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October 2016, Volume 22, Number 4

Farm Wages and Food Costs: 2015

The US Bureau of Labor Statistic's Consumer Expenditure Survey reported there were 128 million "consumer units" or households in 2015. They had an average of 2.5 persons, 1.3 earners and 1.9 motor vehicles; 62 percent were homeowners and the average age of the reference person was 50. Average consumer unit income before taxes was $69,630 and average annual expenditures were $55,975.

These expenditures included $7,025 for food (almost 13 percent of expenditures). Food spending was split 63-37 percent, including $4,015 for food eaten at home ($77 a week) and $3,010 for food bought away from home ($58 a week). The cost of food away from home largely reflects convenience, service, atmosphere and other factors; food costs are about 35 percent of the cost of food purchased in cafeteria-style restaurants, 30 percent in fast food, and 25 percent in fine dining.

To put food spending in perspective, other significant expenditures were $18,400 for housing; $9,500 for transportation; $4,300 for health care; $1,850 for apparel; and $2,850 for entertainment.

The largest food-at-home expenditures were for meat and poultry, an average of $900 a year. Expenditures on cereal and bakery products, $520, exceeded the $415 spent on dairy products.

Expenditures on fresh fruits ($285) and fresh vegetables ($245) were $530 a year or $10 a week (consumer units spent an additional $110 on processed fruits and $130 on processed vegetables). Consumer units spent almost as much on alcoholic beverages, $515 per year, as on fresh fruits and vegetables, $530.

Farmers get less than 20 percent of the average retail food dollar, but slightly more for fresh fruits and vegetables. Farmers received an average 35 percent of the retail price of fresh fruits in 2014 and 25 percent of the retail price of fresh vegetables, so average consumer expenditures on these items meant $165 a year to the farmer (0.35 x 285 = $100 + 0.25 x 245 = $61).

Farm labor costs are typically less than a third of farm revenue for fresh fruits and vegetables, so farm worker wages and benefits for fresh fruits and vegetables cost the average consumer unit less than $54 a year (less because some fruits and vegetables are imported).

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 $2 for a pound of strawberries are paying 86 cents to the farmer and 34 cents to the farm worker; the farm share of retail strawberry prices is 43 percent, and labor's share is 40 percent. For $2 of fresh field-grown tomatoes, farmers receive 48 cents and workers 16 cents.

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 United Farm Workers union won a 40 percent wage increase for some table grape harvesters, largely because Bracero workers were not available. The average earnings of field workers were $11.72 an hour in 2015; a 40 percent increase would raise the average by $4.69 to $16.40 an hour.

For a typical household, a 40 percent increase in farm labor costs translates into a four percent increase in retail prices (0.30 farm share of retail prices x 0.33 farm labor share of farm revenue = 10 percent, farm labor costs rise 40 percent, and 0.4 x 10 = 3.6 percent). If farm wages rose 40 percent, and the increase were passed on fully to consumers, average spending on fresh fruits and vegetables would rise by about $21 a year (4 percent x $530 = $21).

Giving seasonal farm workers a 40 percent wage increase, on the other hand, would raise their average earnings from $11,720 for 1,000 hours of work to $16,400, lifting the average worker above the federal poverty line of $11,770 for an individual in 2015.

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