Since the turn of the century, Americans have spent roughly 10 percent of their disposable income on food each year, two decades of stability that may reflect a leveling-off of U.S. incomes, say two USDA economists. Their analysis provides context to the frequent boast by farm and food industry leaders, often joined by government officials, that Americans enjoy the safest and most affordable food supply in the world.
Consumer spending on food, defined as a share of disposable income, has dropped dramatically, from 17 percent in 1960 to 9.9 percent in 2000. It has remained at around 10 percent for the past two decades, say economists Eliana Zebellos and Wilson Sinclair in USDAs’s Amber Waves magazine. The declines of the 1960s, 1970s, 1980s and 1990s were influenced by rising disposable incomes and by growing efficiencies in the food system, which kept grocery prices low.
Since 2000, the growth rate of disposable income slowed to an average of 1.9 percent a year — it was 3.3 percent annually from 1965-85 — and the portion of that spent on food has declined more gradually than in the previous decades. It was 9.6 percent last year.
“Higher incomes mean food at home can take up a smaller share of income and allow for more funds for the generally more expensive option of eating out,” wrote Zebellos and Wilson, of the Economic Research Service. Spending on food away from home, a category that includes restaurant and takeout meals, grew to 4.7 percent last year from from 4.4 percent during the 2007-09 recession. At the same time, Americans spent less on food at home, also known as groceries, but the share of income spent on groceries declined slowly, to 4.9 percent in 2019.
“This slower decline could reflect Americans opting to prepare more meals at home (as they did during the 2007-09 recession and its aftermath) and purchasing more expensive grocery store options, such as pre-cut vegetables and fruits, imported out-of-season foods, organic products, and prepared dishes, than they did in earlier decades,” said the economists.
Lower-income households spend a larger share of their income on food than do households with higher earnings simply because essentials, such as food and housing, are a bigger part of their monthly outlays. For the one-fifth of Americans with the lowest earnings, food consumed 36 percent of their after-tax income but for households in the top 20 percent of income food only accounted for 8 percent, says USDA.
The farmer’s share of the food dollar has been declining for years. The National Farmers Union said farmers and ranchers will receive 11.9 cents of each $1 spent on Thanksgiving meals, compared to 12.15 cents last year. The NFU says processors, packers, distributors and retailers are taking a larger share of food spending. President Rob Larew called for antitrust action against beef packers: “The key to ensuring farmers a fair price isn’t charging consumers astronomical prices — it’s breaking up these companies and restoring competition to the market.”
American households spent an average $8,169 on food last year, according to the Labor Department.