2207-End-HERO2

End Flap: Which Will Consumers Buy: Fair Wage Labor or Cheap Food?

June 24, 2022
A system that’s built in large part on underpaying those who grow and process the food is not a sustainable system.

Recently I was rereading “Sister Carrie,” Theodore Dreiser’s seminal novel of 1900. As one of the characters descends from prosperity into penury and eventual suicide, Dreiser meticulously documents the price of everything he spends his dwindling funds on.

As I read, I was struck by how expensive the food was. Sirloin went for 22 cents a pound, the equivalent of about $7.70 in today’s money. Dinner for one at a good but not luxury hotel cost $1.50, which would be about $52 today. It reinforced a notion I’ve had for a long time, which is that my generation and the ones immediately following have really had it easy when it comes to food prices.

Well, as we all know, that era may be coming to an end.

Inflation has been pretty much the No. 1 story in food for a while now, reaching levels unseen for decades. As labor problems cascade into transportation problems and shutdowns of single plants lead to nationwide shortages, it leads inescapably to the conclusion that there’s something fundamentally wrong with the system.

And one of the most fundamental problems is that the people involved with it aren’t getting paid enough.

Events in the industry in the past few years, combined with a career’s worth of observation, have convinced me that our edifice of cheap food rests on the backs of underpaid labor. Whether it’s farmers getting hosed by contracts with processors that make it barely profitable to raise chickens, truck drivers who don’t get paid for the endless hours they spend waiting for loads, or food plant workers toiling for 69% of the average manufacturing wage, underpaid labor is a big reason our food is so cheap.

Another reason for cheap food is high concentration in key sectors, especially meat. Bigness leads, ideally, to increased efficiency, through larger and more efficient plants, more available capital and other advantages. It also enables, less than ideally, the underpaid labor that keeps things cheap, as well as opening the door to price-gouging.

Concentration also increases vulnerability in supply chains, as parents driving to store after store in search of baby formula can tell you. When the closure of a single plant can disrupt the supply of vital products for weeks or months on end, it’s a sign that the efficiency of bigness comes with a big price tag – one that we never know when we’ll have to pay.

The pandemic set into motion events that exposed the vulnerability of the system. Now we’ll have to see if the era of cheap food ever comes back.

Justin King, the CEO of British grocery chain Sainsbury’s, doesn’t think it will. In remarks to The Independent, he said, "We spend much less as a proportion, on average, of our household budgets on food than at almost any period in history. That's been a long, gentle decline. I suspect what we will see is a higher proportion across the piece spent on food for the longer term.”

The labor situation, at least, shows signs of moving away from its cheap-and-easy status. Three of the biggest food companies on Earth got hit last year by strikes that pried substantial concessions.

Industry concentration is also getting plenty of critical attention, especially big meat companies. Between criminal and civil charges of price-gouging and accusations that the industry misrepresented supply conditions during the pandemic to keep their plants running, the biggest players in the meat industry, at best, have plenty of explaining to do; at worst, they find themselves whittled down by antitrust action.

A system that’s built in large part on underpaying those who grow and process the food is not a sustainable system. But weaning ourselves from it is going to be a shock. One can only hope that the incline in prices will be as long and gentle as the decline.

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