Estimating the Impact of Food Stamps on the New York City Poverty Rate Using a National Academy of Sciences-Style Poverty Measure
Research Center: Institute for Research on Poverty, University of Wisconsin-Madison
Investigator: Levitan, Mark, and Daniel Scheer
Institution: New York City Center for Economic Opportunity
New York City Center for Economic Opportunity
180 Water Street, 17th Floor
New York, NY 10038
Over the course of the recent recession, the Food Stamp Program (now the Supplemental Nutrition Assistance Program, SNAP) has become an increasingly significant element of the social safety net. This is due in part to the flexibility of the program and its broad eligibility requirements. Unlike other government assistance programs, the Food Stamp Program is not strictly work-conditioned and is available for individuals up to 130 percent of the Federal poverty line. This flexibility means that the Food Stamp Program can be responsive to the increased demand for assistance associated with recessions. Given the sharp rise in participation in New York City and around the Nation, researchers and policymakers have become acutely interested in understanding the degree to which Food Stamp benefits have ameliorated the impact of the recent economic downturn on families vulnerable to poverty.
The official poverty measure, which relies solely on pre-tax cash income, provides a limited view of the impact of government policy on the poverty rate. By taking taxation and in-kind benefits such as food stamps into account, poverty measures based on the National Academy of Science’s (NAS) 1995 recommendations are suited to capture the effect of a wider range of antipoverty policies. Over the past several years, the New York City Center for Economic Opportunity (CEO) has been developing an alternative poverty measure for New York City based on the NAS recommendations. CEO has employed the Census Bureau’s American Community Survey (ACS) as its main data set because it provides a large annual sample for New York City. While the ACS is a rich data source for measuring pre-tax cash income, its food stamp data is incomplete and suffers from multiple forms of measurement error. In addition, there are challenges posed by the survey’s unit of analysis. Addressing these data issues is critical for the development of CEO’s poverty measure as an effective tool for evaluating poverty trends and the impact of antipoverty programs.
In order to address the deficiencies in the ACS data, the researchers took the following three steps: (1) partitioning the ACS households into smaller units more comparable to those in New York City’s administrative records; (2) adjusting the number of cases in the ACS data by identifying likely participants who did not report receipt in the ACS; and (3) estimating the value of yearly food stamp receipt in the ACS via a predicted mean match to the administrative data. In 2007, these adjustments increased the number of cases reported in the ACS from 50 percent of the administrative total to 87 percent and increased the total value of benefits reported in the ACS from 63 percent of the administrative total to 89 percent.
The Food Stamp Program’s growth and its increased impact on poverty in New York City is the result of three factors, two of which were deliberate policies: (1) an outreach initiative in New York City aimed at increasing participation among eligible households; (2) the 13.6 percent increase in food stamp benefit amount in the 2009 American Recovery and Reinvestment Act; and (3) an increase in demand for food stamps in response to the recession. In order to investigate the role of the policy changes in ameliorating poverty during the recent recession, the researchers constructed two counterfactual scenarios. First, the 2009 data were re-estimated, removing the 13.6-percent increase in food stamp benefits contained in the 2009 American Recovery and Reconstruction Act. Second, the food stamp caseload was estimated based solely on labor market conditions and the 2008 and 2009 data were re-estimated based on this counterfactual level of participation. The estimated caseload approximates the number of food stamp recipients in the absence of the outreach initiative.
Food stamps have a large and statistically significant impact, lowering the poverty rate by 1.6 percentage points in 2007. The effect grows to 2.2 percentage points in 2009, suggesting an increase in the program’s importance during the recession. This finding is consistent with the growth in the Food Stamp caseloads and benefit levels from 2007 to 2009. The researchers also looked at two important sub-groups within New York City and found a range of effects. Food stamps reduced poverty by a greater degree among persons living in single-parent families compared with those living in two-parent families (4.2 versus 2.2 percentage points in 2009). However, the impact of food stamps on poverty grew more for two-parent families from 2007 to 2009, as the rise in their participation outpaced that for single-parent families.
The study also revealed that recent policies to expand participation and increase benefits had a small and statistically insignificant impact on the poverty rate in 2009. The counterfactual estimates suggest that without the benefit increase associated with the stimulus, the impact of food stamps on the 2009 poverty rate would have been 2.0 percentage points rather than 2.2 percentage points. Without the benefit increase or the more robust local outreach effort, the impact drops to 1.9 percentage points. Absent the two initiatives, the New York City poverty rate would have stood at 20.2 percent instead of 19.9 percent. The 0.3 percentage point difference is too small to be statistically significant.
This analysis demonstrates the following. First, counting the value of food stamps as income is important to understanding the degree to which antipoverty policy has successfully responded to the economic downturn in 2008 and 2009. Second, food stamps played an important role in cushioning the blow on family incomes due to the recession-related decline in employment and earnings. Third, participation in the program grew among families that historically have not had high levels of food stamp use. Finally, the effectiveness of the program has been largely independent of recent policies aimed at strengthening it. The findings argue for maintaining the program’s flexibility, bolstering its level of benefits, and continuing efforts to increase the participation rate among eligible individuals.