The paradox of food costs
Food is more expensive in absolute terms in high-income countries — a grocery basket in Zurich costs roughly three times more than the same basket in Mexico City. Yet Swiss households spend a smaller fraction of their income on food than Mexican households, because incomes are proportionally higher still.
This is Engel's Law in action: as income rises, the share of it spent on food declines. The practical implication is that in low-income countries, food spending leaves very little for other essentials — healthcare, education, transportation, savings. In high-income countries, the constraint on household budgets is more likely to come from housing than food.
However, within high-income countries, food inflation has become an increasingly significant factor since 2021. In several OECD nations, food prices rose faster than wages for two consecutive years, temporarily reversing decades of declining food burden ratios — particularly affecting lower-income households who have less flexibility to substitute or reduce consumption.
