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New minimum wage would cut food stamps by $4.6 billion

A new study finds that raising the minimum wage would reduce food stamp expenditures by 6 percent.

By MSN Money Partner Mar 10, 2014 1:18PM

This post comes from Krystal Steinmetz of partner site Money Talks News. 

Money Talks News on MSN MoneyDon't like food stamps? Raise the minimum wage. That's the finding of a new study (.pdf file) by the Center for American Progress, a left-leaning Washington, D.C., think tank.

A Georgia's food stamp card © ZUMA Press/Alamy
The report says a hike in the minimum wage from $7.25 to $10.10 per hour, as proposed by the Obama administration, would cut the federal food stamp bill by $4.6 billion a year and reduce enrollment in the program by up to 9.2 percent.

The report is one of the first to study how increasing the federal minimum wage would impact the Supplemental Nutrition Assistance Program or SNAP, commonly known as food stamps. SNAP reaches about 1 in 7 Americans and had a hefty $78 billion price tag in 2011.

University of California economist Michael Reich co-authored the Center for American Progress report. According to The Washington Post:

"What is the best way to make people independent and be able to sustain their standard of living without having to depend on government support?," Reich asked. "It turns out that raising the minimum wage helps make people more independent while saving the government money."

It's been estimated by other studies that taxpayers spend about $7 billion a year to subsidize low-wage fast-food workers and $900 million a year helping bank tellers. SNAP represents a chunk of those funds.

Opponents of an increased minimum wage argue that it would eliminate some jobs and slow job growth.

What do you think of the reported link between hiking the minimum wage and decreased dependency on government programs, like food stamps?

More on Money Talks News:

Mar 10, 2014 4:15PM

So...the government "saves" 4.6 be spent elsewhere.

In the mean time, businesses will just pass on the increases to the consumer.

Meaning, more burden on the already diminishing middle-class.

Mar 10, 2014 3:00PM

This supposed savings is based on the assumption that the Poverty Threshold, used to determine eligibility for SNAP is unchanged by the rise in minimum wage. However this is unlikely, because the cost of labor goes up (and not just for unskilled labor because many workers with skills, currently making $10/hour will no longer work for the same price as an unskilled laborer...and many unions tie increases to the minimum wage). The rising cost of labor will be inflationary.  The Poverty Threshold will rise, and the number of people on SNAP will be relatively unchanged.

If such a thing did not happen, then the increased income would result in an effective marginal tax rate of about 90% on the increase because of lost SNAP, EITC, housing subsidies etc. for full time workers. So, then you'd have increased inflation to be countered by an effective 10% increase in income.  The inflation might not come if there were sufficient offsets in labor costs in other areas (i.e. increased unemployment).  Increased unemployment in the "learning labor force" (those workers who will use unskilled labor positions to prepare for higher paying jobs) will have cascading future effects which will put even more downward pressure on the economy.

Businesses should determine how much they spend for labor, not the government. All this artificial increase will do is to raise the cost of American labor...probably increasing the number of "jobs Americans" won't do (or more aptly - can't be paid appropriately to do) and encourage more illegal immigration as well as dependency on the government.

Mar 11, 2014 7:59AM
Don't need to raise the minimum wage to cut food stamps.

Food Stamps are one of the most abused and wasteful social program this country has ever developed. A family of four receives more money monthly then my family of five spends a month on food. The amount paid out each month should be cut by at least one third. Purchases by food stamps should be (if not already) restricted to the following: Fresh/frozen non prepared meats & fish, fresh/frozen non prepared vegetables, deli meats/cheeses, canned goods, breads, non sweetened dairy, and non sweetened juices. The following should always be banned, and processes need to be in place where not already, to restrict: Soda, bottled water, power and energy drinks, sweetened juices, coffee, tea, ice cream, candy, energy bars, any pre-prepared meals or sandwiches, snacks/junk food, or any food that is mail ordered or shipped anywhere. If these rules would be followed, and recipients would learn how to shop and properly eat, no one would be hungry and we the taxpayers would save billions.

            Tobacco and alcohol should be banned from purchase by welfare funds. No cash should be allowed to be pulled off of any assistance cards except at banks and should be limited to a very low percentage of funds.

Mar 10, 2014 3:50PM
Been saying it all along, taxpayers are subsidizing Walmart's & McDonalds' ability to pay their workers less than what it costs to live.  Raising the minimum wage leads to less dependence on social welfare, with the added bonus that I won't be supporting Walmart despite never shopping there.
Mar 11, 2014 11:40AM

People get all worked up over welfare but I don`t see the anger over CEO`S making $200,000,000

a year and another $200,000,000 golden parachute when they get fired.Let`s not forget their perks.

The amount of welfare is peanuts compared to CEO`S who don`t get their hands dirty.

Mar 11, 2014 11:11AM
This is nothing new to me,i have always said raising minium wage would get millions of people off of food stamps. It will also start the economy growing at a faster pace for people will buy the things they couldn't afford. Its not rocket science. when minium wage is below poverty level income it creates big problems too numberous to mention.
Mar 10, 2014 3:19PM
THe majority of people using the card probably don't work anyway so what difference does it make?
Mar 11, 2014 11:03AM
And when they increase minimum wage, employers will cuts jobs and more people will be put on food stamps. But then leftists don't live in the real world so they don't understand cause and effect.
Mar 10, 2014 9:48PM
Do your research. Most people on food stamps are working. It is a form of corporate welfare, as Terry Tate mentioned.
Mar 11, 2014 10:28AM

"What is the best way to make people independent and be able to sustain their standard of living without having to depend on government support?," Reich asked.


This guy seems to think that the minimum wage isn't a government support.

It's mind boggling that an economist could think that.

The minimum wage is a government floor on wages!

Mar 10, 2014 2:36PM

In other word :

sting the corporations (who are the backbone on world economics) and reduce their profits for a lazy class of overweight, underskilled welfarians too strung out to work!!

Mar 10, 2014 2:41PM
How about cutting or dismantling all together minimum wage this increases hiring pwoer for the corporations. Theen lowering the monthly income value to levels that reduce those who qualify for food!
Mar 11, 2014 10:22AM
BS  The demorats would just raise the amount you could make to keep your "food stamps".
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