Go ask ALICE about grocery prices

0:01NPR.

0:11This is The Indicator from Planet Money. I'm Waylon Wong. And I'm Adrian Ma. As a nation, we have spent so much time collectively gnashing our teeth over grocery prices and the prices of other staples. The cost of everyday items was a major talking point in the presidential election. And the pain is real. Grocery prices are 27 % higher than before the pandemic. And this is partly why one of President Trump's day one executive orders was about emergency price relief to bring down the cost of living. The order was short on specifics, but did mention food, along with fuel, housing, medical care, and other things.

0:49The elevated prices of these essentials are at the heart of this disconnect we've seen between headline economic numbers and people's feelings about the economy. So today on the show, we look at a different way to measure inflation that's designed to capture what a lot of people experience every day at the gas station, the doctor's office, and the supermarket.

1:16This message comes from NPR sponsor Zendesk. Introducing the next generation of AI agents built to deliver resolutions for everyone. With an easy setup that can be completed in minutes, not months, Zendesk AI agents resolve 30 % of interactions instantly, quickly giving your customers what they need. Loved by over 10 ,000 companies, Zendesk AI makes service teams more efficient, businesses run better, and your customers happier. That's the Zendesk AI effect. Find out more at zendesk.com. Last week, I met Bree Kellogg at a supermarket just outside Chicago. Hi. Bree? Yes. Hi. Hi. Nice to meet you.

1:53Nice to meet you, too. Bree's a dietician, and she works for a nonprofit called Beyond Hunger that operates a food pantry. The nonprofit's clients include local families who are struggling economically. They come to the pantry to pick up groceries once a month. Now, part of Bree's job has involved taking some of these clients on grocery store tours to help them shop. Yeah, Bree likes to start her tours in the produce section. And from the jump, there's a dilemma. The U.S. Department of Agriculture recommends that half of what you eat every day be fruits or vegetables. But fresh produce can be expensive.

2:26It is winter in Chicago. We're in the Midwest. So you'll see now our prices have gone up a little bit, especially for some more of those summer and spring type of produce items. Take asparagus. It is$8 a pound. So expensive. So Bree steers us toward a different item, green bell peppers. So the regular price is one for$2.99. And so today it is one for 99 cents. So it's like a third of the normal cost. That's pretty good. Yeah, yeah, let's make some fajitas. So the food pantry where Brie works has seen a huge increase in clientele. In the last six months, it's served more people than it did in all of 2022.

3:11These numbers reflect how many people in the U.S. struggle to afford food despite being employed and housed. And they're struggling even while the headline inflation numbers show improvement. Stephanie Hoops is the national director of a research organization called United for Alice. And you'll learn who Alice is in just a bit. I think it's important to remember that inflation measures the change in the cost of goods, not the actual cost. So we're seeing inflation slow down, which means that prices aren't increasing as fast. But even when, you know, inflation rates are low and everybody's saying, oh, the economy is good, you know, food is still expensive.

3:53Housing is still expensive. Child care is still really expensive. Stephanie is talking about the difference between inflation and the price level. The price level is the average cost of goods and services in the economy. Inflation is an increase in that price level. Right. So even if the price level isn't going up as much as it was in previous years, the overall level is still elevated. It hasn't come down in a meaningful way. Grocery prices in particular have risen faster than inflation for much of the past few years. And like we mentioned earlier, they're still 27 percent above their pre-COVID levels.

4:30Alice is feeling that every day. All right, so it is time to meet ALICE. ALICE is an acronym. It stands for Asset Limited, Income Constrained, Employed. Stephanie's research organization was started by the nonprofit United Way of Northern New Jersey. After seeing a number of struggling families in the region, the organization coined the term ALICE. It describes households that earn more than the federal poverty level but can't afford the basics where they live. Stephanie's data shows that nearly 30 percent of households in the U.S. fall into this category. She says Alice lives in every community in the U.S.

5:05The term is new, but it's for folks that we all already know. The bank teller, child care, the security guard, the public transit operator, your internet repair guy. Like, Alice is so important in our world. Alice households have little to no savings, and they have someone who's working but earning low wages. Even though pay for low-wage jobs got a boost in 2021, Stephanie says those raises still weren't enough to cover the soaring cost of household essentials. It's that feeling of, you know, you're running up a sandhill and two steps up and then you slide back down. Stephanie's organization has its own measure of inflation called the Alice Essentials Index.

5:49It's made up of six basic categories, housing, child care, food, transportation, health care, and basic technology. And the Alice basket of goods and services looks pretty different from the one that the Bureau of Labor Statistics uses for the Consumer Price Index. Take food, for example. Alice is just buying the basics of, you know, cereal, milk, food at home. In CPI, it includes basic costs at home, but it also includes wine and full meal services and snacks out. And so Alice already cut those out of the budget. Alice also is not spending money on hotels or TVs, both things that are part of the CPI basket.

6:33Instead, for housing, the Alice Index tracks only rents for apartments up to two bedrooms. And for technology, the index includes just the cost of a basic home internet plan and a smartphone plan for each adult. The differences between the Alice Index and CPI speak to why inflation hasn't loosened its grip on struggling families. The Alice Index has consistently outpaced CPI for over a decade. And Alice households, because they have limited savings and earnings, have fewer ways to maneuver in times of higher prices. They typically can't buy in bulk or stock up. They also have less wiggle room to make adjustments.

7:09Like if ordering takeout is getting too expensive, a higher earning household could cook at home more. And if organic apples and single origin coffee beans are too pricey, it could switch to cheaper brands. That is not an option for Alice. Alice is already on the essentials. So to swap out items doesn't get you very far. So it really means that Alice needs to do without. And that's very different than doing with lower quality or a little bit less. Back at the supermarket near Chicago, dietician Bree Kellogg from the food pantry is resisting my efforts to commandeer her healthy eating tour. You're walking us past all the carbs.

7:49No bakery? Well, we're going to talk about the difference between the produce section and the rest of the grocery store. Okay. No donuts for me. Bree says a lot of her job at the food pantry is helping clients find a balance between affordability, healthy eating, and something that fits their lifestyle. Processed foods and convenience foods can often be the most budget-friendly. Yeah, I mean, it's calories for cheap. Bree gets it. You know, we've heard it for years now, like you shop the perimeter, right? But again, reality sets in. And we know that we have to shop some more of those processed and packaged foods in the middle section.

8:30Recessor Food Pantry does provide higher ticket items like fresh meat and produce. And that gives clients some relief on their grocery budget. We're just freeing up a little bit more room for people to make those choices, those educated choices that they want to make at the grocery store. So buying some of those more fun items or those top dollar items like the olive oil that they otherwise may not have been able to buy. Right. So it's all about allowing people to make these choices by just loosening up their budget a little bit. Bree shares recipes with clients, too. She says a popular one is something called a fiesta rice skillet.

9:05It's got beans, brown rice and a lot of veggies, including green bell peppers, which I learned today are on sale for a dollar each. So is there going to be like a quiz later? It feels like you've done a lot of studying. Yeah, it's mostly just me looking longingly at the donuts. This episode was produced by Corey Bridges with engineering by Kwesi Lee. It was fact-checked by Sarah Juarez and edited by Patty Hirsch. Kicking Cannon is our show's editor and The Indicator is a production of NPR.

9:43Let's go.