How U.S. Income Groups Get Squeezed By Food Prices

Take a look at the chart we’ve constructed from the Bureau of Labor and Statistics 2009 Consumer Expenditure Survey.  It conveys a sense of how Egypt’s poverty combined with the sharp rise in food prices sparked the political revolt against the Mubarek government.

The chart illustrates how the lower income groups in the U.S. really get squeezed when food and gas prices rise.  In the U.S. the average annual income for the consumer units (households) measured is $62,857, where food expenditures consume a little over 10 percent of income.

But averages distort the true picture of what is really going on as only 15 percent of consumer units fit into this income group.   Many have drowned in pools of water where the average depth is only 11 inches deep.    Almost one third of the households in the U.S.  spend close to or more than 20 percent of their annual income on food.

Remember this the next time the market cheerleaders and policymakers tout core CPI and dismiss food and energy inflation.  It may also help explain the rise in  social angst in U.S. society.  (click here if chart is not observable)

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10 Responses to How U.S. Income Groups Get Squeezed By Food Prices

  1. David Jones says:

    Good Work! I like the reference to Friedman who said “never try to walk across a river with an average depth of three feet. Just finished reading Havana Nocturne by T.J. English. It is errie how the atmosphere then parallels the atmosphere now when a powerful and well connected group lived the life of Riley while much of the population was miserable. “Those who cannot remember the past are condemned to repeat it.” [George Santayana]

  2. Marco Lugon says:

    Interesting, although the statistics are not that alarming:
    Almost one third of the households in the U.S. spend close to or more than 20 percent of their annual income on food.

    I imagine that in Egypt it reads something like:
    Almost two thirds of the households spend close to or more than 50% of their annual income on food.

  3. Anton says:

    Still in inflation adjusted terms food prices are on average some 30 percent lower than highs reached in the 1980s. Compared to the beginning of the 20century they are like 80 percent lower! Compared to wages the decline is even bigger. So, yes compared to 10 years ago food prices are higher but in the big picture we’ve never had it so good. It is true though, and a fact, that inequality has increased, but this has nothing to do with commodity prices.

    • macromon says:

      Good points, Anton. But we do live in an age of increasing expectations, no?

    • Anonymous says:

      Anton,

      Here in California, where tons of vegatables are grown, prices of food have increased over 30%! That’s HUGE impact on seniors relying on on;y Social Security income. Anyway, 30% is far too much, and to think it is not included in CPI is ludricrous.

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