Poverty programs have become cash cows for powerful corporate interests, says Peter Schweizer at the Daily Beast. In the US, state governments increasingly rely on electronic benefit transfer (EBT) cards to distribute social assistance. And around the world, financial services companies are marketing products like prepaid cards to government welfare agencies.
Prepaid cards enable government agencies to place restrictions on how recipients spend assistance as well as making it easier to gather data on spending patterns. Negative attitudes towards welfare recipients may encourage policy makers to take advantage of prepaid cards as a way of distributing assistance to groups such as the long term unemployed.
Prepaid cards in Britain
In Britain MasterCard has partnered with Demos on a project to explore the use of prepaid cards for direct payments and benefits. With the government set to replace a number of exiting benefits and tax credits with a Universal Credit, the research is well timed.
Prepaid cards are similar to bank issued debit cards. The main difference is that funds are not paid into the recipients bank account. Since government agencies issue the card and control the accounts, they can choose to stop recipients from using their cards to withdraw cash and can restrict the kinds of items the cards are used to purchase.
As part of their research project on prepaid cards, Demos released the results of a poll showing that "the majority of people believe the government should start controlling how welfare recipients spend their money." According to a Demos media release:
Whilst 6 in 10 people (59%) agreed the government should control what people spend universal credit on, the figure rises sharply for certain recipient groups and for the purchase of specific items.
- An overwhelming 9 out of 10 people (87%) said at least one group of welfare recipients should have their benefits controlled. 77% said yes to monitoring people with a substance or gambling addiction and 69% for those with a criminal or anti-social history. These figures rose to 82% and 75% respectively among respondents aged over 65.
- Over two-thirds of respondents (68%) agreed the government should stop all recipients from spending their benefits on gambling.
- Over half (54%) agreed with the government stopping people spending their benefits on unhealthy items such as cigarettes or alcohol.
- Just under half (46%) opposed benefits being spent on branded goods such as Nike trainers etc,
- Approximately 4 in 10 people backed a ban on buying junk food (38%) and over a third (35%) on holidays.
According to Demos Deputy Director Claudia Wood, 33% of respondents singled out those claiming disability benefits and 27% the long term unemployed as groups who should have their spending restricted. Wood interprets this a sign that Britain is falling "into a damaging ‘them and us’ culture when it comes to the welfare state" (pdf tables of poll results).
The financial services industry is marketing prepaid card technology to local authorities in Britain. Among the selling points are the ability to prevent recipients from withdrawing cash from ATMs and the ability "to block certain Merchant Category Codes (MCC), or restrict card usage to desirable merchants only."
EBT in the US
The US provides a model of how EBT cards can be used to control and monitor spending. For decades the US Department of Agriculture supported low income households by distributing paper stamps that could be redeemed for food. But during the 1990s and 2000s state governments shifted the Food Stamp Program to EBT.
Now known as the Supplemental Nutrition Assistance Program (SNAP), the program’s EBT cards allow recipients to buy eligible food items but prevents them buying products such as alcohol, cigarettes, vitamins, hot foods or pet food. In many stores electronic cash registers and barcode scanners automatically distinguish between eligible and ineligible items.
Some commentators are calling for further restrictions on spending — particularly on snack foods and sugary drinks. For example, in the Los Angeles Times Paul Whitefield writes: "People on food stamps shouldn’t be allowed to buy junk to eat and drink." Organisations like Eat Drink Politics argue that corporations that manufacture and distribute unhealthy food benefit from the current arrangements and are lobbying against health-oriented changes to SNAP.
Using prepaid cards for benefits makes it easier for government agencies find out what products recipients are buying. Last year the US Department of Agriculture issued a Request for Information (RFI):
… to identify industry capabilities and compare the feasibility of obtaining and analyzing nationally representative food purchase data maintained by large store chains, loyalty card companies and/or other commercial sources to determine what types of foods are purchased by participants in the Supplemental Nutrition Assistant Program (SNAP, formerly known as the Food Stamp Program).
An earlier study used EBT food stamp data to examine the shopping behaviour of different categories of recipient including how quickly they spent their entitlements and where they shopped.
For stigmatised groups such as the long-term unemployed it may be easier to gain public support for increased assistance if prepaid cards are used to restrict spending. But because the cards identify customers as welfare recipients the cards themselves are stigmatising.
Read more …
Welfare quarantining in America, Club Troppo
Food Stamps — Follow the Money: Are Corporations Profiting from Hungry Americans? Michele Simon, Eat Drink Politics
Should claimants be paid vouchers to stop spending on ‘vices’? Brian Wheeler, BBC
A controversial, but vital, debate, Claudia Wood Demos