Big-Box Stores Make Billions Off Food Stamps. Often It’s Their Own Workers Using Them.

Commentary about business and finance.
April 1 2014 8:04 AM

The Secret Life of a Food Stamp

The biggest winners of the SNAP economy are the ones the government won’t tell you about.

(Continued from Page 1)

It was these sorts of questions that Jonathan Ellis, a journalist at the Argus Leader in South Dakota, was pursuing when he stumbled into a legal battle with the federal government that is still unresolved. Ellis had requested information from the U.S. Department of Agriculture about exactly how much it reimburses each store for sales from EBT cards.

“Typically, if a business participates in a government program, you can get a copy of their contract and find out how much they’re being paid,” Ellis says. That’s how it works when the government pays a construction company to build a bridge, or a defense contractor to build a fighter plane. But when Ellis filed a Freedom of Information Act request to find out how much the government pays stores in the food stamp program, he was denied.

In refusing Ellis’ request, the USDA cited a provision dating back to the 1970s forbidding the government from sharing “relevant income and sales tax filing documents” that a store might submit in the course of applying to be part of the food stamp program. For many years officials at the USDA have interpreted that to mean no information can be released on how much an individual store or company makes in food stamp revenue. Ellis and his newspaper think that is a misinterpretation of the federal statute; recently a federal appeals judge agreed, and sent the issue back to a lower court for review.

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Kevin Concannon, undersecretary for food, nutrition, and consumer services at the USDA, who oversees the food stamp program, agrees that SNAP sales information should be made available. “I think, personally, it’s in the interest of the American public,” he told me. “These are public benefits that are moving through the economy.” Yet he wouldn’t rule out the possibility that his agency could appeal the judge’s ruling.

That means for the time being, there is a lot we don’t know about how food stamp subsidies affect stores. So what do we know?

We know that food stamps affect how and when stores manage their inventory, as sales often spike on the days of the month when benefits kick in. In Ohio, where cards are recharged between the first and the 10th of the month, stores stock up on bread, meat, milk, and cheese ahead of the rush of customers. “All the staples are usually what disappears the fastest,” says Mary Burkett, an assistant manager at a Walmart Supercenter in Ohio. “If you don’t have your staples, you know customers are going to be upset, you’ll lose sales.”

While we don’t know exactly how much individual stores make in EBT card sales, we know that EBT revenue really matters to stores’ bottom lines. This is something Walmart share-holders have learned firsthand. When Walmart announced disappointing profits and store sales last quarter, company executives blamed bad weather and the reduction in SNAP benefits that went into effect in November 2013, after an economic stimulus bill expired.

Then just last month, when Walmart released its annual report, it listed among the potential risks facing the company “changes in the amount of payments made under the Supplement Nutrition Assistance Plan [sic].” Namely, the $8 billion in cuts to SNAP that Congress passed earlier this year.

At a private dinner Walmart held for market analysts last fall in Bentonville, Ark., a company vice president estimated Walmart takes in 18 percent of all food stamp spending in the U.S., a number Walmart’s David Tovar confirmed when I interviewed him. Meaning, Walmart took in more than $13 billion in revenue, or about 4 percent of Walmart’s total sales in the U.S.

So Walmart is likely the biggest single corporate beneficiary of SNAP, but it’s not just Walmart. A growing number of stores have baked food stamp funding into their business models since the Great Recession. The tally of stores authorized to accept food stamps has more than doubled since the year 2000, from big-box stores like Target and Costco to 7-Elevens and dollar stores. It’s a paradox that the more people are struggling to get by, the more valuable food stamps become for business.

In 2009 the CEO of Family Dollar told shareholders that expanding in to the multibillion-dollar food stamp market represented a “significant opportunity” that would help the company weather the bad economy. Other stores put tables outside their doors with information about SNAP to help sign more people up.

Retailers’ embrace of SNAP has been encouraged by the USDA, which depends on stores to make the program work. It’s a symbiotic relationship, and the government takes every opportunity to remind retailers what’s in it for them. In a USDA training video sent to stores that take food stamps, the narrator drives the point home: “If you approach it as you do any other good business practice, accepting SNAP benefits can be a profitable part of your operation.”

Profitable for companies, and potentially for their workers, too. The USDA’s Kevin Concannon says food stamps can be a job creator. He told me about a visit he made to H-E-B Grocery, a supermarket chain in Texas. “The vice president of the company pointed to some of the clerks,” Concannon recalls, “and he said, ‘See these folks here? We’re able to employ more of those, for more hours per month, due directly to the financial impact of food stamp benefits.’ ”

But there is something else that’s important to point out about the jobs you can get at stores that accept food stamps. In many cases, at many different stores, those jobs pay so little that their workers depend on food stamps, too.

In order to be authorized by the government to participate in SNAP, a store must meet certain standards and fulfill certain responsibilities. It must keep a specific amount and variety of food in stock. It must work with the federal government to monitor fraud. It must not discriminate against customers who use EBT, or force them to use certain lines. But nowhere does the government require that for a store to be part of the food stamp program, it must pay its workers enough that they don’t need to use food stamps themselves.

This is part one in a three-part series. Read the entire series here.

Krissy Clark is senior reporter for Marketplace’s Wealth & Poverty Desk. Follow her on Twitter.

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