Carpe Diem

Thanks to technology, Americans spend dramatically less on food than they did 3 decades ago

Source: Bureau of Labor Statistics. Image Credit: Lam Thuy Vo / NPR

Source: Bureau of Labor Statistics. Image Credit: Lam Thuy Vo / NPR

NPR’s Planet Money reports that ” Americans spend less on groceries than they did a few decades ago. That’s partly because of new machines and technology that have made it much cheaper to produce food.”

Exhibit A: Watch the amazing video above showing how technology, automation, and innovation have significantly lowered the costs of producing potato chips at the Herr potato chip factory in Nottingham, Pennsylvania. One example: the company now produces 5-6 tons of potato chips per hour (10,000 to 12,000 pounds), compared to 5-10 pounds of chips per hour when the company first started in the 1940s.

Over the last twenty years, the share of consumer spending on food has fallen from about 13% in 1982 to less than 9% last year, thanks to falling grocery prices that have resulted from advances in technology, more automation, and greater efficiencies in food production and delivery. For example, between 1982 and 2012, the inflation-adjusted prices of many common food items fell (see table below), and many of those declines in price have been significant, by as much as one-quarter or more in the case of chicken legs, pork chops, steak, bananas, lettuce and butter.

foodBottom Line: Falling real food prices over time, thanks to innovation and technology, is just one example of how all Americans (especially low-income and middle-income groups) are better off today than in any previous period.

 

16 thoughts on “Thanks to technology, Americans spend dramatically less on food than they did 3 decades ago

  1. It is great that the food industry can feed people less expensively. But they are also producing many unhealthy foods and killing more people than drug dealers. Isn’t it immoral for a drug pusher to get people addicted to drugs so they can make money supplying the addicts habit? It is no less immoral for the food industry push unhealthy foods. I don’t advocate legislation to deal with it because that would probably just make things worse through unintended consequences. But the next time you go to the grocery store, look at how prominently they display the foods that are killing people. They are merchants of death.

    • anonymous: “But they are also producing many unhealthy foods and killing more people than drug dealers. … They are merchants of death.”

      So true. One only has to look at the long term decline in U.S. life expectancy to see just how deadly are the food products Americans are consuming.

      Oh, wait a minute …

    • anonymous: “. But they are also producing many unhealthy foods and killing more people than drug dealers.

      It’s amazing that people are unable to think for themselves and make their own choices about what they eat.

      /sarc

  2. Reduced-cost food also allows us to spend more on, say, health care and entertainment & recreation. And we do. And it is considered a “crisis” in the case of health care, but not a word about the “unsustainable cost” of entertainment & recreation.

    • I agree, Luther, that Americans choose to spend more on health care becuase they have more to spend. But I also believe that severe government interferemce in health insurance and health care industries causes Americans to spend much more than we should be spending. I don’t think such government interference is very strong in the entertainment and recreation industries.

      Just so we’re clear about my views, the government interference in insurance and health care markets did not start with Obamacare. Rather, it has been steadily growing for at least six decades.

      • I also believe there has been (and tremendously much more so under Obamacare) significant government interference in health insurance and care. However, removing that interference doesn’t necessarily mean we would spend less – we may spend the same but get even higher quality (which is what I suspect).

        • I can’t speak for anyone else. But if my health insurance bill were lower, I’d use the savings to pay for a better health club membership.

  3. i’m not sure this is as straightforward as is being presented.

    does this food spending include eating out?

    we eat out a lot more that we used to. if that is not included here (and i do not think it is as groceries + eating out is more like 12-13% of spending today, not the 9% they claim) then they may just be (at least in part) measuring a change in eating habits, not a change in price.

    the purported price drops for specific foods are also pretty questionable. the foods used as benchmarks have changed. you are comparing choice cuts of meat now to what were prime then and cuts like flank steak to rib eye.

    all the best cuts of meat fell out of the basket when their prices rose.

    i also wonder about the quality comparison. meat today has FAR more steroids, antibiotics, and hormones in it. milk in particular is full of hormones.

    to compare like to like, we would probably need to use the (much more expensive) organic/no hormones etc meats, dairy, and eggs today.

    comparing a steroid riddled piece of choice flank steak today with what would today be called prime organic rib eye seems like a pretty slanted methodology.

    i’m not sure what happens to the price level if you keep quality constant. it may still be down in real terms, but i suspect by considerably less.

    further, i have real doubts abut how useful it is to deflate this with cpi. why is that relevant? all is shows is the price of food relative to other things.

    if food went up in price 20% and everyhting else by 30% but income was only up 10%, using cpi would make food look more affordable, when, in fact, it is less so.

    i do not know if it would change the outcome here (and i suspect it might even mean food looked more affordable) but i think one really needs to base affordability measures on median income, not cpi.

    how affordable somehting is is determined by your income, not it’s change in price relative to other items.

    • further, if food spending dropped as % of household spending, why does that necessarily tell us anyhting about affordability?

      if rent and healthcare rose a great deal and crowded food out so we now spend less or have replaced higher quality food with lesser due to budget constraints, that would not seem to mean it was more affordable but it would still be consistent with the data.

      i have no idea if and to what extent that happened, but one needs to be very careful to be sure the data is measuring what you think it is.

    • Using the average hourly wage, and calculating the number of hours (or minutes) worked to buy the food items listed in the chart would produce almost identical results, in terms of the percent changes. The average hourly wage has increased by 2.5 times between 1982 and 2012, and the CPI has increased about 2.4 times over that period. So because wages and the CPI have increased over time at about the same rate, it wouldn’t matter whether the CPI is used to adjust prices over time, or whether the “time cost” method was used… They would both produce almost exactly the same percent changes.

      • i still have some real doubts about the comparability of these foods though.

        is steak the same cut and the same grade? i’ll bet it is not. it sure isn’t in the cpi.

        are we comparing what would today be called “organic” or at least hormone free foods from 1980 with food full of hormones etc today and ignoring that comparable foods are available but cost considerably more (50-100% higher)?

        it does seem that if one is going to champion the use of quality adjustments to account for better cars and computers, that one should also make sure to compare apples to apples (sorry) with food and makes sure they are the same apples and steaks. the BLS is notably very bad about that. they make no allowance for such things nor do they add in a negative quality adjustment when they drop the grade of meat in the basket from prime to choice (which they did) as a weighting adjustment.

        i also still have real doubts about that % of spending and how it is affected by eating out more and a lower savings rate.

        if we save less than we did in 1982 (and we do by quite a margin) then spending the same amount would look lower as a % of spending but would not really seem to indicate any more affordability.

        i’m just not convinced that metric is necessarily meaningful by itself.

        • Oh, for God’s sake, man. Give it up. The food available to us today is far more healthy than the crap which was on the shelves in the 1960s and 1970s. Consumers have been demanding healthier choices and they’ve been getting them. Nutritional science has made orders of magnitude gains since I was a child, and those gains have been incorporated in the food we eat.

          I’m a diabetic, and I am keenly aware of what I put into my mouth. The foods which have been developed for people such as me – as well as the foods developed for all sorts of other illnesses and health requirements – just were not on the shelves 30, 40, and 50 years ago.

          Don’t believe the leftist crap you read about the evil corporations who are poisoning us. You should know better than to listen to that garbage,

        • morganovich: “if we save less than we did in 1982 (and we do by quite a margin) then spending the same amount would look lower as a % of spending but would not really seem to indicate any more affordability.”

          The biggest reason Americans are savings less than they did in 1982 is that the adults of today did not grow up in the Great Depression. Adults of today have been conditioned to believe that the government will provide for them in retirement. They’ve watched the taxpayers provide seniors with retirement funds and health care for the past five decades.

          The second reason Americans are not savings as much as they did in 1982 is because the Fed made borrowing expensive back then and cheap today. When mortgage loans were 13% and credit card rates were 18%, instant gratification was much more costly.

          The third reason net savings are so low is because government interference in the higher education market caused college costs to skyrocket.

          The reduced savings has nothing to do with food affordability and everything to do with government interference in free markets.

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