Cheap Eats: How America Spends Money on Food
Food is cheap and getting cheaper in America, unless you’re poor
Like most journalists, Atlantic writers tend to be both curious and often hungry, which might be why we write so much about the price of food and drinks. So I really dug this new Bloomberg Businessweek chart about “America’s shrinking grocery bill.” (You should check out the full, rich version of the chart.)
Here’s the story. Thirty years ago, the average household spent about 17% of its income on food. Today it spends about 11%. It’s a global trend: Food is getting cheaper relative to incomes everywhere with rising incomes. But there’s also a distinctly American thing going on here. We spend less of our cash on food than any other country — “half as much as households in France,” according to Dorothy Gambrell.
In fact, if you consider “cheap eats at home” the most important measure of social welfare, the United States is the greatest country on earth. Eating at home takes much less from our budget than other countries.
One reason we spend so little money at home is that we spend so much more money under other people’s roofs. Over the last century, Americans have spent more and more on food they didn’t prepare at home.
This is all part of one of the happiest economic stories of the last century — the falling relative price of essentials like food and apparel in the 20th century. Families used to spend more than 50 percent of our income on eating and clothing. Now, the average household spends well under 20 percent.
But “average household” doesn’t mean much in a country where the top 20 percent earns 15X the bottom 20 percent. So how do poor families food budgets compare to the rich — and how that changed over the last 30 years?
The short answer is that relative food costs are low and falling fast for everybody — but they’re not falling for the poor.
In 1984, the poorest Americans spent 16 percent* of their income to eat. The median-income family also spent 16 percent of its (slightly higher) income on food. And the rich spent the least. In the last three decades, food’s share of the family budget has fallen for all but the poorest families, where it’s stayed the same.
It’s well understood that everybody needs food to live, no matter how much money they make. But stomach sizes have a much narrower spectrum than U.S. incomes. So how are rich people earning so much more, but spending nearly the same share of their budgets on food?
Deep inside the numbers, you see some pretty spectacular differences between rich and poor families’ eating habits. The richest quintile spends about 4X as much as the poorest in general– but it spends 6X on alcohol, 5X on dining out, and 3X on food. The most important difference between rich families and poor families when it comes to food spending isn’t really what they eat, but where they spend their food money. Poorer families eat much more at home. Richer families spend more money (but a similar share of their income) dining out.
Overall, the falling burden of food costs is good news for lower- and middle-class families. It means they can devote more money to things like health care and education and energy and homes, which are getting expensive faster than their wages are rising. But we shouldn’t rule out the possibility that those accelerating costs are putting pressure on poor families to spend less on food.
In other words, we can’t rule out that the lowest-income households only spend one-sixth of their money on food, not only because real food prices are falling, but also because they’re forced to consume less, as mortgages and gas prices eat into the budget.
*Why are my figures slightly different than Bloomberg’s? I used “spending” and they used “after-tax income.” Slightly different figures. Same general idea, though, but keep in mind that richer households are more likely to save more, so dividing by income will always give you a lower number than dividing by spending.