U.S. poor spend high percentage of income on food

by Laura Lloyd
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 American households in the poorest 20% of households spend between 28.8% and 42.6% of their annual before-tax income on food.

WASHINGTON — In the last two-and-a-half decades, American households in the poorest 20% of households spent between 28.8% and 42.6% of their annual before-tax income on food, compared with 6.5% to 9.2% spend by households in the highest income quintile, said the Economic Research Service (E.R.S.) of the U. S. Department of Agriculture. Before-tax income includes earnings and other money income, public assistance, Supplemental Security Income payments and benefits from the Supplemental Nutrition Assistance Program (SNAP).

Spending patterns at the low end of the economic scale, as well as at higher-income levels, reflect “Engel’s Law”, named for a nineteenth century statistician Ernst Engel, who observed that households spend more money on food as their incomes rise, but a smaller share of their overall income, while poorer households spend less money on food but their spending accounts for a greater share of their income, the E.R.S. said.

“The share of income spent on food is more volatile for poorer households than for higher income households,” the E.R.S. said. “The lowest income households saw their share of income spent on food drop from 41.1% to 28.8% over the years 2001 to 2007 but then rise to 35.5% in 2009. Meanwhile, over the same period, the highest income households saw relatively minor yearly swings of 0.5 to 1 percentage points.”

The E.R.S. noted its data indicated a 2001 jump in the share of income spent on food by the lowest income quintile, reflecting an increase of 3.3% in food prices.

“Higher food prices disproportionately affect the spending behavior of low-income households and often require them to allocate a larger share of their incomes to food,” the E.R.S. said.

The increased share of income spent on food by the lowest income households between 2007 and 2009 in part reflected income decreases related to the 2007-09 recession.

“In 2009, before-tax incomes fell 6.5% for the lowest income households, 2.5% for middle-income households, and 0.6% for the highest income households,” said the E.R.S.

From 2009 to 2012, before-tax income for the poorest households remained stable, possibly reflecting higher SNAP benefit levels provided in the American Recovery and Reinvestment Act of 2009, the E.R.S. said.

“This extra assistance, ending in 2013, helped the share of income spent on food by the lowest income families remain fairly stable as well,” the E.R.S. said. “In addition, lower-than-average food price inflation in 2009 and 2010 helped offset additional increases in food spending as a proportion of income that would have occurred due to declining earnings.”  
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