March 31, 1999

Food Stamps Can Help Low-Income Working Families
Put Food On The Table

by Sharon Parrott and Stacy Dean

Over the past several years, the number of families receiving cash assistance has fallen dramatically. Through September 1998, welfare caseloads had fallen 45 percent since 1994 when they reached their peak and 35 percent since enactment of the Personal Responsibility and Work Opportunity Reconciliation Act in August 1996. While the welfare rolls have fallen dramatically, many families no longer receiving cash assistance continue to have very low incomes. Although between half and three-quarters of the families leaving welfare include a parent who works, most of these parents have below-poverty earnings. Families with low incomes often struggle to afford items such as health insurance, housing and food.

The Food Stamp Program can significantly improve a working poor family's ability to purchase food. In fact, a family of four with a full-time minimum wage worker can be lifted almost to the poverty line (or in some cases, above the poverty line) through the combination of earnings, food stamps, and the earned income tax credit (EITC). Without food stamps, such a family's annual income would fall more than $2,600 below the poverty line.

 

Working Poor Families Can Qualify for a Significant Food Stamp Benefit

Studies recently have been conducted of former recipients of cash welfare assistance in Indiana, Maryland, Ohio, South Carolina, Washington State, and Wisconsin. Although the studies employed different methodologies, each found that working former recipients had low earnings. The studies found that when employed, most working former recipients worked more than 30 hours per week but earned less than $8 per hour, with a large portion earning less than $6 per hour. The studies also suggest that many former recipients who work have periods of unemployment or decreased earnings in the three or six-month period after they leave welfare.

$1,800 per year — assuming the family has moderate housing costs. (Food stamp benefits depend, in part, on a family's housing costs. This calculation assumes the family spends $350 per month on rent and utilities.)

Tables 1-3 show the food stamp benefits for which families of different sizes would be eligible at different earnings levels. Because food stamp benefits depend, in part, on families' housing costs, each table makes a different assumption about housing costs. Table 1 assumes that families spend just $250 per month on rent and utilities. Table 2 assumes families spend $350, while Table 3 assumes families spend $450.(1) (Thus families spending more than $450 in rent and utilities would be eligible for more food stamps than is shown in the Table 3 while families spending less than $250 would be eligible for less than is shown in Table 1.) As the tables show, for any level of earnings, larger families receive more food stamps because the food stamp benefit structure recognizes that feeding a larger family costs more than feeding a smaller one. Finally the food stamp benefit calculations shown in these tables assume the families do not have out-of-pocket child care costs and have no other income other than the earnings of the parent.(2)

 

Table 1

Food Stamp Benefits of Low-Income Working Families, Assuming the Families Spend
$250 per Month for Rent and Utilities

Earnings

30 hours,

34 hours,

Full-time,

minimum wage

$6.50 per hour

$7.50 per hour

Monthly take- home earnings:

$617.81

$883.72

$1,199.63

Family size

2

$124

$40

$0

3

$223

$139

$57

4

$313

$229

$147

Note: "Take-home" earnings equals earnings minus federal payroll taxes and does not include the EITC or the effects of state taxes.

 

Table 2

Food Stamp Benefits of Low-Income Working Families, Assuming the Families Spend $350 per Month for Rent and Utilities

Earnings

30 hours,

34 hours,

Full-time,

minimum wage

$6.50 per hour

$7.50 per hour

Monthly take- home earnings:

$617.81

$883.72

$1,199.63

Family size

2

$154

$50

$0

3

$253

$149

$57

4

$343

$239

$147

Note: "Take-home" earnings equals earnings minus federal payroll taxes and does not include the EITC or the effects of state taxes.

   

Table 3

Food Stamp Benefits of Low-Income Working Families, Assuming the Families Spend
$450 per Month for Rent and Utilities

Earnings

30 hours,

34 hours,

Full-time,

minimum wage

$6.50 per hour

$7.50 per hour

Monthly take- home earnings:

$617.81

$883.72

$1,199.63

Family size

2

$184

$80

$0

3

$283

$179

$57

4

$373

$269

$147

Note: "Take-home" earnings equals earnings minus federal payroll taxes and does not include the EITC or the effects of state taxes.

 

Food Stamps Help Families to Afford an Adequate Diet

The food stamp program is designed to supplement low-income families' incomes in order to ensure they are able to purchase an adequate low-cost diet.(3) The program has long served a broad spectrum of low-income households, not just families that receive cash assistance. Despite low food stamp participation rates among food stamp-eligible households not receiving cash assistance, historically almost sixty percent of food stamp households have not received any cash assistance income, and more than 20 percent of food stamp households have included earners. (The extent to which households eligible for food stamps do not participate in the program is discussed below.)

Low-income working families can have difficulty purchasing a nutritious diet and meeting all of their other basic monthly expenses such as housing, transportation, health care and clothing. Roughly speaking, food stamp benefits are equal to the difference between the cost of purchasing a low-cost diet and 30 percent of a family's available income (net of certain deductions). Families with low earnings that do not participate in the program are likely to have greater difficulty affording food while still meeting their other essential needs. The dilemmas low-income families face in meeting both their food and other bills is illustrated by a study at Boston Children's Hospital, which found that increases in admissions of infants with nutrition-related illnesses followed months in which heating needs (and therefore costs) were especially high.

Ensuring that families have the resources necessary to purchase an adequate diet is in the nation's long-term interest. If children do not receive an adequate diet through the critical years when nutrition is important to brain growth and mental and physical development, it can compromise their long-term health and well-being. Families need to have the resources so their children may develop into fully contributing and productive members of society.

In addition, the food stamp program can be a vital work support for families with low earnings. Benefits serve as an important cushion during periods in which a parent loses his or her job or a parent's earnings fall due to circumstances such as an illness in the family or a cutback in hours of employment. While families facing significant and long-term reductions in their earnings may be eligible for and receive cash aid, many families facing temporary periods of unemployment or earnings reductions will not receive cash aid and be better able to weather the temporary income loss if food stamps are available.

Food stamp benefits can significantly increase a family's monthly take-home income. Table 4 shows the extent to which food stamps increase families' monthly incomes. For example, a family of three in which a parent works 30 hours per week at the minimum wage earns $618 per month after payroll taxes are paid. If the family receives food stamps, its total monthly income would rise to $871, an increase of 41 percent. (Table 4 does not includes the EITC when calculating monthly take-home income since, as noted, most families receive it once a year as a lump-sum payment.)

 

Table 4
How Much Can Food Stamps Raise the Incomes of
Low-Income Working Families

(Table assumes families spend $350 monthly for rent and utilities)

Earnings

30 hours,

34 hours,

Full-time,

minimum wage

$6.50 per hour

$7.50 per hour

Monthly take-home earnings:

$618

$884

$1,200

Food Stamps for a family of 3:

$253

$149

$57

% Increase in monthly take-home earnings:

41%

17%

5%

Note: "Take-home" earnings equals earnings minus federal payroll taxes and does not include the EITC or the effects of state taxes.

 

The Importance of Food Stamps Has Increased

Many working poor families receive no cash assistance and could benefit substantially from receiving food stamps. These families may be ineligible for cash assistance because their incomes, while low, are above the eligibility limit for their state's cash assistance program.(4) Other families may have incomes below the income-eligibility criteria but do not receive cash assistance due to a time limit or other policies that limit eligibility, such as policies that restrict two-parent families' access to assistance. Still other families may be eligible for assistance but not receive it for a variety of reasons. Some families may want to "save" months against their time limit, while others simply may not want to be on "welfare." Finally, some families may be actively encouraged by their state to "make do" without cash assistance if they have other sources of income.

As the number of low-income working families not receiving cash assistance grows, ensuring that these families have access to food stamp benefits increases in importance. Historically, many families gained access to the Food Stamp Program through their receipt of cash assistance, since states were required to offer joint application procedures for cash and food assistance. As a result, families receiving cash assistance and eligible for food stamps historically have had a very high participation in the Food Stamp Program. A study in the mid-1980s found that more than 90 percent of families that received cash assistance and were eligible for food stamps participated in the Food Stamp Program.(5) By comparison, the most recent data on food stamp participation among low-income households with earnings showed that only 55.2 percent of food stamp-eligible- households with earnings and children participated in the Food Stamp Program.(6)

Cash assistance rolls have already fallen dramatically as a result of state welfare reform efforts, a strong economy, and strengthened supports for working poor families. As cash assistance rolls have fallen, the number of people receiving food stamps has also fallen substantially. This decline far outstrips the decline in the number of people eligible for food stamps. Between 1996 and 1997, the number of poor people fell by less than one million while the number receiving food stamps fell by more than three million. During the two-year period from 1995 to 1997, the decline in the number of people receiving food stamps — 4.4 million — was five times greater than the decline in the number of people living in poverty. If cash assistance rolls continue to decline, food stamp participation among poor families could continue to fall.

Because food stamps can be such a significant benefit to working poor families, it is important for the U.S. Department of Agriculture, states, and nonprofit organizations to reassess how to improve access to the program for these families.


Endnotes:

1. These shelter costs were selected based on state median shelter costs among working food stamp households of three or four with children 1997. In 9 states, the median shelter cost among such food stamp recipients was $300 or less, in 28 states it was between $301 and $400, and in 14 states it was above $400. Nationally, the median shelter cost for a working food stamp household with children and between two and four household members was $350. See Center on Budget and Policy Priorities, A Guide to Calculating Food Stamp Benefits for Families with Children (March 1999) for state-by-state data on the median shelter cost of working food stamp households with children.

2. For more detailed information about how to compute food stamp benefits, see Center on Budget and Policy Priorities, A Guide to Calculating Food Stamp Benefits for Families with Children (March 1999).

3. Although food stamps can help to provide a family with enough resources to purchase an adequate diet each month, the benefit is based on a very low food budget. For example, the food stamp benefit for a family of four in 1999 assumes that the monthly cost of a "thrifty food plan" is $419. By contrast, USDA's most recent estimate (February 1999) of the monthly cost of a moderate cost diet for a family of four (two parents and two children) was between $569 and $683, depending on the age of the children.

4. Most states have changed their cash assistance policies to allow families with somewhat higher earnings to receive modest cash assistance to supplement those low earnings. While this means that families remain eligible for assistance at higher income levels than was true under former AFDC rules, in more than 40 states a family of three still loses eligibility for cash assistance at earnings levels below the poverty line.

5. General Accounting Office, Food Stamp Program — Participation by AFDC Households (February 1988). Some so-called "mixed households" — households in which some members received AFDC while others did not — were not eligible for food stamps because the overall household income placed them above the food stamp eligibility limit. An example of such a household would be a single mother with a child who live with the mother's own parents. The single mother and child might be eligible for cash assistance, but if the grandparents' have significant income then the total household income — the income measure on which food stamp eligibility is generally based — the household could be ineligible for food stamps.

6. Office of Analysis and Evaluation, FNS, USDA, Food Stamp Program Participation Rates: January 1994 (March 1997).