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October 2018, Volume 24, Number 4

Food Spending 2017

The US Bureau of Labor Statistic's Consumer Expenditure Survey reported 130 million US "consumer units" or households in 2017. They had an average of 2.5 persons, 1.3 earners and 1.9 motor vehicles; 63 percent were homeowners and the average age of the reference person in the household was 51. Average consumer unit income before taxes was $73,600, and average annual expenditures were $60,100.

These expenditures included $7,700 for food, almost 13 percent of total expenditures. Food spending was split 57-43 percent, including almost $4,400 or $85 a week for food eaten at home and almost $3,400 or $65 a week for food bought away from home. The cost of food away from home largely reflects convenience, service, atmosphere and other factors. Food costs are about 35 percent of spending on food in cafeteria-style restaurants, 30 percent in fast food and 25 percent in fine dining.

Other significant consumer-unit expenditures were $19,900 for housing; $9,600 for transportation; $4,900 for health care; $1,800 for apparel; and $3,200 for entertainment.

The largest food-at-home expenditures were for meat and poultry, an average of $945 a year. Expenditures on cereal and bakery products, $565, exceeded the $450 spent on dairy products.

Expenditures on fresh fruits ($315) and fresh vegetables ($275) were $590 a year or $11.35 a week; consumer units spent an additional $110 on processed fruits and $135 on processed vegetables. Consumer units spent almost as much on alcoholic beverages, $560 per year, as on fresh fruits and vegetables, $590.

Farmers get less than 20 percent of the average retail food dollar, but slightly more for fresh fruits and vegetables. Farmers received an average 38 percent of the retail price of fresh fruits in 2015 and 28 percent of the retail price of fresh vegetables, the most recent data available, so average consumer expenditures on these items meant $197 a year to the farmer (0.38 x 315 = $120 + 0.28 x 275 = $77).

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 $65 a year. In fact, farm wages for US farm workers are less than $65 because some fresh fruits and vegetables consumed are imported.

Even though strawberries are picked directly into the containers in which they are sold, and iceberg lettuce is wrapped 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 about 70 cents to the farmer and 30 cents to farm workers. For $2 of fresh field-grown tomatoes, farmers receive 50 cents and workers 15 cents.

About half of the workers employed on US crop farms are unauthorized. These unauthorized crop workers are aging and settling, making them less mobile and flexible. Farmers are adjusting to fewer unauthorized newcomers by substituting machines for workers and supplementing the current workforce with legal H-2A guest workers.

What would happen to consumer expenditures on fresh fruits and vegetables if enforcement speeded the exit of unauthorized workers from agriculture? It is unlikely that all unauthorized workers would be removed instantly, producing a labor supply shock. Instead, some unauthorized workers would age out of farm work and not be replaced by unauthorized newcomers from abroad.

The closest natural experiment occurred after the end of the Bracero program in 1964. Mexican guest worker Braceros were guaranteed a minimum wage of $1.40 an hour at a time when US farm workers were not covered by the minimum wage. Some grape growers seemed to invite worker protests in 1965 by offering US workers who knew that Braceros earned $1.40 an hour only $1.25, prompting a strike. Cesar Chavez assumed control of the strike and won a 40 percent wage increase in the first UFW table grape contract to $1.75 an hour in 1966, largely because Bracero workers were not available.

What would happen to consumer expenditures if there were a similar 40 percent wage increase today? The average earnings of field workers were $12.50 an hour in 2017, so a 40 percent increase would raise them to $17.50 an hour.

For a typical household or consumer unit, a 40 percent increase in farm labor costs translates into less than 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; if farm labor costs rise 40 percent, retail spending rises 0.4 x 10 = 3.6 percent). If average farm worker earnings rose by 40 percent, and the increase were passed on fully to consumers, average spending on fresh fruits and vegetables for a typical household would rise by $21 a year (3.6 percent x $590 = $21.24).

Giving seasonal farm workers a 40 percent wage increase, on the other hand, would raise their average earnings from $12,500 for 1,000 hours of work to $17,500, lifting the average farm worker household of four from half of the federal poverty line of $24,600 in 2017 to over 70 percent.