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Last Updated: 17 December 2014
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Perryman: The Economic Cost of Hunger

By M. Ray Perryman
M. Ray Perryman

WACO, December 17 - Hunger!! The very word brings thoughts of suffering and need — be it children leaving school on a Friday afternoon knowing they will not have a decent meal until Monday morning, parents confronting the impossible choice between buying food and providing adequate shelter or transportation to work, or seniors enduring pain and humiliation on a daily basis.

Although hunger is devastating to those affected, it remains all too common. This fact alone should be sufficient to motivate lasting and permanent solutions, yet decades of heroic effort have fallen short.

As a public service, we recently studied the economic aspects of hunger and found that there are also practical economic reasons for the elimination of hunger. This is the first in a series of columns related to the issue.

The problem of hunger is bigger (and more costly) than many people realize. Some 17.5 million U.S. households (almost 50 million people) had difficulty obtaining sufficient food last year, according to the latest U.S. Department of Agriculture (USDA) Household Food Security in the United States in 2013 report released in September 2014. In other words, at some time during the year, these households—more than 14 percent of the households in the United States — had some difficulty providing enough food for all family members due to a lack of resources.

Worse, 6.8 million of those households (5.6 percent of the total number of US households) had very low food security meaning that at some point during the year, food intake of some members of the household was reduced and normal eating patterns disrupted due to limited resources.

The recent recession exacerbated the problem of hunger. The number of households that were food insecure increased by over four million and has been slow to improve. In fact, even with the slight drop in 2013, the number of food insecure households (17.5 million) is still far above the pre-recession total of 13.0 million in 2007.

Federal programs have failed to deal adequately with the problem of food insecurity. Although there was a temporary increase in some benefits within the federal Supplemental Nutrition Assistance Program (SNAP) during this period, the additional funding ceased in 2013. The more recent trend has been toward reductions in funding, a pattern that seems likely to continue.

Even beyond the obvious physical and mental costs of food insecurity and the incalculable toll on the stability and dignity of families across the U.S., there is a tremendous economic cost. Health care needs of people who are food insecure are higher due to increased incidence and severity of disease. Health outcomes are also worse, reducing productivity and lifetime earnings. In addition, education expenses are higher. Food insecurity is associated with a greater need for intervention such as special education, and education and achievement levels (and, hence, lifetime earnings) are negatively affected.

These costs multiply as they work their way through the business complex and are largely borne by the whole of society. Economic aspects of hunger have been the subject of numerous prior studies, and empirical assessments have provided valuable data regarding the effects of hunger on health care, education, and related outcomes. While many of these prior efforts reflect excellent and careful scholarship that is highly useful, they are based on traditional health economics approaches and, thus, only measure certain aspects of the total cost.

Incremental outlays for excessive and avoidable health care and education is largely a net withdrawal of resources from the economy that could otherwise be used in more productive ways. Moreover, when the earnings of individuals are diminished, society is deprived of productive capacity and spending potential which causes losses in output throughout the supply chain and reduces the demand for consumer goods. The effects of these drains, which have not previously been quantified in a comprehensive manner, cascade through all aspects of business activity. We therefore developed a new way to look at the economic cost of hunger. (The full methodology is explained in the study, which may be downloaded at www.perrymangroup.com.)

According to our analysis, hunger costs the economy $461.9 billion in total expenditures, $221.9 billion in gross product each year, and nearly 2.5 million permanent jobs. These amounts represent about 1.3 percent of total output in the United States and 1.8 percent of total domestic employment, thus reflecting a significant drain on current business activity. It should be noted that the lifetime effects of hunger occurring in 2014 alone (as opposed to the impacts in a typical year as described above) are much larger and include almost $3.4 trillion in aggregate spending, over $1.5 trillion in gross product, and 15.9 million years of employment.

This more comprehensive picture sheds new light on the overall burden to society, as well as the potential benefits of solving the problem. It also informs the policy process and assists in crafting economically sound solutions. The vast majority (85.7 percent) of households were food secure throughout the year in 2013, meaning they had access to a plentiful, consistent supply of food. However, in a nation as affluent as the United States, the fact that one in seven people go hungry at some point in the year is no less than tragic.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

Write M. Ray Perryman

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