Sunday, October 18, 2015

The Relationship between the Minimum Wage and SNAP Benefits

In light of current policy, how much does a minimum wage earning single mother with 2 dependent children  stand to gain/lose in SNAP benefits ("food stamps") if the minium wage in the US is increased to $10.10 per hour?

I use the basic guidelines from the USDA website that determine the level of SNAP (Food Assistance) based on an applicants income.

Here is the link to the Dept of Agriculture's website that the following graphic organizers came from.

All I did was change the amounts of monthly income based on 2 different wages ($7.25 and $10.10).  I also made assumptions regarding monthly shelter ($600) and dependent daycare costs ($350).  These may be higher or lower, depending of where the person lives in the US. I also use 172 work hours in month---40 hours per week X 4.3 weeks in a month.

I double checked my math so I am relatively confident of the numbers (however, check if you like and let me know. I am a bit math challenged).

This first one shows the level of SNAP benefits at the prevailing $7.25 minimum wage. The person would be entitled to $469.00 per month in food assistance (see last line "16") out of a maximum $511 allowed.

This is a form of "non-cash" income that supplements the market income a person earned. In effect, if you add this amount to the monthly market income earned ($1,247 "cash income") you have a total of $1,716 in monthly income. Back this out to an effective hourly rate and you have $9.98 ($1,716/172 work hours per month).

The SNAP subsidy works out to $2.73 per hour ($9.98 minus $7.25).

The next one shows a minimum wage of $10.10 per hour.

Market  monthly "cash income" is $1,737.00 at $10.10 (line 2).  "Non-cash" SNAP benefits are $293.00 per month (line 16).  Total income is $2,030.00 for an effective hourly wage of $11.80 ($2,030/172 hrs).

The SNAP subsidy works out to $1.70 per hour ($11.80 minus $10.10).

The market income the person earns is $490.00 per month more at $10.10 an hour vs $7.25 and  SNAP benefits decrease by $176.00 per month. Net change in total compensation is +$314 or an additional $1.82 on an hourly basis ($314/172 hours worked in a month) for the single mother of two.

While the hourly minimum wage increased by $2.85 per hour ($10.10 minus $7.25), a 39% increase, the SNAP subsidy decreased by $1.03 on an hourly basis ($2.73 minus $1.70), 38% decrease, the single mother of two is effectively "better off"on net by just $1.82 per hour worked when all is said and done as the minimum wage moves from $7.25 to $10.10 per hour.

Raise the minimum wage by $2.85 and the single parent is ultimately better off by only $1.82.  Beats a sharp stick in the eye, but is it a pathway out of poverty?

Note: LOTS of caveats with this posting.  Market income is subject to payroll taxes so an increase in the min wage will cost a worker more.  There may or may not be a "dis-employment effect" with raising the min wage (more so in some industries than others).  How might this affect the EITC tax credit. On and on and on...I just wanted to present a cursory perspective on the merits (demerits) of increasing the min wage in light of existing policy on SNAP (food stamp) benefits.

Hope it helps do just that.  Comments welcome.  Thanks.
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