The Inflation’s In The Poverty

The United States Department of Agriculture (USDA) produces excellent research. In March of 2010 I discussed their report, Energy Use in the US Food System, which noted that the energy-cost intensity of food production was expanding. (see: the Gregor.us blog post Paris Over Amherst: Food Energy and Credit). Given the strong advance in energy and food poverty the past few years, as reflected in soaring participation in SNAP (food stamp programs), the USDA has produced a new piece of research just last month, Alleviating Poverty in the United States: The Critical Role of SNAP Benefits. The report concludes that, SNAP benefits have a relatively stronger effect on the depth and severity of poverty than on the prevalence of poverty. Yes, that makes sense.  But something additional in a key chart from the report caught my attention. | see: SNAP participants, people in poverty, and the unemployment rate, 1980-2009. (click on image to enlarge).

I’ve drawn a red, vertical line in the USDA chart at the year 2003. As you can see, that is the year that the unemployment rate started to fall again after the previous recession, but, that the poverty rate and participation rate in food stamp programs went higher. Why the divergence? The explanation is rather obvious to me. This is the period when energy, especially oil, entered a phase transition to structurally higher prices. It’s also the period that food price inflation, and food price volatility, entered the system. Eventually all series would correlate once again, after the 2008 financial crisis.

There’s certainly no need to post a chart of energy prices here. However, I did find a fresh and up to date chart of food price inflation from a Congressional Budget Service report, Consumers and Food Price Inflation, April 2011. (opens to PDF)

What’s happened in the United States the past decade is that purchasing power for food and energy has declined. While government data shows overall inflation as tepid, the effects of this decline can be observed in real terms in the advance of poverty. This is why I began my research into city level SNAP data years ago, in the automobile and gasoline sensitive economies of southern California. Since that time a number of reports and data have recorded the strong advance of food poverty and energy poverty in the United States. If you are looking for inflation you won’t find it in the aggregate. The inflation’s in the poverty.

–Gregor

  • http://twitter.com/Frank_McG Frank McGillicuddy

    folks bailing from the labour force is related to ur idea as well

  • gregor.us

     Well, one factor that I did not mention was the flattening of wage growth also–even in nominal terms. So wages are declining in real terms now. Moreover, even a weekly benefit package from the SNAP program would of course be suffering a decline in purchasing power. G

  • http://www.facebook.com/dj4money Anthony Thomas

     As somebody that gets a measly $200 in SNAP every month, its even a issue to eat healthy and not become obese. In fact I have reduced my calorie intake by 200-300 (based on 2,000 Calories) and have lost 15-16lbs as a result (plus weight training).
     
     Now my dollar (SNAP) would go father if I bought nothing but high sugar/calories/fat foods. But buying Ground Turkey is about $2 more than lean ground beef and $3-4 more than not so-lean Ground Beef that some have complained has “Pink Slime” in it.

     I’ve been saying for years that the money in your pocket is worth less than in years gone by. You simply cannot afford our standard of living on the depressed wages you earn from one job, which leads to working more than one job or both parents working more than one job… Children suffer and you see the society decay everyday…