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The graph shows the evolution of two price indexes: food consumed at home and food served in a restaurant. It’s striking how the price of food served to you has kept increasing, while the price of food you prepare yourself has either increased more slowly or even decreased. In fact, the difference between these prices has increased by 61% over the sample period, meaning that the ratio of restaurant food prices to home food prices is 61% higher now than it was in 1953. What do we make of this? After all, the basic ingredient for both is the same: agricultural products. The difference is that restaurant meals also include a substantial service component: Other people prepare the food and serve it to you. While agriculture has benefited from big-time productivity enhancements, the same cannot be said for the manual labor provided in a restaurant. As real wages increase, the kitchen and wait staff become more expensive more quickly than the goods they prepare and serve, which is why our restaurant bills grow more quickly than our grocery bills. To be fair, we don’t usually pay ourselves to do our own grocery shopping, cooking, serving, and dishwashing. Or, for that matter, give ourselves a 20% tip.
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