How policy makers could address the food-insecurity epidemic

Rebecca Stropoli | Feb 24, 2021

Food insecurity is a critical problem in the United States, and the COVID-19 pandemic has only made it worse. Current Population Survey estimates from 2020 show nearly one in four households with children are food insecure, lacking access to a sufficient amount of affordable and nutritious food. Nutrition is key, as healthy food combats conditions such as diabetes, obesity, and low cognitive functioning. 

Recent research presents evidence that may suggest some potential policy solutions. They include combining minimum-wage increases with targeted promotions and marketing, as well as addressing the financial distress that creates headwinds for healthy eating.  

University of California at Davis’s Mike Palazzolo and Georgia Tech’s Adithya Pattabhiramaiah examined whether minimum-wage hikes could help alleviate food insecurity. Some public-policy advocates and politicians have branded the $7.25 federal minimum wage a “starvation wage,” but would raising it actually affect the amount of food consumers purchase—and, crucially, its nutritional value?

Palazzolo and Pattabhiramaiah tackled this question by looking at the effects of both national and local minimum-wage hikes. Minimum-wage amounts across states, cities, and counties in the US can differ widely. For example, California had a statewide minimum wage of $10 at the start of 2016, but San Francisco had a higher rate of $13. 

The researchers tracked 309 hikes made between 2007 and 2016. In the data studied, the median minimum-wage increase was 50 cents an hour, which equated to an extra $80 per month for full-time minimum-wage earners.

By combining data from the Nielsen Homescan panel, provided by Chicago Booth’s Kilts Center for Marketing, with a proprietary data set containing nutritional labels for the food purchased, the researchers were able to measure both the amount of food bought as well as its nutritional value. To estimate the impact of the wage hikes, they compared the purchase behavior of households earning below and just above their locality’s minimum wage.

When wages go up, households whose key earners make the minimum wage do, on average, purchase more food, the researchers find. However, the food is not necessarily any healthier. 

Retailers can potentially nudge consumers to purchase healthier foods when they become more open to buying new foods.

There is one notable exception: households whose dietary health ranked among the worst did buy larger amounts of healthful food after a wage hike. However, minimum-wage households that previously purchased more healthful food bought less of it after an increase. So raising the minimum wage may be a promising start when it comes to addressing food insecurity, but it may not be a comprehensive solution.

The data indicate that increases in the minimum wage can encourage households to try new foods, however. Of the additional food products the households bought, around one-third hadn’t been purchased by them before, according to the data. 

This implies that an opportunity exists for intervention when minimum-wage increases are imminent. Retailers can potentially nudge consumers to purchase healthier foods when they become more open to buying new foods. Stores with brand images built around helping shoppers eat healthier may be especially inclined to take advantage of this opportunity.

Manufacturers may also be able to help nudge consumers when the minimum wage increases. Because retailers have access to behavioral data on their customers, public-health agencies and related organizations might consider partnering with them to create campaigns, the researchers also suggest. Previous research—by Illinois State University’s Joon Ho Lim, North Carolina State’s Rishika Rishika, University of South Carolina’s Ramkumar Janakiraman, and University of Maryland’s P.K. Kannan—finds that when brands put the nutritional information on the front of their products, it may encourage competitors to improve the nutritional content of their own. Encouraging front-of-product labeling could be particularly effective at instilling such competition when minimum-wage households receive an income boost, as households are more receptive to buying new foods and may examine those labels to decide which new foods to buy, the researchers say. 

A separate study—by Rice University’s Alexander Butler, Irem Demirci from NOVA University Lisbon, University of Texas at Dallas’s Umit Gurun, and Rice PhD candidate Yessenia Tellez—considered the effects of financial distress on food-consumption choices. Using Nielsen Homescan data and credit-bureau data, the researchers constructed a zip code–based panel that tracked 2.5 million people annually between 2004 and 2017.

The credit-bureau data included a shopper’s credit history, credit scores, total debt, past-due debt, delinquency, and any instances of bankruptcy, repossession, and foreclosure. Areas with higher numbers of people who were delinquent on payments, or had accounts sent to collections, or had credit cards declined were considered to be particularly stressed.

Financially stressed households tended to be more price sensitive in their purchases, search out more deals, use more coupons, and switch their shopping venues to discount stores, the researchers find. Additionally, these households increased their purchases of high-calorie foods such as instant meals, cookies, and potato chips by an average of 21 percent. These food items were more likely than healthy foods to have their prices cut during times of broad economic distress.

It isn’t just the lower price point that may attract financially distressed households to more highly processed and calorie-rich foods. Many poor families are dealing with poverty-induced stresses that tax mental bandwidth. (For more, see “Anuj K. Shah says we’re criminalizing the effects of poverty,” Fall 2020 issue.) And many of these products are so convenient, Gurun says, that poor families will choose them to avoid the additional work and effort involved in purchasing, preparing, and preserving fresher, more healthful foods. Households with children are particularly sensitive to financial stress and have outsize reactions to it, find Butler, Demirici, Gurun, and Tellez.

But the researchers also have suggestions for how to address this. For one, in the short run, it helps to fund food banks, which have become increasingly common amid the pandemic’s massive economic fallout. Households in severe financial stress are less prone to food insecurity if they are located near a food bank.

“If you supplement these food banks for a short period of time until you figure out what you’re going to do for the long run, it does help a lot, because it reaches the segment of society that is hurt most,” Gurun says.

In the longer run, policy makers should consider social-welfare and insurance programs that target distressed areas with the aim of halting the cycle of poverty and obesity that is costly to both individuals and society as a whole, the researchers write. As Gurun points out, it isn’t only that poverty can lead to obesity but that obesity can also lead to poverty, as discrimination can make it harder for obese people to secure gainful employment.

The researchers suggest policy responses including debt relief to financially distressed households and programs that help people relocate from poor neighborhoods (which are more likely to have a dearth of good food choices) to ones with better access to job opportunities. Another potential solution they note: providing tax incentives to companies that can create new, good-paying jobs.