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People Stop Trying To Save Money On Groceries When They Use Food Stamps

Applying for food stamps usually indicates that a household is struggling financially, but a new study reveals that families spend more for the same amount of food once they are using taxpayer funded benefits.

Families receiving Supplemental Nutrition Assistance Program (SNAP) benefits, also called food stamps, are less likely to save money by buying generic brands or using coupons if they are buying food with government benefits, researchers at Brown University claim in a study published Monday.

The study upends the idea that food stamps recipients use the taxpayer-funded benefits just like they would use cash, and instead show that people’s food choices change when using food stamps.

The study, titled “How Are SNAP Benefits Spent?” also revealed that food stamps users apparently don’t take advantage of the food assistance to make their dollars go further, but simply spend more on food than they would otherwise.

“For every $100 in SNAP benefits that a household receives, the household spends just over $50 more on food each month,” Jesse Shapiro, professor of economics at Brown and co-author of the study, said in a statement.

In other words, the food stamps dollar does not stretch as far as cash in practice.

Shapiro and co-author Justine Hastings, also a professor economics at Brown University, found that for several months before going on food stamps, families increasingly depended on seeking bargain deals like purchasing generic store brands, which are often identical to name-brand products, but marketed differently.

Analyzing six years’ worth of transactions at a single, unnamed grocery store chain in five different states, the Brown research team was able to track 608 million transactions of nearly 500,000 households before and after going on food stamps and after between February 2006 and December 2012. That period of time saw the largest growth of the SNAP program, when President Barack Obama’s administration allowed for dramatic expansion of the program.

At its peak, more than 47 million people received food stamps nationally in 2013, after Obama allowed states to waive work requirements for the program in qualified counties while the economy recovered. More than 44 million people are still on food stamps according to Department of Agriculture data, but that number is dropping as states reinstate the work requirements. (RELATED: 7 States Are Ready To Cut Special Post-Recession Food Stamp Program)

When the same families started using food stamps to buy groceries, they were less likely to purchase store-brand products, opting for the typically more expensive name brand products.

“Once households adopt SNAP, there is a marked and highly statistically significant drop in the store-brand share,” the authors say in the study.

The decline in purchasing store brand goods indicates “a change in households’ choice of brand within a category” of groceries, the authors conclude.

The authors attribute the change in spending behavior to “mental accounting,” a process that leads food stamps recipients to earmark the government benefits for food, but not apply the potential savings to other purchases.  Food stamps can only be used to purchase eligible food items. The food cannot be hot or be from a restaurant, and non-essential items like alcohol are prohibited.

Economic theory, the authors say, would suggest that someone receiving $200 for food every month (the average monthly benefit in January 2017 was $125.67 per household) would be able to spend $200 more on other non-food necessities.

In practice, however, food stamps recipients simply spend more money on food.

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