Is America's obesity linked to its decline in saving?

Commentary about business and finance.
June 24 2008 4:51 PM

Hey, Fat Spender

Is America's obesity linked to its decline in saving?

It's well-established that Americans have been getting fatter for decades. Obesity rates skyrocketed from 1980 to 2003: More than a third of Americans are now obese, according to the Centers for Disease Control, which is more than twice the proportion of a generation ago. Medical authorities debate the particular causes—inactive lifestyle, changes in diet—but some of the explanation may be economic.

Consider: During the same period, the U.S. savings rate plummeted and consumption as a percentage of the country's gross domestic product rose. Now, all three trends appear to be moderating. This suggests that the market may be applying a bit of discipline to America's waistline. If so, it would break a five-decade trend and affect industries ranging from health care to restaurants to insurance.

Obesity rates grew after World War II but really took off around 1980. The culprits? Taxes, higher wages for women, and portion sizes at restaurants, according to two economists at the University of Miami.

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Increases in take-home pay turned eating out from a luxury to an everyday occurrence. And as women's wages grew and more women worked outside the home, more families found themselves eating takeout or in restaurants. Per capita spending on groceries fell, while the amount spent outside the home on food rose sharply.

Here's where it gets interesting. Restaurant portions are bigger than those typically eaten at home. And they've gotten larger over time. Gargantuan sizes have even become a common selling point. The number of new products introduced in restaurants bragging of huge portions increased sevenfold during the '80s and '90s, according to researchers from New York University.

The reason for larger portions is simple. Sixteen ounces of soda will set you back about $1.10 at a 7-Eleven in New York. A Double Big Gulp contains four times as much soda (and calories) but costs only 50 cents more. Everybody seems to win—the cost of the extra soda is a few pennies, and the customer gets a bargain. And businesses that cut back on portion sizes, or don't keep up, look stingy in comparison to competitors.

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For all that soda-chugging, there may be a break in the obesity trend. The percentage of Americans who are obese has not increased significantly since 2003. A study published in late May also indicated that childhood obesity may have hit a plateau. Of course, the issue has received tons of attention in recent years, so consumers may have changed their eating habits in response. But there is another possible explanation: Consumers are unwilling to go further into hock to eat out.

The graphs of America's savings rate and consumption as a percentage of GDP display suspiciously similar patterns. Savings declined steadily from around 10 percent of annual family incomes in 1980 and have hovered at zero or slightly below in recent years. How much of this went into unsustainable consumption—for instance, buying double Frappuccinos—is unclear. But stabilizing waistlines could be a sign that consumers are repairing their balance sheets.

This trend could mean trouble for some companies. A decline in eating out would hit restaurants. Sales of insulin and other drugs used by the obese would see their high growth rates slow—as would hip and knee replacements. Others would benefit. Health insurance premiums could fall. And more people would live to retirement, helping companies ranging from nursing homes to colostomy-bag manufacturers. 

Unfortunately, this doesn't mean you're going to get a seat on the subway soon—or perhaps ever again. The number of obese Americans isn't growing as quickly, but those who are fat are continuing to put on weight—sort of a big-tail effect. And come the next economic boom, the busily employed may once again crowd restaurants in search of the next great boom in portion sizes.

Rob Cyran is a correspondent for Breakingviews, a global online financial commentary Web site.

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