Cost of Living, Spending Power & Doughnut Economics: Why Making “Just Enough” is So Problematic
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Many federal assistance programs – including SNAP, NSLP, WIC and Medicaid – use household income to determine eligibility. For states and program administrators, this provides a relatively simple system of determining who can access government benefits and who cannot.
However, the guidelines’ black and white nature leaves scores of needy families without access to the medical, nutritional and financial help they need. In our world of grays, households who bring in just enough to “not need” assistance still often worry about running out of food, paying bills or accessing quality medical care.
These people frequently end up in society’s “doughnut hole,” according to English economist Kate Raworth, because they lack the resources to establish a solid social foundation (explained further below).
In this article we’ll discuss how programs determine eligibility for federal assistance, why so many people don’t receive the aid they need, and how this all relates to doughnut economics.
FPL and Federal Assistance Programs
If a family (or individual) is struggling to meet their basic needs, they can apply for government assistance. However, these diverse programs are designed specifically to benefit low-income Americans, so the applications always ask about family income and savings [FN1].
Many programs use the Federal Poverty Level (FPL) to gauge need. These guidelines, which are updated and published annually by the US Department of Health and Human Services (HHS), are specific to household size and adjusted for certain regions [FN2].
Here are some examples of program-specific, FPL-based guidelines:
Food Stamps (SNAP): gross household income less than 130% FPL + less than $2,250 in accessible savings [FN3]
School Meals (NSLP/SBP): free meals for children from households with a gross income less than 130% FPL and reduced-price lunches for students whose family income falls between 130-185% FPL [FN4]
WIC: gross household income less than 185% FPL + medically at-risk, or automatically eligible for assistance if household income is less than 130% FPL [FN5]
Note: Applicants can also qualify for government assistance through other standards (e.g. kids in foster care automatically receive free school meals). Cash relief programs, such as TANF and SSI, do not use FPL to determine eligibility [FN2].
Why FPL-Based Assistance Isn’t Enough
The poverty guidelines provide a simple way to determine who’s in and who’s out when it comes to federal assistance programs, but it’s not a perfect system. Many low-income households are left without the assistance they need because they make just enough to miss the cut-off for government assistance.
To provide some perspective, 185% of the FPL for a family of four is $48,470 in 2020 [FN2].
According to HowMuch.net, an online cost of living estimator, a family of four needs to earn at least $55,000 a year to live in Chicago. This estimate assumes the household is following the Thrifty Food Plan (which is difficult in and of itself), but still paying for rent, utilities, insurance, childcare, healthcare and transportation [FN6].
As you can see, there’s a significant gap between 185% FPL and funds needed to cover basic cost of living expenses in Chicago. Unfortunately, this pattern holds true in most major US cities. As a result, households who earn slightly too much to receive government assistance frequently struggle to meet essential needs from month-to-month.
Even for those who do qualify for assistance, two parents working full-time minimum wage jobs (earning $7.25/hour in Chicago) will bring home just $30,160 a year before taxes [FN6]. This year, 130% FPL for a family of four is $34,060 [FN2]. The minimum wage workers with two children would qualify for most government assistance programs but, even with medical and nutritional assistance, imagine trying to come-up with that extra $20K to cover basic costs each year.
That’s why so many low-income Americans are forced to work multiple jobs and make financial or life choices that sometimes baffle middle class neighbors.
Doughnut Economics in 21st Century America
American households who report an income just above the assistance programs’ FPL thresholds are often said to be living in the doughnut hole. This is a reference to Kate Raworth’s progressive economic model, The Doughnut, which promotes more equitable resource distribution to reduce inequality and save our planet.
Raworth argues that 21st century leaders need to focus on fulfilling every individual’s basic needs and promoting sustainability, not just growing GDP. She asks us to think of society like a doughnut: there’s an outer edge formed by the “ecological ceiling” (an inherent limit to planet’s natural resources), as well as an inner edge around the hole that’s the “societal foundation” – the baseline condition where all citizens have their basic needs met.
When people don’t have enough basic resources like food, income, healthcare, education or justice, it amplifies inequality. On the flip side, when people use too many resources it decimates the environment. So, the goal is a redistributive balance where we – as a society – meet everyone’s individual needs without putting undue strain on the planet’s resources [FN7, FN8].
In the US, safety net programs like SNAP, school meals and Medicaid provide millions of families with the essentials to develop a stronger societal foundation. However, resource distribution in our country is still far from equal. Too often, families who earn too much to qualify for government assistance but too little to live comfortably fall through the cracks.
Keeping People Out of the Hole
So, how can we get more low-income families into the sweet, balanced, doughy part of the doughnut?
Many local charities and some government programs have emerged to help fill the gaps. For example, the Children’s Health Insurance Program (CHIP) is a federal program that provides health & dental insurance to children under 19 who don’t qualify for Medicaid. In some states, this program provides coverage to children whose families make up to 400% FPL [FN9]. Local charities and nonprofits, like those listed here, also provide nationwide assistance with food, bills and more.
In Amsterdam, leaders recently took it a step further by announcing that they’re adopting the Doughnut Model to help the city come back stronger from the COVID-19 pandemic. Citizens wanted a greener model that promoted more equity & social justice, and leaders responded with Raworth’s model [FN10].
Given the constant shockwaves rippling through our previously-rigid economic, social and personal routines, it will be interesting to see if other cities follow Amsterdam’s lead in the coming months.
Resources
1. https://www.usa.gov/benefits
2. https://aspe.hhs.gov/poverty-guidelines
3. https://www.cbpp.org/research/food-assistance/a-quick-guide-to-snap-eligibility-and-benefits
4. https://frac.org/wp-content/uploads/cnnslp.pdf
5. https://www.fns.usda.gov/wic/wic-eligibility-requirements
6. https://howmuch.net/cost-of-living/il/chicago
7. https://www.kateraworth.com/doughnut/
8. https://www.youtube.com/playlist?list=PL0GL611hRRm-F9mFBZ0Q8HKfHYGv7qrCk