Tuesday, March 15, 2011

Why our "10%" brag is mostly spin...

I've been irritated for years about the constant hammering that - thanks to us - consumers only spend 10% of their income on food.

First of all it uses AVERAGE income, which most economists think distorts the picture since nearly 2/3 of Americans earn LESS than average income.

Second, food prices are not determined for the most part by subsidized corn, wheat, etc. and when the are they are in the wrong way: dairy, sugar.

Finally, the poor (who farmers don't like to talk about much) face the problem of inelastic demand.
The financial restraints on lower-income consumers mean they have less flexibility when food and energy prices climb. Families making $15,000 to $20,000 a year use 19 percent of their after-tax income for food and those earning $20,000 to $30,000 typically use 18 percent, compared with 8 percent for families earning more than $70,000 annually, according to the Labor Department's 2009 Consumer Expenditures Survey, released October 2010. [More]
Income inequality is getting worse, so these extremes will be widening. At this rate, farmers will be talking about how lucky consumers making over $200,000 are to have our farm program, while not looking at the other 80%.

While these inequalities are not the fault of agriculture, exploiting them deceptively for self-promotion is - as my father would put it - sharp practice.

We really, really need to know more about who we serve. And care a little more.


Jake in OH said...

John, I look at this as a comparison number rather than a stand alone. These percentages are irrelevant unless you stand them up against other countires. You can make the same arguement ofr other countries as far as "average income" which will jump many of them up as well. We still stand tall here in the USA in this regard.

Anonymous said...

I not sure i agree with you in your assessment of Food costs. Yes it is true the lower the income the higher the percent spent on food. It is also true that the lower the income the more lower cost food is purchased which also has an effect of the percentage--I do not believe that is considered in the calculation. To move on to cost being determined by subsidized product; humm REALLY. The last subsidy I got wasn't much and while it was a nice addition it certainly didn't make the difference in the bottom line. Now if we are talking about the subsidized crop insurance program here's the question is this a subsidy of farmers or is it a subsidy of the insurance industry. Crop insurance is a drag on the bottom line UNTIL there is a weather problem such as we had in Virginia last year. Crop insurance kept this farmer going last year. Does that mean I would be out of buisness--no--it does mean I do not have to cut back so bad to recover. So if the subsidy of crop insurance goes away it will be so expensive that I won't buy it.
MY PET PIEVE is farmers that pride themselves on being self sustaining yet they hold off-farm jobs and/or their wives work to keep the household afloat. If these guys are so sef sufficient quit the off-farm jobs and tell the wife to stay home then we'll see who really is self sufficient. I admit I have an off-farm job and farm because I want to and enjoy it BUT the farm has to support it self. I don't think that makes me a hobby farmer! I believe a hobby farmer is one who doesn't care if there is a profit or loss.
Dave in Va

Anonymous said...

Caring a little more would be good but those in ag typically show little regard maybe even contempt for their suburban and urban customers. As a result the knife cuts both ways and this may explain why urban America tends to have a negative view of industrial, main stream ag.

Anonymous said...

"after tax income" is going to make all the other outflow percentages greater. Taxes are a part of everyones budget John. If you figure TOTAL income then the amount spent on food (not groceries)(not tips and drinks when eating out) will probably be about 10%.