Monday, June 21, 2004

Charging Big Bucks for Treating the Poor Like Human Beings

Three weeks ago, we relayed a story about stores that specialized in selling to WIC customers so they could gouge the goverment program:
[T]he prices at W.I.C. specialty stores are typically 10 percent to 20 percent higher than those at supermarkets and other retail grocers.
Now. less than a month later, our usually slow-moving government is moving with lightning speed to solve the problem--it's going to start cutting mothers from the program.

By Virginia Ellis, LA Times Staff Writer

SACRAMENTO — Some of California's poorest children could soon be shut out of a government food program due to an explosion of stores that cater to low-income mothers but charge top dollar for milk, eggs and other staples.

Prices at the stores — most in the Los Angeles area — are as much as 16% higher than at supermarkets and other retailers. Many have sprung up in clusters near offices where young mothers go for food vouchers and nutrition classes.

Experts say the jump in the number of these businesses is now adding $33 million a year to the cost of the Women, Infants and Children program in California, which serves nearly 1.3 million people.

"Over the long haul, the major driving force that is raising our costs are these [stores]…. To the extent that they become more predominant and charge more overall, we have to find ways to cut corners," said Linnea Sallack, chief of the WIC branch of the California Department of Health Services.

Nationally, about 100,000 eligible children, pregnant women and new mothers could be denied benefits, one official estimated. It has not been determined how many of those would be in California.

The number of recipients the program can serve is limited by the amount of the federal grant that funds it, so high costs threaten its ability to serve all those who are eligible. Despite the rising costs brought about by these stores, in previous years the state has been able to serve all eligible participants by dipping into a federal emergency fund, but that money has now run out.

Although the WIC program is a quarter-century old and most state retailers accept its vouchers, the growth of stores exclusively serving its recipients has taken officials by surprise. The phenomenon is nationwide, but the biggest increase has been in California, where the number of stores has grown from 86 in 1996 to 322 in 2001 and to 659 this year. In the late 1990s, they accounted for only 11% of the WIC dollars spent on food; this year, the figure has vaulted to 43%. Nationally, the current number is about 11%.

According to federal data, nationwide there were 523 of the stores in 2000. In 2001, the number increased to 621, and by 2002 it had reached 778.

The federally funded program is administered by the state, and regulations to curb its costs have been grinding through Sacramento since 2000. The new rules are pending in the state Department of Health Services and are opposed by the specialty grocers, who have spent $427,113 on lobbyists and consultants in the last three years and have given campaign money to key politicians.

The Federal government 'acknowledges' that the stores aren't doing anything illegal--but isn't price-gouging illegal? Isn't price-fixing illegal? These stores aren't competing, they're all selling at the highest price allowed by the program even though the high-end costs weren't intended to pad their pockets.

Unlike food stamps, WIC vouchers are not for specific dollar amounts but for 60 particular food items. Other stores — where competition generally keeps prices lower — redeem them at the prices they charge paying customers.

But WIC-only stores have no such customers. They sell only to WIC recipients and generally stock just the milk, cheese, cereal, eggs, juice, peanut butter and other staples authorized by the program. And they tend to charge the government the WIC maximum, which is set high to make sure grocers in isolated or rural areas can cover their increased costs.

WIC-only stores are generally in urban areas and have no such costs. Doesn't thast make thier pricing policies actionable? Ask how these stores justify their over-charging and things get real interesting. First, they say--

[Manuel Castaneda, president of the Nutritional Grocers Assn. of California and co-owner of 32 WIC stores,] noted that WIC-only stores don't get the price breaks and other allowances from manufacturers that big chains get for buying in volume. But "the Nutritional Grocers Assn. supports efforts to contain food costs," he said.

Greenstein, who has analyzed the data from the state report on redemption costs, said it showed WIC-only stores consistently charged prices not only higher than chain supermarkets but also higher than grocers with one or two cash registers.

Oops. Excuse #1 down the tubes. On to excuse #2, and the problem with this one is the truth in it. Castenada claims that the stores are necessary because they provide a shopping place where the shoppers aren't ridiculed.

Recipients flock to their stores, they said, because they offer convenience, easy access to authorized items, and clerks who speak their language and treat them respectfully.

"I think if you ask the participants, they'll tell you they shop in WIC-only stores because … they don't like the way they're treated by clerks in other stores," said Manuel Castaneda, president of the Nutritional Grocers Assn. of California and co-owner of 32 WIC stores. "They don't like the way they're treated by other customers."

"The dirty looks, the sneers, the grunts — WIC transactions are complicated and time-consuming," he said. "They come up to the register with six vouchers … and everybody in line starts grunting."

In WIC specialty stores, Castaneda said, customers don't have to search the aisles for approved items; a clerk brings what they need to the counter and helps with the transactions.

"We give them dignity. We give them a comfortable environment that's free of stigma," Castaneda said.

In other words--let's just cut to the chase--the 15% surcharge is justified because they treat low income mothers as if they were real people while other stores treat them like, well, like poor people: unwanted, dirty, time-consuming leeches sucking at the public tit because they're too lazy to get real jobs.

I hate to say it but Casteneda has a point: there have been times when I needed food stamps in order to avoid starvation--literal starvation, not figurative--and I know damn well how people's attitude changes toward you when you pull that scrip out of your pocket instead of money. I can readily understand why the mothers prefer WIC-only stores that cater to them to chain groceries that treat them as if they're something that crawled out from under a rock.

What's disturbing about this argument isn't the truth in it but the fact that Casteneda thinks he deserves--in all of his 32 stores--a sizable payment for being human to other humans. Apparently we have reached the stage in America where we think we have a right to be paid an exorbitant price for being courteous to the poor.