There has been a lot of theorising about why so many Americans feel worse off economically. True, real wages are now finally increasing, the labour market is great, the stock market is up, and consumers are spending. But none of this amounts to a complete picture of Americans’ quality of life. And people will tend to think it has declined if things they value feel like a stretch.
According to the US Department of Agriculture, spending on food took up more than 11% of income in 2022, the latest year for which data is available – the highest in 30 years. It is a stunning turn.
Food once dominated household budgets. In 1933, Americans spent 25% of their money on food. One of the great triumphs of modern agriculture and late industrialisation is that food became so much cheaper – both at the supermarket and in restaurants. Dining out was once a rare luxury for most Americans, even the relatively well off. In 1930, “food away from home” (the government’s designation for eating out) was only about 3% of US disposable income, and about 13% of total food budgets. In 2022, it was about 50% of food budgets. The reason is not that eating out became more expensive; it’s that it became more common.
Since the pandemic, all food has become more expensive. Food prices are up more than 25% since January 2020. Grocery prices have gotten better lately, up just 1.2% last year – less than the rate of inflation. But restaurant prices continue to rise, up 5% last year – and this is in addition to their post-pandemic increase. Add in higher minimum-wage laws and a tight labour market for service jobs, and odds are that dining out will cost even more this year. Of course, people can still eat at home. But here’s the catch: They don’t want to. Things like my ride-share driver’s date nights have become important to his quality of life.
Luxuries becoming more commonplace was a big theme of the 20th century. Think how much cheaper and better many consumer goods and services became: TVs, air conditioning, air travel, and so on. More recently, car services and worldwide overnight delivery have become normal. And then there are the things that didn’t even exist half a century ago, such as the device you are looking at right now, and the network that connects it.Once these luxuries became common, they ceased to be luxuries. Taking them away, or pricing them like luxuries, registers to many people as a big drop in their standard of living.This may explain why so many people aren’t cutting back. Even though restaurants are getting more expensive, they are still attracting customers. Even after accounting for inflation, people are spending more in restaurants.