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Friday, July 25, 2014

The Cost of An Egg

I've read plenty of articles that deal with the price of food and how it relates to items like inflation, money printing, the economy, regional disasters, and free trade. I'd never really seen it used in the manner of a recent social media ad campaign posted on the Presidents feed as it was earlier this week.

23%! I know right?!? That's a pretty startling increase in a fairly short amount of time for something that seems as abundant as eggs. I was actually expecting that the correlation between the price of eggs had more to do with gas prices and other factors that seem to be holding back the economy that just don't seem to grab the headlines the way that they did ten years ago when we began this era of economic stagnation. Being fairly confident in my assertion, I began my research in the hopes of coming up with some snarky response to the 'real' reason that eggs were climbing in cost as such an aggressive click.

I was very shocked by what I found.

After looking up some historical egg prices from the Bureau of Labor and Statistics and comparing it to some historic gas prices the only real correlation I was finding was that both prices were quite volatile. Sure, there are some gas price spikes in the 2005 to 2007 range that correlate with some spikes in egg prices, but gas prices, although high, have actually stabilized over the past few years. That's when I realized something else, the year 2009 was chosen very carefully for this ad. Just using the BLS numbers, the average price so far in 2014 compared to 2009 is right around 23% (21.4% by my math, but I usually assume the people who make these ads have access to a little more precise data or compound it at a slightly finer interval).

2009 was chosen because it came at the heals of the great recession. Gas plummeted in in price which coincided nicely with an over 16% reduction in the cost of eggs from 2008 to 2009. That is to say, if this ad chose the price increase from 2008 to 2014, the number would have been... wait for it... 1.77% increase.

Doesn't quite fire up the crowds the same way, huh?

but that's not all, I contrasted the data against another set of data provided by the Department of Labor. Obama wants us to believe there is some correlation between the cost of eggs and the wage that people are paid, and he is absolutely right!

Excusing 2009 as a major economic outlier for a moment (as it is for just about economic trend comparative), and selecting the change in price for the years of 1996, 1997, 2007, and 2008. Why these years you ask? These are the years were there was an increase in the minimum wage. over the past 20 years. What was the average increase in a carton of eggs for these years? 9.19%!! About the same as the raises minimum wage workers got during those years.

In the same 20 year span from 1994 through 2013 were we didn't have an increase in the minimum wage (again, omitting 2009), we had mostly positive economic growth years and a stable or downward trending unemployment rate. The average increase per year  for eggs during this time was a whopping 2.72%, just a little ahead of inflation for the time of 2.42%. This also includes some well above average increases in the last couple years. (Take out the Obama years, and the rate increase is closer to 2.41%, almost perfect with inflation)

Over 9% compared to less the 3%. Eggs go up in price over 3 times faster when the minimum wage goes up!

So, when it comes to eggs and raising the minimum wage, the last couple of decades tells us that the raise they get doesn't even cover the increase cost of a dozen eggs.

I'm not trying to say the increase in food prices isn't alarming, there are many issues out there causing these food increases that need to be addressed such as a bird flu outbreak in Mexico and new state regulations in California that have had an impact nation wide. Yet, once again, this administration is presenting very misleading facts to try and push an agenda on us while ignoring actual factors that are causing the problem. Call it breaking the yolk in order to fry an egg, it makes no sense. The numbers are pretty clear, an increase in the minimum wage would make the problem he is addressing worse, not better.


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