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Hunger Pays a Heavy Price to Bad Policy

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Hunger Pays a Heavy Price to Bad Policy

Raising the minimum wage could worsen the problem of food insecurity. April 19, 2021
Economy, finance, and budgets
Politics and law

The USDA categorized 35 million Americans as food insecure, or having “limited or uncertain access to adequate food,” in 2019—a number that will rise amid the Covid-19 pandemic. Food insecurity is a genuine problem, affecting health outcomes and imposing steep costs. Because higher incomes are associated with lower probabilities of food insecurity, many advocates suggest raising the minimum wage to reduce it. Such calls have received more attention lately, as prominent Democrats call for a national minimum wage of $15. But these advocates are wrong: raising the minimum wage would likely worsen the problem of food insecurity in the U.S.

One group would almost certainly benefit: households with wage-earners currently making the minimum wage. All else held equal, the policy would lead to increases in income and declines in food insecurity for that group. But a wage hike would have other consequences that would generate higher rates of food insecurity among other households and, for that matter, may diminish some of the benefits even for households that see a rise in wages.

Raising the minimum wage affects employment and, consequently, household income. A robust literature shows that increases in the minimum wage lead to declines in aggregate employment, reductions in hours worked, and declines in earnings. Households with individuals who have lost their jobs, seen reductions in hours, or been unable to find work will experience higher probabilities of food insecurity. The negative consequences would be especially acute in areas with low median wages (in many states, the median wage is less than $15 per hour). These happen to be, in the main, counties with already-high rates of food insecurity.

An increase in the minimum wage will also cause prices to rise in industries where a high proportion of workers receives the minimum wage—such as food service. The consequences of this price increase will fall disproportionately on the bottom quintile of earners. Higher food prices mean higher rates of food insecurity.

The argument that most people receiving the minimum wage are poor and, therefore, that raising the minimum wage will help alleviate poverty depends on an inaccurate premise. Almost as many people earning the minimum wage in 2018 had total household incomes over $100,000—20 percent—as did the 23.6 percent with total incomes under $25,000. An increase in the minimum wage would serve to raise the incomes of wealthy households nearly as much as it would raise the incomes of lower-income households.

A wage hike will also have distributional consequences. In response to an increase in the minimum wage, firms would need to make decisions about who will keep their jobs and who will lose them (or not be hired in the first place). As the minimum wage goes up, those with disabilities and criminal records—two groups that already experience high levels of food insecurity—will have an even harder time landing jobs.

Advocates should focus instead on reforming the Supplemental Nutrition Assistance Program, or SNAP. The program has proved successful in reducing food insecurity among recipients. Unlike the minimum wage, SNAP doesn’t discourage work (benefits gradually diminish as incomes increase), doesn’t interfere with the success of our agricultural supply chain, has no demonstrated effect on prices, and assures that benefits go to those who need them. Raising benefit levels by about $160 per month would cut food insecurity by up to 60 percent among SNAP recipients. Expanding eligibility to the millions of households that are near-eligible for SNAP but are food insecure because of raised income thresholds could further reduce it. And cutting the tax associated with SNAP—currently, for each additional dollar of earned income, benefits fall by about 24 cents—would lead to increased incentives for work and higher SNAP benefits per recipient.

Food insecurity remains a leading indicator of well-being in the U.S., and reducing it is an important goal. Increasing the minimum wage is a policy that will do the opposite.

Photo by Scott Olson/Getty Images

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