How the baby formula shortage links back to a federal nutrition program

“The uproar over infant formula shortages is prompting lawmakers to confront how a federal nutrition program may be helping a small handful of formula manufacturers dominate the U.S. market.

The federal government’s widely-used nutrition program for women, infants and children, known as WIC, is by far the largest purchaser of formula in the U.S., with more than half of infant formula in the U.S. going through the program. And just two companies serve close to 90 percent of the infants who receive benefits through the program, in part because of the way WIC awards its contracts.”

“The Abbott recall and resulting shortages were especially disruptive for WIC recipients. About half of all babies born in the U.S. qualify for WIC, which serves low-income families. Many of these households don’t have the time or resources to drive around looking for alternative formula brands or scour the internet for available stocks. Even if parents and caregivers could find alternative formulas, their WIC benefits might not have covered the specific brand they could find when the shortages first hit.

For the past three decades, WIC has used what’s called sole-source contracting, which is designed to save the program money by allowing the states to buy formula far below retail prices. The National WIC Association estimates that state rebates save about $1.7 billion in costs each year. When a state contracts with a company, all WIC participants in the state use that same manufacturer. Just three companies have been awarded contracts during this time: Abbott Nutrition; Mead Johnson, which makes Enfamil; and Nestle, which makes Gerber.”

““The dirty secret about WIC is these formula companies actually lose money on formula that they sell through WIC,” because the lowest bidder ends up winning the state contracts, explained a former Democratic Senate aide. “But what happens is… if you give birth in a hospital and you request formula, you’re going to get the formula that is whoever has the WIC contract,” allowing the formula makers to reach a massive pool of new customers. Getting a state WIC contract can also mean more favorable shelf space at retailers across the state and more brand loyalty.

Not everyone agrees about the extent to which sole-source contracting has driven consolidation in the formula industry, versus other factors, like overall consolidation across the food sector and high food safety regulatory costs, since infant formula is more highly regulated than most other foods.”

” But the USDA’s Economic Research Service in 2011 found that switching a state WIC contract gave the new manufacturer about a 74 percent bump up in market share in the state. Most of that is the result of WIC participants switching — since they make up more than half the market — but the rest is the result of more preferential treatment at the retail level.”

The solution to “differential demography” is more migration

“In 2020, the general fertility rate in the US hit its lowest level on record, and provisional data for the first six months of 2021 showed a 2 percent decline in the number of births compared to the same time period in the previous year.

And what’s happening in the US is taking place in much of the rest of the world, as people are slower to marry and slower to have children.

That trend has helped contribute to what will be one of the dominant themes of the 21st century: the slowdown of population growth, especially in developed countries, and the eventual shrinking of the number of human beings on the planet.”

Taking Formula From Immigrant Babies Won’t Fix the Shortage

“Migrants in detention centers aren’t free to leave facilities whenever they want to shop for baby formula. Legally, essential products must be provided to migrant children that the government has detained. “Facilities will provide access to…drinking water and food as appropriate,” reads the 1997 Flores settlement that addressed the treatment of migrant children. A 2015 Customs and Border Patrol document on detention standards noted that “food must be appropriate for at-risk detainees’ age and capabilities (such as formula and baby food).” These legal standards predate the Biden administration.

Nor would diverting baby formula away from immigrant detention centers ease supply chain woes in a meaningful way. Ursula—the facility Cammack singled out on Twitter—holds around 1,100 detainees. The number of American parents who rely on formula to feed their infants is on the order of millions. Though several Republican lawmakers and right-leaning news outlets are agitating about the “pallets of baby formula for all of the illegals who are crossing into the United States,” none have been able to say exactly how much formula is going to detention facilities or how often shipments are arriving.

The baby formula shortage is indeed a huge problem. About 40 percent of top baby formula brands are out of stock right now, and producers are warning that shortages could last for several months. But the shortage wasn’t caused by the government’s legal duty to feed the kids it has confined. “Much of the current shortage is rooted in a February recall of formula after a suspected bacterial outbreak at an Abbott Nutrition plant in Michigan,” explains Reason’s Eric Boehm. And while we could re-fill those shelves with formula from abroad, tariffs and quotas “make it burdensome and costly to import the supplies that are now desperately needed.”

You can’t solve the national shortage by making it harder for undocumented parents to feed their babies. Instead of looking for immigrant scapegoats, lawmakers should tackle the trade and regulatory policies that helped create the current shortage.”

The census shows the US needs to increase immigration — by a lot

“There are two main ways that the US could increase overall population growth: by encouraging people to have more children or by increasing immigration levels.

On their own, pro-natalist policies have historically failed to increase birthrates in the kinds of numbers that would be required to stave off stagnant population growth. Internationally, research has shown that child allowances have led to slight, short-lived bumps in birthrates. From 2007 to 2010, Spain had a child allowance that led to a temporary 3 percent increase in birthrates, but that was mostly because more people decided to have children earlier, rather than have more of them. After the allowance was revoked, the birthrate decreased 6 percent.”

“Immigration is a much more reliable driver of population growth. The average age of newly arriving immigrants is 31, which is more than seven years younger than the median American, meaning that they could help replace an aging workforce. They are also more entrepreneurial, which encourages economic dynamism, and more likely to work in essential industries, such as health care, transportation, construction, agriculture, and food processing.

Immigrants may also help stave off regional population declines. Immigrants are more likely to settle in areas where foreign-born populations already live, which are typically large metro areas that have lost population in recent years. Frey found in a 2019 report that, of the 91 large metro areas that gained population since the beginning of the decade, 15 would have actually lost population were it not for immigration, including New York, Chicago, Detroit, and Philadelphia. In another 11 large metro areas, immigration accounted for more than half of their population growth.

Refugees are also more likely to settle in less dense population centers where housing costs are lower, possibly reinvigorating the nearly 35 percent of rural counties in the US that have experienced significant population loss in recent decades.

Raising immigration levels wouldn’t necessarily require a major reimagining of the US immigration system, though that might offer more flexibility to reevaluate immigration levels periodically — it could be accomplished by just increasing the caps on existing forms of visas and green cards.”

U.S. Fertility Rate Drops to Lowest Level Ever

“American women are choosing to have fewer babies and the result is that America’s total fertility rate in 2020 has fallen to a record low of 1.64 births per 1,000 women between 15 and 44 years of age, according to the Centers for Disease Control and Prevention. Demographers define replacement fertility as 2.1 children per woman over the course of her lifetime; one to replace her, another to replace the father, and a tenth extra to account for children who die before reproducing and those who churlishly refuse to make their parents into grandparents. Populations with sustained sub-replacement fertility will eventually begin to shrink.”

“As recently as 60 years ago, the average American woman gave birth to 3.6 kids during her lifetime. Following the introduction of effective birth control pills, the U.S. total fertility rate began to fall steeply from 1960 to a nadir of 1.74 children per woman in 1976. Fertility rose again to hover just below replacement until 2007 when it began its contemporary drop to the lowest rate ever recorded. The U.S. fertility rate is now basically the same as that of other rich developed countries.”

“modernity offers people a multitude of life options that compete with the bearing and rearing of children. Evidently, the trade-offs between work, travel, socializing, entertainment, sports, and parenting that people are making reduce fertility. The upshot is that modern people considering their options are voluntarily choosing to have fewer children.”

The U.S. Baby Bust Continues

“The number of babies American women are having continues to fall”

“The total number of births for the United States in 2019 was 3,745,540, down 1 percent from 3,791,712 in 2018. The report notes that this is the fifth year that the number of births has declined after an increase in 2014, and the lowest number of births since 1986.”

“The U.S. TFR is now similar to that of many other countries, including those that make up the European Union (1.543), Australia (1.74), New Zealand (1.71), Japan (1.42), South Korea (0.977), Brazil (1.73), and China (1.69). This mirrors the decadeslong global trend of women choosing to bear ever fewer children over the course of their lifetimes. Global total fertility stood at more than five children per woman in 1964 and is well on its way toward below replacement levels, having now dropped to 2.415 children per woman as of 2018.”