The easiest way to make something cheaper to replace American labor with cheaper labor — that is, hardware, software, or cheaper foreign workers. Agriculture has replaced 95% of its labor force (as a share of the economy) thanks to farm mechanization. Over the same time, families could afford much more food.
But here’s the really interesting part: While relative spending on food and drink has declined, the portion of our food and drink spending going to farmers declined, too. Farming has become even more efficient and productive than grocery market prices reveal. That’s because,increasingly, when we buy food, what we’re really paying for are the business services required to market and distinguish it.
Consider $1 of food spending. In 1967, 26 cents of it went to farmers and manufacturers. Today, that share has fallen to 16 cents, economist Stephen Rose has reported for The Atlantic. In 1967, only 6% of food spending went to the service sector. By 2007, the number of people working in business services quadrupled, and their share of our food spending doubled. As the economy moved from growing stuff to serving stuff, farmers lost 7% of their share of the food market and restaurants ate up nearly the same portion.
Yep, prices are people. “Baked into the price of everything we buy is the rising cost of advertising, accounting, legal services, insurance, real estate, consulting, and the like — jobs performed by the high-wage workers of our modern economy,” Rose elaborates.
From the stuff getting expensive the fastest, like hospital stays and elite college tuition, to the prices that are falling the fastest relative to wages, like television and freeze-dried prepared foods, we are paying for people — just as we always have. The big idea here is that prices follow workers.
Read more. [Image: Kiss Me, I’m Polish]