My wife is incensed over the price of food. We eat well, not extravagant but well and we pay for it. Some say that the price of food has outstripped wages. The following analysis posted by Carpe Diem refutes that.
The blue line in the chart shows the 11% increase since June 2009 in the broadest CPI food category “Food and Beverages,” which is one of the eight major CPI groups according to the BLS, and includes (among hundreds of other items that cover all food and beverage groups): breakfast cereal, milk, coffee, chicken, wine, full and limited service meals away from home, and snacks (Note: This is a sample, see the full list of items here). It should be noted in any discussion about food prices that “food away from home” is almost 50% of total food spending for Americans, according to the most recent USDA data (see Table 10). Therefore, I’m using the most comprehensive measure of food and beverage prices, which would most accurately reflect the prices of food for the typical American household. Using different CPI measures doesn’t change the analysis much – the “CPI-Food” has increased 11.3%, “CPI-Food Away from Home” has increased the same 11.3%, and “CPI-Food at Home” increased 11.36%.
Here’s the key point – over the last five years, the BLS wage series “Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private” has increased by 10.8% from $18.57 to $20.58 per hour (see red line in chart). Therefore, the broadest measure of food and beverage prices has increased by only slightly more (11%) than the increase in average hourly earnings (10.8%). Food inflation is not “blowing away wage growth” – it’s basically almost exactly matching it! The BLS wage series used here starts in 1964 and is the measure of hourly earnings used most frequently for historical analysis, given its 50-year history. A more recent measure of hourly earnings was introduced by the BLS in 2006 — “Total Private Average Hourly Earnings of All Employees: Total Private” — and that measure has shown a slightly lower increase in hourly wages since June 2009 of 10.4%, but is still just slightly below the 11% increase in food prices, and provides no statistical support for the claim that “food inflation blows away wage growth.”
