Grocery stores are a notoriously low-margin business, while hiring workers in New York City costs more than almost anywhere else in the country.
From the website of Zohran Mamdani, the Democratic nominee for mayor of New York City: “As Mayor, Zohran will create a network of city-owned grocery stores focused on keeping prices low, not making a profit. Without having to pay rent or property taxes, they will reduce overhead and pass on savings to shoppers.”
From this argument, you might think that the reason that New Yorkers pay a lot for food is because of the greed of grocery store owners. But grocery stores are a notoriously low-margin business.
The Food Industry Association, July 2024: “In 2023, profit margins in the grocery industry hit 1.6 percent — the lowest level since it was one percent in 2019 — as total expenses increased, FMI found.”
NPR, September 2024: “For almost all companies that NPR analyzed, between 2018 and 2023 the margins either declined or grew less than one percent.”
Mamdani is not alone in erroneously believing that grocery stores make large profits and this is why food costs so much. “Respondents said they believe grocers have a profit margin of 30 percent, a figure that was down slightly from a similar poll The Feedback Group conducted last year.”
One reason food costs a lot in New York City is that a portion of it is subject to sales taxes. The city charges a cumulative 8.875 percent sale tax — a city sales tax rate is 4.5 percent, a state sales and use tax of 4 percent, and a “Metropolitan Commuter Transportation District surcharge” of 0.375 percent. The city charges these taxes on a wide variety of foods and beverages, including beer, bottled water, candy, chocolate, carbonated beverages, fruit drinks, fudge, Gatorade, honey-coated nuts, ice, ice-cream cones, lemonade, mineral water, nuts, and Yoo-hoo, among other products.
Another reason products of all kinds in the city cost more than elsewhere is because labor is more expensive in the city than almost everywhere else. The minimum wage in New York City is currently $16.50 per hour, tied for the fourth-highest minimum wage in the country.
Mamdani pledges that if elected, he will raise the city’s minimum wage to $20 per hour in 2027, $23.50 in 2028, $27 in 2029 and $30 in 2030. This will not make any product any cheaper.