Work Requirements for SNAP
Introduction
Many government transfer programs require recipients to be working or looking for work in order to receive benefits. Gray et al. (2023) study the impact of work requirements for eligibility for the Supplemental Nutritional Assistance Program (SNAP) using data and policy variation from Virginia.
When Virginia’s work requirements were in place, non-disabled, childless adult beneficiaries (ages 18-49) needed to comply with work requirements to receive SNAP transfers. These beneficiaries could only participate in the program if they were employed, participated in qualifying job training programs, or completed approved community service for at least 80 hours each month. These requirements only applied to those below age 50, and so the setting provides a natural regression discontinuity for estimating the effect of work requirements. The paper exploits this age 50 cutoff to estimate the impact of SNAP work requirements on program participation, employment, and earnings of beneficiaries. The paper also exploits variation in Virginia’s work requirements over time. The requirements were suspended from 2009 to 2013, due to the Great Recession. This pause allows the paper to identify a sample of individuals who would be on SNAP in the absence of work requirements. That time variation allows them to explore how the age discontinuity impacts employment when work requirements were re-instated in 2013.
In the description below, the MVPF is framed as the elimination of work requirements. Such a policy presumably imposes a cost on the government but has a positive willingness to pay for those who are no longer required to work. But, it is worth noting that this is equivalent to the MVPF of imposing work requirements. Such a policy would have both a negative willingness to pay by those who are harmed by the work requirements and a negative cost to the government.
MVPF = 0.9
Net Cost
To compute the costs of eliminating work requirements, the paper considers the direct costs and fiscal externalities. The direct costs are composed of two pieces. The first is the additional government expenditure due to an increase in program participation by individuals who would participate in SNAP if (and only it) the work requirements were eliminated. The paper estimates that work requirements reduce program participation within the relevant population by 23.4 percentage points. The paper defines the relevant population as able-bodied adults without dependents (ABAWDs) that are still enrolled in SNAP after 18 months. Given that SNAP transfers are on average $201.12 per enrollee and 63.2 percent of ABAWDs enrolled at month 0 are still enrolled at month 18, this piece of the direct cost of eliminating work requirements is (0.234/0.632)*$201.12 = $74.47 per person per month.
The second piece of the direct cost is an administration cost. The paper estimate that the elimination of work requirements increases the number of recertifications per ABAWD by 0.215 and decreases the number of new applications per ABAWD by 0.114 over eighteen months. Using data on costs reported in Geller et al. (2019), this results in a reduction of $2.42 per person per month, for a total direct cost of $74.47 – $2.42 = $72.05 per person per month.
A fiscal externality arises because the elimination of work requirements also causes enrollees to reduce their work supply and earnings (and thus remitted income tax). The paper conservatively estimates that the policy results in an average change in earnings of $66.84 per person per month. For single, unmarried workers working 80 hours per month the relevant average tax rate is 16.5 percent. Therefore, the elimination of work requirements creates an extra 0.165*$66.84 = $11.03 decrease in government revenues per ABAWD per month.
The net cost then is $72.05 + $11.03 = $83.08 per relevant ABAWD per month.
Willingness to Pay
To compute the willingness to pay (WTP) per relevant ABAWD for the elimination of SNAP work requirements, the paper divides the relevant population–able-bodied adults without dependents (ABAWDs) that are still enrolled in SNAP after 18 months–into two groups: (a) beneficiaries who remain in the program even in the presence of work requirements, but decrease their labor supply (and earnings) when work requirements are eliminated, and (b) new participants after the elimination of work requirements.
The WTP of group (a) has a lower bound of $0 under the normal assumption that utility changes from re-optimizing are second-order (by the envelope theorem). The paper argues that in this setting, there may be substantive utility changes such that the WTP may be as high as $201.12 per month for the relevant population (the fraction of the relevant population with earnings changes). Thus the upper bound is (0.13/0.632)*$201.12 = $42.24 after accounting for differences in rounding.
Members of group (b) are defined as the fraction of the relevant population who enters the program due to the policy change. The benefit amount is $201.12 per month. Assuming they value the transfer on a dollar-for-dollar basis, the total WTP in this group is (0.234/0.632)*$201.12 = $74.74 per person per month.
Therefore, the total WTP per relevant ABAWD per month. is bounded between $74.74 and $74.74 + $42.24 = $116.71.
MVPF Summary
Dividing the willingness to pay by the net cost yields MVPFs of 0.90 (= $74.74/$83.08) to 1.40 (= $116.71/$83.08). The authors note that if the true earnings response is 0, than the MVPF is bounded between 1.02 and 1.40.
References
Geller, Daniel, Julia Isaacs, Breno Braga, and Borjan Zic (2019). Exploring the Causes of State Variation in SNAP Administrative Costs. Bethesda, MD, and Washington, DC: Manhattan Strategy Group and the Urban Institute.
Gray, Colin, Adam Leive, Elena Prager, Kelsey Pukelis, and Mary Zaki (2023). Employed in a SNAP? The Impact of Work Requirements on Program Participation and Labor Supply. American Economic Journal: Economic Policy, 15(1): 306-341. https://doi.org/10.1257/pol.20200561
Policy Features
- Category
- In Kind Transfers
- Sub-Category
- Cash Transfers
- Beneficiary Type(s)
- Adults
- Country of Implementation
- United States
- Year of Implementation
- 2013
- Empirical Method
- Regression Discontinuity
- Research Type
- Primary
- Peer Reviewed
- No
- MVPF Publication Link
- doi.org/10.1257/pol.20200561