Disclaimer

The content is solely the responsibility of the authors and does not necessarily represent the official views of RIDGE, USDA, or the Census Bureau. Results have gone through Census disclosure review under the following release numbers: CBDRB-FY21-POP001-0045, CBDRB-FY21-POP001-003, and CBDRB-FY21-POP001-0049.

Motivation

• SNAP is a primary component of U.S. safety net

• In 2019, $60 billion for nutrition benefits to over 36 million people

• Program means-tested $\Rightarrow$ economic theory predicts $\downarrow$ labor supply (Hoynes and Schanzenbach, 2015)

• Qualitative evidence: Awareness of earnings/benefits trade off

I was offered a job for $2 more, and then, I had to account for the travel... [I]f I take this job with me spending basically as much money as I’m making, my SNAP benefits are going to be lowered as well. So it basically would’ve been me working backwards. [emphasis added] (Caspi, De Marco, et al., 2020)

Literature

Sparse literature relating SNAP to labor supply

Early Literature:

• Structural Methods (Moffitt, 2004)

More Recent Literature:

• County-level roll out of the Food Stamp program $\rightarrow$ modest negative labor supply effects for single mothers (Hoynes and Schanzenbach, 2012)

• SNAP expansions among immigrant populations reduce work hours (East, 2018)

• Small literature on natives is mixed (Scholz, et al., 2009; Moffitt, 2016; Ben-Shalom, et al., 2011; Farkhad and Meyerhoefer, 2018)

Literature

ABAWDs (Able-Bodied Adult Without Dependents)

• I.e., individuals 18-49 who are required to work to get SNAP more than 3 months of 36 except in downturns.

• Growing strand of literature assessing effects of work requirements for ABAWDs

• Mixed results (Harris, 2019; Han, 2018a; Stacy, Scherpf, et al., 2016; Cuffey, Mykerezi, et al., 2015; Gray, Leive, et al., 2019; Stacy, Scherpf, et al., 2018)
  

No work studying intensive margin effects of SNAP benefits formula

Why? Data requirements are substantial hurdle

Data Quality

• Much of prior research uses self-reported surveys on earnings and SNAP

• Problematic because self-reported SNAP is under-reported in ways likely not innocuous (Harris, 2019; Han, 2018a; Stacy, Scherpf, et al., 2016; Cuffey, Mykerezi, et al., 2015; Gray, Leive, et al., 2019; Stacy, Scherpf, et al., 2018)

• Further, to study SNAP benefit formula, need to know monthly income and detailed expenses (e.g., shelter costs) which are rarely measured

This Paper

First assessment of whether SNAP benefit formula distorts labor supply along intensive margin ⁺

+ Intensive margin - how much people work as opposed to whether they work at all.

• Uses novel, detailed administrative program data for Colorado and Oregon

• Can observe net income and disregards, e.g., dependent care and excess shelter cost

• Accurate SNAP eligibility and benefit levels

Contribution

Fills gap in SNAP-labor supply and bunching literatures

Bunching

• Growing public finance literature revitalized by (Saez, 2010) studying adjustments to kinks/notches in budget set

• Largely focused on taxes, and papers on means tested programs have focused on tax credits requiring work (see review by (Kleven, 2016)

• No evidence of this systematic behavior for safety net programs

Policy Implications

• SNAP designed to reduce labor supply distortions with benefits that fade out as earned income $\uparrow$ (Oliveira, Prell, et al., 2018)

  • Whether there are distortions is an empirical question

• Important policy implications for SNAP and for work requirements in the safety net more broadly

  • E.g., Time limits

Benefit Calculation

• Maximum benefits attached to Dept. of Agriculture Thrifty Food Plan

  • Amount to feed family at "minimal cost"

• Families expected to contribute 30 percent of available resources (i.e., net income) for food

How is net income calculated?

Benefit Calculation

Net Income Deductions

• Standard Deduction - misc costs

  • $167 for 2021, for fewer than 3 people in SNAP case

• 20% Earned Income Deduction - work incentive

• Child Care, Child Support, and Medical Deductions - rarely used

• Shelter Deduction

  • Rent/utility costs exceeding half of net income

  • Capped at $586 for 2021, unless disabled or elderly case

Share of Cases using each Disregard

• "Earner Sample": $1+ of earned income and not elderly or disabled case

• Shelter is most common deduction outside of earner and standard

Average Levels of Net Income Inputs

• Earner sample has $\uparrow$ earnings and $\downarrow$ unearned inc
• Disregards have similar values, but shelter is most common

Maximize Benefits; Net Income $=0$

Take Away

• With shelter deduction, can have sizeable earnings with full benefits

  • Potential scope for bunching behavior

• SNAP benefits taxed away 24 cents on every dollar of earned income for households with no shelter deduction

• SNAP benefits taxed away 36 cents on every dollar of earned income for households with some excess shelter expenses

• Thus, recipients may bunch at Net Income = 0, i.e., where each additional dollar earned is initially taxed

• Possible larger effects for households with shelter deduction

Empirical Design

• Use well-known bunching estimators utilized in other contexts ^*

• Augment Chetty, Friedman, et al. (2011) and estimate $$\begin{equation*} C_j=\sum_{i=0}^{7}\beta_i\cdot\left(Z_j\right)^i+\sum_{i=-200}^{200}\gamma_i\cdot1\left[Z_j=i\right]+\epsilon_j \label{eq:basicbunch} \end{equation*}$$

  • $C_j$: number of respondents in net income bin $j$
  • $Z_j$: net income bin for unit ($50 intervals)
  • Excluded region around net income = 0 is $400

• Intuition: approximate shape of counterfactual bunching region by interpolating the shape from surrounding areas with order 7 polynomial

• Parametric bootstrap for standard errors

* Kleven (2016); Saez (2010); Bertanha, McCallum, et al. (2019)

Example

Empirical Design

Caveat

• Specification selected for its simplicity, but has drawbacks

• Bunching likely $\Rightarrow$ non-zero taxable income elasticity at kink, but without restrictions on the heterogeneity distribution any sized elasticity is consistent with kinks (but not notches) (Blomquist, Newey, et al., 2019; Bertanha, McCallum, et al., 2019)

• In future work, leverage benefit changes (e.g., new Thrifty Food Plan adjustments every October, or categorical eligibility) to better model counterfactual density

Aggregate Gross/Net Income

• Oregon: Large mass at <$150 Gross (683,000 cases)
  • Not centered at NI=0 so not interpreted as caused by kink
  • Not seen in categorically eligible cases via TANF (not pictured)

Aggregate Gross/Net Income

• Colorado: Relatively smooth gross income

• Both: No noticeable bunching at NI=0

Net Income by Size of Case

• Possible that labor market frictions differ by family size

• Especially true for single-person units

$\Rightarrow$ We might expect heterogeneity in bunching by SNAP case size

Net Income by Size of Case

Let's explore the single-unit bunchers in CO, by self employment income

CO Net Income by Self Employment

• Self employed exhibit most bunching behavior in other contexts (Saez, 2010; Chetty, Friedman, et al., 2011)

• Colorado provides data on self employment income

Colorado Net Income for Case Size = 1

Next, we explore possible bunching heterogeneity by shelter deduction

Net Income by Shelter Deduction

No substantial heterogeneity (aside from Oregon low earners)

Conclusion

Summary

• Explored bunching where SNAP benefits are initially taxed

• Discussed why there could be possible heterogeneity: case size, self employed, shelter deduction

• Only evidence of bunching for self-employed single-unit cases, but economically small effects

Main Take Away

Labor distortions from SNAP benefit kink not a first-order concern

Next Steps

• Leverage people's experience with SNAP. Do people with experience do more bunching?

• Explore impact of work requirements (e.g., ABAWD time limits)

• Explore impact of notches from net/gross income tests, particularly for shelter deduction cases

References

Scholz, J. K, R. A. Moffitt, et al. (2009). "Trends in Income Support". In: Changing poverty, changing policies. New York: Russell Sage Foundation, pp. 203-241.

Stacy, B., E. Scherpf, et al. (2016). "New Evidence on Labor Supply and SNAP: What Are the Roles of Work Requirements, Expanded Eligibility, and New Program Rules?".

Stacy, B, E. Scherpf, et al. (2018). "The Impact of SNAP Work Requirements".