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 ERS said.
“The share of income spent on food is more volatile for poorer households than for higher income households,” the ERS said. “The lowest income households saw their share of income spent on food drop from 41.1 percent to 28.8 percent over the years 2001 to 2007 but then rise to 35.5 percent in 2009. Meanwhile, over the same period, the highest income households saw relatively minor yearly swings of 0.5 to 1 percentage points.”
The ERS 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 percent 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 ERS 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 percent for the lowest income households, 2.5 percent for middle-income households, and 0.6 percent for the highest income households,” said the ERS.
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 ERS 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 ERS 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.”