Trends & ForecastsDecember 13, 2019

Trump’s SNAP Cuts Could Be Bad News for Businesses

By SHAMONTIEL VAUGHN | Contributing Writer‍

[RETHINK Retail] — Buying groceries just became more frustrating for some Americans, after the Trump Administration announced it would be tightening availability on food stamps beginning April 2020.

Any “able-bodied adults” who do not have dependents but have received Supplemental Nutrition Assistance Program (SNAP) benefits for more than three months are the primary target of these cuts.

SNAP recipients, between the ages of 18 to 49, who fall under this criteria would be required to work a minimum of 20 hours per week or lose their benefits, according to NPR. This puts approximately 755,000 adults at risk of losing food funds in 2020. In turn, retail stores will lose billions.

 

Who’s behind the SNAP cuts

In July 2013, the rate of unemployment was 7.3 percent, and 45 complete states with able-bodied adults without dependents (ABAWD) were eligible for time limit waivers. With a few exceptions, the Food and Nutrition Act of 2008 (the Act) limited ABAWDs to only receive SNAP benefits for three months in a 36-month period (the ABAWD time limit).

But as of 2019, the national unemployment rate is at its lowest rate (3.7 percent) since 1969. In turn, Trump’s administration reevaluated who should be eligible for these nutritional benefits and for how long.

According to U.S. Secretary of Agriculture Sonny Perdue, “In the midst of the strongest economy in a generation, we need everyone who can work to work. This rule lays the groundwork for the expectation that able-bodied Americans re-enter the workforce where there are currently more job openings than people to fill them.”

However, for some SNAP recipients, this questionable amount of job openings “than people to fill them” seems to be more of an assumption than a fact. It also leaves out significant reasons for why some SNAP recipients were given extensions on food assistance. For example, individuals who were working and/or participating in a work program of at least 80 hours per month, or participating in workfare, were given extensions.

It also doesn’t account for family caregivers, low and declining employment-to-population ratio  or a lack of jobs within certain occupational areas. And this decision affects a diverse group of people.

In 2016, characteristics of select households* that received SNAP benefits accounted for:

  • 15,752 non-Hispanic whites (38.9 percent)
  • 11,134 non-Hispanic African-Americans (24.9 percent)
  • 7,510 Hispanics (11.8 percent)
  • 1,430 non-Hispanic Asians (2.8 percent)
  • 411 non-Hispanic Multi-Race individuals (0.8 percent)
  • 571 non-Hispanic Native Americans (1.1 percent)
  • 6,731 individuals with an unknown race (12.8 percent)

One-person households (11,352 households) were the highest recipients of these benefits, and the highest gross income for these participants was $17,118. U.S.-born citizens dominate SNAP recipient benefits (at 19,772), with a little more than 2,800 refugees, naturalized citizens and noncitizens also receiving SNAP.

But regardless of low salaries, academic goals and/or employment-to-population ratio concerns, the U.S. Department of Agriculture is laser-focused on how this mandatory work requirement could save about $5 billion over the next five years.

 

How SNAP regulation affects the retail industry

As of fiscal year 2017, approximately 76 percent of authorized SNAP retailers (about 200,000 retailers) were small grocers, convenience stores, combination grocery stores and specialty stores. These store types fall under the Small Business Administration. While these SBA stores make up most authorized retailers, they reportedly receive less than 15 percent of all SNAP benefits.

Meanwhile, big-name retail stores such as Kroger, Target, Walmart and dollar value stores that accept SNAP benefits will also notice the change. Business Insider reports that approximately $33 billion of SNAP benefits were spent in stores such as Walmart and Target. An additional $18 billion went to supermarket chains such as Kroger, Giant and Food Lion.

In addition to brick-and-mortar stores, online retailers have also reached out to low-income communities. Amazon provided SNAP payment options for a two-year test pilot in New York. Other areas of New York were scheduled to extend this deal, along with Alabama, Iowa, Maryland, Nebraska, New Jersey, Oregon and Washington.

Additionally, Amazon and Walmart were already competing for electronic benefits transfer (EBT) card customers, with Amazon offering a reduced amount to be eligible for Amazon Prime membership and shipping. (And that’s not including their Amazon Store Card Credit Builder marketing to low-income consumers.)

With SNAP recipients now having to find new ways to juggle their non-food expenses with food expenses, stores will get hit hard. But small businesses in low-income communities will get hit much harder while many recipients may be forced to find a new way to put food on the table.

 

*   Note: During fiscal year 2016, SNAP provided benefits to approximately 44.2 million people living in 21.8 million households each month across the United States. The total federal cost of the program in fiscal year 2016 was $70.9 billion, $66.5 billion of which went to SNAP benefits and the remainder to program administration. The average monthly SNAP benefit across all participating households in fiscal year 2016 was $255.