Sunday, November 10, 2013

New Food Stamp Benefit

Under the traditional rules for setting food stamp/SNAP benefits, monthly benefits would have increased $25.48 between October 2008 and the present, except for the small fraction of beneficiaries who receive the minimum benefit.  In early 2009, the ARRA deviated from those rules by legislating an immediate $46.53 increase.  That extra increase expired, putting the program back on its traditional path for benefits (but not eligibility -- that's another story).

Of course, putting a program back on its traditional path is known in Washington as a cruel cut.

The average amount of the cut, accounting for beneficiaries who receive the program minimum benefit, is $20.36 per month.  That's about 1/2 of one percent of the employee compensation of the median non-elderly household head or spouse when they are working (and thereby not getting SNAP benefits).  Almost half of the reductions in labor among such person result in SNAP participation, which is why putting SNAP benefits back on their traditional path increases the reward to work by about 1/4th of one percent of compensation.

The overall reward to work is about half of compensation, so the new SNAP benefits increase the reward to work itself by about 1/2 of one percent.  By itself, the change would increase aggregate hours worked by somewhere in the range of (0.2,0.4) of one percent.  That change would be partly realized as additional employment and another part as additional hours.  E.g, at the very high end the additional nationwide employment addition would be 500,000.

However, this increase in the reward to work is small when compared to the reduced reward to work that came in January 2013 with the expiration of the payroll tax cut, and tiny when compared to the reward to work that is coming January 2014 from the ACA.

[Technical note: the traditional SNAP procedure is to increase the maximum benefit (for each household size) proportionally every October according to food price inflation.  Note that the vast majority of SNAP households do not receive the maximum benefit, but instead receive the maximum benefit minus an amount according to their family income.  I.e., adding $25 to the maximum benefit adds $25 to essentially every SNAP household's benefit, which is why my calculations are based on the dollar addition to benefits rather than the percentage increase in maximum benefit.]

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