How free school lunches lower grocery prices for everyone

Food assistance programs are integral to the US social safety net.
Food assistance programs are integral to the US social safety net.
Image: REUTERS/Jonathan Ernst
We may earn a commission from links on this page.

Millions of children each year in the US receive free or reduced-price meals through the National School Lunch Program (NSLP). Research has shown that food programs have numerous benefits, such as boosting test scores and lowering childhood obesity in some of the nation’s most vulnerable groups.

But a new paper found the benefits of free school lunches go beyond just the families whose children receive it.

The researchers—Jessie Handbury, from the University of Pennsylvania and Sarah Moshary, of the University of Chicago—looked at the effect of free lunches on the private sector and surrounding households, and found it pushed down prices at national grocery chains. The study, published by the National Bureau of Economics Research, is a working paper, which means it hasn’t been peer reviewed.

In the US, children in low-income households are eligible for free or reduced-price lunches under the NSLP. Within that program, the Community Eligibility Provision (CEP) is a program that does not require student applications to qualify, and is meant to reduce administrative burden on schools. If at least 40% of a school’s enrolled students are eligible for free school lunch, then the school qualifies for the CEP.

In the 2016-17 academic year, 20,721 schools, covering 9.7 million students, participated in the NSLP under the CEP, according to the paper. (The researchers noted that, in their sample period, most eligible schools do not adopt CEP.)

The researchers took CEP program data from 2011 to 2016 and analyzed it alongside data on grocery prices, purchases, and household zip codes from Nielsen, a market research firm.

The effect of free school lunches on grocery stores

Following the school’s entry into the CEP program, households with school-aged children took fewer trips and spent less at grocery stores, especially at large chains, according to the study. That led to as much as a 10% in decline in sales at large chains, the researchers estimated.

In response, grocery stores adjusted their prices. And given that chain stores tend to have uniform pricing, the researchers found the change in prices spread through chains even in communities with low CEP program uptake. As a result, households that live near grocery stores—even those with no school-aged children—benefitted from the lower prices. The researchers found that grocery prices fell 2.5% across all stores.

The researchers raised the question of whether the school lunch policy affects other companies up the supply chain, such as distributors and wholesalers, but that was not covered in the current study.

How everyone benefits from free school lunches

The school lunch program indirectly reduces grocery costs for the median household by about 4.5% in 2016, the researchers estimated. On the other hand, the annual direct benefit of the NSLP for a household with children amounts to a 25% reduction in shopping costs.

The findings highlight a difference between programs like NSLP and cash-transfer programs, where the latter have been shown to have a negative effect on nearby households, the researchers wrote. For instance, a 2018 working paper that looked at a Philippine cash transfer program found that it raised the local prices of certain foods.