[Correspondent Diary] The 'Pizza Rule' Broken... US Inflation Seen Through New York Pizza

President Joe Biden Eating Pizza
Photo by Reuters Yonhap News

[Asia Economy New York=Special Correspondent Joselgina] In New York, USA, there is a so-called "pizza principle." Over the past several decades, the price of a slice of pizza that New Yorkers have enjoyed without burden has shown a trend linked to the one-way fare of the New York subway.

New Yorker Eric Bram first mentioned through The New York Times (NYT) in 1980 that since the early 1960s, the price of a slice of pizza exactly matched the New York subway fare. In 2014, Jared Lander, a statistics professor at Columbia University, conducted a comprehensive study on pizza and subway costs and confirmed a significant correlation.

And in early 2022, the price of a slice of pizza in New York began to far exceed the subway fare. The price gap is expected to widen further. The pizza principle no longer holds true.

According to Bloomberg News, the recent average price of a slice of pizza in New York City was found to be $3.14, significantly surpassing the $2.75 one-way subway fare. The average prices in the five boroughs?Manhattan ($3.26), Bronx ($3.15), Queens ($3.10), Brooklyn ($3.06), and Staten Island ($3.12)?all exceeded $3.

Still, throughout New York City, "99-cent pizza" and "1-dollar pizza," considered iconic local foods, can often be found, and some pizzerias maintain the slice price at $2.75, equal to the subway fare. However, many $1 slice pizza shops have closed following the pandemic, and recent price increases are evident.

This is largely due to inflation in the United States reaching its highest level in 40 years. The news outlet recently published an article titled "Pizza Prices Surpass Subway Fares, Upending Decades of New York City Economics," identifying the cause of the broken pizza principle amid rapid inflation. It explained that costs for basic ingredients such as cheese, flour, and tomatoes, as well as utility expenses and labor costs, have sharply increased.

In the U.S., cheese prices rose more than 5% year-over-year as of February. The increase over the past three years is about 10%. Flour prices have risen 11.6% in the past year, reaching the highest level in over a decade. Due to the recent Ukraine war, wheat prices are at record highs.

The average price of gas utilities also surged 24% over the past year. All these factors contribute to upward pressure on pizza prices. Additionally, labor costs have soared. As of the end of September last year, the average wage of food industry workers in New York City increased 7.9% compared to the same period the previous year.

On the other hand, the New York subway fare has been frozen at $2.75. Unlike past cases where subway fares increased within months after pizza prices rose, the fare is expected to remain at the current level for the time being. Earlier, New York Governor Kathy Hochul’s proposed state budget included funding to keep MTA fares frozen this year.

In New York, where prices are notoriously high, it is hard to find a meal as cost-effective and affordable as a slice of pizza. The broken pizza principle will ultimately push up prices across other restaurants and overall inflation.

The possibility of New York pizza prices soaring to the $4 range also seems high. The U.S. inflation, at its highest level in 40 years, is unlikely to subside easily. Starting with the inflation data to be released this month, the impact of Russia’s invasion of Ukraine is expected to become more pronounced. Economists estimate that the U.S. Consumer Price Index (CPI) for March, to be announced on the 12th, rose 8.4% year-over-year, far exceeding the previous month’s 7.9%.