Is Inflation Driving More People to Food Stamps?

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For Americans struggling to pay for ends meat, paying for said meat just got tougher.

On Thursday, the Bureau of Labor Statistics reported its numbers that track inflation. Back out the cost of food and energy, which most economist do, and inflation looks rather tame. But if you just look at the price of food, inflation looks like a growing problem. The price of food rose 0.6% in February, and that was on top of a 0.5% increase in January. Again, these are low numbers, but the rate of growth in prices is what could be alarming. Food prices rose just 0.1% in August 2010. So prices have really picked up in just six months.

And rising food prices comes at a time when the number of people already getting food stamps has risen dramatically. From October 2007, which was just before the financial crisis, to December 2010, which is the most recently available statistics, the number of people on food stamps rose 62% to 44.1 million. That equals 13.1% of the population, up from 9% a little over three years ago. Despite the need, a number of Republicans have targeted food stamps as a problem that needs to be cut to reduce the deficit.

Of course, just because food prices are rising doesn’t mean more people will go on food stamps. The food stamps program is based on income. A family of four with a gross monthly income of $2,389 qualifies for food stamps. So just because you pay more for food doesn’t mean you can start to qualify for food stamps. But inflation does come into the equation. Here’s why:

So why are there so many more people on food stamps then there were three years ago? The obvious answer is the dramatic rise in the unemployment during the recession.There are nearly 14 million people counted as unemployed, up from a little over 7 million back in October 2007. (Of course there are a lot of people who are unemployed but not counted as unemployed, but that’s another story.) As a percentage of the population, that 5.7% who are unemployed, up from 3.1% who were unemployed a little over three years ago. But the percentage of the population who are on food stamps rose a little over 4.1%.

So where do those extra 1.5% of the population come from. Turns out it’s not just the number of people on food stamps that has risen, but the number people on food stamps who have an income is way up as well:

The number of working Americans turning to free government food stamps has surged as their hours and wages erode…

While the increase in take-up is often attributed to the sharp rise in unemployment – which on Friday hit 9.7 per cent – the Financial Times has learnt that some 40 per cent of the families now on food stamps have “earned income”, up from 25 per cent two years ago.

So why is that? Inflation, mixed with wage stagnation. When you factor in inflation, the average wage of the American consumer is basically flat. Here’s a chart (h/t Economic Policy Institute):

At the same time, the price of food and nearly everything else besides electronics, and just recently housing, has been rising. For the past few years, those increases have been small. But with prices starting to pick up, food inflation could start to be a real problem.