benefit reduction rate (BRR)

In social welfare programs, the amount of money that is withheld from a public assistance payment for each additional dollar of household income beyond a specified amount. For example, in Aid to Families with Dependent Children (AFDC), the Food Stamp program, and housing programs, benefits vary depending on the other sources of client income. Thus, when a client becomes employed, the AFDC benefits are reduced by 100 percent of the amount earned, and food stamp benefits are reduced by 30 percent of the amount earned. However, the major practical alternative leads to the cliff effect, which is also a disincentive.