Increasing costs outpacing raised wages, tourists still looking to spend money

Prices are constantly on the minds of sellers and consumers as inflation continues to drive up the cost of daily essentials like gas and groceries nation-wide.

Groceries are some of the hardest hit items, other than gas, according to Assistant Professor of Economics at Michigan State University Steven Miller. 

“Food is a special price category that the Bureau of Labor Statistics breaks out, because it's such an important component of our everyday expenditures. That's one of the ones that you really should watch and it's kind of one of the core components of our budget,” Miller said. 

“Even though today we spend less on food than we did in the past, because our food production system is so efficient, it still makes it a huge component. And food is getting pounded right now because of Ukraine, because of environmental hazards, floods, stuff like that. Our global food production is under threat at this point, and we're going to see quite a bit of price volatility just in the food segment alone.”

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In an effort to make healthy food more accessible, Coveyou Scenic Farm Market in Petoskey is expanding a program they began a couple of years ago where customers pay a flat fee at the beginning of the season and can then take home as much produce as they like. 

Owner David Coveyou said it’s a system built on trust and he hasn’t had anyone abuse it so far. 

“The irony is, we started (the program) a few years ago and now with prices, inflation and food on the whole and especially produce (being more expensive), it seems like it's the right program for the right time," he said. "For people who really want to eat healthy, it's a great time to be able to do that.”

This season, the program has grown in membership and Coveyou Farms is doing more than ever to make the community aware of it. 

“You can't get out of the grocery store for $100. Here, you can go for half a year feeding a family for under $1,000, produce-wise and we think there's value there for people who have families and realize how much they spend, especially if you're trying to eat organic produce,” Coveyou said.

Gas is the other necessity hit hard by inflation.

Beaver Island Boat Company is spending more than ever before on fuel, to the point they have added a fuel surcharge to the cost of passage. 

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The ferry burns about 150,000 gallons of fuel each year, according to Beaver Island Boat Company Manager Tim McQueer. Last year, the company paid $1.79 per gallon, this year the cost per gallon was locked in at $3.89, increasing the company’s annual cost of fuel by about $270,000 compared to last year.

McQueer estimated that this year’s fuel bill will be roughly $585,000, which is why, starting May 1, the company began charging a $4.50 fuel surcharge for passengers and $16 round-trip for vehicles.

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Despite the extra charge, MQueer said ridership has still been strong.

“(The response) has been pretty understanding. We haven't had too much pushback. We're still going to absorb a lot of the cost, even with the fuel surcharge, it does help. But I think our customers realize that we are absorbing a large amount of that cost and trying not to pass it all on to our customers,” McQueer said.

Fuel isn’t the only additional cost the ferry is seeing. Beaver Island Boat Company, like many other businesses, has had to increase wages in order to retain staff, however, the extra pay still isn’t enough to keep up with rising costs. 

“We did the largest across-the-board pay increase that we've ever done in the company last year,” McQueer said. “And unfortunately inflation outpaced that raise. So we did across-the-board like 6 percent pay raise, but unfortunately, inflation has bypassed that so our employees aren't really seeing the difference that that pay raise gave them.”

Miller said $15 per hour can’t be considered a living wage in most parts of the country. It is impossible to define what a living wage is, however, as cost of living varies by location.

“It is unfortunate, because we've made huge gains over the last about five to 10 years reversing the wage disparity. So this just basically wiped it out,” Miller said. “So the middle or lower, unskilled wages (that) increased over the last few years, whatever gains they just experienced, just got lost. So they're back to square one.”

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Miller said that, in times where inflation is going up, people may spend their money quicker, instead of trying to save it. 

“As we see prices increase, it makes less sense to have money in our bank account. We actually pay the bank to hold our money for us because the interest rate they're paying us is less than the inflation rate, so we want to spend our money before the value of the money decreases.”

If the current inflation were to reach the point of recession, Miller said tourist areas like those in Northern Michigan, may not suffer like some would expect. People looking to save money but still want to get away, will likely travel within the state or people from surrounding states will come to Michigan instead of traveling far distances, which may lead to an increase in tourism.

This reflects what local governments and business owners have encountered since the beginning of the COVID-19 pandemic — tourism increased unexpectedly as people came to Northern Michigan to get away. With restrictions easing, people are still looking to get away, so Northern Michigan officials and business owners are expecting another record-breaking summer.

“Last year, we had a very good year,” McQueer said. “This year we're seeing passenger numbers higher. Our vehicle numbers have declined a little bit so that may be an indication that less people might be driving or maybe they're riding together or deciding to take less cars or less vehicles. So our number of vehicles has (gone) down a little bit since last year, but the passengers already this year are above last year's numbers.”

Contact reporter Tess Ware at tware@petoskeynews.com. Follow her on Twitter, @Tess_Petoskey