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January 2009, Volume 15, Number 1

Food Costs and Labor Costs: 2007

According to the US Bureau of Labor Statistic's Consumer Expenditure Survey, there were 120 million "consumer units" in 2007. They had an average of 2.5 persons, 1.3 earners and 1.9 vehicles; 67 percent were homeowners, and the average age of the reference person was 49. Average consumer unit income before taxes was $63,100 and household expenditures averaged $49,600. http://www.bls.gov/cex)

These expenditures included $6,100 for food (12 percent). Food spending was split 57-43 percent, including $3,500 for food eaten at home ($67 a week) and $2,700 for food bought away from home ($52 a week). The cost of food away from home largely reflects convenience, atmosphere, and other factors not related to food costs.

To put food spending in perspective, other significant expenditures were $17,000 for housing and utilities; $8,800 for transportation; $2,900 for health care; $1,900 for apparel; and $2,700 for entertainment.

The largest food-at-home expenditures were for meat and poultry, an average $777 or $15 a week. Expenditures on cereal and bakery products, $460, exceeded the $387 spent on dairy products.

Expenditures on fresh fruits ($202) and fresh vegetables ($190) totaled $392, or $7.50 a week (consumer units spent an additional $112 on processed fruits and $96 on processed vegetables). The average consumer unit spent more on alcoholic beverages, $457 or $8.75 a week, than on fresh fruits and vegetables.

Farmers get a small share of the retail food dollar, an average 19 percent. In 2006, farmers received an average 30 percent of the retail price of fresh fruits and 25 percent of the retail price of fresh vegetables, so consumer expenditures of $392 meant $109 to the farmer (0.3 x 202 = $61 + 0.25 x 190 = $48). Farm labor costs are typically less than a third of farm revenue for fresh fruits and vegetables, meaning that farm worker wages and benefits for fresh fruits and vegetables cost the average consumer unit $36 a year http://www.ers.usda.gov/Briefing/FoodMarketingSystem/pricespreads.htm).

Even though strawberries are picked directly into the containers in which they are sold, and iceberg lettuce gets its film wrapper in the field, farmers and farm workers get a very small share of the retail dollar. Consumers who pay $1 for a pound of apples are giving 30 cents to the farmer and 10 cents to the farm worker; those spending $2 for a head of lettuce are giving 42 cents to the farmer and 10 cents to the farm worker.

If the influx of immigrant workers were slowed or stopped and farm wages rose, what would happen to expenditures on fresh fruits and vegetables?

In 1966, the fledgling United Farm Workers union won a 40 percent wage increase for table grape harvesters, largely because Bracero workers were not available. The average earnings of field workers were $9.40 an hour in 2007, according to a USDA survey of farm employers, and a 40 percent increase would raise the average to $13.15 an hour. If this wage increase were passed on to consumers, the 10 cent farm labor cost of a pound of apples would rise to 14 cents, and the retail price would rise to $1.04.

For a typical household, a 40 percent increase in farm labor costs translates into a four percent increase in retail prices (0.275 x 0.33 = nine percent, farm labor costs rise 40 percent, and 0.4 x 9 = 3.6 percent). If farm wages rose 40 percent and were passed fully to consumers, average spending on fresh fruits and vegetables would rise by $14 a year (3.6 percent x $392), the cost of two movie tickets. However, for a typical seasonal farm worker, a 40 percent wage increase could raise earnings from $9,400 for 1,000 hours of work to $13,150, lifting him or her above the federal poverty line for an individual.