When the food-stamp program, known as SNAP, was first expanded nationally in the 1970s, just one in 50 Americans participated. Today that number has reached one in eight Americans. Unsurprisingly, the number of people benefiting from the program has increased dramatically since the beginning of the pandemic from 38 million to 41.5 million in FY2021.
Most of the increase in the number of people on food stamps over time has nothing to do with fraud, as some like to claim, but it has everything to do to with changes in eligibility rules and increases in payments per eligible person.
Recently, a reporter sent me this study out of Pennsylvania’s Independent Fiscal Office. According to the Center on Budget and Policy Priorities, in 2021, 14 percent of the state’s population receives food stamps, slightly higher than the national average. Also, 46 percent of beneficiaries are in working families, 61 percent are in families with children, and 46 percent are in families with members who are older adults or are disabled.
During the pandemic, some changes were made to up the benefit amounts for recipients. (AEI’s Angela Rachidi had a piece on this here.) In addition, new eligibility standards that raise income limits have just been announced. The Department of Health and Human Services estimates that “174,000 new households will qualify for SNAP due to the higher income limit, and under the ongoing [federal public health emergency] PHE, they would qualify for the maximum benefit.”
The question the Pennsylvania Independent Fiscal Office study is asking is whether this will create disincentives to work. The conclusion is that it likely will:
Research finds that a key feature of successful safety net programs is an income phase-out because it avoids an “all or nothing” benefits cliff for recipients. A vertical cliff provides a strong disincentive for household members to seek employment, work more hours or accept promotions due to the potential loss of benefits. The graph displays the cliff for households under the federal PHE and higher income thresholds. A household loses all benefits if income exceeds the threshold by one dollar. Due to this design, emergency allotments give the largest benefit increase to households with highest incomes just below the threshold. For a household of 4, the monthly SNAP benefit ($939) is largely equal to income earned by a member who works 20 hours per week at $15 per hour ($1,200 per month, $1,052 after state-local income and employee payroll taxes). Households could gain significant benefits if members work less to move below the threshold. While emergency allotments provide relief, they will also likely reduce the supply of labor, which is reinforced by expansion of the income thresholds.
Of course, putting cash in people’s pockets and reducing food insecurity are important. But it matters how you do that. And should the government be involved, we shouldn’t ignore the potential tradeoffs of such policies. The changes in food-stamp eligibility combined with other relief programs that were expanded during the pandemic could reduce the incentives to work for most of the non-elderly population. The changes could also reduce income mobility, with all the known consequences for children. Increased employment among low-income parents, for instance, has driven much of the long-term declines in child poverty.