Family Economics Review [Dec. 1961]

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Consumer and Food Economits Research Division, Agricultural Research Servi•·•·~
UNIT ED STATES DEPARTMENT OF AGRICULTURE ~mmmrJi!illiii!ii!~ill~~~~r~
Prepared· for home demonstration agents and home economics specialists of the
Agricultural Extension Service, this publication reports current developments
in family and food economics, and economic aspects of home management.
~ I
ANNUAL OUTI.DOK ISSUE
LIBRARY Of GE OF
THE woMAN'S ~TH CAROUNA
,.HB UNIVERSiTY OORF 0 N.C.
c:a.E.ENSB •
CONTENTS
NATIONAL ECONOMIC OUTI.DOK FOR 1962 .•..•.•..•............ ·· 3
OUTI.DOK FOR FAMILY LIVING ....•.•....•...... · · .•. · · · · · · · · · · 5
OUTI.DOK FOR SUPPLIES AND PRICES OF FOOD .... ... ......... ... 7
OUTI.DOK FOR CLOTHING AND TEXTILES ........... ··········· ·· · 9
OUTI.DOK FOR SUPPLIES AND PRICES OF HOUSING
AND HOUSEHOLD EQUIPMENT ...............•......... ........ 16
OUTLOOK FOR MEDICAL CARE COSTS IN 1962 ....... .•........... 24
ESTIMATED COST OF l WEEK'S FOOD .....•.........•........... 28
CONSUMER PRICES .....••..............• · · · · · • · · · · · • · · · · · · · · · 30
ARS 62-5
December 1961 Washington, D. C.
The articles making up this issue of
Family Economics Review are condensations
of talks given at the 39th Annual National
Agricultural Outlook Conference, held in
Washington, D. C., November 13-16, 1961.
NATIONAL ECONOMIC OUTLOOK FOR 1962
Rex F. Daly
Economic Research Service
Economic activity has rebounded rather sharply this year from the 1960-61
recession low reached in the first quarter as spending increased in major
segments of the economy. While the cyclical recovery so far is about average,
it has left a relatively high level of unemployment. The 1960-61 recession
was the fourth, the mildest, and the shortest recession in the postwar period.
Further increases in Government spending, business outlays for new capital,
and consumer buying point to a continued expansion in economic activity in
1962. Demand increases indicated for the coming year would push the economy's
gross product to a level around 8 percent or so above the current rate. Such
a pickup in business activity would take up much of the slack existing in the
economy without resulting in significant increases in the general level of
prices.
The advance in total personal incomes in 1961 followed a year of relative
stability. Real disposable income per person, after allowing for price change,
has risen an average of 2.5 percent from the first to the third quarter this
year. Increases in output and employment indicated for 1962 are expected to
lead to a substantial gain in consumer income. With relatively stable prices
and continued population growth, the stage is set for a stronger domestic
market in 1962 for food and goods and services in general.
It appears that spending by Federal, State, and local Governments will
increase more in 1962 than in the past year. The 1962 Budget Review released
in October estimates budget expenditures for fiscal 1961-62 at $89 billion,
$7.5 billion above 1960-61. Budget receipts are expected to rise about
$4.5 billion to $82.1 billion. The result is a budget deficit of $6.9 billion,
compared with $3.9 billion in 1960-61.
National security, international and space program requirements account
for about two-thirds of the estimated $7.5 billion increase in budget expendi­tures.
Agricultural programs and Health, Education, and Welfare activities
require about a fourth of budgeted expenditure increases.
Federal expenditures for goods and services may rise around $7 billion in
the coming year from about $57 billion in the third quarter this year. This
increase would be more than double that during the previous year. In addition,
the uptrend in expenditures by State and local Governments to provide schools
and other facilities for a growing urban population may add as much as
$4 billion to the increase in Government demands for goods and services. If
the recovery continues in 1962 as expected, both Federal and State and local
Government revenues will rise. By the first half of 1962, the Federal trans­actions
in the income and product accounts will likely turn to a surplus.
Even though a deficit may continue on the State and local Government trans-
-4-
actions, there would be a substantial over-all reduction from the large deficit
existing in the first half of 1961. This shift would tend to dampen the impact
of rising Government expenditures on national output.
The pickup in business outlays for new plant and equipment now underway
will likely continue in 1962. Business spending for new plant and equipment
rose about 4 percent in the third quarter of 1961 and is scheduled to rise
another 3 percent in the fourth quarter, according to the latest Securities
and Exchange Commission-Commerce Department survey of business investment
plans. Construction contracts for nonresidential building have increased more
than a third since February. Manufacturers' new orders for durable goods in
September were up 22 percent and production of durables 12 percent from their
lows early in 1961. As demands on the economy increase, rising output will
stimulate capital expansion in many industries in the coming year. Investment
outlays for new products and for cost-reducing types of investment are also
expected to add to capital spending . Possibly of greatest importance in
contributing to the confidence of businessmen, as well as to their ability to
invest, was the 14 percent increase in corporate profits in the second quarter
of 1961 and the prospects for further gains this year and in 1962 . Although
operating rates will rise as output increases, excess productive capacity may
be a moderating influence on the expansion plans of some industries in 1962 .
Substantial idle plant capacity still exists in a number of major industries.
The rise in residential construction this year will likely extend into
1962, though increases may be moderate . Private housing starts changed little
from June to September following the moderate increase from reduced levels at
the close of 1960. Despite relatively high vacancy rates, apartment construc­tion
is setting a new high, accounting for close to a fourth of all housing
starts in 1961. Single-family starts so far this year are down about 8 per­cent
from a year earlier. While interest rates on home mortgages are rela­tively
high, consumer incomes are rising and Government policies are directed
toward an easing of repayment terms and limiting increases in mortgage inter­est
rates.
Inventories were worked down during the 1960-61 recession and business
sales in general have expanded contributing to reduced stock-sales ratios .
Some further buildup in business inventories can be expected as economic
activity expands. However, much of the main impact of inventory changes on
total demand and on economic activity has already occurred .
If indicated increases in nonconsumption spending materialize, they will
contribute to further gains in output, employment and consumer incomes . Recent
relatively high personal savings and declines in installment credit outstanding
also place the consumer in a better position to buy . Increases in consumer
buying, consequently, are expected to be fairly general. A bigger auto year
is in prospect for 1962. Larger sales of other durable and nondurable goods
are indicated and the uptrend in expenditures for services will continue .
Developments in 1960-61
-5-
OUTLOOK FOR FAMILY LIVING
Laura Mae Webb
Agricultural Research Service
From the viewpoint of family living the most significant developments
this year have been the rapid increase in total disposable personal income
in the last two ~uarters; the sharp advance in the realized net income of
farm operators for the year as a whole; and the small increase in retail
prices over the past 12 months.
Prices paid for goods and services used by families, as measured by the
Consumer Price Index, increased about 1 percent during the year ending
September 1961. This was at about one-half the annual average rate of in­crease
of the preceding 6 years, and all the major categories shared in the
slowing down in the rate of increase.
When retail price changes are taken into account, consumer income per
person in the United States will show a small gain over last year, while the
buying power of farm families taken as a whole will show a very appreciable
increase due to the marked improvement in farm income.
Prices for services have advanced much more sharply than have prices
for commodities in recent years, and family spending patterns in the economy
as a whole have shown an increase in the proportion of expenditures for
services during the past decade. This increase in spending for services is
substantially more than can be accounted for by increased charges for such
services . In terms of constant dollars, personal consumption expenditures
for services have increased about 26 percent between 1955 and 1960, compared
with 11 percent for commodities.
Outlook for 1962
Prices for services will probably continue to rise, at least in the
near future, and this upward trend will be mainly responsible for a further
small advance in the Consumer Price Index during the coming year. Consumer
incomes are expected to continue to rise in 1962, resulting in a substantial
gain in real consumer income per person. However, the buying power of farm
families may not change appreciably from this year's level. Consumer prices
are expected to show a small increase relative to realized net income of
farm operators , but this may be offset in part by larger opportunities to
supplement farm income by nonfarm earnings and by further contractions in
the size of the farm population.
-6-
Many families are seeking ways to reduce expenditures for services, or
to protect themselves against unusual outlays. In the area of medical care,
for example, for which prices in urban areas have advanced 26 percent since
September 1955, an increasing number of families are taking out medical
insurance. According to the Public Health Service, 67 percent of U.S. fami­lies
had hospital insurance, 62 percent had surgical insurance, and 19 per­cent
had doctor visit insurance in 1959. This is an area where differences
between farm and urban levels of living persist. A substantially smaller
proportion of farm families had such insurance than did rural nonfarm and
urban families. Yet at the same time, farm families have as much or more
need for medical care services than do other groups in the population. This
is indicated by the relatively high incidence of chronic illness among farm
people.
Government action in two areas--housing and social security--will con­tribute
to a better level of family living next year and in subsequent years.
Under the Housing Act of 1961, many families will find it easier to
obtain loans to repair or remodel their present homes or acquire new ones in
the coming year. Some of the provisions have special application to rural
areas. The Farmers Home A&ninistration is now authorized to make loans to
families living in rural areas, even though not engaged in farming. Many of
these families are not served by other housing programs and cannot qualify
for credit from conventional sources. This bill also provides that a small
loan to modernize or repair a farm dwelling may be made without requiring a
mortgage on the farm, thus cutting down loan closing costs and speeding up
loan making. Another feature of this bill that may lead to an improvement
in the living conditions for many low-income rural families is that loans
may be used to provide necessary wells for household water. The authority
to make a loan for constructing a new farm dwelling or for construction
improvements on an existing one is continued.
Many older families, a group that is likely to be especially affected
by rising service costs, will benefit in the coming year from several amend­ments
to our social security law, effective August 1961. The minimum
benefit paid most workers over 65 has been raised from $33 per month to $40;
most aged widows' benefits have been increased by 10 percent. For the second
successive year, the amount of money a beneficiary can earn without a com­mensurate
loss of benefits has been raised. Men may now choose to have their
old-age benefits start at 62, rather than wait until they are 65; women have
had this privilege since 1956. However, lower retirement benefits are paid
to men and women who retire before they are 65.
The many families subject to social security taxes--whether as employees,
employers, or self-employed--will find these taxes slightly higher beginning
in January 1962. Taxes will go up from 3 to 3-1/8 percent for employees and
employers and from 4.5 to 4.7 percent for self-employed people.
-7-
OUTLOOK FOR SUPPLIES AND PRICES OF FOOD
Robert J. Lavell
Economic Research Service
In 1962 we expect a larger volume of food available for consumption than
in 1961. This will include greater variety and new fonns, and many foods will
be more available than in the past. With average growing conditions, produc­tion
of food from crops should be about the same in 1962 as this year. Live­stock
production is expected to continue the upward trend through 1962.
Population will continue to increase at about the same rate and expanding
economic activity points to a continued rise in consumer incomes. These two
factors should bring increased expenditures for food. But with the abundant
supplies of livestock products and food crops we expect next year, average
retail food prices are not expected to rise much in 1962. What increase there
may be--possibly up to l percent--will come mostly from higher marketing costs
because of increased wage rates, higher transportation costs, and more market­ing
services which we will be demanding.
Meat production in 1962 probably will increase enough over this year's
level~permit a small increase in per capita consumption. Nearly all of
this increase will be in pork. Pork production will likely exceed year­earlier
levels throughout the year. The larger fall pig crop now being
farrowed assures larger supplies during the first half of 1962. Slaughter
during the last half will depend upon next spring's farrowings, for which
some increase seems likely. It appears that cattle producers will continue
to increase inventories during 1962, so the increase in beef slaughter will
be only slightly more than the population growth. Production of veal is
expected to be about the same or slightly larger than this year's, yielding
less per person. Smaller lamb and mutton supplies are likely in 1962. Part
of this year's slaughter came from ewe lambs originally intended for breeding
purposes, which lowered the productive potential of our sheep flocks.
Little change is expected in 1962 in average retail prices for meat over
the 1961 level. The somewhat larger meat supply per capita probably will be
largely offset by an increase in demand for meat stemming from the larger
population and higher incomes.
Supplies of poultry will continue plentiful. The per capita supply of
broilers for the whole of 1962 may be a shade below 1961. Broiler prices in
the first few months may average a little below the same period of 1961.
Turkey supplies in the first half of 1962 are expected to remain at levels
close to those of this year. Though the turkey crop next year may be down
somewhat, the carryover of frozen stocks into 1962 will be well above a year
earlier . A Marketing Agreement and Order program may influence the size and
marketing of the main-season 1962 turkey crop, and hence prices.
-8-
Egg production is likely to exceed year-before production well into the
spring of 1962. The outlook is for first ~uarter retail prices to remain
below the corresponding months' prices of a year earlier.
Supplies of dairy products in 1962 will exceed re~uirements by a wider
margin than in any year since 1954. Commercial demand for dairy products in
1961, especially butter and fluid whole milk, showed more weakness than in
the preceding 3 years, despite higher consumer incomes . Substantially larger
donations from Commodity Credit Corporation stocks arrested the decline in
consumption per capita of butter at about the 1960 level. Cheese was the only
bright spot in the dairy consumption picture this year, showing another in­crease
in its consumption rate .
Plentiful supplies of dairy products will tend to keep retail prices
through 1962 at about year-earlier levels . As in recent years, consumers will
realize some decline in the average per unit cost of dairy products as they
switch to (1) items with lower fat content, such as from ice cream to ice milk,
(2) store purchases as opposed to home deliveries, and ( 3) purchases in larger
containers, such as from ~uarts of milk to half gallons and gallons .
For the l961-62 marketing season of edible fats and oils, current indi­cations
are that total supplies, including oilseed, will set a new record,
about 15 percent larger than last year's supplies. The increase is due mainly
to the record 1961 soybean crop, though supplies of lard and butter will also
be slightly greater. Prices of a few vegetable oil food products likely will
continue higher than in 1960, because of higher support prices for oil crops.
Retail prices of most food fat products in 1962 will not differ much from
this year's.
Total supplies of fresh and processed fruits in prospect from now until
mid-1962 are larger than last year . Supplies of fresh deciduous fruits,
fresh citrus, canned, frozen, and dried fruit are all somewhat larger. Apple
production was much larger this year than last, and the supply of fall and
winter varieties of pears is expected to be up moderately. The prospective
acreage of strawberries for harvest in 1962 is about 4 percent larger than in
1961. Florida tangerines are the only citrus fruit of which supplies are
expected to be substantially smaller than last year . Although supplies of
California oranges are expected to be smaller, this will be more than offset
by increases in other States, particularly Florida.
Supplies of canned fruits for the 1961-62 marketing year are expected to
be moderately larger than a year earlier because of increased carryover stocks
and the probable record-size pack. Canned peaches , fruit cocktail, cherries,
and purple plums are expected to be in greater supply. Fruit juice, expe­cially
frozen orange juice, is expected to be available in larger volume.
Retail prices of some of the fresh fruits probably will not average as
high this winter as last, but prices of most processed fruits probably will
be about the same.
-9-
The supply of canned vegetables through the middle of next year is
expected to be larger than a year ago, with a pack more than offsetting
smaller stocks at the beginning of the pack year. Because of increased costs
of processing and distribution, consumers are likely to pay a little more for
processed vegetables.
Potato supplies are larger than last year, and well above normal market
needs. Retail prices during the next 3 or 4 months probably will average
below those of a year earlier. Barring unforeseen cuts in acreage or yield,
enough potatoes should be produced to allow per capita consumption next year
to be the same or slightly larger than this year.
Supplies of all food cereals will continue large. The upward trend in
retail prices of cereal food products should continue into the coming year
because of prospective increases in processing and distribution costs. Per
capita consumption of wheat in food products is expected to continue downward.
Domestic consumption of rice and corn probably will be about the same as last
year.
OUTLOOK FOR CLOTHING AND TEXTILES
Doris P. Rothwell
U.S. Department of Labor
The outlook for textiles and apparel should be examined in the framework
of general economic forecasts. Among factors to be reckoned with are: The
expectation of continued growth in the U.S. economy; the probability of about
1.5 to 2 percent a year price rise; the almost certain sharp rise in popula­tion;
and the rising trend in personal incomes and the standard of living.
Naturally all forecasts are contingent upon continued peacetime conditions.
For textiles and apparel there are many other factors to be considered.
The complexities of these industries are illustrated by the several stages
of production, the thousands of individual small firms, the numbers of com­peting
fibers with many new ones to come, the upsetting influences of foreign
competition and of cyclical changes in demand and supply, and the difficulties
imposed by low profit margins on operating conditions; and, of course, by
continuously changing styles.
The economy as a whole is at present in a recovery stage. Personal
incomes, which reached a record $400 billion in 1960, are at a still higher
rate this year. Industrial production has turned upward. Textile production
during the recent recession had dropped more sharply than total production.
The Federal Reserve Board's Index of Industrial Production fell from 111 in
January 1960 (1957=100) to 102 in January 1961, and textile production from
6223 36 0- 61 -2
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112 to 98. This year, however, the textile industry has recovered materially.
While total industrial production, seasonally adjusted, rose 11 percent to 113
by August, textile production reached 116, up 17 percent.
Price developments
The apparel industry produces to meet established price lines. For a
time it meets competition and covers increasing costs by cutting corners in
imperceptible ways. Eventually, however, the pressure of increasing costs
results in outright price increases or, more usually, in producing to higher
price lines.
Price changes on goods of comparable ~uality both at wholesale and retail
normally are moderate. Competition is so keen and there are so many firms,
that price making is materially influenced by actions of competitors. In
primary markets, average prices of textile products have been running below
their 1947-49 averages. Prices of raw materials are lower than in 1947-49
and wage rates have risen less than in other industries. At retail, as a
result , prices have shown only a moderate increase since 1947-49 and less
than for other commodity groups •
During 1960 and the first half of l96l,the textile industry was in a
depressed state. Prices in primary markets had tended downward. The index
for textile products and apparel dropped to a low of 93.7 (1947-49=100) in
June 1961, as most major fiber components declined. Cotton products decreased
from 95.0 in December 1959 to 89.5 in June 1961; wool products from 104.2 to
99·5 in March 1961, and manmade fiber products from 81.3 to 75.1 in June 1961.
Beginning about mid-1961, wholesale prices of textile products turned
upward a little, partly in keeping with the general business recovery, but
also because of increased costs. Raw cotton prices have risen over ll percent
so far this year. By September 1961, cotton products were up 1.7 percent from
t heir lows earlier this year and wool products 2.3 percent. Prices of manmade
fiber products have remained at their June 1961 level.
The effect of higher wholesale costs has been carried over into retail
prices. In September 196l,the apparel component of the Bureau of Labor Sta­stics
Consumer Price Index was 111.1 (1947-49=100), slightly higher than a
year ago. In general, this reflected the introduction of new fall merchandise
at higher prices than at the end of the previous selling season. The midyear
upturn was most noticeable for women's and girls' apparel, which rose 2.7 per­cent
during the third ~uarter of this year. In September, prices for women's
and girls' apparel were 1 percent above a year ago .
A number of forces are tending to push costs up. One is the effect of
the increase in mlnlffium wage to $1.15 an hour which went into effect Septem­ber
3, and the further i ncrease to $1.25 to become effective 2 years hence.
Not only does this mean that textile workers below the mllllffium must be given
pay raises, but that better skilled and senior workers in some cases will be
-ll-raised
to maintain established pay 'differentials. On top of other cost in­creases,
the pay raises probably mean price advances.
A survey of members by the Southern Gannent Manufacturers Association
this summer disclosed that nearly 80 percent intended to boost prices, many
of them by 5 to 10 percent. Hosiery manufacturers have estimated the effect
of this year's wage increase at an overall rise of 8.3 percent in labor costs,
or the e~uivalent of about 25 cents per dozen pairs of hose in total manufac­turing
costs. One large manufacturer has planned to raise prices of men's
work clothing items about $1 per dozen to cover both higher costs of cotton
and higher wages.
Higher prices of raw cotton have already been reflected in higher prices
for cotton yarns and broadwoven goods and further increases are likely. Spot
cotton prices increased rather steadily this year following the February
announcement by the Department of Agriculture of the support level for the
1961-62 season beginning August l, 1961. According to one industry spokesman
higher prices for cotton goods are "inevitable." Prices of sheets and pillow­cases
already have been raised.
There are, however, restraining influences which should temper the price
rise. Chief among them is competition, both domestic and foreign.
Total textile imports in 1960 were at a record level. Imports particu­larly
from low-wage countries such as Hong Kong and Japan continue to pose a
threat of strong price competition to our domestic textile producers. The
import situation is serious enough that it is receiving special attention
from the Federal Government. Following a special emergency meeting of the
international General Agreement of Tariffs and Trade Committee, cotton tex­tile
imports from low-wage countries were temporarily frozen at the levels
prevailing on October l of this year. Although this does not solve the prob­lem,
at least it checks further expansion of imports for the time being.
Later in October the 17-member nations of the committee met in Geneva to seek
a more long-range solution to the problem of international trade in textiles,
which involves many political and economic aspects outside of the field of
textiles itself.
On the supply side productive facilities are more than ample. Also
there are possibilities for more efficient operation and greater automation
which should improve productivity and eventually reduce costs. In 1958, it
was said that three-fourths of manufacturing e~uipment in the industry was
obsolete. Only one-fifth of spindles in use at the end of last year were
lO years old or less. During 1960, capital expenditures for improvement of
textile plants and e~uipment were the highest since 1951. The recent tax
incentive providing more liberal depreciation allowances on e~uipment in the
textile industry should help speed the retirement of obsolete e~uipment. As
a result the industry may be embarking upon a period of extensive moderniza­tion
of plant and e~uipment.
-12-
Consumers' attitudes and actions will also have much to do with prices.
Buyers now are much more knowledgeable about ~ualities than they used to be
and expect value for a price. Their present attitude toward apparel prices
has two seemingly opposite aspects. On the one hand, they are willing to pay
a premium for good ~uality; on the other, for style goods, they are satisfied
with less durable articles if they can be obtained more cheaply. The first
attitude comes from the generally high levels of personal income resulting in
upgrading of purchasing. The second indicates consumers' desire for modern
new styles and their realization that clothes can become outmoded before they
wear out .
Consumers' desire for good ~uality manifests itself in many ways. It
accounts for the acceptance of manmade fibers even though they fre~uently
mean higher price tags, because they possess special ~ualities not possible
in the natural fibers. It explains the importance attached to brand names
and labels such as Dacron, Acrilan, or finishes such as Everfast, Sanforized­Plus,
which convey a guarantee of ~uality. It has brought trading-up of
~uality and prices in many lines. In pricing apparel for the BLS Consumer
Price Index, we fre~uently find it necessary to take account of shifts in
popularity of given ~ualities. For example, the Bureau is now pricing men's
slacks of washable manmade fiber blends in year-round weights in addition to
the 100 percent rayon and acetate slacks. Many of our specifications have
been widened to include new fabrics, some of which command higher prices.
Recently we provided a specification for boys' polo shirts of the more expen­sive
collar type as an alternate to the crew type formerly priced. Our boy­style
women's shorts specification was broadened to include Jamaica and
Bermuda styles.
This tendency to trading-up in prices is clearly illustrated in this
year's Daily News Record, "Wash and Wear Study." According to its findings,
major national brand firms introduced higher price lines for men's summer
suits this year. Although the biggest volume seller among men's Dacron poly­ester
fiber and cotton wash and wear summer suits was again rated as $39-95
this spring, the second best seller was $32.95 compared to $29.95, and the
third best $35 compared to $30. In all-cotton wash and wear suits, the volume
seller this year was $17.95; last year $15.95.
Dress manufacturers too have been producing better ~uality but in higher
price lines. To a great extent this is one means of covering increased costs,
generally preferred, when consumers will accept it, to depreciating ~uality
and selling at unchanged prices. Fairchild's Blue Book Trade Directory now
lists in the "Budget Classification" those manufacturers making street dresses
to retail at $22.99, up $6.00 from the level of about 5 years ago. Blouses
manufactured to retail at $5.99 to $6.50 now are classed as "popular-priced"
where formerly $4.99 was the upper limit. The "medium price" class for
blouses now extends up to $11.99 retail, up about $3.00 from 5 years ago.
Raincoats in fancy new fabrics and style are fashion items with prices up to
$70 or $80 contrasted with $25 for the utilitarian garments formerly offered.
A mark of the opposite view of consumers toward prices is the growth of
nonnationally advertised brands of some articles, such as shirts, underwear,
socks, and hose. Since the consumer is heavily influenced by the advertised
-13-
trade names of manufacturers, national brands generally sell at premiums over
nonnationally advertised ones. To avoid price cutting, manufacturers of
national brands resist selling outside of established retail trade channels.
Supermarkets, drug chains, and discount retailers, therefore, provide a
natural market for lower priced nonnationally advertised brands.
Another illustration of the second attitude of consumers is the growing
popularity of nonleather shoes and of casual, play-shoe types that have a
shorter life than leather shoes but are lower priced. In 1960, only 28 per­cent
of shoes produced had leather soles, down from 31.5 percent in 1959, and
from 51 percent in 1950; 76 percent had leather uppers, compared with 84 per­cent
in 1950. Particularly striking is the growth of sneakers, both for teen­agers
and adults, that usually sell for less than half the price of leather
shoes. The National Shoe Manufacturer's Association estimates that sneakers
will amount to a hefty 17 percent of the number of all shoes sold next year
compared to 8. 5 percent in 1955. A large part of them will be low-cost imports
from Japan.
Fashions
Marked shifts in styles are not usual for footwear but they are customary
for other apparel, and are in fact fostered by the industry. Moreover, f~:hion
trends are changing in fundamental ways. These changes are affecting wearing
apparel for men, women, and children. Textile writers speak of sophistication
and of a "cultural upsurge" in tastes, which manifests itself in studiedly
casual attire, and in simple but elegant dressup clothes. More leisure time,
suburban living, and the new American informality in living, have brought new
demands for "leisure" clothing, largely sportswear. Fashions in clothes,
formerly a female prerogative, are affecting men too. Gay sports shirts and
slacks for men are an important and growing influence in the total picture.
Formerly custom tailored for upper-bracket society, such articles are now
mass produced for middle-income people. Children's wear used to be chiefly
utilitarian . Now it must be attractive as well. Bouffant dresses and nylon
underwear of pleasing patterns and styles are being produced for them in
volume.
Casual wear
The American way of life has a pronounced effect on the kinds of clothes
people want. At one time sportswear was worn only for sports and outdoor
activities. Work clothing was serviceable, durable and not very attractive.
Nowadays casual clothing is worn on many occasions--in the home and often on
the job. Work clothing is better styled and often colorful, and the two
classifications are no longer distinct.
According to Bureau of the Census Current Industrial Reports, output of
men's and boys' sports shirts more than tripled between 1946 and 1959· During
this period work shirts production declined from well over 5·5 million dozen
a year to something over 4 million. Many of the so -called work shirts were
produced with sports collars and short sleeves.
-14-
Men's and boys' bib overalls have declined to less than a third of their
1947 production. Apparently work pants, styled more like sports slacks, are
taking over from dungarees and overalls. Output of men's dungarees and waist­band
overalls by 1959 was less than a third of 1947, while output of men's
work pants was up considerably; that of men's and boys' cotton slacks went up
2 or 3 times in the last 5 years •
Changes in fabrics used reflect the influence of demand for leisure time
clothing. Twills are most common, particularly for work clothing, and matched
sets are popular, replacing denim overalls and chambray shirts in combination.
Other fabrics used include shirtings, sateens, poplins, corduroy, and bedford
cord. Cotton is still the dominant fiber, for men particularly, largely be­cause
of the higher cost of manmade fibers, but manmade fiber wash and wears
are making some inroads for leisure clothing.
The nature of population changes in the 1960-70 decade will have a real
impact on the demand for leisure apparel and work clothing. A large part of
the growth in total population will be of the young and the old, both of whom
use leisure wear extensively. Occupational changes also will affect demand.
Agricultural and manual production workers will decline but service workers,
who like nice looking clothes and snappy uniforms, will rise over 50 percent.
Wash and wear
Wash and wear is important for casual wear but also for other clothing,
notably men's dress shirts and women's dresses. It has declined a little in
importance, possibly because of the extravagant claims first made for it.
Housewives now recognize and accept the need for a little ironing on most
articles. If some of the new processes now being developed prove successful,
wash and wear's share of the market will surely mount again. One of the most
significant new processes is a nonresinous finish, obtained by a chemical re­action
with the cotton fibers. This should last the life of the garment while
the resin finishes now used not only wear off in washing, but also often yel­low
because of their affinity to chlorine.
Textile fibers
The "battle of the fibers" had become almost a cliche in textiles. Now
the problem is not so much survival as of assimilation--of combining the
beauty and comfort of the natural fibers with the utility of the manmade.
A trend to watch is the use of lighter weight fabrics, induced largely
by changes in living conditions and made possible by the advent of new fibers
of high strength. This trend has been noticeable in the past few years and
may continue to some extent. For example, from 1951 to 1958 average fiber
per unit decreased from 3.40 pounds to 2.88 pounds for overcoats, topcoats,
and storm coats; and for men's and boys' suits, from 2.94 pounds in 1952 to
2.50 pounds in 1958.
-15-
The dominance of cotton is not yet seriously challenged for consumer
goods, probably because it combines many good ~ualities at a low price, but
it has lost ground to manmade fibers especially for industrial textiles. New
finishes to provide better wash and wear ~ualities and the blending of cotton
with synthetics in many fabrics will promote the popularity of cotton. In
1940, 80 percent of fiber consumption in the United States was cotton, in 1950,
66 percent, and in 1960, 62 percent. In total ~uantity, however, cotton con­sumption
has remained fairly stable and is likely to increase.
Silk is a small fraction of the total, but there are signs of increasing
demand, particularly if current experiments with washable and stain-resistant
finishes prove successful. A return of silk stockings is not impossible.
Wool has held at a fairly steady 9 to 12 percent of consumption from as far
back as 1920.
Last year manmade fibers represented over 30 percent of fiber consumption
as the new miracle fibers came into prominence and continued to open up new
markets for textiles. For example, synthetics represent one-third of fibers
used for floor coverings and are most important for tires. Despite its rapid
growth, the field of completely synthetic fibers is still in the early stages
of development. The number of potential chemical constructions is virtually
unlimited. Already we have several hundred with many more under study. In
1960 American Viscose alone had 109 different manmade fibers. A most bewil­dering
picture for both consumer and producer~ Blending of different con­structions
is still undergoing research by major chemical and textile firms.
Gradually, the best combinations of different fibers are proving themselves.
Among effective blends for apparel are Dacron 65 percent with rayon or cotton;
Dacron 50 percent and Orlan 50 percent; and Dacron 50 to 55 percent with wool.
New developments
A recent innovation in retail distribution is the "self-service soft
goods supermarket," sometimes called "discount department store." By 1960,
business in such outlets was estimated at 6 to 7 percent of retail sales of
general merchandise and apparel stores. These operate at a lower markup
(about 20 to 30 percent of sales compared to the usual 35 to 40 percent for
apparel), offering a narrower range of prices and catering to lower and lower­middle
income families. The ~uality of merchandise carried is being upgraded.
A part of this trend is integration with food and drug stores. Food
supermarkets for some time have been expanding their merchandise lines to
include more nonfoods. Some old department stores are introducing self-service
in some departments. This retailing change is a competitive influence that is
likely to bring lower margins and possibly lower prices as did the discount
appliance stores a few years ago.
It appears likely that major strides toward modernization of textile
plant and e~uipment are in the offing. In recent years great technological
advances have been made and more are expected. For example, shuttleless looms,
-16-
now used for coarse cloth may become adaptable to other fabrics. Another
invention is the automatic spinning mill. New four-feed hosiery knitting
machines, which can produce about 3,000 dozen pairs annually compared to
1,000 and 1,500 dozen pairs by the present single- and twin-feed machines,
have been perfected.
Among new product ideas can be mentioned nylon zippers, paper blankets,
drip-dry woolens from Australia and a new finish to provide permanent pleat­ing
in wool fabrics. Washable wool blankets are said to be generally avail­able
now. The Department of Agriculture has worked out a wool shrinking
process called "interfacial polymerization" which is the application of a
permanent plastic skin to the wool fabric. Recently, the Department of
Agriculture announced a new formaldehyde process for a wash and wear finish
for cottons which will be more durable than present ones. It is said that
fabric so treated will not wrinkle when tumble dried and is not yellowed or
discolored by bleach.
A recent innovation is stretch fabrics for women's skirts. Stretch wool
suits are to be tested this fall in the market. A new acid dying acrylic
fiber, Orlon type 44, is being offered this fall for a few items, principally
sweaters, and should be in full commercial output by fall 1962. Dupont is
experimenting with a new synthetic to replace shoe leather. It is said to
weigh only two-thirds as much. Pilot production is scheduled for late 1963.
Just recently one mill announced its plans to introduce a revolutionary
new woman's stocking called "Ultrason" because it will be manufactured in part
with ultrasonic equipment~ Presumably the process has already been tried in
some other countries. It would seem that there is no end to new discoveries
for textiles!
To sum up, 1962 should bring many textile novelties and despite many
problems, be a good year for textiles. ;
OUT:WOK FOR SUPPLIES AND PRICES OF HOUSING AND HOUSEHOLD ~UIPMENT
Laura Mae Webb
Agricultural Research Service
During the past year, prices for housing and equipment as measured by
the Consumer Price Index (CPI) have increased only 0.4 percent or one-third
the rate of the total CPI (1.2 percent). However, prices of various goods
and services included in this category have moved at different rates and in
opposite directions . (See chart.) The CPI measures price changes for the
same quantities and qualities of goods and services from period to period.
Individual families may have found that their expenditures for housing and
equipment changed very differently than the CPI because their purchases did
-17-
Cost of Operating and Maintaining
Home Rises; Appliances Fall
% OF DEC. 1952
120 AliJ!
100
1958
DATA FROM BUREAU OF LABOR STATISTICS, MARCH 1950 -JUHE 1961.
1960
* HOT AVAILABLE BEFORE DEC. 1952. A.HOT AVAILABLE BEFORE DEC. 1950.
U.S. DEPARTMENT O F AGRICULTURE NEG. 61 (9)-5677 AGRICULTURAL RESEARCH SERVICE
not cover the full range of goods and services included in the index, or be­cause
they bought different quantities or qualities of these goods and services
than in previous years.
Housing
Construction and repair
Total private housing starts, adjusted for seasonal changes, were at an
annual rate of slightly less than 1.4 million units in September 1961. This
was about 37 percent above the December 1960 low. Fann housing starts, which
constitute only a very small fraction of total private housing starts, were
. higher for each of the months April through August 1961 than for the corre­sponding
months in 1960 but fell substantially in September.
The Housing Act of 1961 contains several provisions that will make it
easier for many low- and medium-income ·families to obtain loans to repair or
remodel their old homes or acquire new ones in the coming year. The Act
authorizes the Fanners ' Home Administration to make loans to families living
in rural areas, even though they are not engaged in fanning. Many of these
families were not served by other Government housing programs and cannot
qualify for credit from conventional sources. This bill also provides that
a small loan to modernize or repair a fann dwelling may be made without re­quiring
a mortgage on the fann, thus cutting down loan closing costs and
-18-
speeding up loan making. Loans may also be used to provide wells for house­hold
water. The authority to make a loan for building a new farm dwelling or
for construction improvements on an existing one is continued.
For urban families, the Act permits the Federal Housing Administration to
insure mortgages on homes with both a smaller downpayment and a larger mort­gage
amount than before. It also provides for a maximum maturity period of
35 years in case of new homes. The Act sets up a new program under which that
agency may insure loans for major home improvements, up to a maximum of
$10,000 per dwelling unit. Although primarily designed for homes 10 or more
years old, new homes are eligible for this insurance if major structural
changes are involved or if the improvements are necessitated by fire, flood,
or other casualty.
A fairly recent development in the housing market, the shell house, is
believed to have accounted for a considerable amount of new building in rural
areas, especially in the South, during the past year. The typical shell house
is frame with a completed exterior and an unfinished interior, with only 2- by
4-inch studs separating the rooms and no plumbing or electricity installed.
Prices, consequently, are considerably lower than for conventionally built
houses. They are typically financed by installment credit such as that used
for buying cars or washing machines, rather than by conventional mortgage
credit. Most buyers are reported to be families who would not be able to
qualify for conventional mortgage loans, or Government-guaranteed housing
loans.
Builders of shell houses require that the purchaser own the land on which
the house is to be built. If the land is worth enough (one builder requires
5 percent of the shell house price), a lien on the land is accepted in place
of a downpayment. Installment payments usually extend over 5 to 7 years.
Interest rates of 6 to 10 percent per year are quoted but because installment
rates are figured on the total credit extended, rather than on the unpaid
balance, the buyer's true annual interest rate is approximately twice this
amount. Some builders are now including materials for finishing houses in
the purchase price of the shell home so that payments can be extended over
the length of the house payments; others are providing more nearly completed
homes with partitions, plumbing, and electricity installed. In the latter
case, a longer repayment period is provided--sometimes up to 12 years--and
monthly installments may be lower than for the true shell house which must be
paid for over a shorter period of time.
Rents
Urban residential rents advanced at a slightly lower rate the past year
than the preceding year. (See table l.) This represents a considerably
slower rate of increase than occurred during the preceding 10 years.
The upward trend in rental prices is likely to continue during the coming
year. Rental vacancies are slightly higher than a year ago, but costs affect­ing
rentals are continuing to advance. Home maintenance and repair costs rose
-19-
Table 1.--Consumer price indexes for selected housing items
(December 1952 = 100)
Group and subgroups
1959
Total housing .•.•••••.•••.• 111.4
Rent . • • • • • . • • • • . • . • . • • • • • 116.0
Rome maintenance and
September
1960
113.4
117 ·7
113.9
119.2
repairs •.••.•••..•.•.•. 119.4 121.4 123.0
Other home-owner costs:
First mortgage interest
rates ............... .
Property insurance
rates l/ ............ .
Gas and eiectrici ty .••••.
Gas .•••••••••••.•••.•..
Electricity •.••••.•••••
Solid and petroleum fuels.
Solid fuels •••.•••••.••
Petroleum fuels •••.••••
Household operation .•••.•
Laundry soaps and deter-gents
............... .
Laundry services •••••••
Drycleaning and pressing
Telephone ••.•••••.•••••
Water 2/ .............. .
Housefurnishings .••.•••••
Textiles .•••..••.•.••••
Floor coverings:
Rugs, wool Axminster ••
Carpets, wool broad-loom
.............. ·
Carpets, rayon broad-loom
.............. .
Rugs, felt base •••.••
Furniture and bedding ••
Furniture •.•.••••.•..
Bedding:
Sofa beds •••.••.•••
Mattresses .•..••.••
Appliances .•.•••.•••.• ·1
118.7
109.9
115.2
125.1
106.0
109.6
110.1
108.8
119.2
119.1
119.9
115.8
108.5
141.6
96.1
94.4
107.4
lll.6
87.6
118.6
100.4
99.2
104.0
103.8
84.9
124.7
108.7
119.0
132.2
106.8
109.4
109.4
109.3
121.7
118.6
125.0
117.0
110.6
146.6
96.2
95.6
108.6
114.1
88.7
119.6
100.5
99·1
104.3
105.5
83.9
119.3
108.5
119.0
131.9
106.9
111.4
110.2
113.0
122.5
116.6
127.5
118.0
110.0
150.9
95·9
95·9
109.2
110.8
85.2
122.7
101.5
100.6
104.6
103·9
81.9
~ May data; priced in May and November only.
g/ March data; priced in March only.
Source: U.S. Bureau of Labor Statistics.
Percent change
Sept. 1959- Sept. 1960-
Sept. 1960 Sept. 1961
+1.8
+1.5
+1.7
-1.1
+3.3
+5.7
+.8
-.2
-.6
+.5
+2 .1
-.4
+4.3
+1.0
+1.9
+3.5
+.1
+1.3
+1.1
+2.2
+1.3
+.8
+.1
-.1
+.3
+1.6
-1.2
+0.4
+1.3
+1.3
-.2
0
-.2
+.1
+1.8
+.7
+3.4
+.7
-1.7
+2.0
+.9
-.5
+2.9
-.3
+.3
+.6
-3·9
+2.6
+1.0
+1.5
+.3
-1.5
-2.4
-20-
during the past year l. 3 percent. Property tax increases have been widespread
in recent years because of higher costs for local government services and have
contributed to the upward trend for rents. Fuel prices (solid fuels and fuel
oil combined) are about 1.8 percent higher than a year ago, and water rates
are up 2.9 percent.
Gas, electricity, and fuels
Charges for fixed quantities of electricity to urban consumers remained
practically unchanged during the past year. The increase since December 1952
has been moderate--about 7 percent, compared with about 14 percent for the
total housing component. Gas prices to urban consumers increased about 32 per­cent
in this period. More than one-third of this increase has occurred in the
last 3 years. There was a decrease in gas prices during the past quarter .
Although residential electric rates have remained practically unchanged
during the past year, some consumers may have found their bills considerably
higher than a year earlier because they used more electricity. This probably
happened if they purchased additional electrical equipment, such as dryers or
air conditioners. While increased use of electricity means a higher total bill,
it usually does not result in a proportionate increase in cost because of the
rate structure ~or electric power. The table shows that, while somewhat more
than three times as many kilowatt hours were used on the average farm during
a summer month in 1960 than in 1947-49, the average bill was only a little
more than double that of the earlier period.
Table 2.--Electricity: Kilowatt hours used, average monthly bill
per farm, and average cost per kilowatt hour
U.S.A. average
Period Kilowatt hours Average Average cost per
used per fann monthly bill y kilowatt hour
Dollars Cents
Average 1947-49 ........ 196 6.13 3.13
1955 ................. 385 10.00 2.61
1958 ................. 487 11.60 2.38
1959 ................. 558 12.60 2.25
1960 ................. 615 13.20 2.14
I
~/ Generally a bill for a period ending in June or July.
Source:
May 1960.
USDA. Agricultural Prices, p. 26. November 1960 and p. 30,
Farm Electricity Report. June 27, 1957.
-21-
Much of the increased consumption of electricity may have been due to
increased use for farm production purposes. The average urban housewife would
likely find the use of an additional large electrical appliance adding consid­erably
more to the family's electrical bill than would the farm wife whose
husband uses electricity for farm production purposes.
Although since December 1952 fuel prices have advanced somewhat less
(ll percent) than the total housing index (about 14 percent), some types of
fuels registered fairly substantial increases. Between September 1960 and
September 1961, prices for fuel oil increased 3.4 percent, although solid fuels
(mostly coal) were only fractionally higher (0.7 percent).
Other household operation commodities and services
Prices for laundry services and drycleaning and pressing continued their
advance last year (2.0 and 0.9 percent, respectively). Prices of washing
machines continued to decline, and soap and detergent prices are lower than a
year ago. With these conditions prevailing, it is not surprising that per
capita personal consumption expenditures for laundry services in 1960 dollars
continued to decline last year, as they have been doing since 1955, indicating
that an increasing number of families are doing their own laundry. The per
capita expenditures for laundry services were as follows;
Year:
1955
1956
1957
1958
1959
1960
l
Average expenditure ~
$6.27
5·94
5.70
5·13
5.06
4.86
~ U.S. Department of Commerce data deflated by Consumer Price Index for
laundry services.
The past 18 months have witnessed a development that may lead to a decrease
in per capita expenditures for drycleaning services. At least four leading
makers of large electrical e~uipment have introduced coin-operated drycleaning
machines . ~ Indications are that the installation_of these machines is ex~
panding very rapidly. According to a trade source, lt takes about 1,000 faml­lies
to support one of these machines.
One of the large cleaning organizations in the Washington, D. C., area
opened a coin-operated drycleaning center in its store this fall. The letter
announcing the new service listed some typical drycleaning assortments that
~ McGraw-Hill Publishing Company. New York. Electrical Merchandising
W-eek. January 23, 1961.
-22-
could be put in one machine at one time. The cost of using the coin-operated
method was reported to be $2.25 versus $10.50 for professional service. The
$2.25 did not, of course, provide for any spotting or pressing by establish­ment
personnel.
Telephone rates to urban subscribers declined slightly during the past
year. A Census Bureau survey indicates that 3 out of 4 households in the
United States had a telephone in March 1960. '?) A smaller percent of rural
than urban households had telephones--67 and 79 percent, respectively. Less
than half of households with incomes under $1,500 had a telephone, compared
with 95 percent with incomes of $10,000 or over. Telephones were found in
77 percent of the households where there was a family group, and 63 percent
of those made up of single persons. Households with telephones were at a
peak where the head was middle age or older.
The annual survey conducted by the Statistical Reporting Service, USDA,
shows for the year ending June 1960 that the percent of farms with telephones
was higher in almost all States than a year earlier. ]/ In 7 States, 90 per­cent
or more of the farms had telephones; in 8 States less than half the
farms had telephones.
Housefurnishings and Equipment
Prices
Prices of housefurnishings and equipment as a group declined fractionally
during the past year, but there was not uniformity in price movement, either
as to relative amount or direction of change, between the different subgroups.
Appliance prices have declined uninterruptedly since mid-1951 and are
now 2.4 percent lower than in September 1960. The coming year may bring a
halt to this decline, or even a slight price increase . Five large manufac­turers
of electrical appliances have announced price increases ranging from
3 to 5 percent to their distributors; most of these increases are not to
become effective until January 1962. The manufacturers attributed the
increases to steadily rising costs of material and labor. Whether the dis­tributor
passes on this increase to the consumer will probably depend in
large part on demand. Three other major producers reported they had no im­mediate
plans for price increases.~/
'?) U.S. Department of Commerce, Bureau of the Census. Characteristics of
Households with Telephones, March 1960. Series P-20, No. 111.
August 2, 1961.
]/ U.S. Department of Agriculture. Agricultural Prices, p. 4o.
February 15, 1961.
}}) Wall Street Journal. October 20, 1961.
-23-
Demand and supplies
For the 9 month period January through September 1961, retail sales of
furniture and appliances were about 4 percent lower than during the corre­sponding
period in 1960. L/ August 1961 was the only month in which sales
exceeded those of a year earlier.
During recent weeks the press has indicated a growing feeling of optimism
among manufacturers and distributors that sales of household durable goods
will be higher next year. The factor that probably contributes most to this
attitude is the continuing upward trend in new housing starts. Recent surveys
of consumers' intentions to buy during the coming year also support this view
to some extent. According to the Federal Reserve Board's Survey of Consumer
Intentions to Buy, conducted in July 1961, consumers' plans to buy television
sets were somewhat higher than the July levels of the past 2 years and there
was a slight increase in plans to buy radio and phonographic equipment. How­ever,
the FRB survey indicated consumers' plans to buy washing machines and
refrigerators during the next 6 months continued lower than in the same period
of 1960.
Current levels of production of housefurnishings and equipment reflect
manufacturers' optimism regarding sales in the next few months. Production
of such goods was 10 percent higher in August than in January 1961. ~/ For
the past 3 months, production has been higher than in the corresponding
months of 1960. Some large producers of electrical equipment reported their
sales in September 1961 were substantially higher than a year earlier. 1/
In summary, most indications seem to justify a fairly optimistic view
for 1962. Although the trend in prices, in general, will likely continue
upward, the rate of increase is expected to be moderate and supplies of goods
and services will be quite adequate.
2/ U.S. Bureau of Census.
§Y Federal Reserve Board.
I/ Wall Street Journal, October 5, 1961.
-24-
OUTLOOK FOR MEDICAL CARE COSTS IN 1962
Ethel D. Hoover
U.S. Department of Labor
Changes in medical care prices
Over the whole postwar period, prices for medical care increased more
rapidly than the Consumer Price Index for all items combined--about 60 percent
and 28 percent, respectively. The increases for medical care corresponded
very closely with the steady upward trend for all services, until the last few
years when medical care prices rose at a somewhat faster pace. Prices for all
commodities combined fluctuated within a relatively narrow range--particularly
since 1950.
The postwar period can be divided into three parts:
l. The immediate postwar and Korean period from 1946 to 1952. Prices
for commodities rose rapidly through 1948 with the end of price con­trols
and heavy demand for goods not available during the war, declined
for about 2 years, and then increased again during the Korean period.
The net change in these 6 years was 36 percent for all items, 40 per­cent
for commodities, and 31 percent for services. Prices for all
medical care increased 34 percent.
2. A period of relative stability from 1952 to 1955. During these
3 years, the all items index increased less than l percent. A de­cline
of over 2 percent in commodities was more than offset by the
continued uptrend for services . Medical care prices in these
3 years increased about 9 percent, again corresponding to the in­crease
of about 9 percent for services generally.
3. Relatively moderate price increases from 1955 to 1960. Changes
among the major groups in this period ranged from an increase of
22 percent for medical care down to 5.5 percent for apparel. Com­modities
increased by an average of 8 percent compared with 16 per­cent
for services. In the first 9 months of 1961, the index for
medical care increased by 1.8 percent.
The steady increase in prices for medical care in the postwar period has
been due primarily to the increase in services. The index for all medical
care (1947-49 = lOO) stood at 156 for the year 1960, with medical care serv­ices
at 163 and prescriptions and drugs at 123.
The chart on page 25 shows the great diversity of price changes among the
individual items of medical care services since December 1952 (the first date
for which the CPI in its present form was available). The major price in­creases
occurred for hospital room rates and for hospitalization insurance.
These two i terns were the predominant influence in the postwar rise. The
-25-
CONSUMER PRICE INDEXES FOR SELECTED MEDICAL CARE ITEMS
DECEMIER 1952. JUliE 1961 (QUARTERLY)
r----,-----,----,-----r----.----~~~~--~----~--~••x
DECEMIER 1952•100 190
170
160
150
140
130
120
110
100
· i952 · · 1t53 · · l9s4 · · J95S · · i9s6 · · 1t57 · · 1t5i · " .....
1tst , ... "'' u•ITIED STATES DIEPARTMUT Of LAIOII·IURIEAU Of LAIOII STATISTICS
increase for professional services from December 1952 to September 1961 was
30 percent or less, compared with 65 percent for hospital room rates and more
than 85 percent for hospitalization insurance. In the first 9 months of 1961,
the room rates rose 7 percent, insurance 5.1 percent, physicians' fees 1.7 per­cent,
and dentists' fees 0.7 percent. Prices for prescriptions and drugs
declined about 0 .5 percent.
Explanations and reasons for the increase in hospital room rates and cost
per hospital day~ usually refer to the increases in earnings of hospital per­sonnel,
the additional expense of an increased volume of paid labor, and higher
prices for supplies and e~uipment. The reason given most emphasis is the in­creased
pay, with the number of paid employees in hospitals next in importance.
According to a recent study by the Bureau of Labor Statistics, g/ occupational
earnings in private hospitals were substantially higher in 1960 than in 1956-57
!/ A composite of all costs per patient to the hospitals increased from
$9.39 in 1946 to $23.12 in 1955 and to $30.19 in 1959, according to figures
prepared by the American Hospital Association, as given in Source Book of
Health Insurance Data, 1960, p. 56. Health Insurance Institute. New York.
~ U.S. Bureau of Labor Statistics. Earnings and Supplementary Benefits in
Hospitals, mid-1960. Bulletin No. 1294, p. 5· May 1961.
-26-
in 15 areas surveyed. The increases ranged from less than 5 percent to more
than 50 percent, with most occupations within the range of 15 to 24 percent.
The larger number of peo"ple employed is associate'd with the increased use of
hospitals and with the additional services that are now performed in them.
Dr. Russell A. Nelson, Director of Johns Hopkins Hospital in Baltimore, sum­marized
some of the available data, 3/ indicating that the biggest hospital
expense is the payroll--about 60 percent of a hospital's costs. The average
payroll cost per patient in voluntary short-term general hospitals increased
from about $5 in 1946 to nearly $18 in 1959, due partly to bringing wage
scales and benefits in line with private industry. The number of people
employed per 100 patients went up from 156 just after World War II to 224 in
1959·
The accelerated increase in hospitalization insurance premiums in the
last few years reflect these increases in hospital cost, and in addition the
higher insurance costs due to a higher rate of utilization of hospital care
by the insured group. (Note: The increases in premiums due to increased
benefits are not reflected as price increases in the CPI.) Various allega­tions
have been made that there is abuse of hospital insurance by both doctors
and patients. 4/ Although the extent of overuse is not indicated by factual
studies on a national basis, a number of local and State studies have been
made. One study of medical records in Michigan found that when the patient
paid the entire bill, understay (16.7 percent) was more common than overstay
(6.3 percent), but that when the bill was paid by any other source, whether
or not the patient participated, overstay (ll.8 percent) was twice as common
as understay (5.6 percent). 21
Following Congressional Hearings, particularly in the early part of 1960,
wide publicity was given to the pricing policies of drug manufacturers. In
the latter part of 1960 and early 1961, reductions in manufacturer's prices of
prefabricated prescriptions were put into effect and were gradually reflected
at the retail level. Druggists reporting to BLS indicated that their lower
prices for prescriptions were due to manufacturers' reductions as well as to
increased competition, presumably from discount drugstore operations, mail­order
sales, and similar distributive competitive influences.
For physicians, the responses to the economic influences of higher demand
and limited supply are frequently advanced as reasons for the increases in
fees. The high cost of education, particularly for specialized study, and the
investment required for modern complex equipment have also helped to explain
the upward drift in prices for physicians' services.
l/ In an interview as reported in the Washington Daily News, March 21, 1960.
Figures are from studies of the American Hospital Association.
4/ An article on "The Healthy Sick" in the October 12, 1960, issue of the
Wall Street Journal refers to some specific instances .
21 A University of Michigan study of hospital and medical economics in
Michigan, summarized in the Wall Street Journal, May 15, 1961.
-
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The outlook for medical care prices during the coming year seems to be a
continuation of our experience during the last several years, with perhaps
some moderation in the rate of increase. This cautious statement is based
partly on reports and forecasts from various sources, but more on the expecta­tion
that the American people will continue to increase their use of medical
goods and services as they have in the past years. With our higher incomes,
we have raised our standards of what constitutes adequate medical care. Addi­tional
demand by a growing population ~uld put more strain on our physicians
and on the hospital facilities. Although the hospitals, insurance organiza­tions,
and the profession generally are making efforts to cut costs through
more efficient use of facilities, increases in costs are anticipated. In the
drug field, there may be some additional price reductions in the coming year,
but the average amount spent per prescription may be higher as more expensive
new products are developed and prescribed.
EXEenditures for medical care
The importance families place on obtaining medical care is very evident
when we look at the record of medical care expenditures. The proportion of
total expenditures that is devoted to medical care has increased significantly.
One study made by BLS at the beginning of the century shJwed that city workers'
families spent an average of 2.7 percent of their total expenditures for
"sickness and death" (medical care and funeral expenses). 6/ By 1950, city
workers' families had almost doubled the share they devoted to medical care--
5 percent of total expenditures (not including funeral expenses).
The distribution of the medical care dollar among the various medical
goods and services has also been undergoing a transformation. The BLS family
studies indicate that during and before World War I, expenses for physicians
took half or more of all medical expenses, and hospitals less than 10 percent.
By the midthirties, direct expenditures for physicians were down to 39 per­~
ent, hospitals were up to lO percent, and prepaid medical care (mostly hospi­talization
insurance) was 7 percent of expenditures. By 1950, expenses for
physicians were 34 percent, direct payments for h0spital expenses were only
5 percent, but the proportion for prepaid medical care had more than doubled.
It was 19 percent in 1950. The percent for medicines, drugs, and appliances
remained the same--17 percent--from World War I to 1950.
The steadily increasing proportion of personal consumption expenditures 1/
devoted to medical care can be attributed to a number of developments. The
relatively faster rate of price increase for medical care than for other goods
and services is one. The influence of "higher quality" or more complex pro­cedures
at higher cost is also present, as the improvements and advances in
medical science alter the incidence of various illnesses. There is also the
U.S. Department of Labor.
1959
How American Buying Habits Change, pp. 163-
1/ U.S. Department of Commerce series.
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greater volume of medical care used--more care for individuals and for a
larger proportion of the population, as incomes and standards of adeq_uacy have
risen. The increase in "use" was estimated at about 100 percent from 1929 to
1958, 27 percent during the 10 years 1948 to 1958, and from 17 to 20 percent
for the 5 years 1953-58. ~/
Some of the increase in the use of medical care must be attributed to the
changing age distribution of the population. With the remarkable increase in
longevity, more people live to be 65 years old or more. The need for medical
care by older people is usually more prevalent and more persistent than
earlier in life.
We can look forward to continued efforts to reduce illness and disability,
particularly the chronic and mental disorders. The cost of such progress and
more medical care for more people can be expected to take an increasing share
of the national income and of the average family budget during the next year.
~ For basis of estimates, see Doctors, Patients, and Health Insurance, by
Herman M. and Anne R. Somers (Brookings Institution, Washington, D. C. 1961),
pp. 168 and 170.
ESTIMATED COST OF l WEEK'S FOOD
The table on the opposite page presents the estimated cost of l week's
food to be prepared and served at home. The estimate is based on q_uantities
of food in low-cost, moderate-cost, and liberal plans. The plans are
available as a leaflet--Low-Cost, Moderate-Cost, and Liberal Food Plans,
HHE(Adm.)-146. The cost of food for a specific family can be estimated from
the table, since costs are given for individuals of different ages.
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Estimated Cost of 1 Week's Food,~/ October 1961--U.S.A. Average
Sex-age groups
FAMILIES
Family of two, 20-34 years 2/ ........... .
Family of two, 55-74 years gj ........... .
Family of four, preschool children 3/ ... .
Family of four, school children~/~ ..... .
INDIVIDUALS
Children:
Under 1 year ....•...•..•...............
1-3 years ............................. .
4-6 years ............................. .
7-9 years ..•....••.•........•.•........
10-12 years ••..•..••.•....•............
Girls, 13-15 years ....•••...•....••......
16-19 years .•....•.....•....•....•.....
Boys, 13-15 years ••••.....••...••........
16-19 years ...•......•.•..•..•.....•...
Women:
20-34 years •........•..................
35-54 years .......•.•........•.....•.••
55-74 years ........................... .
75 years and over ................•.....
Pregnant .........•.......•.............
Nursing .•..•......•....•..........•....
Men:
20-34 years .............•..•.........•.
3 5-54 years • • . . . . • . • . . . . . . • . • . . • • . . . . . .
55-74 years .....•......................
75 years and over ......•.•.•........•..
Low-cost
plan
Dollars
13.60
12.20
20.50
23.60
3.10
3.70
4.40
5.20
6.00
6.40
6.50
6.90
8.10
5.40
5.20
4.90
4.80
6.70
8.50
7.00
6.60
6.20
6.00
Moderate- Liberal
cost plan pla11.
Dollars Dollars
18.80 21.10
16.80 18.90
27.40 31.20
32.00 36.20
3.80 4.20
4.60 5.30
5.70 6.70
6.80 7.70
8.10 9.30
8.60 9.90
8.60 9.80
9.50 10.80
11.10 12.50
7.50 8.40
7.20 8.20
6.80 7·70
6.40 7.30
8.80 9·70
10.80 12.00
9.60 10.80
8.90 10.00
8.50 9·50
8.10 9.10
~ These estimates were comp~ted from quantities in low-cost, moderate­cost,
and liberal food plans published in tables 2, 3, and 4 of the o~tober
1957 issue of Family Economics Review. Quantities for children were revised
January 1959 to comply with the 1958 NRC Recommended Dietary Allowances.
The cost of the food plans was first estimated by using the average prices
per pound of each food group paid by nonfarm survey families at 3 selected
income levels. These prices were adjusted to current levels by use of Average
Retail Prices of Food in 46 Large Cities Combined released periodically by the
Bureau of Labor Statistics.
g/ Ten percent added for family size adjustment. For derivation of factor
for adjustment, see pages 3 and 4 of the September 1960 issue of Family
Economics Review.
JJ Man and woman 20-34 yearsj children, 1-3 and 4-6 years. EJ Man and woman 20-34 yearsj children, 7-9 and 10-12 years.
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CONSUMER PRICES
Table 1.--Index of Prices Paid by Farmers for Commodities Used in Family Living
(1947-49 = 100)
November 1960; March 1961-November 1961
Item Nov. Mar. Apr. May June July Aug. Sept. Oct. Nov.
1960 1961
All commodities ............. 119 119 119 119 119 119 119 119 119 119
Food and tobacco .......... -- 118 -- -- 118 -- -- 118 -- --
Clothing .................. -- 119 -- -- 119 -- -- 121 -- --
Household operation ....... -- 119 -- -- 118 -- -- 119 -- --
Household furnishings ..... -- 102 -- -- 102 -- -- 102 -- --
Building materials, house .. -- 121 -- -- 121 -- -- 121 -- --
Auto and auto supplies .... -- 137 -- -- 136 -- -- 136 -- --
Source: U.S. Department of Agriculture, Agricultural Marketing Service.
Table 2.--Consumer Price Index for City Wage-Earner and Clerical-Worker Families
(1947-49 = 100)
October 1960; February 1961-0ctober 1961
Oct. Feb. Item Mar. Apr. May June July Aug. Sept. Oct. 1960 1961
All items ................... 127 128 128 128 127 1281 128 128 128 128
Food ...................... 121 121 121 121 121 121 122 121 121 121
Apparel .•...•..•....•...•. lll 110 llO 110 110 llO 110 110 111 111
Housing ................... 132 132 132 132 132 132 132 132 133 133
Rent .................... 142 143 143 143 143 144 144 144 l4l+ 144
Gas and electricity •...• 126 126 126 126 126 126 126 126 126 126
Solid fuels and fuel oil. 136 141 141 140 136 136 136 137 137 138
House furnishings ........ 104 104 104 104 104 104 lOl+ 103 104 104
Household operation ••... 138 138 138 139 139 139 139 139 139 139
Transportation .•...•.••..• 146 146 146 146 147 148 148 149 149 150
Medical care .............. 157 159 160 160 160 161 161 161 162 162
Personal care ............. 134 134 134 134 134 134 134 134 134 134
Reading and recreation ..•• 122 123 123 124 124 124 124 124 125 125
Other goods and services .. 133 133 133 133 133 133 134 134 134 134
Source: U.S. Department of Labor, Bureau of Labor Statistics.
U, S, GOVERNMENT PRINTING OFFICE: 1961 0 - 6ZZJ36