 2013

Father forced to take pay cut to keep public benefits

The “cliff effect” is what happens when just a small raise in a family’s income leads to an abrupt termination of essential public benefits, such as childcare. That happened to one man, who was about to get a promotion and a raise, and instead had to choose a pay cut. TODAY’s Lester Holt reports.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> can you ever imagine saying no to getting a raise at work? some people are happy to do it because the extra money could actually hurt them financially. it's known as the cliff effect . it's 3:00 a.m . welcome to dan greely's day.

>> i drink a lot of coffee in the morning.

>> reporter: dan is a single father of three young children ages 2, 4 and 6. they live in a city near boulder, colorado.

>> 4:00 i pack their bags. 5:00 they're in the car going to day care .

>> reporter: at 6:30 a.m ., dan arrives at his job at a nonprofit community center and food pantry .

>> this can go on there.

>> reporter: more than nine hours later, it's back home to cook, clean and play.

>> i don't get a break. i love it. every minute of it. it's my life.

>> reporter: back in 2010 , life looked promising. dan , who was earning $44,000 a year, was about to be promoted to director of facilities and operations. the additional raise he figured would finally allow him to fulfill a dream to buy his own home but then --

>> i had to take a pay cut. my stomach was in knots. supposed to get a raise and instead i took a pay cut.

>> reporter: did your boss think you were crazy?

>> pretty much so. i don't think anybody ever asks for a pay cut. i was making ends meet. i was just making ends meet. it really hurt.

>> reporter: what happened? the answer lies in state policies that prevent hundreds of thousands of families from climbing up the economic ladder.

>> daddy!

>> reporter: dan took a pay cut so he could keep his child care assistance. he only qualified for help from the state if he stayed below a certain income.

>> i felt like i was standing on the edge of a cliff and i was going to get pushed off. there's nowhere to go.

>> reporter: dan fell victim to what is known as the cliff effect . that's when just a small raise in a family's income leads to an abrupt termination of an essential public benefit. it's a dilemma getting more attention. a number of groups are trying to raise awareness of the cliff effect in the hopes of affecting some policy changes among state governments .