Family Economics Review [1987, Number 2]

              Editor
Joan C. Courtless
Managing Editor
Sherry Lowe
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~
Economics
Review
1987 No.2
Contents:
Income Trends of the Young and the Elderly
Paul Ryscavage
International Textile Trade: The Consumer's Stake
Rachel Dardis
Impacts of Imports on Food Prices and Choices
Jean Kinsey
Abstracts
Household and Family Projections: 1986 to 2000
Household Wealth and Asset Ownership, 1984
New Budgeting Guide on Managing Your Finances
After-Tax Money Income Estimates of Households, 1984
Financial Well-Being of Farm Operator Households
Employment of Retired-Worker Women
Regular Features
Some New USDA Charts
New Publications
Updated Estimates of the Cost of Raising a Child
Cost of Food at Home
Consumer Prices
ANNOUNCING NEW BUDGETING GUIDE ON
MANAGING YOUR FINANCES -- SEE P. 12.
Issued April 1987
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14
20
9
10
12
12
26
28
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28
30
32
33
Income 'fi"ends of the Young and
the Elderly1
By Paul Ryscavage 2
Labor economist
Bureau of the Census
U.S. Department of Commerce
A popular topic in the media today is the
contrast in the economic situations of the
young and the elderly. The difficulties of
the baby boom generation in s~curing an
economic foothold in society have been viv­idly
described by Frank Levy and Richard
Michel (2), two economists from the Urban
Institut;: They show that this particular
generation's incomes have risen much slower
than did the incomes of their parents at the
same age. Other writers, such as Phillip
Longman (3), have juxtaposed the economic
problems of the young with the economic
gains of the elderly. He points to the vast
sums of money the Federal Government has
spent on the 65-and-older population and
suggests it is disproportionate to their
representation in our society.
The purpose of this paper is to review the
income trends of the young and the elderly
as reflected in various income measures
published by the U.S. Bureau of the Census.
Income trends for these groups are examined
over the 1950-85 period, with particular
emphasis on the 1970-85 period. Certain
demographic, economic, and social factors
associated with the trends are discussed.
The scope of this paper, however, is limited
and does not deal with many of the issues
1This article is taken from a paper pre­sented
at the Annual Agricultural Outlook
Conference in December 1986 in Washington,
DC.
2The views and opinions expressed in this
paper do not necessarily reflect those of
the Bureau of the Census.
addressed by Daniel Radner of the Social
Security Administration (_1_). Radner examined
income trends by 5-year age groups for both
the aged (65 and over) and nonaged (under
65), adjusted for differences in needs of
family units of different sizes, and dis­cussed
related topics such as changes in
inequality and poverty.
The Data
Many analyses of income trends are based
on the income statistics collected by the
U.S. Bureau of the Census in the Current
Population Survey (CPS). Each March inter­viewers
visit approximately 60,000 house­holds
around the country and ask a series of
questions about the incomes of household
members in the previous calendar year.
These data are then processed, tabulated,
and published each year by the Bureau (_~) •
The Census Bureau reports a variety of
income measures for persons, families, and
households. The two that receive the
greatest attention are the median income of
families and the median income of unrelated
individuals. Families are defined as groups
of two or more persons related by blood,
marriage, or adoption, and residing
together. Unrelated individuals are persons
15 years old and over who do not live with
any relatives. Another increasingly popular
measure is the median (and mean) income of
households. This measure combines the in­comes
of families and unrelated individuals.
A household consists of all persons who
occupy a housing unit. Per capita measures
for families, households, and the population
receive little attention.
The CPS income concept is based on
"money" income only. Not included are
noncash benefits such as food stamps,
Medicare, subsidized housing, and free or
reduced-price school lunches, as well as
the many employer-provided benefits (for
example, health insurance). These benefits
have come to represent a growing proportion
of aggregate income in recent years.
1987 No.2 Family Econom1cs Rev i ew
Longrun Trends
In the following discussion, the
"young" were defined as persons age
25 to 34. This age group in 1985
accounted for slightly more than two­thirds
of all persons age 20 to 34. The
elderly were defined as individuals
age 65 and over. The income measures
for this broad age group mask signifi­cant
income variation within it, but
it is not possible to identify income
trends for specific subgroups of the
elderly in the published data. All
income estimates have been adjusted
for price changes by the Consumer
Price Index ( CPI) and are expressed
in 1985 dollars.
Real median incomes (incomes in 1985
dollars) between 1950 and 1985 for young
and elderly families are charted in
figure 1; the real incomes for young and
elderly unrelated individuals are charted in
figure 2. One fact that is immediately
clear is that according to this measure the
young have higher incomes. In 1985, the
median income for a family in which the head
was 25 to 34 years old was $26,023, compared
with $19,162 for a family in which the head
was 65 years or older. For unrelated indivi­duals,
the young's median was $17,211, com­pared
with the elderly's median of $7,568
(see table 1, p. 4)
Figures 1 and 2 also reveal what has hap­pened
to real incomes, as reflected by the
medians, of both groups over the last 35
years. Between 1950 and 1970 real incomes
of the young and elderly grew steadily, with
the young'.s rising slightly faster, probably
as a result of the strong job market situa­tion
in the sixties. Real income for young
families grew by 3. 0% a year and for elderly
families by 2. 5% a year.
After 1970 or so, however, the income
trends of the young and old changed dra­matically.
Growth virtually came to a halt
for the young while it continued for the
elderly. For families in which the head was
25 to 34 years old, median income (in 1985
Z family Economics Review 1987 No.2
dollars) declined by 0. 3% a year, and for
unrelated individuals age 25 to 34 it fell
0. 6% a year on average. During these same
years, the incomes of elderly families and
unrelated individuals continued to grow at
slightly more than 2. 0% a year. 3 It is this
stark contrast in real income growth between
these groups that has attracted the media's
attention.
The obvious question is--why did real
income growth for the young suddenly come
to a halt between 1970 and 1985 while it
continued for the elderly? Some of the
factors that have been associated with these
changes can be classified as demographic,
economic, and social.
Demographic. The impact of the baby
boom (the large cohort of persons born
between 1946 and 1964) on the number of
members of the 25- to 34-year-old age group
is shown in table 2, p. 4. Between 1955 and
1970, persons in this age group increased
from about 23 million to 25 million--an 8%
increase. Between 1970 and 1985, however,
the 25- to 34-year-old population increased
from 25 million to 42 million--a 66% increase.
Whereas the 1970 estimate reflects persons
born between 1936 and 1945, the 1985 esti­mate
reflects persons born between 1951 and
1960--the middle of the baby boom years.
What was the significance of this for 25- to
34-year-olds in the last 15 years or so?
Richard Easterlin <.!), among others, has
written extensively on the causes and con­sequences
of changes in fertility. Easterlin
generalizes and suggests, " ••• a baby boom
generation finds the going comparatively
tough." Because of its sheer size, a rela­tively
large cohort of individuals finds
itself fiercely competing for the available
jobs, housing, education, and other necessi­ties
of life more so than a smaller cohort.
The consequences of this competition are
rather evident when we examine the data on
crime, suicides, divorce, births out of
wedlock, and other aspects of social stress.
Although the strength of the relationships
between these problems and the maturing of
the baby boom generation can be debated, the
3 Mean incomes for these groups reflect
similar trends.
Median Incomes of Families
By Age of Householder
30
26
26
Z4
~
~""'
~ ~
22
:::-c
0 ~
'0 ~ 20
~
I{) ~
a> 0 16
~.c:
b
~~ 16
14
12
10
6
1950 55 60 65 70 75 60 65
Age of householder
0 25 to 34 years + 65 years and over
Figure 1
Median Incomes of Unrelated Individuals
By Age
20
19
16
17
16
15
~ 14
~""' :~: :~, 13
0 ~
'0 OS
12
~ 11
10 :l
a> 0 10 Ol,c:
""'E-o 9
~~
~ 6
7
6
5
4
3
2
1950 55 60 65 70 75 60 65
Age
0 25 to 34 years + 65 years and over
Figur e 2
1987 No.2 Family EconomJ.cs Rev1ew 3
Table 1. Median incomes of families and unrelated individuals, with householder/individual
age 25 to 34 years and 65 and over, between 1950 and 1985
[In constant 1985 dollars]
1985
1980
1975
1970
1965
1960
1955
1950
Year
Average annual rate of change
(percent):
1970-85 ...•........•.•...•.•..•.•
1950-70 ••........................
Fami 1 ies
25 to 34
$26,023
26,648
27,301
27,297
24,126
20,669
18,042
15,037
-0.3
3.0
65 and
over
$19,162
16,819
16,104
13,999
11,97 4
10,523
9,365
8,504
2.1
2.5
Unrelated
25 to 34
$17,211
16,925
17,959
18,894
16,635
13,099
9,887
9,599
-0.6
3.4
individuals
65 and
over
$7,568
6,653
6,618
5,405
4,698
3,829
3,387
2,867
Source: U.s. Department of Commerce, Bureau of the Census, Current Population Survey.
Table 2. Number of persons age 15 and over, 25 to 34, and 65 and over, between 1955 and
1985
[In thousands]
Year
1985
1980
1975
1970
1965
1960
1955 .................................
Total rate of change (percent):
1970-85 ..••...................•....
1955-70 ••••••••••.•••••••.•••••••••
Total, 15
and over
184,828
17 4, 081
162,542
148,241
135,627
125,641
116,293
24.7
27.5
25 to 34
42,053
37,829
31,148
25,295
21,806
22,337
23,453
66.3
7.9
65 and
over
27,322
24,685
21,662
19,254
17,650
15,571
14,013
41.9
37.4
Source: U.S. Department of Commerce, Bureau of the Census, Current Population Survey.
4 Family Economics Review 1987 No.2
fact remains that an unusually large number
of young people came upon the scene in re­cent
years seeking their niche in society.
Economic. The last decade and a half
were years of economic problems. Recessions
took place in 1974 and in the 1979-82
periods, and unemployment rose sharply. At
the same time, inflation soared to annual
rates in excess of 10%. Reflecting these
developments, young workers, as well as
other workers, had problems in the labor
market. Unemployment rates for men age
25 to 34 rose from around the 2% mark at
the end of the sixties to almost ·7% by the
early eighties. For young women the unem­ployment
rates nearly doubled. The wage
picture was bleak for both sexes. Table 3
shows the real incomes of men and women
who worked at full-time jobs the year
around, for selected years in the 1955-85
period. Real incomes for persons with this
amount of work experience increased by
roughly 2.5% a year between 1955 and 1970
for both men and women. In the next 15
years, however, the men's full-time, year­around
median income dropped by 0.8% a
year and the women's grew very little.
The young, of course, derive a substantial
proportion of their income from the labor
market, whereas the elderly do not. In 1985,
for example, 83% of the young worked at some
time during the year, compared with only 15%
of the elderly. Consequently, the sluggish
economy and weak labor market had a greater
impact on the young than the old. In addi­tion,
although the incomes of the young were
subject to inflation and eroding purchasing
power, the incomes of many of the elderly
were not. Beginning in 1975, Social Security
benefits were indexed with the CPI. More­over,
the inflationary spiral of the late
seventies and early eighties worked to the
advantage of some of the elderly because it
increased the returns from their income­producing
assets. (The net rental value of
owner-occupied housing, however, is not
counted as income in the CPS data.) And
clearly, the existence of Medicare for many
of the elderly helped to improve their
economic condition. (Medicare also is not
counted as income in the CPS.) In short, the
elderly were considerably more sheltered
from the economic storms of the last decade
and a half than were the young.
Table 3. Median incomes of men and women age 25 to 34, who worked full time, year around,
between 1955 and 1985
[In constant 1985 dollars]
1985
1980
1975
1970
1965
1960
1955
Year
...............................
...............................
Average annual rate of change
(percent):
1970-85 .•......•••..•....•.•..•..
1955-70 .•.•.••............•.•..•.
NA - Not applicable.
Income
$22,321
23,139
25,538
25,282
22,281
19,797
17,343
-0.8
2.5
Men
Percent
70.6
70.3
69.7
74.0
77.6
72.7
77.0
NA
NA
Income
$16,740
16,056
16,792
16,409
13,839
12,892
11,466
0.1
2.4
Wanen
Percent
45.1
39.6
40.8
36.6
36.4
32.3
37.2
NA
NA
Source: U.S. Department of Commerce, Bureau of the Census, Current Population Survey.
1987 No.2 Family Econom1 cs Rev1ew 5
Social. Another factor often alluded to as
a negative influence on median family income
in recent years has been the growth of one­parent
families headed by women. Divorce,
marital separation, and children born out of
wedlock have all contributed to the increase
in single-parent families. The proportion of
all families that were headed by women in
1985 was 16%, up from about 12% in 1970.
This upward trend was somewhat more pro­nounced
among the young--in 1970 about 11%
of young families were headed by a woman,
and by 1985 the comparable proportion was
17%. The median incomes of these families in
1985 was only $8,900, compared with $27,735
for all families. A growing proportion of
these families tends to depress the median
income for all young families.
Another Perspective on Income Trends
Whereas the trends in the median incomes
for the young and elderly over the last
15 years appear to support the notion that
the elderly have been doing better than the
young, it is important to look at all the
available income data published by the
Census Bureau. Household income data from
the CPS first became available in 1967, so
it is possible to observe income trends in
these data over the period in which the
elderly were far outstripping the young in
real income gains--at least according to the
median-family-income measure.
Real median incomes for households in
which the householder was age 25 to 34 or 65
and older between 1970 and 1985 also indi­cate
that the incomes of the elderly were
rising faster than those of the young. Real
incomes of the elderly increased by 2 .1% per
year in the 1970-85 period while they
dropped slightly for the young household
(table 4). ·
Many other changes were taking place over
these years; one of the most significant was
in the average size of households. At the
mid-century point, the average number of
persons in households was 3. 37, and it
drifted slightly downward to 3.14 persons by
1970. But then the decline accelerated over
the next 15 years, reaching 2.69 persons per
household in 1985. This decline has been
associated with the postponement of marriage
6 Family Economics Review 1987 No.2
and childbearing among the young, and an
overall shift to different living arrange­ments.
The drop in average household size was
particularly sharp in the 1970-85 period for
young households. In these households,
average size declined by almost one person,
from 3. 69 to 2. 87. However, for households
with householders age 65 and over, there was
only a slight decrease, from 1.83 to 1.77.
If one adjusts the household incomes of
the young and the elderly for changes in
household size by using the Census Bureau's
income-per-household-member measure, a
somewhat different picture of real income
trends emerges." For young households, real
income per household member advanced by
$2,000 between 1970 and 1985--an increase of
roughly 1.5% a year (table 5). For elderly
households, real income per household member
rose slightly more--by $2,400, or 1.7% a
year. Clearly, the disparity in income growth
during the past 15 years is less obvious
using the income-per-household-member
measure.
When the same adjustment is made to the
incomes of all households in the Nation
during these years, the real income picture
is not as gloomy as the median household and
family income measures indicate. Real income
per household member grew by 1.4% a year in
the 1970-85 period; although this is not a
robust rate of growth, the increase suggests
that real incomes were growing.
Levy and Michel have discussed the paradox
of lackluster family income growth and
rising per capita consumption (!, p. 36).
They suggested that during a period of weak
wage growth (like the seventies and
eighties) households had to make certain
adjustments in their economic behavior to
insure a rising standard of living. This
explanation has particular relevance for the
young. Levy and Michel said they made
"demographic accommodations"--many young
persons postponed marriage or did not marry,
.. A per-capita or per-person equivalence­scale
adjustment assumes a two-person
household needs twice as much income as a
one-person household. This, however, does
not allow for economies of scale in large
households.
Table 4. Median incomes of all households, and households with householder age 25 to 34
years and 65 and over, between 1970 and 1985
[In constant 1985 dollars]
1985
1980
1975
1970
Year
........................ •.• ...... .
Average annual rate of change
(percent):
1970-85 .•..•.•........•..•..•..•.•.
Total
households
$23,618
23,121
23,585
24,197
-0.2
Households with householder--
25 to 34 65 and over
$25,085 $13,254
25,245 11,464
26,238 11 '163
26,845 9,691
-0.5 2.1
Source: U.S. Department of Commerce, Bureau of the Census, Current Population Survey.
Table 5. Incomes per household member, and average household size for all households and
households with householder age 25 to 34 years and 65 and over, between 1970 and 1985
[In constant 1985 dollars]
1985
1980
1975
1970
Year
Average annual rate of
change, 1970-85 (pet) ••
NA - Not applicable
Total households
Inccrne
per
household
merrber
$10,884
10,079
9,528
8,824
1.4
Average
household
size
2.67
2.73
2.89
3.14
NA
Households with householder--
25 to 34 65 and over
In cane
per
household
menber
$9,732
9,246
8,853
7,743
1.5
Average lncane
household per
size household
menber
2.87 $10,622
2.92 9,456
3.15 9,084
3.69 8,203"
NA 1.7
Average
household
size
1.77
1.74
1.77
1.83
NA
Source: U.S. Department of Commerce, Bureau of the Census, Current Population Survey.
1987 No.2 Family Economics Review 7
young families delayed having children, and
some of the wives in these families entered
the labor market to help bolster the slow
growing earnings of their husbands. These
demographic accommodations are associated
with smaller households. Clearly, a greater
proportion of the population is in the labor
force today than in 197 0, childbearing has
been delayed for many women, and a much
larger proportion of the young live alone or
with other unrelated persons. Consequently,
in selecting income measures by which to
judge the economic condition of groups of
people, one must also be mindful of the
dramatic changes that have taken place in
the size of households.
Another factor that should be considered
in judging the economic situations of the
young and the elderly concerns the income
concept of the CPS income data. The CPS
uses a money income concept that does not
include the income implicit in many of the
noncash benefits received from the govern­ment
(for example, food stamps, Medicare, or
subsidized housing) and from employers (for
example, health insurance, life insurance,
or pension plans). Both young persons and
the elderly receive these benefits to
varying degrees; and since they are not
pounted in the CPS income data, we do not
have a complete picture of the income
resources of both groups.
Noncash income has become an increasing
share of total income in recent years. In
the fifties and sixties cash incomes proba-bly
accounted for almost all income going to
the young and elderly. Today the elderly
benefit from Medicare and other noncash
programs, whereas the young receive consi­derably
more in the way of employer-provided
benefits tha!l their parents did and also are
eligible for certain noncash benefits from
the government. Integrating such income
information into the CPS income data would
provide us with further insight into trends
in real income.
8 Family Economics Review 1987 No.2
The Income Outlook
The outlook for the real incomes of the
young and the elderly depends on many
factors--the health of the economy, infla­tion,
social policy, living arrangements,
and so forth. Any projection should involve
a number of income measures, a reconcilia­tion
as to why they differ, and an assess­ment
of the impact of noncash benefits.
Short of this, one can speculate about
future income trends of the young--using
Easterlin's thinking as a guide.
By 1995, the 25- to 34-year-old age group
will consist of persons born in the 1961-70
period--a period in which fertility began to
decline and the baby boom years came to an
end. In other words, the young in 1995 will
consist of a relatively smaller group of
persons. If Easterlin's ideas are correct
about the "tough going" of large generations
and relatively easier times of small co­horts,
competition in the job market should
be much less, and downward pressure on
wages not as severe as in the seventies and
eighties. Consequently, the incomes of the
young may be less affected by the factors
that retarded income growth for them in the
1970-85 period.
REFERENCES
1. Easterlin, Richard A. 1980. Birth and
Fortune, p. 6. Basis Books, Inc.,
New York.
2. Levy, Frank, and Richard C. Michel.
1986. An economic bust for the baby
boom. Challenge. March I April issue,
pp. 33-39.
3. Longman, Phillip. 1985. Justice between
generations. The Atlantic Monthly. June
issue, pp. 73-81.
4. Radner, Daniel B. 1986. Changes in the
Money Income of the Aged and Nonaged,
1967-1983. Studies in income distribu­tion,
No. 14. U.S. Department of Health
and Human Services, Social Security
A dminis tra tion.
5. U.S. Department of Commerce, Bureau of
the Census. 1986. Money Income of House­holds,
Families, and Persons in the
United States: 1984. Current Population
Reports, Series P-60, No. 151.
Household and Family
Projections: 1986 to 2000
Projections of the number of U.S. house­holds
and families for the years 1986 to
2000 are based on certain assumptions about ~
future rates of household formation and pop­ulation
change. Three series (A, B, and C)
are pre sen ted in a report from the U.S.
Census Bureau, providing a range of projec­tions
that consider past and possible future
trends influencing household formation. Past
trends include a decreasing proportion of
young and middle-aged adults living in
married-couple households; an increasing
proportion of young adults (never married or
formerly married) who maintain their own
households; and an increasing proportion of
elderly adults maintaining their own house­holds
rather than living with younger family
members. In recent years, however, apparent
shifts in several of these demographic
trends indicate a slowing in the rate of
increase in household formation. These
shifts include a slight decline in the
divorce rate since 1979; and, between 1980
and 1984, a growing propensity of young
adults to live in homes maintained by
parents.
Series A assumes a continuation of past
trends in householder proportions but gives
more weight to changes in recent years.
Consequently, Series A projects a somewhat
slower but still rapid increase in the
number of households. At the other extreme,
Series C assumes that abrupt changes in
marriage and divorce may have come to an
end and, therefore, householder proportions
will remain constant during the next 15
years. Series B was developed to reflect the
intermediate assumption that changes in
marriage and divorce will slow considerably
but not cease during the next 15 years.
Using Series A projections, the number of
U.S. households would reach 110.2 million by
2000, an increase of 27% over the March 1985
figure of 86.8 million. Series B indicates
105.9 million households in 2000, and
Series C, 102.4 million households, in­creases
of 22% and 18%, respectively, over
the 1985 to 2000 period. Each series of
projections, however, shows a decline in the
annual rate of increase of households over
the period.
In March 1985 the average number of per­sons
per household was 2.69 and the average
per family was 3.23. The projections of the
average size of households for the year 2000
vary from 2.32 for Series A to 2.64 for
Series C. Average family size is predicted
to range from 2.96 to 3.17.
According to projections of household type
for the year 2000, husband-wife households
would range from 47% (Series A) to 59%
(Series C) of all households, compared with
58% of all households in 1985. Nonfamily
households, which consist of a person living
alone or with persons to whom they are not
related, are projec~ed to vary from 27% to
37% of all households, compared with 28% of
all households in 1985.
Between 1980 and 1985, most of the
increase in the number of households was
found in the age groups 35 to 44 and 65
years and over. Between 1985 and 2000 the
aging of the post-World War II baby boom
cohorts will cause most of the projected
increase in household numbers to occur in
households with householders between the
ages of 35 and 54.
Source: U.S. Department of Commerce,
Bureau of the Census, 1986, Projections of
the number of households and families: 1986
to 2000, Current Population Reports, Popula­tion
Estimates and Projections, Series P-25,
No. 986.
1987 No.2 Fam i ly Ec onom ics Re vie w 9
Household Wealth and Asset
Ownership, 1984
Median household1 net worth in 1984 was
$32,667, according to the Survey of Income
and Program Participation conducted by the
U.S. Bureau of the Census. Net worth is
defined as the value of assets covered in
the survey minus any debts. Assets covered
include interest-earning assets, stocks and
mutual fund shares, real estate (own home,
rental property, vacation homes, and land
holdings), equity in own business or profes­sion,
mortgages held by sellers, and equity
in motor vehicles. 2 Liabilities covered
include debts secured by any asset, credit
card or store bills, bank loans, and other
unsecured debts.
1 Individuals living in group quarters
(such as college dormitories, convents, and
boarding houses), in institutions, or in
military barracks--and who would not normal­ly
share financial resources--were excluded
from the results shown in this report.
2 Not included were equities in pension
plans, cash surrender value of life insur­ance
policies, or the value of jewelry and
home furnishings.
The largest share of household net worth
was held in home equity. Homeowners hip was
reported by almost two-thirds of all house­holds
and accounted for 41% of total net
worth, with a median home equity of $40,597
(see tables 1 and 2). Interest-earning
assets were the next most important asset
type. Deposits at financial institutions
accounted for 14% of net worth. Nearly 72%
of households had interest-earning assets at
financial institutions; the median amount of
their deposits was $3,066. Interest-earning
checking accounts and money market deposit
accounts, available since 1982 as a result
of the deregulation of the banking industry,
were held by 25% and 16% of households,
respectively. IRA and KEOGH accounts consti­tuted
only 2% of household net worth, but .
were held by 20% of households. Stocks and
mutual fund shares, also held by 20% of
households, accounted for 7% of net worth.
Household wealth and asset ownership
increased as income increased. 3 Median net
worth increased from $5,080 for households
with average monthly incomes less than $900,
to $123,47 4 for households with average
3 Income is defined as the average monthly
income received from all sources by all
household members during the 4-month period
prior to the interview.
Table 1. Distribution of net worth in 1984, for selected asset types
Interest- Stocks Equity
Monthly household Total earning Other and Equity Equity in own IRA or
income net assets at interest- JIUtual in in nntor business KFXXlH
worth financial earning fund own vehicles or pro- accounts
institutions1 assets2 shares home fession
Less than $900 ••••••••• 100.0 13.7 1.4 3.1 54.2 6.6 10.4 0.9
$900 to $1,999 ......... 100.0 18.2 2.6 2.6 48.3 7.3 8.3 1.6
$2,000 to $3,999 •••••••• 100.0 15.7 2.5 5.2 46.1 7.5 8.3 2.4
$4,000 or more ••••••••• 100.0 11.5 4.3 11.4 30.2 3.9 13.2 2.7
Total ................ 100.0 14.4 3.1 6.8 41.3 6.0 10.3 2.2
1 Includes passbook savings accounts, money market deposit accounts, certificates of deposit, and
interest-earning checking accounts.
2 Includes money market funds, U.S. Government securities, municipal and corporate bonds, and other
interest-earning assets.
Source: U.S. Department of Commerce, Bureau of the Census, 1986, Household Wealth and Asset
Ownership: 1984, Current Population Reports, Household Economic Studies, Series P-70, No. 7 •
10 Famlly Economics Review 1987 No.2
monthly incomes of $4,000 or more. House­holds
in the bottom 26% of the income
distribution owned 10% of total net worth,
whereas households in the top 12% of the
income distribution owned 38% of total net
worth. This indicates that wealth holdings
were concentrated at the top of the income
distribution.
The composition of net worth differed sig­nificantly
by income group (table 1). Home
equity decreased in relative importance as
income increased--from 54% of net worth for
the lowest income group, to 30% of net worth
for the higher income group. Holdings of
stocks and mutual fund shares, however,
accounted for 3% of the net worth of the
lowest income group, compared with 11% of
the highest group. The top 12% of the income
distribution owned 63% of the value of
stocks and mutual fund shares.
Age is correlated with net worth because
of the increasing opportunity to accumulate
wealth. Net worth increased during worklife
from $5,7 64 for the youngest households,
to $73,664 for households in the 55- to
64-year-old category; net worth then
declined after retirement to $60,266 for
those 65 years and over.
The distribution of net worth by age of
householder was different from the distribu­tion
of income by age. The median household
income of the under-35 age group was about
twice that reported by householders 75 years
and over ($1, 596, compared with $828), but
the older group had a net worth approximate­ly
10 times that of the younger house­holders.
Even after excluding home equity,
net worth was 6 times greater for the older
group.
Married-couple households had the largest
median net worth --$50, 116. Female-maintained
households had a larger median net worth
($13, 885) than did male-maintained house­holds
($9 ,883) because the median age of
female householders was higher and net
worth increased with age. One-third of the
female group, but only about one-sixth of
the male group, was age 65 or older. When
net worth levels are compared within age
groups, households maintained by females
age 54 or younger had lower net worth than
their male counterparts.
Table 2. Households owning assets and median value of holdings in 1984, for selected asset types
Monthly household income
Less than $900 ••••••••••••••••••
$900 to $1,999 •••••••••••••••••••
$2,000 to $3,999 ................ .
$4, 000 or more •• ••••••••••••••••
Total •••••• •••••• • • • • • • • • • • • • •
Less than $900 ••••••••••••••••••
$900 to $1,999 ................ ..
$2,000 to $3,999 ••••••••••••••••
$4,000 or more •••••••••••• • •••••
Total •••••••••••••••••••••• • • •
Interest-earning
assets at
financial
insti tutions1
47.7
70.3
84.7
92.7
71.8
$1,931
2,490
2, 770
7,351
3,066
Stocks
Other and Equity Equity
interest- lTI.ltual in in rrotor
earning fund own vehicles
assets 2 shares home
Percent of households owning assets
2.7 6.4 42.5 62.3
6.3 13.5 60.4 89.5
9.8 26.1 76.4 96.9
22.7 49.2 88.7 97.2
8.5 20.0 64.3 85.8
Median value of holdings for asset owners
$8.715 $3,427 $29,355 $1,978
9,746 3,379 36,392 3. 208
5,997 2. 727 41,599 5,040
11,635 6,466 63,439 7,597
9,471 3,892 40,597 4,104
Equity
in own IRA or
business KEXni
or pro- accounts
fession
7.9 4.5
10.5 11.7
14.2 26.4
26.0 52.8
12.9 19.5
$3,277 $4,129
3,986 4,229
5,249 4,429
22.713 6,616.
6,298 4,805
1 Includes passbook savings accounts, money market deposit accounts, certificates of deposit, and interest-earning
checking accounts.
2 Includes money market funds, U.S. Government securities, municipal and corporate bonds, and other interest­earning
assets.
Source: U.S. Department of Commerce, Bureau of the Census, 1986, Household Wealth and Asset Ownership: 1984,
Current Population Reports, Household Economic Studies, Series P-70, No. 7.
1987 No.2 Family Economics Review 11
Net worth holdings also differed by the
race and ethnicity of the householder.
White householders had a significantly
higher median net worth than black house­holders
($39,135, compared with $3,397).
Households with a householder of Spanish
origin 4 had median holdings of $4,913, not
significantly different from black
households.
4 Persons of Spanish origin may be of any
race.
Source: U.S. Department of Commerce,
Bureau of the Census, 1986, Household
Wealth and Asset Ownership: 1984, Current
Population Reports, Household Economic
Studies, Series P-70, No. 7.
New Budgeting Guide
On Managing Your Finances
The Family Economics Research Group of
the Agricultural Research Service and the
Extension Service announce their new
budgeting workbook for consumers-­Managing
Your Personal Finances. This
guide is designed to help consumers develop
money management skills. It is divided into
three sections: Section I, The Principles
of Managing Your Finances, helps consumers
determine their current financial situation,
set goals, and make a working budget for
their specific circumstances. Section II,
Financial Tools Used in Money Management,
gives information on savings and invest­ments,
insurance, and credit use. Section III,
Coping With Change, helps consumers plan
for financial adjustments to retirement and
changes in the economy.
Managing Your Personal Finances is for
sale from the Superintendent of Documents,
U.S. Government Printing Office, Washington,
DC 20402, in individual sections or the com­lete
set. Include the stock number(s) with
your request:
HG-245 (set) SN001-000-04484-2. $6.00
HG-245-1 (Sec. I) SN001-000-04485-1. $3.25
HG-245-2 (Sec. II) SN001-000-04486-9. $1.50
HG-245-3 (Sec. III) SN001-000-04487-7. $1.75
12 Fam ily Economics Revi ew 1987 No.2
After!lt:Ix Money Income
Estimates of Households, 1984
Data from the Annual Housing Survey,
the Income Survey Development Program,
and the Internal Revenue Service were
combined with the March 1985 Current
Population Survey data to derive the
estimates shown in this report--the
fifth in a series of special reports
released by the U.S. Census Bureau.
The main purpose of this report is to
provide a better measure of year-to­year
changes in household purchasing
power and of differences in purchasing
power between subgroups of the popu­lation.
Four types of taxes were
simulated and subsequently deducted
from the total money income received
by households in order to estimate
after-tax income--Federal individual
income taxes, State individual income
taxes, FICA and Federal retirement
payroll taxes, and property taxes on
owner-occupied housing.
Mean after-tax household income in 1984
increased faster than inflation for the
third consecutive year. Mean household in­come
after taxes was $21,564 in 1984, a 2.7%
increase over the 1983 level after adjusting
for the 4.3% increase in consumer prices
(see table). Improved economic conditions
and a 5% reduction in 1984 Federal income
tax rates (the last of four annual tax-rate
reductions scheduled by the Economic
Recovery Tax Act of 1981) contributed to
this financial gain.
In 1984, 92% of U.S. households paid one
or more of the taxes covered in this study.
Federal income and FICA payroll taxes were
paid by 77% and 74% of households, respec­tively.
Fewer households paid State income
taxes (64%) and property taxes on their
homes (61%). The mean amount of taxes paid
in 1984 ($6,398) was about $200 higher than
in 1983 after adjustment for inflation. Mean
Federal income taxes did not change signifi­cantly
between 1983 and 1984; however, both
State income and FICA payroll taxes
increased.
Mean after-tax household income, 1984, by selected characteristics
[In 1984 dollars]
Characteristic
1984
incane
Percent
increase
over 1983 1
All households ........................................... . $21,560 2.7
Race or Spanish origin: 2
White •••.•...••.•••.•..•.•...••.•......•••••••••••••.• 22,370
14,799
17,359
2.6
3.4
3.8
Black ......•....................... . . . · · · · · · · · · · · · • · · • • • · Spanish or1g1n ..•....••.•••.••••.•••••••••.••••.•...••
Region:
Northeast
Midwest ••••••••••••••••••.••••••••••••••••••••• • ••••••
22,001
20,865
20,951
23,038
3.1
*1.3
2.6
3.9
South ........•.........................•..............
West ••••••••••••••••••••••••••••••••••••••••••••••••••
Type of family household:
Married couples with children
Married couples without children •••••••••••••••••••••••
Female householder, no husband present, with
26,839
26,454
3.6
2.9
related children ...................................... . 12,242 3.8
Age of householder:
Under 65 years . .....................•......•.....••....
6 5 years and over ....•..•.•..•.............•.....•.....
23,104
15,745
2.6
2.8
1 Significant at the 95% confidence level, unless otherwise noted.
2 Persons of Spanish origin may be of any race.
•Significant at the 90% confidence level.
Of the total taxes paid in 1984, 57% were
Federal income taxes; FICA payroll, State
income, and homeowner property taxes
accounted for 21%, 13%, and 8% of the total.
These taxes reduced the income available to
households by about $513 billion in 1984,
or 22% of the total money income received.
Following the payment of taxes, the number
of households with incomes of $50,000 or
more fell from about 11.1 million to 4.4
million. In contrast, the number of house­holds
with less than $15,000 of income
increased from 28 • 9 million before taxes to
34.5 million after taxes.
About 64% of households with incomes below
the poverty level in 1984 paid one or more
of the four taxes studied. Tax payments
reduced their mean income by about 7%--from
$4,700 before taxes, to $4,420 after taxes.
More poverty-level households paid FICA pay­roll
taxes ( 44%) and property taxes on their
homes (33%) than paid Federal (9%) and State
income taxes (15%). However, the percentages
paying Federal and State income taxes
increased since 1983.
Source: U.s. Department of Commerce,
Bureau of the Census, 1986, After-tax Money
Income Estimates of Households: 1984,
Current Population Reports, Special Studies,
Series P-23, No. 147.
1987 No.2 family Economics Rev1.ew 1J
International Textile 'Itade:
The Consumer's Stake1
By Rachel Dardis
Professor
University of Maryland
Introduction
The establishment of the General Agreement
on Tariffs and Trade (GATT) in 1948 was de­signed
to liberalize trade between countries
and to increase the growth and prosperity of
market-oriented economies. The GATT was
successful in the fifties and sixties in
promoting trade liberalization, particularly
with respect to tariff rates. However,
higher tariff rates were retained for the
textile and apparel industries. In addition,
these industries received special treatment
in 1962 when the Long-Term Arrangement on
Cotton Textiles (LTA) became effective. This
agreement authorized quantitative restric­tions
on imports of cotton textiles from
particular low-cost sources (notably the
developing countries) and was a major depar­ture
from the nondiscrimination rules of the
GATT system. The LTA was followed by a
Multi-Fiber Arrangement (MFA) in 1974,
which has been renewed several times. The
MFA increased the scope of trade restric­tions
for textile products and established
rules for the negotiation of quantitative
re~trictions on imports between developing
and developed countries.
This article examines the impact of trade
restrictions for textile products on con­sumer
welfare. The first section examines
consumer gains from trade, and includes the
impact of trade on domestic producers. The
second part focuses on the growth of trade
restrictions for textile products, with par­ticular
emphasis on quantitative restraints.
The static and dynamic costs of trade re­straints
are examined in the third part of
the paper, and the fourth section provides
empirical estimates of the impact of trade
restraints on consumers of U.S. apparel in
1980.
1This article is condensed from a paper pre­sented
at the Annual Agricultural Outlook Con­ference
in December 1986 in Washington, DC •
14 Fam i ly Economics Rev i ew 1987 No.2
Consumer Gains From Trade
Consumer gains are based on the increase
in consumption possibilities due to trade.
Trade encourages countries to specialize in
the production of goods and services for
which they have a comparative advantage,
and to pass on any cost saving from such
specialization to consumers. In addition,
trade enables consumers to purchase goods
and services from an international rather
than a national marketplace, and to take
advantage of production possibilities in
different countries.
Measurement of the consumer benefits from
trade is based on consumer willingness to
pay for the product or on consumer demand
for the product (~_). In an open economy, a
country will import goods as long as the
world market price is lower than the world
supply price (including transport costs).
The initiation of trade will result in a
lowering of domestic prices. Domestic
production will decline and domestic con­sumption
will increase. Imports account for
the difference between domestic demand and
supply. Although the consumer gains from
trade, the producer loses. The divergence
between producer and consumer interests
should be borne in mind in evaluating trade
regulation policies.
The dynamic gains from trade are even
more significant. First, trade provides a
stimulus to domestic producers to respond to
changes in production technologies and to
adopt the lowest cost methods of production.
The U.S. steel and automobile industries are
examples of industries that have adopted new
production technologies from abroad due to
the pressure of international competition
(2, 11). Second, trade encourages process
a~d Product innovation as producers seek to
maintain their competitive position on in­ternational
markets. Finally, trade creates
an environment in which producers are
responsive to consumer needs.
Trade Restrictions for Textile Products
The textile and apparel industries in
developed countries are protected by both
tariffs and quotas. Tariffs have remained
high on textile products in spite of various
tariff-cutting rounds that have reduced
tariffs on manufactured goods (.!_Q).
Quotas have existed since 1962 when the
LTA became effective. The LTA allowed im­porting
countries to limit their imports of
cotton textiles from low-wage or developing
countries. The LT A was renewed for 12 years
until the expansion of textile production in
developing countries and the growth of the
manmade-fiber industry rendered it ineffec­tual.
Pressure from the developed countries'
textile industries to close the loophole in
the LTA led to its replacement by the MFA
in 197 4. The new arrangement was more
liberal initially than the LTA, t'\'lough its
scope was widened to include manmade fiber
and wool textiles.
The MFA was also viewed as a temporary
measure and was designed to last 4 years. It
established a framework for managing trade
in textiles and apparel that would ensure
the following: (1) Encourage trade expansion
and the gradual removal of trade restric­tions,
(2) increase the economic development
of developing countries and their share in
world textile trade, and (3) provide time
for industries in developed countries to
adjust to international competition.
The MFA had two important features. First,
it allowed developed countries to restrict
imports from developing countries. The im­position
of quotas on a selective bilateral
basis is contrary to the basic GATT rules of
trade where trade is conducted on a nondis­criminatory,
multinational basis. The second
feature was that only exports from low-cost
developing countries were restricted. Thus,
trade between developed countries continued
under normal GATT rules. According to
Smallbone (!.Q), this resulted in trade
diversion from poor to rich countries.
In spite of these characteristics, the MFA
has been renewed three times since its
inception in 1974 (1977, 1981, and 1986).
Its renewal has been attributed to the fact
that "the policy choice in the textile and
apparel sector has never been a choice
between GATT rules and the MFA, but
between the MFA and more severe modes of
national protection" (!~). In addition, each
extension of the MFA has allowed importing
countries to impose greater restrictions
than existed previously (!.Q).
The permanent nature of "temporary"
arrangements such as the LTA and the MFA
casts doubt on the effectiveness of such
arrangements in achieving the "progressive
liberalization of world trade in textile
products" (a stated objective of the MFA)
and in facilitating the restructuring and
adjustment of import-impacted industries.
The negative effect of continued protection
in adjustment has been noted in an
Organization for Economic Cooperation and
Development study (_~) that cautioned that
"protection itself becomes less effective in
promoting adjustment when--as a result of
the repeated renewal of protectionist
measures--the firms being protected have no
reason to expect that they will ever be ex­posed
to the full challenge of international
competition."
Cost of Trade Restrictions for Textile
Products
Static effects. Static costs and
benefits are confined to the short-term
effects on consumer prices and choices as
well as output and employment gains in the
protected industries. Tariffs increase
prices directly, whereas quotas increase
prices by reducing the quantity of the good
that may be imported. Price increases, in
turn, will increase domestic output and
employment, though the latter may also be
affected by industry modernization due to
the pressure of international competition.
Most authorities agree that a tariff does
not provide the same degree of protection to
the domestic manufacturer as a quota, since
a reduction in world market prices will
weaken the protective effect of a tariff. In
addition, the foreign manufacturer may
reduce prices in order to offset the price
increase from a tariff. In contrast, a quota
limits the quantity of foreign goods that
may be imported irrespective of price
changes. Also, quotas may encourage trading­up
by exporters as they seek to maximize
their revenue profits. According to
Smallbone (!Q), both Hong Kong and Taiwan
have encouraged their apparel industries to
move into higher value production. She noted
that such developments will reduce the
supply of "cheap imported clothing," since
the number of new entrants (who might manu­facture
inexpensive clothing for exports) is
1987 No.2 Fam1ly Econom1cs Rev1ew 15
restrained by the MFA. Bergsten (2) also
noted the vulnerability of low-inco~
consumers to import restrictions.
Dynamic effects. The dynamic costs of
trade restrictions for textile products
include the impact of decreased competition
on firms in the importing country. There is
less pressure to be efficient, innovative,
or responsive to changes in consumer
demand since protection means that domestic
firms are insulated to some extent from
international competition. The continued
protection of the textile and apparel indus­tries
in developed countries also affects
the growth of other sectors of the economy,
in particular the exporting sector. A study
by a European Task Force on trade protec­tion
Cl) concluded that protection is likely
to retard the transfer of resources to effi­cient
exporting industries (which is vital
to the country's future prosperity) and at
the same time retain resources in ineffi­cient
industries that need government
suppot"t and government programs in order to
survive. Finally, the MFA limits the parti­cipation
of the poorest developing countries
in world trade of textiles and apparel (6).
Dynamic benefits from import restrictk;ns,
according to Smallbone ClQ), could include
"economies of scale which manufacturers
might obtain from running their firms at a
higher level of production than they were
able without import restrictions; greater
incentive to invest in better technologies
granted by the higher profits; and the
opportunity for the industry to reorganize
itself into better-sized, more productive
units." However, these potential benefits
must be considered in relation to a
"possible permanent loss of competitiveness
of the protected sector," as well as the
diversion of resources to the protected
sector.
Impact of Tariffs and Quotas on Consumers
of U.S. Apparel
Previous research by Dardis and Cooke (4)
and Hickok (E._) show two major characteris-­tics
of import restraints on apparel. First,
import restraints involve income transfers
from domestic consumers to producers,
whether domestic or foreign. Second, import
res train ts are regressive.
The estimated costs of U • S • import
restraints on apparel in 1980 are given in
table 1 (expressed in 1984 dollars). Total
consumer losses are approximately $13
billion, with consumer expenditure losses
accounting for the major portion of such
losses. Deduction of producer gains and
tariff revenue from consumer losses results
in a welfare loss that ranges from $0.7 42
billion to $1.160 billion, depending on the
price elasticity of demand. This welfare
loss is relatively small, reflecting the
Table 1. Costs of trade res.trictions on apparel in 1980
[ 1984 dollars]
Conponent
Consumer expenditure loss •••••••••••••••••••••••••
Reduction in quantity loss •••••••••••••••••••••••••
Total consumer loss ............................... .
Producer gain ..................................... .
Tariff revenue gain ............................... .
Welfare loss ......•.........................••......
Price elasticity of demand
0.25 0.50
(billions of dollars)
12.688
0.418
13.106
10.394
1.970
0.742
12.688
0.836
13.524
10.394
1.970
1.160
Source: Dardis, Rachel, and Katherine Cooke, 1984, The impact of trade restrictions on
U.S. apparel consumers, Journal of Consumer Policy, Vol. 7, pp. 1-12.
16 Family Economics Review 1987 No.2
fact that consumer losses are offset by
domestic producer gains. Thus, trade
restraints result in income tranfers from
consumers to producers.
Employment gains were not included in the
estimation of welfare loss, since such gains
are likely to be offset by losses in other
sectors of the economy including the distri­bution
and export sectors. In addition, it
might be argued that workers will not remain
permanently unemployed if protection
ceases (1.) •
The costs of trade restraints as well as
their impact on different income groups was
investigated by Hickok (~). Total consumer
losses in her study ranged from $8.5 billion
to $12 billion for price increases of 17%
and 25%, respectively. The tax effects,
based on a 25% price increase, are given in
table 2. The income-tax surcharge due to
protection ranges from 3% for the highest
income group to 23% for the lowest income
group. Values for a 17% price increase range
from 2% to 15%. These data clearly indicate
the regressive nature of trade restraints
and the fact that they penalize low-income
consumers.
Conclusions
Trade restraints for textile products
impose high costs on consumers and the
economy. The short-term costs are higher
prices paid by consumers and the reduction
in consumer choice due to product upgrading·
The regressive nature of trade restraints
also means that low-income consumers bear
a disproportionate share of the cost of
protecting domestic firms and workers. The
dynamic or long-term costs include the lack
of incentive for the protected industries to
respond to changes in production and
consumption and the effects of protection on
other sectors of the economy.
In contrast, the benefits from trade
restraints may be limited. Trade diversion
and product upgrading reduce the efficacy
of trade restraints as new sources of supply
and new products continue to exercise
competitive pressures on the textile and
apparel industries in the developed coun­tries.
Thus, the share of the developed
countries in world textile exports has
declined from 78% in 1970 to 63% in 1983.
The corresponding figures for world apparel
exports are 63% and 44% (!.!). During this
same period, the market share controlled by
the developing countries has increased from
Table 2. Tax effect of trade restrictions on apparel in 1984
I ncare range
$7,000-$9,350 ...............
$11,700-$14.500 .............
$16,400-$18,700 .............
$23,400-$28,050 .............
$35,100-$46,800 .............
$58,500 and over ............
Cost of protection
as a percent of
income
1.56
1.38
1.32
1.23
1.15
0.94
Federal incane
tax rate
6.90
9.64
11.49
14.56
19.93
30.70
Income tax surcharge
equivalent to cost
of protectionl
(percent)
23
14
11
8
6
3
1cost of protection as a percent of income, divided by the applicable Federal income tax
rate.
Source: Hickok, Susan, 1985, The consumer cost of U.S. trade restraints, Quarterly
Review 10(2) :1-12, Federal Reserve Bank of New York.
1987 No.2 Family Economics Rev1ew 17
15% to 25% for textiles and from 21% to 41%
for apparel.
Decisions concerning trade policies for
the textile and apparel industries in the
developed countries have also neglected the
interests of other parties who are adversely
affected by such policies. The major groups
are (1) exporting industries in developed
countries, (2) smaller, poorer developing
countries who have been late entrants on the
textile scene, and (3) consumers in the
developed countries. The lack of consumer
input in trade-policy decisions was noted in
the following from a recent OECD study (~_):
"Consumers and consumer representa­tives
are often at a disadvantage in
terms of influencing trade policy
decisions. Consumer interests are
generally more diffuse geographically
and in terms of product coverage than
those of domestic producers of a
particular commodity. Further, having
focused to date their efforts on the
implementation of consumer protection
laws, for lack of resources or other
reasons consumer representatives may
not always have been aware of the
consumer impact of trade policy mea­sures
and thus may not have taken
full advantage of existing possibilities
to exert influence on trade policy
decisions."
This lack of awareness may explain consumer
apathy in the past to trade · policies that
are detrimental to their interests. The
challenge for consumer educators is to alert
consumers and consumer representatives to
the consequences of various trade policies
so that th~y may become effective in
advocating policies that promote their
interests.
REFERENCES
1. Benard, Andre. et al. 1984. A Europe
Open to the World. Trade Policy
Research Center, London.
2. Bergsten, C. Fred. 1972. The Cost of
Import Restrictions to American Con­sumers.
American Importers Association,
New York.
18 Family Economics Review 1987 No.2
3. Currie, John M., John A. Murphy, and
Andrew Schmitz. 1971. The concept of
economic surplus and its use in
economic analysis. Economic Journal
81(324):741-99.
4. Dardis, Rachel, and Katherine Cooke.
1984. The impact of trade restrictions
on U.S. apparel consumers. Journal of
Consumer Policy, Vol. 7, pp. 1-12.
5. Hickok, Susan. 1985. The consumer cost
of U.S. trade restraints. Quarterly
Review 10(2):1-12. Federal Reserve
Bank of New York.
6. Keesing, Donald B., and Martin Wolf.
1980. Textile Quotas Against Developing
Countries. Trade Policy Research
Center, London.
7. Morkre, Morris E., and David G. Tarr.
1980. Staff Report on Effects of
Restrictions on United States Imports:
Five Case Studies and Theory. Federal
Trade Commission, Bureau of Economics.
8. Organization for Economic Cooperation
and Development. 1986. International
Trade and the Consumer. OECD, Paris.
9 • , Economic Policy Committee.
1985. Cost and Benefits of Protection.
OECD, Paris.
10. Smallbone, Teresa. 1986. Consumer
interest in textile and clothing
policy. International Trade and the
Consumer. OECD, Paris.
11. U.S. International Trade Commission.
1985. A Review of Recent Developments
in the U.S. Automobile Industry
Including an Assessment of the Japanese
Voluntary Agreements. US lTC Publication
No. 1648.
12. • 1985. Emerging Textile-
Exporting Countries, 1984. USITC
Publication No. 1716.
13. Rosen, Stuart M., Bruce H. Turnbull,
and Jeffrey P. Bialos. 1985. The
Renewal of the Multi-Fiber Agreement:
An Assessment of the Policy Alterna­tives
for Future Global Trade in
Textiles and Apparel. Submitted on
behalf of the National Retail Merchants
Association.
Some New USDA Charts
Chart 177
Distribution of Financial Assets
In 1985, individuals held 67 percent of their financial assets in securities, savings accounts, and demand deposits,
down from 72 percent in 1975. The proportion of assets in private pensions and money market funds increased
during this period.
Demand deposits 6% ------~
Government insurance
and pensions 7%
Private pensions 15%
Private life insurance 3%----..../
Money market funds 3% _ ____ __;
1985 1975
Other tangible assets include residential and nonresidential fixed assets, consumer durables, and inventories. Source: Federal Reserve Board.
Chart 170
Employee Benefits
Over 95 percent of all full-time employees receive paid
holidays and vacations and participate in group health and life
insurance plans.
Retirement
Sick leave
Rest time
Long-term
disability
insurance
Sickness/
accident
insurance
% of employees
!~- i;bC%:40,~1&~~
!~~awwwam1
30 Professional-administrative
38 Technical-clerical
70 ::::::::::=::::::;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;:;::=::;:::::::::::;:;:;:;:;:;:;:; Production
1985 data. Full-time employees in private industry. Source: Bureau of Labor
Statistics.
Chart 168
Real Wage and Salary Income per Civilian
Employee
After steady gains throughout the 1950's and 1960's, real
wage and salary income peaked in 1973 at $19,705, and then
declined until 1982.
1950 55 60 65 70 75 80 85
Sources: Bureau of Economic Analysis and Bureau of Labor Statistics.
1987 No.2 Family Economics Rev1.ew 19
Impacts of Imports on Food
Prices and Choices 1
By Jean Kinsey
Associate professor, Agricultural and
Applied Economics Department,
University of Minnesota; and
Resident fellow, Resources for the Future
In 1986 the United States imported $19.3
billion worth of agricultural products, an
increase of 7% over the year before. About
86% of agricultural imports are used for
food; 40% of these imports are not produced
domestically and do not, therefore, compete
directly with domestic farm products.
Agricultural exports traditionally exceed
agricultural imports, but during May of 1986
the value of agricultural imports exceeded
exports by $152 million. Only one other time
since 1959 has the balance of trade in
agriculture been negative, and that was
during a longshoremen's strike in 1971. This
time, the phenomenon was due to significant
declines in agricultural exports (down 12%
in value and 23% in volume, compared with
May 1985) and temporary increases in the
value of imported coffee and tomatoes.
In the absence of any political or
economic barriers to trade, imported food
should provide U.s. consumers with wider
choices at prices lower than would prevail
if . the same foods were produced locally •2
The actual impact of food imports on food
prices and consumers' choices is described
in the following discussion.
1 This article is taken from a paper pre­sented
at the Annual Agricultural Outlook
Conference in December 1986 in Washington,
DC.
2 In theory, as long as countries or
regions that produce specific food products
most efficiently do so, and then trade them
for products produced more efficiently
elsewhere, consumers in both countries gain
by having more goods available at a lower
cost.
20 Fam i ly Economics Review 1987 No.2
Complementary Imports
Food imports are classified as complemen­tary
if they are not produced domestically,
and as supplementary if they add to or com­pete
with domestic production (J_). Comple­mentary
food imports increase the variety of
foods from which consumers can choose, and
improve both the taste and nutritional stat­ure
of the American diet. They are produced
in other countries at lower cost primarily
because of tropical or specialized climates
not available in the United States.
Complementary food imports comprise about
30% of the volume and 40% of the value of
agricultural imports. They include coffee,
bananas, cocoa, tea, spices, tropical
fruits, some tree nuts, and some cooking
oils. Although the last three items are
officially classified as supplementary or
competitive imports, several are not pro­duced
in the United States. The distinction
is somewhat arbitrary since all complemen­tary
food imports compete with domestically
produced food to the extent that consumers'
food dollars would be spent on domestic
products in the absence of imports.
The per-unit import value of five
important complementary imports has fallen
absolutely and in constant 1980 dollars
between 1980 and 1985. In real terms, the
per-unit import value of spices fell 33%,
cocoa beans fell 34%, chocolate preparations
fell 32%, and coffee fell 12% (figure 1).
The average retail price of coffee also fell
4.5% in real terms during that time.
The real per-unit import value of bananas
and tea rose by 25% and 19%, respectively,
over the past 6 years. In the case of
bananas, however, a 25% increase represents
only 2 cents per pound; the price has
actually been quite stable since 1981. The
average real retail price has been 34 cents
per pound every year since 1980, except for
198 2 when it was 33 cents.
With the exception of tea, and less so for
bananas, per unit values of complementary
food imports have been falling. When these
falling per-unit import values are reflected
in lower food prices, consumers benefit
either by being able to buy more of these
foods or by having more money left to buy
domestically produced foods and other goods
and services. One factor that can keep
lower import prices from being reflected in
lower retail food prices is import tariffs,
fees, or other trade barriers. Complementary
food imports are not, however, generally
subjected to tariffs or other overt trade
restrictions.
Changes in the prices of complementary
imported foods are primarily a function of
world supply, which is, in turn, a function
of weather conditions and other major
unforeseen and largely uncontrollable events
such as wars and cartels. For example, a
recent drought in Brazil destroyed over one­half
of their coffee crop. Brazii provides
30% of the world's high-quality coffee
beans, and when they had a short supply in
early 1986, coffee prices rose about 50%. In
order to maintain its share of the world's
coffee market, Brazil bought less expensive
beans for its domestic consumers and
exported most of its own crop. Decreases in
Brazilian coffee production have been
partially offset by increased production in
Africa, Indonesia, Thailand, the Philippines,
and other parts of South America. Overall,
world coffee production in 1986-87 is
expected to be down about 14%. Barring
another drought, the price of coffee beans is
expected to drop back to normal by mid-1987.
Other weather-related effects include a
1984 drought in Kenya, which decreased
their coffee and tea production. Tea pro­duction
has since increased 29% in Kenya; it
is up in India and Sri Lanka, but is down
somewhat in China. The real per-unit import
values of tea increased over 18% between
1980 and 1985. The large increases in 1983
and 1984 can be attributed, at least
partially, to bad weather.
Cocoa bean production in the Ivory Coast
is expected to be down about 2% in 1986, but
world production should be up about 2% over­all.
Cocoa and chocolate products' per-unit
import values should continue their downward
trend.
Complementary Foods 1980-1985
Import values (1980 dollars per pound)
$1.70
$1.60
$1.50
$1.40 \1 Coffee
$1.30
$1.20 0 Chocolate
$1.10
$1.00
+ Tea
$0.90
$0.80
0 Cocoa
$0. 70
$0.60
$0.50
6 Spices
$0.40
$0.30 X Bananas
$0.20
$0.10
$0.00
1980 81 82 83 84 85
Figure 1
1987 No.2 Family Econom ic s Re vi ew 21
Supplementary Imports
Food imports that are close substitutes
for domestically produced agricultural
products are called supplementary or
competitive. They compete directly with
domestic producers for the consumer's food
dollar. These foods are imported because:
(a) Domestic demand exceeds domestic supply,
as in the case of sugar. (b) They are
produced more efficiently (at lower cost)
elsewhere, and it is cheaper for us to im­port
them than to produce them domestically.
(This is true of casein, for example.)
(c) They are not perfect substitutes for
locally produced food--they provide unique
taste characteristics that can be obtained
only in certain regions of the world or with
particular processing skills. They may or
may not be less expensive than their Ameri­can
counterparts, but consumers demand them
because they add variety to the diet. Many
European cheeses and wines exemplify this
type of food import, as does fresh produce
available from warmer climates during our
wintertime.
Supplementary food imports include beef,
pork, fish, cheese, fruits and fruit juices,
fresh and processed vegetables, wheat flour
and bakery products, sugar, some vegetable
oils, and casein. They comprise about 70% of
food imports by volume and 60% by value.
Over 85% of them are processed foods so that
considerable value has been added to the raw
agricultural commodity before it enters the
United States. Processed foods for which the
import value more than tripled between 1972
and 198 2 include fresh and frozen pork,
poultry, dairy products, cheese, casein,
biscuits, cakes and wafers, wine, malt
beverages (beer), vegetable oils, and
coconut oil (~_).
Real per-unit import values declined
steadily over the past 6 years for red
meats, wheat flour products, sugar cheese,
and malt beverages (beer) (figure 2). For
Supplementary Foods 1980-1985
Import v alues (1980 dollars per pound)
$2.00
$1.90
$1.80
$1.70 0 Wine
$1.60
$1.50
+ Cheese
$1.40
$1.30
$1.20 0 Red meat
$1.10
$1.00 t. Wheat
$0.90 products
$0.80
$0.70 X Beer
$0.60
$0.50 v Sugar
$D.40
$0.30
$0.20
$0.10
1980 81 82 83 84 85
Figure 2
22 fam il y Econom i cs Rev iew 1987 No.2
beer, meats, and grain products, this
corresponds with an increase in the import
consumption ratio. 3 It would seem that these
foods were being imported on the basis of
comparative advantage in production, and
that consumers should benefit by lower food
prices. In fact, the real retail prices of
ground beef, whole wheat bread, and white
flour did fall by 1%, 10%, and 23%, respec­tively.
On the other hand, the average real
retail price of canned hams (many of which
are imported) increased 3%, and T-bone
steaks (almost none of which a~e imported)
increased 4%. Many factors influence the
changes in retail prices of supplementary
food imports. These include tariff and non­tariff
trade barriers, weather conditions,
and both worldwide and domestic supplies.
In 1986 both domestic and world supplies
of red meats were high relative to demand,
and production is expected to increase from
101.7 million tons in 198 5 to 102.6 million
tons in 1987. This should tend to depress
price increases of red meat for several
months.
Fruit and vegetable imports are more sen­sitive
to weather vagaries than most other
food imports. The import consumption ratio
of vegetables rose from 3. 7% to 4.8% between
1980 and 1984. In spite of tariffs and other
trade regulations on tomato imports, the
average real price of fresh tomatoes fell
7.5% since 1980.
The real per-unit value of fresh and
frozen fruit imports rose until 1983 and
then dropped to 1980 levels. The average
real retail price of strawberries reflects
this by peaking in 1982 and then falling,
ending up 4.7% lower in 1985 than in 1980.
The import consumption ratio of total fruit
rose steadily from 26% to 32% over that time.
Fruit juices behaved differently. The
import consumption ratio rose dramatically
from 13% in 1980 to 56% in 1984, dropping
back to 39% by 1985. The real per-unit
import value fluctuated only $0.01 per
pound, but the retail price increased 11%.
Heavy frosts in Florida in 1984 forced a
3 The percent of total consumption of
specific foods that is made up of imports.
large increase in imported citrus juice,
mainly from Brazil. Citrus production in
South America and Australia has increased
since 1984, increasing world supplies. This
should hold down future price increases in
citrus fruits.
Normal or above normal production of table
grapes, peaches, nectarines, and apples
around the world is expected in 1986-87.
Their real prices are not expected to rise.
Fruits that may be in short supply in 1987,
with projected price increases, are pears,
apricots, cherries, and processing tomatoes.
The supply of almonds was diminished by bad
weather in almond-producing areas around
the world, so rising prices can be expected.
Real per-unit import values of wine fell
between 1980 and 1983 and then rose 21%.
Cooking oils' real per-unit value fell over­all,
but was 42% higher in 1984 than before
or after. Most of this was due to big
increases in the per-unit value of coconut
oil during 1984. However, the price of palm
oil may decline in the future because
Colombia is expanding the area devoted to
its production.
The real per-unit import value of sugar
declined 42% over the past 6 years, whereas
the real retail price fell 30%. The price of
sugar, however, is determined largely by
trade restrictions and domestic supply.
In general, the real price of most
imported foods has fallen over the past
6 years. One could interpret this as a
natural outcome of healthy competition, but
other factors come into play. Worldwide
excess supplies of some products tend to
depress prices. Innovations in transporta­tion
and handling, especially with respect
to fresh produce, are lowering costs and
providing consumers with greater variety
and lower prices.
Trade Restrictions and Prices
Every country aspires to be nearly self­sufficient
in food production and is loath
to see its productive capacity eroded by
import competition. The United States, as
well as every other trading country in the
world, has a variety of tariffs and
nontariff barriers to importing food that
competes with domestic production. Although
these trade barriers are designed to serve
1987 No.2 Family Econom1cs Review 2J
many good purposes, lowering the price of
food to consumers is not one of them.
The United States has import tariffs on 82
different categories of supplementary food
imports representing about 36 different
types of food. Of these tariffs, 22% are an
ad valorem" tax; the rest are fixed rates
ranging from 0 .1 cent per pound for fresh
peaches in brine entering during the summer
months, to 35 cents a pound for table pota­toes,
and $1.34 per gallon of champagne­type
wines. Ad valorem tariffs range from
3% on corned beef, to 35% on prepared
apricots (_§_).
Tariffs increase the price of foods on
which they are levied, but they are not
changed often and are not generally a cause
of price fluctuations. Furthermore, tariff
rates have tended to decline over time, and
the use of nontariff trade barriers (quotas,
licenses, and embargos) has increased. The
United States uses absolute quotas to
restrict the quantities of red meat, sugar,
and dairy products being imported. There
are tariff-rate quotas on fluid milk, live
cattle, and (until 1988) seed and table
potatoes. Duties and import fees are fairly
common. A wide variety of domestic regula­tions
that specify grade, size, quality,
maturity, sanitation, health, and labeling
standards for specific food, though not
designed as trade barriers, can act as such.
They raise the costs of importing, but they
also protect the health and safety of
consumers (~).
Import restrictions tend to raise prices
of imported products and lead to retaliatory
measures by trading partners, resulting in
overall diminished volumes of trade. Trade
wars are known to raise consumer prices and,
ultimately, hold down consumer incomes by
slowing the rate of economic growth. Houck
estimated (~_) that restricting imports and
exports in the United States by 25% would
increase the import prices of foods and
beverages by 23% in the short run. The
longrun price for a new mix of domestically
produced and imported foods would increase
0. 5%. Longrun price increases for all
imported agricultural commodities were
similarly estimated to climb over 25%.
4 Imposed at a percent of the value.
z• Family Economics Review 1987 No.2
Several examples of the predicted or
actual impacts of current trade restrictions
on food prices bear examination. For exam­ple,
studies by the World Bank (!.!) estimate
that consumer food prices in the United
States are 17% higher than they would be
without trade restrictions.
Import quotas on beet and cane sugar
clearly illustrate how import restrictions
result in higher food prices. Import quotas
on sugar are set so that only the difference
between domestic demand and domestic pro­duction
is imported. We pay about 20 cents
per pound for imported sugar (the price
deemed necessary to keep the domestic sugar
producers in business), but the world price
is about 6 cents. The difference of 14 cents
times the 1984 domestic sugar consumption of
17.3 billion pounds is $2.4 billion. This
averages $9.50 per household, or about
$3.52 per person per year. This rough cal­culation
is very close to the $2.5 billion
consumer welfare loss estimated by Dardis
(~_). Others have estimated that out of the
extra $2.5 to $2.9 billion U.S. consumers
spend per year for sugar, $1.6 to $1.8
billion is transferred to domestic sugar
producers, $0.5 to $0.66 billion is trans­ferred
to the countries holding the quota
rights, and about $0.5 billion is "lost to
the economic winds" (~_).
Considerable discussion about restricting
imports of casein has taken place. The hope
is that such restrictions would cause casein
users to switch to nonfat dry milk, allevi­ating
some of its excess supply and lowering
Government costs related to the domestic
dairy program. Casein is not produced
profitably in the United States primarily
because of high support prices for nonfat
dry milk. A study conducted by Manchester
and Lipton (i) showed that either a 50%
quota or a 50% ad valorem tax would result
in higher food prices of $66 million and
$180 million respectively. Furthermore, the
ad valorem tax would have little or no
impact on Government costs. A 50% quota
could, however, save between 4% and 14% of
the total $2.2 billion cost of the dairy
program. The higher figure assumes that all
cheese made with casein is replaced by
natural cheese. Coffee whiteners and dessert
toppings use about 20% of the imported
casein. For these products, there is no good
substitute for casein and import quotas on
casein would raise their prices.
With a growing recognition that trade
barriers imposed "at the border" (tariffs,
quotas, and licenses) tend to trigger retal­iation,
domestic production subsidies are
playing a larger role in determining the
flow of trade (.!_). Domestic policies that
subsidize production may actually lower food
prices but can increase taxpayers' costs.
Domestic production quotas, especially when
combined with import quotas, almost certain­ly
raise consumer food prices. F:or example,
a domestic production quota on peanuts keeps
the price of peanuts about three times
higher than the world price. We pay
one-third the price for peanuts produced in
excess of quota, but we do not import
peanuts at this lower price (1).
Consumer gains from imported goods depend
on trading for goods produced in countries
that have a comparative advantage in their
production. Cost savings from specialization
and trade can be passed on to consumers in
the form of lower prices in the absence of
trade barriers. Furthermore, trade provides
an incentive for domestic producers and
processors to improve their technology and
efficiency by adopting lower cost production
methods. This ultimately lowers consumers'
costs. Trade also fosters product innovation
reflecting consumer demand, and generally
increases consumers' choices.
REFERENCES
1. Blackhurst, Richard. 1986. The economic
effects of different types of trade
measures and their impact on consumers.
International Trade and The Consumer.
Report of the 1984 OECD Symposium,
Organization for Economic Cooperation
and Development. (Paris, France.)
2. Dardis, Rachel. 1987. International
trade: The consumer's stake. In
E. Scott Maynes, editor. The Frontier
of Research in the Consumer Interest.
Proceedings of the International
Conference on Research in the Consumer
Interest sponsored by American Council
on Consumer Interests and the Associa­tion
for Consumer Research. (Wingspread
Conference Center, Racine, WI, August
1986.)
3. Houck, James P. 1983. American
households--victors or casualties in
international trade? Proceedings of the
20th Annual Conference of the American
Council on Consumer Interest, pp. 130-
135. (Kansas City, MO, March 1983).
4. Johnson, D. Gale. 1986. Comments on
agricultural trade and development:
Broadening the horizon. United States
Agricultural Exports and Third World
Development: The Critical Linkage,
pp. 220-230. Conference papers and
materials of Agricultural Policy Study
of the Curry Foundation. (Washington,
DC, July 1986.)
5. Manchester, Alden C., and Kathryn L.
Lipton. 1986. Counting the cost of
restricting casein imports. National
Food Review. NFR-34, pp. 8-11. U.S.
Department of Agriculture, Economic
Research Service.
6. Menzie, Elmer L ~ , and Barry E.
Prentice. 1983. Barriers to Trade in
Agricultural Products Between Canada
and the United States. ERS Staff Re­port
AGES-830414. U.S. Department of
Agriculture, Economic Research Service.
7. Milmoe, Stephen R. 1983. Food and fiber
imports. National Food Review. NFR 21,
pp. 10-13. U.S. Department of Agricul­ture,
Economic Research Service.
8. Rossmiller, George E., and Ann
Tutwilwer. 1986. Agricultural trade and
development: Broadening the horizon.
United States Agricultural Exports and
Third World Development: The Critical
Linkage, pp. 191-214. Conference
papers and materials of Agricultural
Policy Study of the Curry Foundation.
(Washington, DC, July 1986).
9. U.S. Department of Agriculture. 1969,
1972, 1982. U.S. Agricultural Foreign
Trade Statistics.
10. , Economic Research Service.
1985. Food Consumption, Prices, and
Expenditures 1964-84. Statistical
Bulletin 736, and selected updated
tables.
11. World Bank. 1986. World Development
Report.
1987 No.2 Family Econom1.cs Revl.ew 25
Financial Well-Being of Farm
Operator Households
Almost one-sixth of all U.S. farming
households had negative total incomes in
1984, whereas about one-ninth had total
incomes of more than $60,000. This disparity
in a year with relatively high farm income
demonstrates the importance of income dis­tribution
in determining the overall finan­cial
well-being of farm operators and their
households. Research findings 1 reported by
Mary Ahearn in a publication from USDA's
Economic Research Service (ERS) indicate
that income was very unequally distributed
among farm households.2 Evidence suggests
that the distribution of income among
farming households has become more unequal
over time, largely because of the structural
changes that have occurred in agriculture.
In 1984 total income (from farm and
off-farm sources) averaged $26,633 for farm
operator households, excluding the value of
inventory adjustment. About three-fifths of
the total income earned by farming house­holds
came from off-farm sources. Most of
the income earned on the farm comes from the
rental value of farm dwellings, home con­sumption
of farm-produced food, and wages
and benefits that operators pay themselves
and their households.
Nearly 40% of farm operator households had
low money income in 1984, defined as below
$10,610. Using the farm operator's major
occupation and level of money income, the
financial positions of the following four
types of farm households are calculated in
the report (see table).
Type I. Nearly 30% of farm operator
households had low money incomes and an
operator· with farming as a major occupation.
Type I households had a negative average
income. The farms of the type I households
1Data from the 1984 Farm Costs and Returns
Survey.
2A relatively high Gini index of 0.60 was
found for farm operator households in 1984.
The Gini index for all U.S. families in 1983
was 0. 38 • The Gini index, which measures the
shape and distribution of income inequality,
takes the value of 0 for perfect equality
and 1 for perfect inequality.
26 Family Economics Review 1987 No.2
had about one-quarter of the farming sector's
sales. Their farm equity was relatively high
with the highest debt-to-asset ratio of the
four types. Average benefits from govern­ment
farm programs were slightly below the
average for all farms. These households have
a great need for Government support pro­grams
because their incomes are low, their
production is relatively high, and their
major occupation is farming.
Type II. About 35% of farm households had
incomes greater than $10,610 and farming as
a major occupation. The sales of type II
operations were more than 60% of the farming
sector's total sales. Type II households had
the highest average income (and the highest
average asset, debt, and equity) of all four
household types. Farm income made the most
significant contribution to their high in­comes.
Off-farm income was derived primarily
from sources such as interest, dividends,
transfer payments, and rental of nonfarm
property, rather than from nonfarm wages
and salaries. The average Government pay­ment
of nearly $4,000 was the highest
received by any household group, although it
made a relatively small contribution to
their total incomes.
Type III. Only about 10% of farm operator
households had low money incomes and an
operator whose major occupation was not
farming. Their sales and expenses were much
lower than type I households, but both types
had negative net farm income. The higher
off-farm income of type III households made
their total income losses less than those of
type I households. Considering their nonfarm
primary occupation, type III households
earned relatively little off-farm income.
Their average equity was below the average
farm operator household's equity. Their
debt-to-asset ratio of 0.16 was relatively
low. These households are only slightly
affected by farm income support programs
because of their low production levels.
Type IV. About one-quarter of farm
households had income levels above $10,610
and an operator with a major occupation
other than farming. This group of house­holds
had a positive farm income and a large
average income from off-farm sources. Their
Average financial position of farm operator housholds based on low-money-income status and major occupation, 1984 1
Major occupation
Item
Fanning Other
Total farm income •••••••••••••••••••••
Business farm income •••••••••••••••••
Gross income ••••••••••••••••••••••••
Expenses ••••••••••••••••••••••••••••
Government farm payment ••••••••••••
Wages paid household members ••••••••
Total off-farm income ••••••••• •• ••••••
Nonfarm wages and salaries •••••••••••
Wages and salaries, other farms ••••••
Business and professional ••••••••••••
Other ••••••••••••••••••••••• •••••••••
Total household income •••••••••••••
Assets ••••••••••••••• •• •• • • • • • • • • • • • • •
Debts ••••••••••••••• • • • •• • • • • • • • • • • • • •
Eq~··••••••••••••••••••!.!••••••••
Low
money incane
Type I
-$17,681
-20,298
53,123
7 3,420
1, 711
906
4,337
1,411
145
530
2,251 - -13,344
314,883
88.211
226,672
Above low
lOOney incane
Type II
$39,438
33,398
125,506
92,108
3,805
2,235
12,439
4,009
198
2,197
6,035
51,877
449,685
97,398
352,286
y
Low Above low
lOOney incane lOOney incane
Type III Type IV
-$18,431 $4,627
-19,589 3,669
24,638 30,734
44,226 27.065
348 495
810 462
6,864 38.544
4,163 23,247
200 103
1,464 11,655
1,036 3,539
-11,567 43,170
240.589 198,343
37,676 29,981
202 ;912 168,362
1 Data from the 1984 Farm Costs and Returns Survey, USDA.
Source: Ahearn, Mary, 1986, Financial Well-Being of Farm Operators and Their Households, Agricultural Economic
Report No. 563, Economic Research Service, U.S. Department of Agriculture.
average farm sales were in the same range as
type III households, but their expenses were
much less. The average total income of type
IV households was second only to type II
households. Their farm assets, debt, equity,
and debt-to-asset ratio are the lowest of
all household types. These households are
relatively unaffected by farm programs
because of their small contribution to
production.
Farm households experience lower incomes
on average than nonfarm households. The gap
between the average income of farm house­holds
and nonfarm households, however, has
lessened somewhat over time as a result of
the increases in off-farm income. Farm
households have a higher proportion of
households in both the lowest and highest
income groups than do nonfarm households.
Another difference in the financial well-being
of farm and nonfarm households is
evident in the income-to-equity relation­ships.
Farm households tend to have smaller
income-to-equity ratios than do nonfarm
households, indicating that farm households
are apt to have more wealth at lower income
levels or, conversely, that their wealth is
likely to earn them less -income than nonfarm
households.
The ERS report also contains definitions
of types of incomes, descriptions of dif­ferent
groups of people who are associated
with farms, and guidelines for comparing the
financial well-being of nonfarm and farm
households. Numerous tables also permit
comparisons of farm household income classes
by sources of income, agricultural product
sales, region, type of production, farm
equity classes, and debt-to-asset ratios.
Source: Ahearn, Mary, 1986, Financial
Well-Being of Farm Operators and Their
Households, Agricultural Economic Report
No. 563, Economic Research Service, U.s.
Department of Agriculture.
19!!7 No.2 Family Economics Review 27
New Publications
The following are for sale from the Super­intendent
of Documents, U.S. Government
Printing Office, Washington, DC 20402,
(202) 783-3238:
Food Consumption, Prices, and Expendi­tures,
1985. SB749. January 1987.
SN001-019-00499-1. $5.50.
Research for Tomorrow: 1986 Yearbook of
Agriculture. January 1987. SN001-000-
04472-9. $9.50.
1986 Agricultural Chartbook--Enlarge­ment
version (black and white charts,
each on an 8- by 10-inch page).
SN001-019-00487-8. $15.00.
* * * * * *
The following are available from the
Consumer Information Center, P.O. Box 100,
Pueblo, CO 81002, (303) 948-3334:
A Woman's Guide to Spcial Security.
What women should know about benefits
upon retirement, disability, widowhood,
or divorce. Revised September 1986.
15 pp. (SSA) 512R. Single copy free.
The Mortgage Money Guide. Handy guide
to different types of mortgages and loan
financing options; includes information
on refinancing. 16 pp. Revised 1986.
(FTC) 129R. $1.00.
Employment of Retired-Worker
Women1
As part of the Social Security Adminis­tration's
New Beneficiary Survey, retired
women and men were interviewed in October
to December 1982--18 to 30 months after
they first received Social Security retired­worker
benefits. The experience of the
women retired -worker beneficiaries,
1 Data from the New Beneficiary Survey,
October-December 1982.
28 Family Economics Review 1987 No.2
particularly their past and present employ­ment,
is the focus of a 1986 Social Security
Administration report. 2
The Social Security program does not
require complete withdrawal from the labor
force as a condition of retired -worker bene­fit
receipt; many persons work part time or
full time for pay after they begin to col­lect
Social Security benefits. Monthly bene­fit
amounts are reduced by $1 for each $2
earned in excess of a specified exempt
amount, which is indexed to reflect any rise
in overall wages. About one-fifth of the new
beneficiary women were working 18 to 30
months after first receipt of Social Secu­rity
retired-worker benefits (see table).
Among women retired workers, unmarried
women were more likely than married women
to be working, 28% compared with 18%.
Employment rates for unmarried women were
dramatically higher when unearned income
was low; 46% of those women whose income
was less than $500 monthly were working,
compared with about 16% of those whose
monthly income was $1, 000 or more.
Married women who began receiving' bene­fits
at age 62 (about one-half of all women
with retired-worker benefits) differed from
other retired-worker women. Only 14% were
employed at the time of the interview. Of
these women, 43% had left their last job
more than 3 years before age 62, and 14%
had done so 1 to 3 years prior to that age.
In contrast, unmarried women and wives
whose first receipt of benefits was at age
63 or older were not likely to stop work
before receiving benefits, and about 30%
were still employed. Married women were
more likely to be working if their spouse
was working than if the husband was
retired (about 26%, compared with 14%) •
2 About three-fifths of all beneficiary
women age 62 and older receive Social Secu­rity
benefits based on their own earnings
record. The report excludes wives or widows
who receive benefits based only on their
husband's earnings record. The employment
rates of women retirees were similar to
those of widow beneficiaries but higher than
those of wife beneficiaries.
Women receiving their first Social Security retired-worker benefits in June 1980 to May 1981, by age
and marital status 1
Age at benefit receipt
(years)
Total number (thousands) •••••••••••••••••••
62 ...•.....••.••••••.••••...•..•....•..••.
63-64 ..•.•...........................•...•
6 5 or older •..•.............•... ; ......... .
Total ................ • • . • • • · · · · • · • • • • · · · ·
62 •••••••••.•.••..•.....•.••..••.••.•....•
63-64 ................•.......•.....•......
65 or older ••••••••••••••••••••••••••••••••
Total . .............. · · · · · • · · · • • • · • • • • • · • ·
Total
551.7
62.8
22.2
14.9
100.0
16.0
27.8
32.5
21.1
Marital status
Married
368.3
Percent distribution
49.6
12.1
5.1
66.8
Employment rates
13.8
25.9
33.3
17 .5
Urnlarried
183.4
13.3
10.2
9.8
33.2
24.3
30.0
32.2
28.4
1 Data from the New Beneficiary Survey, October-December 1982.
Source: lams, Howard M., 1986, Employment of retired-worker women, Social Security Bulletin
49(3):5-13, U.S. Department of Health and Human Services, Social Security Administration.
Women's employment rates varied markedly
by the occupation of the longest held job.
New beneficiaries from the service occupa­tions
were the most likely to be working
(about 32%). Within this group, private­household
workers had the highest
employment rates (about 47%). Women in
manual/blue collar positions were the least
likely to be employed after first benefit
receipt (about 14%). Of women in other
occupations, 19% to 31% were working at the
time of the survey.
Only 30% of all women respondents received
a pension. 3 These women were much less
likely to be working (9%) than were those
who had no pension income (26%). Among
unmarried women, 10% of those receiving
pensions were working, compared with 42%
of those without pension income.
3 Pension income could be from a private
plan provided by the employer or union, or
from a public plan for Federal civilian
workers, military personnel, State, or local
workers.
Women with no reported health limitations
were slightly more likely than other women
retirees to be employed--25%, compared with
17% of those with walking or grasping
limitations, and 21% of those with other
limitations •4 Regardless of their health
status, women without pension income were
much more likely to be working than women
who received pension income. Within each
limitation group, women without pensions
were two to three times more likely to be
working than those with pensions.
4 As part of the survey, women retirees
were asked to evaluate the degree of diffi­culty
they would have in performing such
activities as walking, grasping, climbing
stairs, and lifting. About 37% reported
limitations in walking or grasping, and 27%
had other functional limitations. About 35%
reported no difficulty with the activities.
Source: lams, Howard M. 1986, Employment
of retired-worker women, Social Security
Bulletin 49(3):5-13, U.S. Department of
Health and Human Services, Social Security
Administration.
1987 No.2 Fam i ly Econom ics Re v 1ew 29
Updated Estimates of the Cost of Raising a Child
The cost of raising urban children: 1986 annual average; moderate-cost level 1
Region and
age of child
(years)
MIDWEST: 5
Under 1 •••••••••
1 ............... .
2-3 ••••••••••••••
4-5 ............ ..
6 ............... .
7-9 ............ ..
10-11 ••••••••••••
12 •••••••••••••••
13-15 .......... ..
16-17 .......... ..
Total ••••••••••
NORTHEAST:
Under 1 ........ .
1 .............. ..
2-3 ••••••••••••••
4-5 ••••••••••••••
6 .............. ..
7-9 ••••••••••••••
10-11 ••••••••••••
12 .............. .
13-15 ••••••••••••
16-17 .......... ..
Total
SOUTH:
Under 1 ....... ..
1 ............... .
2-3 ••••••••••••••
4-5 ••••••••••••••
6 ............... .
7-9 •• , •••••••••••
10-11 .......... ..
12 .............. .
13-15 ••••••••••••
16-17 ••••••••••••
Total
WEST:
Under 1 ........ .
1 ............... .
2-3 ••••••••••••••
4-5 ••••••••••••••
6 .............. ..
7-9 ••••••••••••••
10-11 ••••••••••••
12 ............. ..
13-15 ••••••••••••
16-17 ••••••••••••
Total ••••••••••
Total
$4,526
4,659
4,337
4,596
4,817
5,004
5,191
5,535
5,669
6,212
92,228
4,489
4,650
4,528
4,787
5,162
5,349
5,589
5,922
6,082
6,515
97.354
4,930
5,064
4,747
4,979
5,301
5,461
5,675
6,043
6,203
6 651
100,434
4,857
5,017
4,762
5,050
5,445
5,632
5,872
6,188
6,322
6,929
102,595
$588
721
721
828
801
988
1,175
1,202
1,336
1,496
18.724
694
855
828
935
935
1,122
1,362
1,362
1,522
1,683
21,394
641
775
748
828
828
988
1,202
1,202
1,362
1 496
19,044
641
801
775
881
855
1,042
1,282
1,282
1,416
1,603
20,035
Food
away
frcm
hane
$0
0
0
152
152
152
152
182
182
182
2,308
0
0
0
152
182
182
182
182
182
212
2,548
0
0
0
152
182
182
182
212
212
212
2,668
0
0
0
182
212
212
212
212
212
242
2,968
Clothing
$142
142
231
231
320
320
320
463
463
640
6,260
142
142
249
249
338
338
338
498
498
623
6,546
160
160
249
249
338
338
338
498
498
640
6,616
142
142
231
231
338
338
338
480
480
605
6,366
Housing 3 Medical
$1,961
1,961
1, 723
1,723
1,634
1,634
1,634
1,693
1,693
1 753
30,896
1,991
1,991
1,812
1,812
1,783
1, 783
1, 783
1,842
1,842
1 872
33,040
2,109
2,109
1,872
1,872
1,783
1,783
1, 783
1,842
1,842
1 901
33,574
2,050
2,050
1,842
1,842
1,812
1,812
1,812
1,872
1,872
1,961
33,750
care
$322
322
322
322
322
322
322
322
322
322
5, 796
322
322
322
322
322
322
322
322
322
322
5,796
357
357
357
357
357
357
357
357
357
357
6,426
393
393
393
393
393
393
393
393
393
393
7,074
Educa­tion
$0
0
0
0
152
152
152
152
152
152
1,824
0
0
0
0
190
190
190
190
190
190
2,280
0
0
0
0
228
228
228
228
228
228
2, 736
0
0
0
0
190
190
190
190
190
190
2,280
Transpor- All
tat ion other•
846
846
737
737
737
737
737
791
791
873
13,972
737
737
682
682
682
682
682
764
764
819
12,988
901
901
791
791
791
791
791
846
846
928
14,952
901
901
791
791
819
819
819
901
901
982
15,448
667
667
603
603
699
699
699
730
730
794
12,448
603
603
635
635
730
730
730
762
762
794
12,762
762
762
730
730
794
794
794
858
858
889
14,418
730
730
730
730
826
826
826
858
858
953
14,674
1 Annual cost of raising a child from birth to age 18, by age, in a husband-wife family with no more than 5 children.
For more information on these and additional child cost estimates, see USDA Miscellaneous Publication No. 1411, "USDA
Estimates of the Cost of Raising a Child: A Guide to Their Use and Interpretation," by Carolyn S. Edwards, Family
Economics Research G!"oup, Agricultural Research Service, USDA.
2 Includes home-produced food and school lunches.
3 Includes shelter, fuel, utilities, household operations, furnishings, and equipment .
• Includes personal care, recreation, reading, and other miscellaneous expenditures.
5 Formerly the North Central Region.
JO Family Economics Review 1987 No.2
The cost of ratstng rural nonfarm children: 1986 annual average; moderate-cost level 1
Region and
age of child
(years)
MIDWEST: 5
Under 1 •••••••••
1 .............. ..
2-3 ••••••••••••••
4-5 ••••••••••••••
6 .............. ..
7-9 ............ ..
10-11 ••••••••••••
12 •••••••••••••••
13-15 ••••••••••••
16-17 ••••••••••••
Total ••••••••••
NORTHEAST:
Under 1 ........ .
1 .............. ..
2-3 ••••••••••••••
4-5 ••••••••••••••
6 .............. ..
7-9 ............. .
10-11 ••••••••••••
12 .............. .
13-15 ••••••••••••
16-17 ••••••••••••
Total
SOUTH:
Under 1 ........ .
1 .............. ..
2-3 ............ ..
4-5 ••••••••••••••
6 .............. ..
7-9 ............ ..
10-11 ••••••••••••
12 .............. .
13-15 ••••••••••••
16-17 ••••••••••••
Total
WEST:
Under 1 ........ .
1 .............. ..
2-3 ............ ..
4-5 ••••••••••••••
6 .............. ..
7-9 ............ ..
10-11 ••••••••••••
12 .............. .
13-15 ••••••••••••
16-17 .......... ..
Total ........ ..
Total
4,275
4,409
3,920
4,148
4,498
4,658
4,872
5,237
5,370
5 766
85,915
4,963
5,097
4,867
5,156
5,555
5,715
5,955
6,311
6,472
7 027
104,497
5,121
5,228
4, 739
5,028
5,256
5,417
5,630
6,043
6,177
6,697
100,618
5,328
5,462
4,932
5,221
5,648
5,835
6,049
6,463
6,623
7,247
107,173
Food
at
hane 2
534
668
641
748
748
. 908
1,122
1,122
1,255
1,389
17,361
641
775
748
855
855
1,015
1,255
1,255
1,416
1 576
19,687
641
748
721
828
801
962
1,175
1,175
1,309
1,469
18,564
641
775
748
855
828
1,015
1,229
1,229
1,389
1,576
19,501
Food
away
frcrn
hane
0
0
0
121
152
152
152
152
152
182
2,126
0
0
0
182
212
212
212
212
212
242
2,968
0
0
0
182
182
182
182
212
212
242
2,788
0
0
0
182
182
182
182
212
212
242
2,788
Clothing Housing3 Medical
care
125
125
196
196
302
302
302
463
463
569
5,836
142
142
231
231
338
338
338
516
516
676
6,652
160
160
249
249
338
338
338
516
516
729
6,866
142
142
231
231
356
356
356
534
534
623
6,726
1,872
1,872
1,575
1,575
1,545
1,545
1,545
1,604
1,604
1 634
28,998
2,109
2,109
1,931
1,931
1,901
1,901
1,901
1,961
1,961
2 020
35,232
2,109
2,109
1,812
1,812
1, 753
1,753
1, 753
1,812
1,812
1,842
32,916
2,139
2,139
1,842
1,842
1,812
1,812
1,812
1,872
1,872
1,991
33,988
322
322
286
286
286
286
286
286
286
322
5,292
322
322
322
322
322
322
322
322
322
322
5,796
357
357
357
357
357
357
357
357
357
357
6,426
393
393
357
357
393
393
393
393
393
393
6,930
Educa­tion
0
0
0
0
152
152
152
152
152
152
1,824
0
0
0
0
228
228
228
228
228
228
2,736
0
0
0
0
190
190
190
190
190
190
2,280
0
0
0
0
228
228
228
228
228
228
2, 736
Transpor- All
tation other'
819
819
682
682
710
710
710
791
791
819
13,428
955
955
873
873
873
873
873
928
928
010
16.372
1,092
1,092
901
901
873
873
873
955
955
1,010
16,866
1,092
1,092
928
928
928
928
928
1,010
1,010
1,146
17,796
603
603
540
540
603
603
603
667
667
699
11,050
794
794
762
762
826
826
826
889
889
953
15,054
762
762
699
699
762
762
762
826
826
858
13,912
921
921
826
826
921
921
921
985
985
1,048
16.708
1 Annual cost of raising a child from birth to age 18, by age, in a husband-wife family with no more than 5 children.
For more information on these and additional child cost estimates, see USDA Miscellaneous Publication No. 1411, "USDA
Estimates of the Cost of Raising a Child: A Guide to Their Use and Interpretation," by Carolyn S. Edwards, Family
Economics Research Group, Agricultural Research Service, USDA.
2 Includes home-produced food and school lunches.
3 Includes shelter, fuel, utilities, household operations, furnishings, and equipment.
'Includes personal care, r ecreation , reading, and other miscellaneous expenditures.
5 Formerly the North Central Region.
1987No.2 Family Economics Rev1ew 31
....
N
..,
Ill
3 ....... .
'< ,.,
(')
0
~
0
3 .....
(')
g)
::»
til
<.... .
til s:
~
CD -..
z
.0
N
Cost of food at home estimated for food plans at 4 cost levels, February 1987, U.S. average 1
Cost for 1 week Cost for 1 month
Sex-age group
Thrifty Low-cost M:>derate- Liberal Thrifty Low-cost M:>derate- Liberal
plan plan cost plan plan plan plan cost plan plan
FAMILIES
Family of 2: 2
20-50 years •••••••••••••••••••••••• $39.40 $49.SO $61.70 $76.60 $170.SO $215.SO $267.20 $331.90
51 years and over •••••••••••••••••• 37.30 47.70 59.20 70.SO 161.60 207.10 256.30 307.10
Family of 4:
Couple, 20-50 years and children--
1-2 and 3-5 years •••••••••••••••• 57.20 71.60 S7.70 107.60 24S.20 310.10 379.90 466.60
6-S and 9-11 years ••••••••••••••• 65.70 S4.20 105.50 127.10 2S4.70 364.SO 457.10 550.SO
INDIVIDUALS 3
Child:
1-2 years .......................... 10.30 12.50 14.60 17.60 44.60 54.30 63.40 76.40
3-5 years •••••••••••••••••••••••••• 11.10 13 .so 17 .oo 20.40 4S.30 59.60 73.60 SS.50
6-S years •••••••••••••••••••••••••• 13.70 1S.20 22.SO 26.60 59.20 7S.90 9S.SO 115.40
9-11 years ......................... 16.20 20.70 26.60 30.90 70.20 S9.70 115.40 133.70
Male:
12-14 years ........................ 17 .oo 23.50 29.30 34.40 73.50 101.70 127 .00 149.10
15-19 years ........................ 17.60 24.30 30.20 35.00 76.20 105.30 130.SO 151.50
20-50 years •••••••••••••••••••••••• lS .so 24.10 30.30 36.50 S1.60 104.20 131.10 15S .30
51 years and over •••••••••••••••••• 17.10 22.90 2S .30 33.90 74.10 99.30 122.50 147.00
Female:
12-19 years ........................ 16.90 20.30 24.70 29.90 73.00 SS.lO 107.00 129.40
20-50 years •••••••••••••••••••••••• 17.00 21.20 25.SO 33.10 73.70 92.00 111.SO 143.40
51 years and over ••••••••••••••••• 16.SO 20.50 25.50 30.50 72.SO S9.00 110.50 132.20
1 Assumes that food for all meals and snacks is purchased at the store and prepared at home. Estimates for the thrifty food
plan were computed from quantities of foods published in Family Economics Review, 19S4(1). Estimates for the other plans were
computed from quantities of foods published in Family Economics Review, 19S3(2). The costs of the food plans are estimated by
updating prices paid by households surveyed in 1977-7S in USDA's Nationwide Food Consumption Survey. USDA updates these
survey prices using information from the Bureau of Labor Statistics, CPI Detailed Report, table 3, to estimate the costs for
the food plans.
2 10 percent added for family size adjustment. See footnote 3.
3 The costs given are for individuals in 4-person families. For individuals in other size families, the following adjustments
are suggested: 1-person--add 20 percent; 2-person--add 10 percent; 3-person--add 5 percent; 5- or 6-person--subtract
5 percent; 7- or more-person--subtract 10 percent.
()
~
9.
~
0
0. a
i
Consumer Prices
Consumer Price Index for all urban consumers [ 1967 = 100, unless otherwise noted]
Group
All items ................................... .
Food .••.••••.•.........•••••••••••••..•.•.
Food at home ........•.••. ...•••.•••...•.
Food a way from home ••••••••••••••••••••
Housing .•.•..•.......•...••.............•.
Shelter .................... .............. .
Renters' costs 1
••••••••••••••••••••••••
Rent, residential ••••••••••••••••••••
Homeowners' costs 1
••••••••••••••••••••
Maintenance and repairs •••••••••••••••
Maintenance and repair services •••••
Maintenance and repair commodities ••
Fuel and other utilities •••••••••••••••••
Fuel oil and other household fuel
com modi ties •••.•••••••••••.••••••••••
Gas (piped) and electricity ••••••••••••
Household furnishings and operation •••••
Housefurnishings ..................... .
Housekeeping supplies •••••••••••••••••
Housekeeping services •••••••••••••••••
Apparel and upkeep •••••••••••••••••••••••
Apparel com modi ties •••••••••••••••••••••
Men's and boys' apparel •••••••••••••••
Women's and girls' apparel ••••••••••••
Infants' and toddlers' apparel _ •••••••••
Footwear ..••......•..•.....•.......•••
Apparel services ....................... .
Transportation ........................... .
Private transportation •••••••••••••••••••
New vehicles ......................... .
Used cars .....•...•....•......•.......
Motor fuel .....•••...................... •
Maintenance and repairs •••••••••••••••••
Public transportation ••••••••••••••••••••
Medical care ......•.......•......... • • • · · · •
Medical care commodities •••••••••••••••••
Medical care services ••••••••••••••••••••
Professional services ••••••••••••••••••
Entertainment ..............•...••.. • • · · • • ·
Other goods and services ••••••••••••••••••
Personal care •••.....•...•.••....•••..••.
Personal and educational expenses •••••••
1 Indexes based on December 1982 = 100 base.
Feb.
1987
334.4
330.1
316.6
369.6
365.1
414.0
125.8
288.0
122.5
381.9
436.1
278.8
374.8
2 503.2
428.9
253.5
203.2
325.3
350.6
208.4
192.1
199.9
167.8
304.5
211.0
343.2
310.0
301.3
229.9
356.9
288.1
373.0
439.8
452.4
283.9
489.6
406.8
278.7
359.7
296.4
452.0
Uriadjusted indexes
Jan. Dec.
1987 1986
333.1
328.9
315.2
368.6
363.9
412.3
125.3
287.1
122.0
382.1
437.7
277.7
373.7
2 487.9
428.8
253.1
203.0
324.6
349.8
207.1
190.9
199.2
166.6
301.8
209.9
342.5
308.5
299.8
232.3
354.6
275.8
371.3
438.9
449.6
282.4
486.5
403.7
278.3
358.1
295.7
450.6
331.1
325.2
310.2
367.1
362.1
410.4
124.2
286.0
121.6
380.0
433.1
278.3
371.0
460.6
425.3
252.4
202.5
322.9
349.3
210.9
194.9
202.3
171.7
312.7
214.0
339.5
304.8
295.9
231.7
356.6
261.9
370.7
437.5
446.8
280.8
483.4
401.0
277.4
355.2
293.6
448.8
2 Includes wood, charcoal, and peat, not previously priced •
Source: U.S. Department of Labor, Bureau of Labor Statistics.
Feb.
1986
327.5
315.3
301.5
354.2
356.5
394.8
119.0
273.7
117 .o
379.6
432.8
277.8
390 .o
591.2
444.5
249.0
199.7
318.6
344.5
204.1
188.5
196.8
163.4
311.6
207.9
330.7
319.2
312.2
220.2
370.7
351.5
358.9
422.2
422.3
267.4
456.2
381.6
272 .o
340.3
289.1
417.7
1987 No.2 Family Economics Rev1ew :n
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