Do Lower Food Costs Lead to Higher Health Costs?
I came across some data recently on food expenditure as a share of total expenditures in various countries and thought they were interesting. The percentage spent by Americans didn’t surprise me, but the percentages spent by everyone else did. I find it amazing that the Japanese spend more than twice as much on food as we do.
I couldn’t find any discussion of why these figures vary so widely. Trade and tax policies undoubtedly explain some of it. But most of the difference is probably explained by incomes—the higher a nation’s income, the less its people spend on food.
Out of curiosity, I looked up data for health spending. I could only find data for the OECD countries, but it shows the inverse relationship—the higher a nation’s income, the more it spends on health. I expect that the same would apply to housing as well.
If you add food and health costs together, the U.S. is a bit less of an outlier than it appears looking at either food outlays or health expenditures separately. The numbers are not really additive, but adding them together anyway shows remarkable similarity among the high-income countries; all spend between 20 percent and 22 percent on food and health combined, with Germany being a bit of an outlier on the high side and the U.K. being an outlier on the low side.
Food and housing are obviously the two most important things to people with health being third. So it stands to reason that if they spend less on food or housing they are going to spend more on health. This being the case, any effort to reign in health costs may be futile unless we make food and housing more expensive, which would serve no purpose.
Food Expenditures as a Share of Total Expenditures, 2008
|
Country |
Food Percent |
Health/GDP* |
|
|
Indonesia |
41.9 |
|
|
|
Ukraine |
39.5 |
|
|
|
Vietnam |
35.7 |
|
|
|
Morocco |
35.6 |
|
|
|
Philippines |
35.5 |
|
|
|
India |
34.9 |
|
|
|
China |
33.0 |
|
|
|
Romania |
31.8 |
|
|
|
Russia |
26.1 |
|
|
|
Colombia |
24.9 |
|
|
|
Brazil |
24.1 |
|
|
|
Turkey |
23.1 |
5.8 |
28.9 |
|
Chile |
22.5 |
|
|
|
Mexico |
21.0 |
5.9 |
26.9 |
|
South Africa |
18.6 |
|
|
|
Bulgaria |
18.2 |
|
|
|
South Korea |
14.5 |
6.8 |
21.3 |
|
Czech Rep. |
14.3 |
6.8 |
21.1 |
|
Hungary |
14.1 |
7.4 |
21.5 |
|
Japan |
13.6 |
8.1 |
21.7 |
|
France |
12.6 |
11.0 |
23.6 |
|
Germany |
9.9 |
10.4 |
20.3 |
|
U.K. |
8.5 |
8.4 |
16.9 |
|
Singapore |
7.7 |
|
|
|
U.S. |
5.9 |
16.0 |
21.9 |
* Latest year
Source: U.S. Department of Agriculture, Economic Research Service
Cheap food != good food?
I wonder if this could be because Americans are so concerned with their food being "cheap". Like, Americans eat a lot more cheap processed and/or fast food, which isn't particularly healthy, which then causes them to spend a lot more money on "health" care when they get sick? Probably just part of the picture, but this is certainly interesting to think about.
Choice
Isn't the conclusion then that the amount of dollars spent on health care in the US is a voluntary choice.
People generate income for food, clothing, shelter, leisure, savings, and use the leftover funds as they wish. Food and clothing are relatively cheap in the US as a percent of the number of hours worked. The US averages more work hours than other countries so leisure is not a big expense, and the US is a high consumption and a low savings society. It makes sense that part of the excess US income would go towards more health care.
The high US health care expenditure represents a voluntary choice due to the high US standard of living. It is not a broken system. Medicare has a funding problem, but that is different issue than saying US health care is broken and needs fixing.
Dining Out
Part of the problem with the statistics as to the percentage spent on food has to do with the fact that the studies only take in to account the money spent on food for consumption at home. It does not include money spent on dining out. Many in the U.S. eat out a lot, though not as many as before the recession. When they do dine out they eat a lot of fast food. Fast food is very bad for peoples health. I would like to see a study that includes the amount of expenditures on food that includes dining out.
for most of Europe at least
for most of Europe at least doesn't expensive food data back to the post WW I era when they decided that after the extreme food shortages in WW I that they should follow policies of self sufficiency so that they would not suffer from being cut off from their normal food supplies. Consequently their policy was to support inefficient domestic food production at the expense of cheap food imports. So in some ways expensive food was a rational economic policy.
Japan imports everything
Japan imports everything edible.
Not much nutrition in electronics.
Health care is a "superior good"
"Do Lower Food Costs Lead to Higher Health Costs?"
No, but as income grows spending on food naturally declines as a portion of income, while spending on health care naturally rises.
Health care is a "superior good" -- a good that people want to spend a larger portion of their income upon as their income rises.
Normal goods have diminishing returns. For instance, food. At a meal, the third cheeseburger is a lot less satisfying than the first, so most people skip it entirely -- even as their income keeps rising and they can afford ever more of them. Thus as income rises the consumption of cheeseburgers doesn't but falls behind, and food cost steadily declines as a percentage of income.
Superior goods instead provide closer to constant returns. Such is health care. Additional spending that extends your life and/or improves its quality always produces a valuable benefit for you.
Thus, as expenditures on normal "diminishing return goods" produce less marginal benefit, people shift additional expenditures to the superior good that provides higher returns. As income rises they steadily shift a larger share of it to spending on health care after they become sated with all the food they can eat, cars they can drive, flat screen TVs they can watch, etc.
As Nobelist Robert Fogel said in this regard...
...the long-term income elasticity of the demand for health care is 1.6 -- for every 1 percent increase in a family's income, the family wants to increase its expenditures on health care by 1.6 percent. This is not a new trend...
The same basic situation exists in all developed countries.
It's the reason why the growth rate of health care spending for the US is only about average for OECD countries (even though the level of spending is higher).
And that has implications about the prospects for "bending the cost curve".