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October 2002, Volume 8, Number 4
How We Eat; Food-Sector Jobs
About 2.5 million individuals do farm work for wages sometime during a typical year, so that farm workers represent less than two percent of the 140 million persons with work experience in the US. About 80 percent or two million of these farm workers are immigrants, and an estimated 55 percent were unauthorized in 2000.
One of the most frequently asked questions is what would happen to US food prices if legal and unauthorized farm workers were not readily available. It is important to emphasize that most of the flexibility in the farm labor market is on the demand, not the supply side. For example, when wages increased in the past, farmers responded by producing food with fewer workers, not by inducing more Americans to do farm work. Generally, substituting capital (machines) for workers reduced food prices.
According to the US Bureau of Labor Statistic's Consumer Expenditure Survey for 2000, there were 109 million "consumer units," with an average of 2.5 persons, 1.4 earners and two vehicles. The average household had an income of $44,600 before taxes and $41,500 after taxes; average consumer unit expenditures were $38,000. http://www.bls.gov/cex/)
These household expenditures included $5,200 for food (14 percent), and food spending was split 58-42 percent, included $3,000 for food eaten at home (eight percent, or $58 a week) and $2,200 for food bought away from home. To put food spending in perspective, other significant expenditures were housing and utilities, $12,300; transportation, $7,400; health care, $2,100; apparel, $1,900; entertainment, $1,900; cash contributions, $1,200; and tobacco products, $300.
The largest food-at-home expenditures were for meat and poultry, $800, and nonalcoholic beverages, $250 (milk and cream were another $130). Expenditures on fresh fruits ($163) and fresh vegetables ($159) totaled $322, or $6.20 a week (processed fruits, $115 and vegetables, $84, added $199). The average household spent 15 percent more on alcoholic beverages, $372, than on fresh fruits and vegetables, $322.
The 109 million consumer units spending an average of $322 and purchase a total of $35 billion a year in fresh fruits and vegetables. 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 received an average 16 percent of the retail price of fresh fruits in 2000, and 19 percent of the retail price of fresh vegetables, so $322 from the consumer means $56 to the farmer (0.16 x 163 = $26 + 0.19 x 159 = $30). Farmers do not pay all of this $56 to farm workers- farm labor costs are typically less than a third of farmer revenue, meaning that farm worker wages and benefits are less than $18 per household a year, or less than one half of one percent of average annual spending.
This means that consumers who pay $1 for a pound of apples, or $1 for a head of lettuce, are giving 16 to 19 cents to the farmer, and 5 to 6 cents to the farm worker.
What would happen if the influx of immigrant workers were slowed, farm wages rose, and the increase in farm labor costs were passed through to consumers? 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. Average farm-worker earnings were $7.56 an hour for US field and livestock workers in 2000, according to a USDA survey of farm employers, and a 40 percent increase would raise them by $3 to $10.58. If this wage increase were passed fully to consumers, the 5 to 6 cent farm labor cost of a pound of apples or a head of lettuce would rise to 7 to 9 cents, and the retail price would rise by 2 to 3 cents.
For a typical household, a 40 percent increase in farm labor costs translates into a two to three percent increase in retail prices (0.175 x 0.33 = 6 percent, farm labor costs rise 40 percent, and 0.4 x 6 = 2.4 percent), so total spending on fruits and vegetables would rise by $8, from $322 a year to $330 a year. However, for a typical seasonal farm worker, earnings could rise to $11,200 a year, up from $8,000.
However, the wage increase may lead to farm productivity improvements, so that, in response to higher farm wages, consumer prices may decrease rather than increase.
Food-Sector Jobs. In 2000, the food and fiber industry employed over 24 million people, had an output of over $2 trillion, and generated more than $1.26 trillion worth of value-added, about 13 percent of total gross domestic product. This employment included an average 1.7 million on farms, 4.7 million in input industries, and 17.7 million in food processing and distribution industries- food distribution employment includes 6.6 million in foodservice, such as restaurants, and 8.4 million in food wholesaling and retailing. These data show that almost two-thirds of total food sector employment involves distributing food to consumers. http://www.ers.usda.gov/briefing/foodmarketstructures/foodandfiber.htm)
Food Retailing/Safety. Supermarket sales are $450 billion a year. Walmart-Sam's Club account for 16 percent of these sales, followed by 11 percent for Kroger, eight percent each for Albertson's and Safeway, and five percent for Ahold USA.
Business Week in July, 2002 ranked the value of the world's leading brands- the present value of profits from future sales--and put the value of the Coca-Cola brand at $70 billion; followed by $64 billion for Microsoft; $51 billion for IBM; $41 billion for GE; and $31 billion for Intel.
On October 14, Pilgrim's Pride recalled 27.4 million pounds of cooked sandwich meat-the largest recall in US history. The nationwide recall covers meat processed at the company's plant in Franconia, Pennsylvania from May 1 through October 11. The company says that the meat may be contaminated from listeria.
In July 2002, some 19 million pounds of ground beef from a ConAgra Foods Inc. plant in Greeley, Colorado were recalled because E. coli O157:H7 bacteria sickened 28 people in seven states. Critics have blasted the USDA's Hazard Analysis Critical Control Point food safety program, which puts more responsibility on plants to test their own meat and other products. About 90 percent of the workers employed in ConAgra's Greeley meatpacking plant are Hispanic; most start at $10 an hour.
The Sierra Club released a report, "The Rap Sheet on Animal Factories," in August 2002 that charged that the 630 large feedlots, hog and poultry operations in rural America are contaminating rivers and ground water; the Environmental Protection Agency is under court order to develop new federal regulations for feedlots by the end of 2002.
A 1999-2000 survey found that 31 percent of adults-59 million people-are obese, having a body mass index of 30 or higher.
Cloning. The Food and Drug Administration is likely to allow, by 2003, the sale of milk from cloned cows and meat from the offspring of cloned cows and pigs. The number of cloned animals living on American farms today is small -- most estimates put it at fewer than 100. All are elite animals that cost tens of thousands of dollars to produce and are valued as breeding stock, not as meat, but as the cost of cloning falls, their offspring are expected to show up in the food supply in quantity by 2005.
The National Academy of Sciences concluded in September 2002 that agricultural bioterrorism was a significant threat to the US, primarily because bioterrorism could cause a "loss of public confidence in the food system . . . and widespread public concern and confusion." USDA deals with plant pathogens and animal diseases that are imported accidentally, such as Mediterranean fruit flies in the 1980s, Florida's citrus canker in the 1990s and mosquito-borne West Nile virus in 2002.