Wages Lag Behind Food Costs

It's a battle of survival of the thriftiest.

The average wage in Israel has not kept pace with food prices, which have increased substantially in the last decade, but people have adapted by buying less food and cheaper goods a survey found. Since the year 2000, food prices have increased 40% more than the rise in the average wage, according to findings from a survey conducted by the consulting firm Czamanski Ben Shahar for TheMarker. Food prices increased by 37.7% between 2000 and 2010 while the average wage only rose by 31.4%.

The survey also looked specifically at the rise in the price of fruits and vegetables between 1999 and 2009. Surprisingly, the data revealed that although produce went up by about 40% during the 10-year period, actual spending on fruits and vegetables actually went down, by 4% on average, meaning that families are either consuming smaller quantities of fruits and vegetables or they have gravitated to cheaper foodstuffs.

shoppers - Ilan Assayag - July 12 2011
Ilan Assayag

The picture was similar for food items other than fruits and vegetables, too. Average spending per household went up by just 10% though prices rose by 50%, pointing to either lowered consumption or a move to cheaper products.

Darwinism at the store

"Darwinism also exists in the supermarket industry," said Tamir Ben Shahar of Czamanski Ben Shahar. "At the top are the food manufacturers, which are highly concentrated. The five large food manufacturers control 45% of the market. Their power is great and they report large profits. Beneath them are the retail supermarket chains, which on one hand compete with one another on price but on the other hand still want to protect their profits. At the bottom is the consumer, whose standard of living depends on the prices the manufacturers and retailers pass along to him. In practice, the manufacturers and retailers continue to profit and the consumers continue to pay more and more to maintain the [companies'] profitability."

The financial squeeze goes beyond the grocery bill, too. Average household spending of all kinds, including housing, gasoline, communications expenses, went up 1.4% a year on an annual basis over the decade. Average monthly household expenditures of all kinds have risen to NIS 12,000 a year.

The average household spent NIS 2,428 a month on housing in 2001 but is shelling out NIS 2,997 per month this year, a rise of 23%. Spending on medical care increased by 17%, clothing and shoe prices were 14% higher over the decade, while transportation and communications costs grew by 8%. The only category that did not show an increase was furniture. The average family's monthly food bill comes to about NIS 2,000.

"Wages have not risen to the same extent as food and other expenses. Households are having to spend more to have the same goods, and many times have to cut back on other expenses like clothing, shoes and furniture so they can buy food," Ben Shahar explained.

A breakdown by income levels reveals that between in the top 30% of the income ladder in 2009 paid NIS 300 a month more for food than they did in 2003, whereas the bottom 10% as measured by income actually cut their food spending by NIS 40.

"This shows how disparities have widened in the country. The rich are trying to survive but the poor are not managing," said Ben Shahar.

Food manufacturers and supermarket retailers are reporting increased revenues and profits from year to year, Ben Shahar said, "and the little guy continues to bear the brunt."