Hi
THE LIBRARY
OF
THE UNIVERSITY
OF CALIFORNIA
LOS ANGELES
GIFT OF
Hilde Dietzgen Charlton
In Memory of
Her Mother
,
library-
Institute of Industrial Relations
University of California
Los Angeles 24, California
,
Publications of the National Bureau of
Economic Research, Incorporated
NO. 2
INCOME IN THE UNITED STATES
ITS AMOUNT AND DISTRIBUTION
1909-1919
,
INCOME IN THE UNITED STATES
ITS AMOUNT AND DISTRIBUTION
1909 1919
BY
THE STAFF OF THE NATIONAL BUREAU OF ECONOMIC
RESEARCH, INCORPORATED
WILLFORD I. KING OSWALD W. KNAUTH
FREDERICK R. MACAULAY
EDITED BY
WESLEY C. MITCHELL
VOLUME II
DETAILED REPORT
NEW YORK
NATIONAL BUREAU OF ECONOMIC RESEARCH
1922
COPYRIGHT, 1922, BV
NATIONAL BUREAU OP ECONOMIC RESEARCH, IXC.
Printed in the U. £. A.
,
PREFATORY NOTE
Income in the United States is published in two volumes. The first
volume, which has already appeared, is a summary of the findings, intended
for readers who are primarily interested in the results. The present vol-
ume gives in full the methods and estimates on which the results shown in
the first volume are based. In addition, it goes into many details concern-
ing particular industries.
While the Summary Volume was a joint product of the Staff of the Na-
tional Bureau of Economic Research, the detailed estimates now pre-
sented are primarily the work of three individuals. Mr. King is responsi-
ble for the estimate of the National Income based on the value product of
different industries; Mr. Knauth made the estimate based on incomes
received by individuals; and Mr. Macaulay undertook the discussion of
the problem of the distribution of income by income-classes.
Unity was preserved by means of many consultations, and the whole
book was edited by Mr. Mitchell. Like all the Bureau's publications, the
manuscript of the present volume was submitted to the Directors and
approved by them; though not before many changes of detail and many
suggestions had been incorporated. The Directors have made a construc-
tive as well as a critical contribution to the book as it now stands. At
some points, where the manuscript was not changed to accord with individ-
ual suggestions, the Directors have inserted footnotes to indicate their
points of view.
The present Board of Directors is constituted as follows: —
Directors-at-Large
T. S. Adams, Advisor to the U. S. Treasury Department.
John R. Commons, Professor of Political Economy, University of Wisconsin.
John P. Frey, Editor of the International Mohters' Journal.
Edwin F. Gay, President of the New Yorl; Evening Post.
Harry W. Laidler, Secretary of the League for Industrial Democraey.
Elwood Mead, Professor of Rural Institutions, University of California.
Wesley C. Mitchell, Professor of Economics, Columbia University.
J. E. Sterrett, Member of the firm of Price, Waterhouse and Co.
N. I. Stone, Labor Manager, Hickey-Freeman Company.
Allyn A. Young, Professor of Economics, Harvard University.
V
.3
vi PREFATORY NOTE
Directors-by-Appointment
Hugh Frayne, The American Federation of Labor.
David Friday, The American Economic Association.
W. R. Ingalls, American Engineering Council.
J. M. Larkin, National Personnel Association.
W. H. Nichols, Jr., National Industrial Conference Board.
George E. Roberts, The American Bankers' Association.
Malcolm C. Rorty, The American Statistical Association.
A. W. Shaw, The Periodical Publishers Association.
Gray Silver, The American Federation of Farm Bureaus.
.
TABLE OF CONTENTS
Page
Prefatory Note
PART I
THE ESTIMATE BY SOURCES OF PRODUCTION
Chapter
1. Principles and Methods 1
§ la Basis of Estimates 3
§ lb Business Savings Counted as Income 3
§ lc Net Versus Gross Disbursements 3
§ Id What the Net Value Product Includes 4
§ le Estimating Individual Income from a Study of the Product
of Industries 4
§ If Impossibility of Measuring Value of Government Service
to Business 5
§ lg Are Corporate Surpluses Accurately Reported? b'
§ lh Minor Errors and Irregularities in the Tables 7
§ li Possible and Probable Errors of Estimates 7
§ lj General Plan of Presenting Estimates 10
§ Ik Reduction of Values to Money of Constant Purchasing
Power 10
§ 11 Average Annual Earnings Versus Wage Rates 12
§ lm Interest Payments on Consumption Loans not Deducted
from Income 12
2. Preliminary Studies 14
§ 2a An Estimate of the Population of the United States for the
Intercensal Years 14
§ 2b An Index of the Prices of Consumption Goods Used by
Manual and Clerical Workers' Families 17
§ 2c Price Indices of Consumption Goods Used by the Well-
to-do-Classes 24
§ 2d An Estimate of the Industrial Distribution of the Gain-
fully Employed Persons in the Continental United States 31
3. Agriculture 40
§ 3a Sources of Information 40
§ 3b Methods of Procedure 40
vii
viii TABLE OF CONTENTS
Chapter Page
§ 3c The Value of Animal Products 41
§ 3d The Value of Crops Not Fed to Live Stock 50
§ 3e Payments by Agriculture for the Products of Other Indus-
tries 51
§ 3f The Net Value Product of Agriculture 54
§ 3g The Share of the Employees 55
§ 3h The Share of the Entrepreneurs and Other Property Own-
ers 59
§ 3i The Physical Output of Agricultural Produce 59
§ 3j The Relative Position of Agriculture Among the Industries 62
§ 3k Returns for the Efforts of Farm Operators 62
4. Mines, Quarries, and Oil Wells 65
§ 4a Sources of Information 65
§ 4b The Share of the Entrepreneurs and Other Property Own-
ers 65
§ 4c Total Wages and Salaries 70
§ 4d Number of Employees and Average Earnings 73
§ 4e Total Net Value Product and Share of Employees 74
§ 4f The Mineral Output Compared to Earnings and Population 75
5. Factory Production 78
(Covering that part of the private Manufacturing Industry in-
cluded in the totals presented by the United States Census of
1914.)
§ 5a Importance of the Industry 78
§ 5b The Gross Value of the Products 78
§ 5c The Division of the Net Value Product in the Census Years 84
§ 5d Mode of Estimating the Net Value Product for Intercensal
Years 86
§ 5e The Share of the Employees 87
§ 5f The Share of the Entrepreneurs and Other Property Own-
ers 91
§ 5g The Fraction of the Net Value Product Paid Out as Wages
or Salaries 98
6. Summary of the Hand Trades 99
§ 6a Introduction 99
§ 6b Analysis 101
7. The Construction Industry 103
(Shipbuilding Excluded)
§ 7a Introduction 103
TABLE OF CONTENTS ix
Chapter Page
§ 7b Sources of Data 103
§ 7c The Volume of Construction 103
§ 7d The Aggregate of Wages and Salaries 105
§ 7e The Share of the Entrepreneurs and Other Property Own-
ers: First Estimate 107
§ 7f The Share of the Entrepreneurs and Other Property Own-
ers: Second Estimate 110
§ 7g Purchasing Power of Share of Entrepreneurs and Other
Property Owners Ill
§ 7h The Total Value of Construction 114
8. Summary of Transportation 116
9. Steam Railway, Switching and Terminal Companies 119
§ 9a Nature of Available Information 119
§ 9b Method of Utilizing Data 119
§ 9c The Net Value Product and Its Distribution 124
§ 9d The Physical Output per Employee 124
§ 9e Growths of Railway Service and of Population Compared 129
§ 9f The Purchasing Power of the Shares in the Net Value
Product 130
10. Pullman Car Transportation 133
§ 10a Available Information 133
§ 10b The Share of the Stockholders 133
§ 10c Share of the Employees in the Net Value Product 135
§ lOd Average Annual Earnings of Employees 137
§ lOe The Annual Output per Employee 138
§ lOf Relative Growths of Pullman Service and Population. . . . 139
11. Express Companies 141
§ 11a Introduction 141
§ lib Disbursements to Security Holders and Building Owners. 141
§ lie Total Share of Security Holders and Building Owners. ... Ill
§ lid The Share of the Employees 143
§ lie The Total Net Value Product and Its Distribution 144
§ 1 If The Number of Employees 140
12. Street and Electric Railways II s -
§ 12a Census Data Available 148
§ 12b Share of Security Holders and Other Property Owners. . . 148
§ 12c Share of the Employees 150
§ 12d Corporate Savings 151
x TABLE OF CONTENTS
Chapter Page
§ 12e Average Annual Earnings of Employees 152
§ 12f Purchasing Power of Share of Security Holders and Prop-
erty Owners 153
§ 12g The Average Output per Employee 155
§ 12h Relative Growths of Street Car Service and National Popu-
lation 15b'
13. Private Electric Light and Power Companies 157
§ 13a The Census Data 157
§ 13b The Net Value Product and Its Distribution 159
14. Telegraphs 168
§ 14a The Census Figures 168
§ 14b Disbursements to Stock and Bond Holders 168
§ 14c Corporate Savings 173
§ 14d Purchasing Power of Share of Property Owners and Entre-
preneurs 174
§ 14e The Number of Employees and Their Share in the Value
Product 175
§ 14f Average Annual Earnings of Employees 177
15. Telephones 179
§ 15a Introduction 179
§ 15b Share of Entrepreneurs and Other Property Owners 179
§ 15c The Net Value Product and Its Distribution 183
§ 15d The Number of Employees 184
§ 15e Average Annual Earnings of Employees 185
§ 15f The Efficiency of the Employees 186
§ 15g Telephone Revenue Compared for Residence and Business
Telephones 189
§ 15h Relative Growth of Telephone Service and Population. . . . 189
16. Transportation by Water 191
§ 16a Sources of Information 191
§ 16b Assumption Made 192
§ 16c Mode of Estimating Gross Earnings 192
§ 16d The Share of the Owners and Investors 193
§ 16e The Share of the Employees 195
§ 16f The Net Value Product and Its Division 199
§ 16g The Average Annual Earnings of Employees 199
§ 16h The Tonnage of the American Merchant Marine 201
17. Banking 202
§ 17a Sources of Information 202
TABLE OF CONTEXTS xi
Chapter Page
§ 17b The Composition of the Net Value Product 202
§ 17c Net Versus ( Jross Dividends 202
§ 17d Undivided Profits 202
§ 17e The Purchasing Power of Dividends and [nteresl 204
§ 17f Employees, Salaries, and Wages 205
§ 17g The Share of Salaries and Wages in the Value Product.. . 206
§ 17h Banking Facilities Compared to Population and Income.. 207
§ 17i Changes in the Volume of Business per Bank 209
18. All Braxches of Government 210
§ 18a The Components of the Net Value Product 210
§ 18b The Number of Employees 210
§ 18c The Amount Paid in Wages or Salaries 212
§ 18d The Average Annual Earnings of Employees 213
§ 18e Pensions 215
§ 18f Interest on Public Debts 216
§ 18g The Net Value Product and Its Division 219
§ 18h The Per Capita Net Value Product 220
§ 18i The Share of Government in the National Value Product. . 221
19. Unclassified Industries axd Miscellaneous Income 223
§ 19a The Field Covered 223
§ 19b Number of Persons Occupied in Unclassified Industries.. . 223
§ 19c The Earnings of Employees 223
§ 19d The Effect of the War on the Number of Employees 224
§ 19e The Profits of Entrepreneurs 225
§ 19f Rents and Royalties 225
§ 19g The Total Share of Enterprise and Property 226
§ 19h Other Classes of Miscellaneous Income 227
§ 19i The Net Rental Value of Owned Homes 228
§ 19j Interest on the Value of Direct Goods 228
§ 19k Profits from Cow-Keeping 22! »
§ 191 Profits from Raising Poultry and ( rardens 230
§ 19m The Division of the Net Value Product 231
20. Summary of Part 1 233
§ 20a The Average Income per Ammain 233
§ 20b Business Savings 23 1
§ 20c Miscellaneous Summary Tables Not Appearing in Vol-
ume 1 235
xii TABLE OF CONTENTS
PART II
THE ESTIMATE BY INCOMES RECEIVED
Chapter Page
21. Introduction 249
§ 21a The Problem 249
§ 21b The Method and Data 250
22. Total Amount of Income Received by Persons Having Over
$2,000 Per Year 253
§ 22a Introduction 253
§ 22b Estimate from Income Tax Data 253
§ 22c Tax-Exempt Income 260
23. Total Amount of Income Received by Persons Having Under
$2,000 269
§ 23a Introduction 269
§ 23b Personal Earnings 269
§ 23c The Earnings of Farm Laborers 289
§ 23d Pensions 291
§ 23e The Rental Value of Homes Owned by Their Occupants. . 291
§ 23f Income from Investments 294
24. Farmer's Income 298
§ 24a Introduction 298
§ 24b First Estimate — Based on Total Production and Expenses 300
§ 24c Second Method — Based on Average Ratio of Expenses to
Total Product 305
§ 24d Third Estimate — Based on Sample Incomes 308
§ 24e Final Estimate of Farmers' Incomes 310
§ 24f Comparison with Other Estimates 310
§ 24g Farmers Having Incomes Over and Under $2,000 312
25. Corporate Surplus 314
§ 25a Definition of Corporate Surplus 314
§ 25b The Propriety of Counting Surplus as Part of the National
Income 314
§ 25c The Genuineness of Reported Surplus Accounts 315
§ 25d The Data 321
§ 25e Conclusions 328
26. Summary of Part II . . 330
§ 26a The Total Income of the United States, 1910 to 1919 330
.
TABLE OF CONTENTS xiii
Chapter Page
§ 26b The Degree of Error in the Estimate 330
§ 20c Percentage Division of Number of Persons Having Over
$2,000 and Under $2,000 Income per Year 332
§ 26d The Percentage of the Total Income Obtained by the High-
est 5 Per Cent of Income Receivers : 333
§ 26e The Position of the Farmer 333
§ 26f Income in Each Year in Terms of Constant Purchasing
Power 333
§ 20g The Average Income per ( !apita in Each Year 337
PART III
THE PERSONAL DISTRIBUTION OF INCOME IN THE UNITED
STATES
27. The Problem 341
Practical and theoretical difficulties connected with formulation
of the problem. Relation of personal distribution to factorial
distribution.
28. Pareto's Law and the Problem of Mathematically Describ-
ing the Frequency Distribution of Income 344
Pareto's Law. Improbability that any simple mathematical ex-
pression adequately describing the frequency distribution of in-
come can ever be formulated. Heterogeneity of the data.
29. Official Income Censuses 395
The Australian income census of 1915.
30. American Income Tax Returns 401
Peculiarities of the tax returns from year to year. Irregularities
and fluctuations in the distribution of non-reporting and under-
statement. The undcr-$5,0()() and over-$5,000 groups. Waives
and total income.
31. Income Distributions from Other Sources Than Income Tax
Returns 415
Purposes for which existing distributions have been collected make
them extremely ill adapted to our use — picked data.
32. Wage Distribution 418
Relations between rates and earnings, earnings and income. Earn-
ings per hour, per day, and per week. Distribution of hours
xiv TABLE OF CONTENTS
Chapter Page
worked in a week, and weeks worked in a year. Federal returns
of income by sources. The problem of deriving one regression
line from the other.
33. The Construction of a Frequency Curve for All Income
Recipients 424
An income census the direct and adequate method of solving the
problem. Piecing together the existing data. Checking them
for internal consistency and agreement with collateral informa-
tion. Conjectural nature of final results.
PART I
THE ESTIMATE BY SOURCES OF PRODUCTION
By
WILLFORD I. KING
ASSISTED BY
VIRGINIA SANDMEYER
DOROTHY J. ORCHARD
KATE E. HUNTLEY
,
CHAPTER 1
PRINCIPLES AND METHODS
§ la. Basis of Estimates
The object of this study is to ascertain the total annual income which
the people of the United States derive from each of the leading industrial
fields. The method used for ascertaining this total for each industry is
first to find out how much income is withdrawn from the industry for indi-
vidual use and then to add to this amount the total savings made during
the year and retained in their business by all the enterprises engaged in
the industry in question.
§ lb. Business Savings Counted as Income
That business savings really constitute a part of the national income for
the year in which they are made has been denied by some students of the
subject. The ground for their contention is that such savings merely make
possible an increase in the income of future years and hence should be
ignored in the income report of the year when the saving is done.
This method of treating business savings, though plausible, is open to
grave objections. The income with which we are dealing throughout this
study is book income, that is the amount shown as net gain by an accurate
accounting system and is radically different from psychic income which
accrues only when the goods render service to the consumer. In the
accounts of practically every business, the net income as recorded includes
the annual surplus as well as all disbursements to stockholders or owners.
This uniform policy shows that a consensus of opinion exists among
accountants that savings are a form of income. If the accountants are
wrong, we are driven to the conclusion that the amount of the annual income
of a corporation may be altered greatly by a vote of the director-, concern-
ing the disposition of earnings ! Furthermore, when a corporation reports
increased net earnings, even if no dividends are declared, the stock tends
to rise sharply in value, and any stockholder may ;it once realize personal
income by selling his shares at the enhanced price. For the reasons stated,
it seems best to include business savings in the income for the currenf year.
§ lc. Net Versus Gross Disbursements
A number of the great industrial fields of the United States are domi-
nated by corporations and, in such cases, a study of the income created by
3
4 THE ESTIMATE BY SOURCES OF PRODUCTION
the industry is mainly an analysis of corporation reports. This is emphat-
ically true in the case of the various branches of transportation. Now
corporations do not show in their published reports the amounts of interest
and dividends disbursed to private individuals as contrasted with sums of
similar nature paid to other business enterprises. But in making up a total
of income for the country, these inter-business payments must be elimi-
nated to prevent duplication. The method adopted for accomplishing this
result is to deduct from the sum of interest and dividends paid out by a
corporation all bond interest and dividends received from other corpora-
tions. This plan rests upon the principle that the corporation making the
final payment is, in this instance, merely an intermediary between the
original corporation and the private investor. This principle seems to be
logical although its application occasionally gives rise to certain difficulties
in differentiating between disbursements and business savings.
§ Id. What the Net Value Product Includes
The net value product of each industry is assumed, for the purposes of
this study, to include the returns for the services of all persons engaged in
the industry, whether these persons are proprietors or employees, and of
all property aiding in the productivity of the industry. It has, for example,
been assumed that the stockholder or other entrepreneur owning an equity
in a plant, the holder of the mortgage on the plant, and the lessor of prop-
erty utilized by the business are all alike dependent upon the gains of the
enterprise for at least part of their income, and hence may all be classed
together as being owners of property devoted to the undertaking.
§ le. Estimating Individual Income from a Study of the Product of
Industries
Owing to the form in which the data for some industries are available,
it is impossible to estimate directly the amounts of income derived from
them by individuals or saved by the business enterprises in the industry.
In such instances, one naturally has recourse to the alternative method of
subtracting from the gross output of the industry in question all payments
made to other industries for the materials or services which they have con-
tributed. In following this method, the ideal course of procedure, in the
case of any industry, is to deduct from the gross value of its products not
only the cost of materials used but also such payments as freight and
insurance charges, bank interest, and those taxes which represent the value
of government aid and protection, furnished to the industry. The amount
remaining after these deductions have been made represents the net income
— a quantity which may be either saved or distributed to individuals. In
general, every industry is credited with all goods sold to dealers, consumers,
PRINCIPLES AND METHODS 5
or other industries, and debited with all indirect or production goods
received from other industries. Government, like any other industry,
ought to be credited with the value of its services and debited with the
indirect or production goods received from other industries. An indus-
try can never be debited with charges for direct or consumption goods, 1 for
these are not used to further its business or add to its output.
Just as industries pay freight charges for the services of railways, so
they also pay taxes to meet the cosl of government. In so far as the tax
money buys from government indirect (production) goods or secures ser-
vices in the form of protection or assistance to the industry, the industry
in question evidently ought to be debited with the tax just as it is debited
with freight charges. In so far, however, as the tax money paid by an
industry goes not to pay for aid to the industry but instead to buy direct
government services to individuals, the industry cannot justly be debited
with such taxes; for, in such cases, the services of government are not busi-
ness aids but are forming part of the consumable income of individuals
and therefore fall into the category of direct services — a class which,
according to the principles enunciated above, are never to be charged
against an industry.
This line, however, between the taxes that theoretically should and
theoretically should not be deducted from the gross value of an industry's
output is impossible to draw in practice. Statistically, the only feasible
course is to deduct all of the taxes levied on the business. 2 Such a deduc-
tion inevitably gives rise in most instances to an error in the final results —
unfortunately only one of several types of unavoidable error to which it is
necessary to call attention at this point.
§ If. Impossibility of Measuring Value of Government Service to
Business
One of the most serious of these errors arises from the impossibility of
dividing all services rendered by the various blanches of government into
two classes, namely: —
1. Those rendered to business.
2. Those serving the people directly.
This impossibility has compelled us to act on the basis of the assumption
that the taxes levied against each field of business are equivalent to the
value of the service rendered t<> thai industry by government. This as-
sumption is, however, likely to be far from the truth. In 1918, for example,
manufacturing corporations paid to the Federal Government $2,112,044,-
1 Expenses for welfare work, for example, are not deductions from the value product of
an industry.
* See Volume I, Chapter'-', Sec. IV for a further discussion of this point.
6 THE ESTIMATE BY SOURCES OF PRODUCTION
810 as income tax, war profits tax, and excess profits tax, and considerable
additional amounts were paid by individual manufacturers and partner-
ships operating in this field. Exact statistics are not available, but the
indications are that the entire agricultural industry did not pay to the
United States Government over $100,000,000 in these classes of taxes. 1
It seems highly improbable that in 1918 the Federal Government ren-
dered to the manufacturing industry service valued at more than twenty
times that furnished to agriculture. It may well be that the aid of the
National Government to the farmers' business was worth more than $100,-
000,000 but it scarcely appears credible that the manufacturers received
service worth over two billions. According to the plan followed in this
study, however, the two billions have been considered as an expense to
the manufacturing industry and deducted. Any part of this amount
which is in excess of the value of the services of the Federal Government
to the manufacturers, represents a forced contribution to the general wel-
fare and should, in order to obtain the correct figures for 1918, be added
to the net value product of manufacturing recorded in this study.
If this type of error results in an underestimate of the income arising
from manufacturing, it may, on the other hand, show too high value prod-
ucts for some other fields; for industries may exist which government
has served much but taxed little. Unfortunately it is not at all certain
that the errors arising from this source cancel out, for we cannot measure
even approximately the total value of the service rendered to business
by government. It seems likely, however, that, since 1917, business taxes
have been more than sufficient to pay for the services rendered to business
by all branches of government. If so, this excess should be added to the
total income as reported in this study in order to obtain the correct total
for the nation.
§ lg. Are Corporate Surpluses Accurately Reported?
Another possible source of grave errors is found in the estimates of the
business savings of the various industries. In most instances these esti-
mates have been based upon reported surpluses of corporations operating
in that field. It, therefore, becomes a question of prime importance to
know whether the reported size of such surpluses is reasonably close to the
truth or whether the stated amounts are far too large because of failure to
allow sufficient amounts for depreciation, or are entirely too small, because
many improvements have been charged to operating expenses. Mani-
festly it is impossible to go behind the returns of the reporting concerns,
but it is nevertheless possible to ascertain by indirect methods something
about the validity of the accounting systems used by the average corpora-
1 See I . S. Bureau of Internal Revenue, Statistics of Income, 1918, pp. 11 to 16.
PRINCIPLES AND METHODS 7
tions. If reported surpluses are genuine, they should add to the earning
power of the companies accumulating them in proportion to the ratio
which these surpluses hear to the total of previous investments. An inves-
tigation by Mr. Knauth indicates that, in practice, earnings have increased
in just about this proportion. It appears, therefore, that no greal error
is likely to arise from the practice of accepting as accurate the amount- of
surpluses reported; hence this practice has been adhered to throughout
this study.
§ lh. Minor Errors and Irregularities in the Tables
It is perhaps wise at this point to mention certain mathematical details
connected with the presentation of data in the accompanying tables. The
basic figures in most instances have such a margin of error that errors in
multiplication or division arising from the use of a 12 inch slide rule are of
negligible importance, hence this instrument has been frequently used.
The result is that a computation by more accurate means will occasionally
reveal errors in the fourth significant figure.
In numbers of instances, original computations have been carried to
more places than are shown in the quantities entered in the tables here
presented, hence it follows that an item in a total column may differ
slightly from the nominal sum of the items in the columns from which the
total is derived.
Owing to the inherent characteristics of the decimal system, when all of
the percentages composing a whole are read to any given decimal place, the
recorded items may not add up to exactly 100. The same principle applies
to decimal fractions. The quantities have been correctly entered, no
attempt being made to obtain a total of 100 (or of 1, as the case may
by distorting the component parts.
§ li. Possible and Probable Errors of EstLnatss
It is, of course, impracticable to esti n tte with a iz • of tn ■
po ible or probable error in each of the items entering into the total.
However, it is clear that the likelihood of error is far greater in some in-
stance than in others. An attempt has been made, therefore, to record
for each of the principal items two estimates of error: namely, the probable,
and 'he maximum reasonable. The probable error is denned as being such
that the chances are even that the error is greater or less than the amount
stated. The maximum reasonable error \< defined as being so large thai the
chances are ten to one that it will not be exceeded. The 1918 estimates
for these errors of the various items follow:
8
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 1A
ESTIMATED ERRORS IN THE ITEMS OF THE NATIONAL VALUE
PRODUCT IN 1918
Industry
i I
tt
u
Mineral Prod
tt
uction
tt
it
a
a
a
Factory Prod
uction
tt
a
tt
Construction
tt
Automobile Repairing
Laundrv ....
Custom Grist Mills.
a it ..
Custom Saw Mills..
Shoe Repairing.
Tailoring, Dyeing &
Cleaning
Repair of Machines.
Blacksmithing
Custom Dressmaking.
Railways, Switching &
Terminal ( !ompanies.
Railways, Switching &
Terminal Companies.
Pullman Co
Division
Crops
New Land
Animal Products
Deductions
Wages and Salaries
Rent
Savings
Remainder
Wages and Salaries
Kent
Remainder
Wages and Salaries
Remainder
Total
Wages and Salaries
Remainder
Wages and Salaries
Remainder
Wages and Salaries
Remainder
Total
Total
Total
Total
Total
Wages and Salaries
Remainder
Wages and Salaries
Remainder
Millions of dollars
Size of
item
7,119
405
6,189
-1,031
1,422
214
79
298
12,378
137
3,503
964
317
367
106
84
2
13
2
3
111
661
61
210
83
2,763
807
24
10
Probable
error a
500
200
500
200
70
40
20
30
200
70
300
150
100
90
15
15
1
8
1
1
50
150
40
SO
70
10
50
3
1
Maximum
reasonable
error b
1,500
COO
1,200
400
250
80
70
100
600
200
800
400
250
180
35
70
2
15
2
3
110
500
75
300
120
100
250
7
4
a Even chances.
'- Ten chances to one that the error is not larger than this amount.
,
PRINCIPLES AND METHODS
TA RLE 1 A — C'nnlin lit </
9
Division
Millions of dollars
Industry
Size of
item
Probable
error
Maximum
reasonable
error
Express Co
Wages and Salaries
Remainder
93
— 1 1
1
3
3
a
7
Street Railway
Wages and Salaries
Remainder
31 1
124
10
10
40
Commercial Electric Light
& Power
Commercial Electric Light
& Power
Wages and Salaries
Remainder
Wages and Salaries
Remainder
97
160
49
18
5
20
2
2
15
50
Telegraph
a
8
9
Telephone
Wages and Salaries
Remainder
194
85
5
6
15
20
Transportation by Water..
a it it
Wages and Salaries
Remainder
421
85
30
20
150
60
Banking
ti
a
it
Wages and Salaries
1 )ividends
Surplus
Remainder
281
87
194
204
20
15
6
15
60
30
20
70
Government
a
tt
Federal
State and County
Municipal
Municipal Utilities
Schools
Deductions
3,81 1
384
707
39
578
—170
200
30
30
4
15
20
600
100
150
it
15
ti
u
100
.-,()
Unclassified Industries. . . .
It a
it ti
a n
Wages and Salaries
( Jorporate Profits
Individual Profits
Rents
7, ()•_>'_'
1,017
4,601
263
11)0
101)
700
80
1 ,200
100
1,000
100
Miscellaneous Income
a a
it a
Urban Agriculture
Hume Rental Value
Interest on ( Jon-
sumpt ion ( roods
364
1,237
1 ,27o
80
200
200
240
600
600
Total
60, v. 1
5,194
14,900
1,266
Maximum Reasonable Error of Total.
3,566
The estimated probable error of the total, as computed by the usual
formula from the items given, amounts to 1.3 billions. The maximum
reasonable error of the total as shown by an experimental test with the
items given appears to be about 3.6 billions of dollars. The evidence
10 THE ESTIMATE BY SOURCES OF PRODUCTION
indicates, therefore, that the total is close enough to the truth to meet the
needs of most students of the subject, the error presumably being not
greater than six per cent and perhaps very much less.
Since the errors for the other years of the decade are presumably sim-
ilar in proportionate size to those in 1918, no separate computations have
been made therefor.
§ lj. General Plan of Presenting Estimates
The general plan of exposition determined upon is to attempt to show
for each of the leading industrial fields covered by the Census: —
1. The net value product.
2. The share of the employees in the value product.
3. The average annual earnings derived from the industry by each
employee.
4. The share of the entrepreneurs and other property owners in the net
value product.
5. The purchasing power of each of the above items at prices of 1913.
6. Changes in the physical output per employee.
7. Changes in the physical output per inhabitant of the United States.
8. The average number of employees actually at work
9. The average number of employees attached to the industry.
Frequently it has been possible to determine from the available figures
other facts of interest and these facts have been worked out to a limited
extent.
In some cases, however, since it has not been feasible to cover even the
standard list of inquiries, results have been presented which are not en-
tirely complete.
While an effort has been made to outline the general modus operandi in
most instances, it has been found impracticable to present all of the details.
Those especially interested in the procedure followed may through personal
or written inquiry obtain such additional information as the records of the
Bureau afford.
§ Ik. Reduction of Values to Money of Constant Purchasing Power
The plan of attack decided upon has required that, in most instance!,
amounts be first estimated in money of current purchasing power, or, i a
other words, in terms of book income. The juice changes during the latter
part of the decade have, however, been so large that comparisons of money
values for different years tell practically nothing about the variations that
have occurred either in the physical volume of business or in the quantity
of goods that the income will buy. It has been necessary, therefore, to
convert many items into figures representing values in money of constant
■
PRINCIPLES AND METHODS 11
purchasing power. For tins purpose, prices of the year 1913 have com-
monly been taken as standard, this year being the base used by the United
States Bureau of Labor Statistics and by numerous other organizations.
The accuracy of the results obtained by such conversions evidently
varies in proportion to the correctness of the price indices used as divisors.
The United Stat''- Bureau of Labor Statistics "cost of living" index ha-
been assumed to be satisfactory for the purpose of reducing wages and
salaries to a comparable basis. Since this index has not been computed
for the years preceding 1913, it has been necessary to extend it back by
means of a special investigation. As a test, this Bureau computed the
index for the years 1909 to 1918 and compared the figures for the six oxer-
lapping years (1913 to 1918) with the Government figures just mentioned.'
The fact that the correspondence between the two index scries proved
very close leads to the belief that errors arising from the faultiness of this
index series are not of major importance.
While the general principle to be followed in correcting the income of
the working classes is quite obvious, the best method of converting the
income from property and enterprise to the 1913 base is not so easy to
determine. Since a considerable fraction of personal income of large prop-
erty owners is invested rather than immediately consumed, the propriety
of using an index of prices of consumption goods as a correcting factor for
this type of income may well be questioned. Careful consideration has
been given to this point, and the conclusion has been reached that no other
price index can as legitimately be used for this purpose. Investments are
so heterogeneous in their nature that it is difficult to say jusl what type
should be considered and what weighl should be assigned to each. Prices
of indirect goods, whether stocks of corporations or commodities at whole-
sale are certainly to a large degree, merely reflections of prevailing opinions
of what prices of direct (consumption) goods are expected to be at a later
date. In so far as this is true, it appears more logical to base a collecting
factor for the present date upon prices having their origin in expenditure-;
for present consumption than upon those reflecting anticipated future
needs. After all, expenditures for consumption goods form no mean pro-
portion of the total income of all except the very wealthiest families. It
is believed, therefore, that the procedure followed is more logical than any
other that can be practically applied.
It might seem reasonable to deal with business savings by using the same
method applied to the personal income of the property owner-. However,
it is evident that the immediate function of the first mentioned type of
income is to strengthen the business rather than to purchase consumption
goods. Normally such savings are invested in new plants or equipment.
i Sec Section 2b.
12 THE ESTIMATE BY SOURCES OF PRODUCTION
For this reason, the policy has been followed of dividing the business sav-
ings in each field of industry by an index believed to approximate the
changes in construction costs in that branch of industry for the same year.
§ 11. Average Annual Earnings Versus Wage Rates
While average annual earnings do not always give a good picture of the
absolute economic condition of the employees in an industry at a given
time, the3 r are usually distinctly valuable as indices of change in welfare
from 3 r ear to year. The wide difference in nature between wage rates and
earnings should not be overlooked. Wage rates measure the price of a
specific amount of labor; earnings are connected more closely with the
economic welfare of the employee and his family. Earnings may be mater-
ially reduced by a shortening of hours or an increase in unemployment at
the same time that wage rates are stationary.
The United States Census Bureau commonly reports for various indus-
tries the total amount of wages paid and the average number of wage
earners emplo3 r ed. If the first quantity is divided by the second, the
quotient represents approximately the average earnings of a full time
worker, 1 rather than the average earnings of the workers who normally
make their living in this field of endeavor. To obtain average annual
earnings, it is necessary first to estimate for each year the average number
of workers attached to the industry and then to divide thereby the aggre-
gate of wages paid. Such an estimate has been made for each industry.
The mode of estimating the number of employees attached to, or in other
words, normally making their living in a given industry, is discussed in
Chapter 2.
§ lm. Interest Payments on Consumption Loans Not Deducted from
Income
One of the most puzzling theoretical problems encountered daring the
investigation has to do with interest on loans made for the purpose of pur-
chasing goods for direct consumption. Does sound logic require the deduc-
tion of such interest pajmients from the gross income of the borrower,
when calculating his net income? The practical bearing of the question is
principally in connection with the Liberty Loans which represent billions
borrowed from the bond buyers by the citizens in general in order to obtain
such immediately consumable war supplies as powder and shells. The
bonds were originally held by persons advancing money to relieve others
from paying at that time their respective proportions of the cost of the war.
This advance of money did not necessarily add anything to the aggregate
1 A full time worker is one who works the number of hours designated by the employer
as "full time." For a fuller discussion, see § 2d.
PRINCIPLES AND METHODS 13
of the actual physical product. It merely meant that potential tax-
payers retained too large an income during war lime on the understanding
that they pay a bonus, known as interest, for the privilege of meeting,
from later income, their full share of the burden. It may be contended,
therefore, that if interest receipts are included in the total income of the
people, it is only fair to deduct these amounts from the incomes of the
taxpayers.
The opposite point of view which has led to the inclusion of these interest
payments in the net value product is that the advantage to the taxpayers
of being allowed to postpone the time of payment was evidently felt to be
real enough to make them willing to pay money for the privilege. Further-
more, if the taxpayers feel that the privilege of postponing the assumption
of their respective shares of the burden is not worth the interest charge,
they always have the option of paying off the debt. According to the defi-
nition followed in this study, an advantage of the type just mentioned is a
service which constitutes income, and such income must be added to the
actual physical product in order to arrive at the net value product, or in
other words, at the total income of the country.
Similar reasoning applies with equal force to interest on all sums
borrowed for the purpose of obtaining consumption goods, whether the
borrowing is done by government or by private individuals.
While the arguments just stated have seemed to be weightier than any
on the opposite side, it must nevertheless be admitted that a strong case
can be presented for pursuing the opposite course in this computation
and for this reason, government interest payments have been segregated
so that those who prefer may subtract them from the estimates of aggre-
gate national income for the various years (as presented in Volume I), in
order to secure totals according with their beliefs.
CHAPTER 2
PRELIMINARY STUDIES
§ 2a. An Estimate of the Population of the United States for the
Intercensal Years
In the course of the present investigation, it has been found essential
to have a reasonably accurate estimate of the population of the United
States for each of the intercensal years. The method of interpolation used
in obtaining the estimates presented in the Statistical Abstract of the
United States consists in taking one-tenth of the arithmetic increase since
the preceding Census and adding this amount to the Census figure to find
the population for the next year; similarly the population for each of the
succeeding years is calculated by adding this same number to the estimate
for the year previous. This process is a straight line extrapolation and has
nothing but simplicity to commend it, for, when applied, errors of consid-
erable size gradually accumulate as changing conditions affect population
growth. For example, the Census shows a population on January 1,
1920, nearly two millions less than that given by following the method just
described. Is there a more accurate way of estimating the population in
advance of the Census? If so, what is it? In the hope of answering these
questions, the following study has been made.
For recent years, the Census Bureau has compiled figures showing the
birth rate and the death rate for the registration area and this registration
area has been steadily growing larger until it now appears to be fairly rep-
resentative of the country as a whole. The Commissioner of Immigration
presents annual statistics showing the number of aliens admitted and
departed. It seemed to the Staff of this Bureau that these figures might
readily be used as a basis for estimating the population, year by year.
This view was later endorsed by officials of the United States Census
Bureau.
The mode of procedure followed has been relatively simple. The birth
rate and the death rate are given for the calendar year while immigration
is reported for the fiscal year. By aid of smoothed curves, the birth and
death rates have been estimated for the fiscal years and the excess of the
birth rate over the death rate has been calculated. The population for
June 30, 1910, has been estimated according to the method employed in
the Statistical Abstract. The estimated excess of the birth rate over the
14
PRELIMINARY STUDIES 15
death rate has been applied to this population to find the increase dm
the excess of births over deaths during the fiscal year ending June 30, L911.
This amount plus the excess of immigration over emigration has been
added to the population estimate for June 30, 1910. and the resulting sum
has been assumed to be the population for June 30, 1911. This number
has been taken as a new base and the process has been repeated for the
next year — and so on up to t ho ( Jensus of 1920. The estimate thus arrived
at for January 1, 1920, is in error by approximately half a million, or only
about one-fourth of the corresponding error resulting from the method of
estimate used in the Statistical Abstract, ft has been assumed that the
error was equally distributed among all intercensal years and. by cor-
recting in accordance with this assumption, a revised preliminary estimate
of the population for each year has been secured.
Since the Census estimates of birth and death rates for the various years
are based upon population estimates which are considerably too high for
the last years of the decade, it seems probable that these reported birth
and death rates are both somewhat too low for the period just mentioned.
Following this assumption, these rates have been increased in the same
ratio that the Census estimate of population bear- to the revised prelim-
inary estimate made according to the procedure described above. These
revised rates have been applied to the revised preUminary estimates of
population and the products have been taken as the net additions to the
population arising from the excess of births over death-. By use of these
increments and those due to the excess of immigration over emigration,
the population has been again built up year by year on the basis of the L910
Census. The estimate obtained in this manner for January 1, 1920. differs
by only 414,000 from the Census count at that date.
This difference has been apportioned equally among the various years
of the decade giving as a final estimate the figures shown in the accom-
1 anying table.
16
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 2A
AN ESTIMATE OF THE POPULATION OF THE UNITED STATES FOR THE INTERCENSAL
YEARS
Estimated number
per thousand inhabitants
Estimated thousands
added during the fis-
cal year '' to the popu-
lation of the U. S. by
excess of
Estimated popula-
tion of the Con-
Date
Calendar year
Excess of births
over deaths
tinental U. S.
(Thousands)
Births/
Deaths '<
Cal-
endar
year
Fisca 1
year o,c
Births
over
deaths J
Immigration
over
emigration k
June 30 '
Jan. 1 m
1909.
20 . 2 9
25. 8o
25 . 6 9
25 .4 9
25.2 9
25.0 9
24.9
24.8
24.0
24.4
24.2
14.4
15.0
14.2
13.9
14.1
13.6
13.5
14.0
14.2
17 7
12.9 »
11.8
10.8
11.4
11.5
11.1
11.4
11.4
10.8
10.4
6.7
11.3
12.0
11.3
11.1
11.5
11.3
11.3
11.5
11.2
10.6
10.3
5 S
14.6&
1,078
1,033
1,033
1 088
1 ,088
1,110
1,147
1,131
1,084
1,067
607
7716
544
818
512
402
815
769
50
126
216
19
21
716
90,370
(91,972d)
92,229
93,811
95,338
97,278
99,194
100,428
101,722
103,059
104,182
104,847
106,357
89,557
1910
1911
1912
1913
1914
1915
91,340
(91,97L'(/)
93,070
94,600
96,290
98,310
99,870
1916
1917
1918
1919.
101,080
102,410
1(13,660
104,310
1920.
105,709e
(I Corrected to account for adjustments in population used as a base; quantities read from a curve.
b This is an estimate for the last half of 1919 only.
c Ending June 30 of the given year.
d Census count for April 15, 1910.
e Census count for January 1, 1920.
/Census Bureau, Birth Statistics for the Birth Registration Area of i lie United States.
Estimated from a smoothed curve produced.
h Statistical Abstract of U. S. for 1919, p. SO.
i Preliminary estimate by Census Bureau.
J Rates in preceding column times the population calculated by the preliminary method described in
the text.
k From Statistical Abstracts of the U. S.
1 For mode of derivation, see text.
m Derived from the immediately preceding column by aid of a smoothed curve.
It is true that it would be impossible to obtain results of the degree of
accuracy here presented were it not for the existence of a Census count at
each extremity of the period studied. Nevertheless, by following practi-
cally the same method, omitting only the adjustments used to make the
data conform to the Census of 1920, it appears that the estimate for Jan-
uary 1, 1920, would be in error by only about 495,000.
It is not improbable that even this degree of error might be reduced
somewhat if one used monthly instead of annual figures for immigration
and the rales for births and deaths. Doubtless other refinements might
be introduced. However, the residual error after applying the simple
method just presented is unimportant for most practical purposes. It
seems, therefore, that this plan of estimating the population of the United
States for intercensal years is well worthy of the consideration of statis-
ticians.
An interesting by-product of this study is the light thrown upon the
ultimate apparent effect of the influenza epidemic of 1918 upon the popu-
lation of the country. The fatality caused by the disease was so great
PRELIMINARY STUDIKS 17
that the population on January 1, 1919, was but little larger than on
June 30, 1918. This fact is not at all surprising, but the remarkable feature
is that the death rate during 1919 was so much reduced (despite the exten-
sive recurrence of influenza in that year) that the population on January
1, 1920, was probably little if any less than it would have been had the
influenza epidemic not occurred.
These figures lead one to inquire whether influenza ought not to be
regarded principally as a hastener rather than as a primary cause of the
death of its victims. The only other reasonable explanations of the great
fall in the death rate for 1919 would seem to be that influenza had a bene-
ficent effect in stimulating the health of the survivors or that some un-
known cause greatly interfered with the action of deadly diseases in 1919.
Neither of these latter assumptions seems as probable as the hypothesis
suggested in the original query.
§ 2b. An Index of the Prices of Consumption Goods Used by Manual
and Clerical Workers' Families
Data showing the average annual money wages or annual book income
received by any class of workers have little meaning unless such wages or
income are compared with the changes in the average prices of the goods
usually bought by such workers. The recent wide variations in the price
level have made this fact evident even to the most casual observer. It is,
therefore, essential that a reliable index of prices paid for commodities
consumed by the working classes be at hand.
Recently, the United States Bureau of Labor has published such an
index number covering the years 1913 to date, but it has presented none
for the years 1909 to 1912. The index number worked out by the National
Bureau of Economic Research is the result of an attempt to fill in this gap.
Unfortunately, complete data are not available for all fields; hence it has
been necessary to use estimates of doubtful value in place of actual figures
for certain items. For example, no figures showing the trend of house
rents for the earlier half of the decade have been discovered. Other missing
items are, fortunately, mostly those of very minor importance.
In constructing the price index, the classification made by the United
States Bureau of Labor has been followed closely, all commodities being
divided into six general classes: — namely, Food, Clothing, House Furnish-
ings, Housing, Fuel and Light, and Miscellaneous. In the case of each
group, the index has been constructed to cover the period 1909-1919. the
year 1914 being used as the base year. In deriving the index number here-
with presented, recourse has been had to two apparently distinct but actu-
ally related methods of computation; first, the comparison of aggregates
of actual' prices based upon the estimated quantities used in the base year;
IS THE ESTIMATE BY SOURCES OF PRODUCTION
second, the weighted arithmetic average of relatives, the weights used
being likewise the quantities assumed to have been used in the base year.
Since the same base year and the same weights have been used, the two
methods necessarily give identical results — as can easily be demonstrated
by simple arithmetic.
The reason for varying the method lies in the fact that the original data
were partly in the form of actual prices and partly in terms of relative
numbers only. In the case of fuel and light, for example, the Bureau of
Labor reports furnish relative numbers from 1909 to 1914 and actual prices
from 1914 to date. Under such circumstances, convenience dictated the
use of the particular method of computation that involved least labor.
In the main, the procedure was as follows: Aggregates of prices were
computed for the sub-groups; these aggregates were reduced to relative
numbers; and these relatives were then weighted and combined to give
the final index.
Food.
For the food group, the index number constructed by the Bureau of
Labor and published in the Monthly Labor Review each month seems to be
entirely satisfactory and hence has been used. In recent years, that index
number is based upon the year 1913. For our purposes, it has been neces-
sary to adjust it to the common 1914 base. This has been done by dividing
each annual index by the index number given for 1914 and multiplying
the results by 100.
Clothing.
The articles of clothing included in this group, and the weights used are
based upon the list given by the Bureau of Labor in the Monthly Labor
Review for November, 1919, pp. 2 to 14 — a list showing the actual appor-
tionment of expenditures for clothing by working families of Northern
and Southern Cities. Since it is not easy to find quotations of clothing
prices which are comparable from year to year, it was decided to have
recourse to figures quoted by some mail order house, for by use of the cata-
logue, it is possible to identify with a fair degree of accuracy the same
article in different years. Sears, Roebuck & Company were kind enough
to place a series of their catalogues at our disposal. From these were
selected forty-three articles of men's clothing and forty-four articles of
women's wear, which seemed to be practically identical in quality through-
out the decade under consideration. The price of each article was then
multiplied by the average number of units purchased per family per year,
as shown by the Bureau of Labor study above mentioned. As the figures
are given for Northern and Southern cities separately, an average weight
PRELIMINARY STUDIES 19
for the country was made by weighting the Northern cities two and the
Southern cities one, the larger weighting being given to the North because
that section is so much more populous.
A total value for each article having been thus calculated, the values for
the various articles were next summated in order to obtain an aggregate
value for all articles in the given year. The aggregate value for 1914 was
then taken as a base and called 100, and indices for other years were de-
rived by a comparison of the relative sizes of the aggregate values.
House Furnishings.
As in the case of clothing, the weighting system is based upon a list pub-
lished by the Bureau of Labor 1 showing the average annual expenditure
by working families in the cities of the United States for various articles
of furniture and the number of each item of furniture purchased each year
by the average family. As in the case of clothing, the prices have been
taken from the annual 2 catalogues of Scars, Roebuck & Company. The
method of computation used is identical with that already described for
clothing.
Fuel and Light.
In working up an average index of prices of fuel and light, it was possible
to get satisfactory quotations for coal (anthracite and bituminous), man-
ufactured gas, and electricity.
The prices on January 15th and July loth of each year from 1914 to
1919 for coal in ton lots for household use are published in the Monthly
Labor Review. 3 Separate quotations are given for bituminous coal and
two kinds of anthracite, namely, stove and chestnut. The actual prices
for the years 1914 to 1919 were reduced to relatives on the 1914 base.
Relative prices for each of the three; items had already been computed by
the Bureau of Labor Statistics for the years 1909-19 14, 4 and were simply
transcribed as quoted.
The mean of the relatives for stove and chestnut coal was used as
representative for anthracite. The relative numbers for anthracite and for
bituminous coal were then weighted by the respective annual costs per
average family in the year 1919 for the two varieties of coal as shown by
figures published in the Monthly Labor Review?
Manufactured Gas: The average net price per 1000 cubic feet of gas
1 Monthly Labor Review, Jan. 1920, pp. 27 34.
*Clothng prices were taken from the spring catalogue issued Jan. 1st, and furniture prices
from the autumn catalogue issued Sept. 1. The indices fur each group have Keen adjusted
to the middle of the year before computing the average price index for all commodities.
3 Monthly Labor Review, March, 1920, p. lY.i.
1 Statistical Abstract of the U. S., L915, p. 531, table .'500.
' Monthly Labor Review, Sept. 1920, pp. 92-99.
20 THE ESTIMATE BY SOURCES OF PRODUCTION
was computed by taking quotations of the price of gas from a number of
widely distributed cities x and getting the average of these quotations.
These averages wore reduced to relatives on the 1914 base. The annual
cost of gas per average family per year was ascertained from the Bureau
of Labor Statistics report 2 and the relative prices of gas were weighted by
this figure.
Electricity: Estimates of the average price per kilowatt hour of elec-
tricity used in residences in New York City were obtained from the New
York Edison Company, and these were reduced to relative prices on the
1914 base. As in the case of coal and gas the average cost per family
per year was derived from information published in the Monthly Labor
Review 2 and the relative prices of electricity were weighted by this
figure. The sum of the weighted relatives for these various items making
up the fuel and light group, was divided by the sum of the weights used
and the resulting figure was taken as the index for this group.
Housing
In their recent investigation into the cost of living, the National Indus-
trial Conference Board made a study of changes in the cost of Shelter 3
during the period 1914-1919, using 1914 as the base year. The results of
this study are charted in their report, and from this chart have been read
the index numbers used in making up our average index.
Careful search has failed to bring to light any information whatever
concerning the course of house rents before 1914. As the years 1909 to
1914 were characterized by a relatively stable level of prices, it has seemed
best to assume that house rents remained unchanged during this interval
and hence to use 100 as the index for each year.
Miscellaneous Expenditures.
In constructing the index number for the miscellaneous group, again
the weights were based upon the information given in the Monthly Labor
Review.* After much difficult}', approximate price quotations were
secured for thirteen items of this list, namely, railway passenger fares,
telephone rates, street car fares, automobile repairs, automobile tires,
gasoline, moving picture tickets, newspapers, magazines, college tuition, •'
room and board at college/' hotel rates for lodging,"' and retail prices
of tobacco, and these items were assumed to be fairly representative of
the miscellaneous group.
' Statistical Abstract of the U. S., 1917, p. 5.",); 1919, p. 576.
2 Monthly Labor Review, Sept. 1920, pp. 92-99.
1 National Industrial Conference Board, Research Report, No. 28, May, 1920.
' Nov. 1919, pp. 15-19.
5 These items are of minor importance and hence are weighted lightly.
PRELIMINARY STUDIES 21
The actual prices of each article were reduced to relatives on the base
1914. The relatives were then weighted by the average cost per family
for each item as shown by the Bureau of Labor study for 1919. The sum
of the products for each year was divided by the sum of the weights for
the same year in order to arrive at the index number for that year.
Average Index for all Expenditures for Consumption Goods.
The average indices for the separate groups having been obtained for
the various years by the methods above described, the next step was to
combine them into an index representing the entire expenditures for con-
sumption goods. This combination was effected by multiplying the indices
by weights representing, for 22 cities in the United States in which the
United States Bureau of Labor Statistics conducted investigations in 1919,
the per cent of all expenditures, devoted to each class of items. 1 The
actual numbers used as weights are as follows:
Item of expenditure per cent of total
expenditure
All purposes 100
Food 38.2
Clothing 16.6
Housing 13.4
Fuel and Light 5.3
House Furnishings 5.1
Miscellaneous . . . 21.3
The sum of the products for each year was divided by the sum of the
weights for the same year to obtain the average index for that year. The
final results of the study are presented in the accompanying table.
The fact that the indices from 1911 to 1919 correspond so closely to
those computed by the Bureau of Labor Statistics makes it appear proba-
ble that the indices for the years 1909 to 1913 are also not far from the
truth. The only important reason for suspecting any greater margin of
error in the earlier years is the absence of rent data for that period. How-
ever, it is improbable that there were variations in this relatively small
item sufficiently great to vitiate materially the average indices for the
whole group. It seems safe, therefore, to use the figures presented as a
representative index of the average 1 prices of those consumption goods pur-
chased by the working classes of our population during the different years
of the decade under consideration.
1 Monthly Labor lit vine, October, 1920, p. 65.
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24
THE ESTIMATE BY SOURCES OF PRODUCTION
Since the facilities of the United States Bureau of Labor Statistics are
so much more extensive than any at the command of this Bureau, it seems
fair to assume that their index number is the better one to follow for the
period actually covered, and hence, in the practical application of the index
number for the purpose of reducing the book income of the working classes
to terms of purchasing power, the index number shown in Table 2C is the
one which will actually be used. This is simply the Bureau of Labor Sta-
tistics index carried backward to 1909 by assuming that, for the earlier
years, it varies in the same ratio as the index for all consumption goods
shown in the first column of Table 2B.
TABLE 2C
A COMPOSITE INDEX NUMBER SHOWING THE AVERAGE PRICES OF
CONSUMPTION GOODS USED BY MANUAL AND CLERICAL WORKERS,
THE INDEX BEING BASED UPON INVESTIGATIONS BY THE UNITED
STATES BUREAU OF LABOR AND THE NATIONAL BUREAU OF ECO-
NOMIC RESEARCH
Middle of
Year
Index of Average Retail Prices
Base 1913
1909.
95 . 5 a
1910. . . .
97. 8 a
1911
98. 4 «
1912
99.4 a
1913
100 . b
1914. . . .
101. b
1915
103. b
1916. . .
110. b
1917
129. b
1918.
158 . b
1919. ...
177.3c
1920
216.5c
a National Bureau of Economic Research; derived from Table 2B.
b U. S. Bureau of Labor, Monthly Labor Review, June, 1920, p. 79.
r U. 8. Bureau of Labor, Monthly Labor Review, October, 1920, p. 65.
The more complete data are presented in the hope that they may be of
assistance to other workers in this field.
§ 2c. Price Indices of Consumption Goods Used by the Well-to-do
Classes
Many studies have been made of the changes that have occurred in the
prices of consumption goods bought by the "working people," but this
Bureau has not succeeded in discovering any index showing variations in
the prices of those commodities consumed by the wealthier classes. Yet,
,
PRELIMINARY STUDIES 25
in any study of the changes in the relative welfare of the different sections
of the population, it is, of course, imperative that such an index be avail-
able, especially in times of rapidly shifting price levels when quantities
shown in terms of money value are almost meaningless. With the hope of
filling the gap in the available statistics along this line, the computation
of an index of the above mentioned type was undertaken.
It was found that the most feasible form of procedure was first to obtain
relative prices for a number of specific classes of commodities and then to
compute therefrom a weighted arithmetic average index number, using as
constant weights the relative expenditures in a given year for each class
of articles. The first problem, then, was to estimate the proportion of
expenditures going for each purpose.
Recently, the Federal Reserve Board made a study of the apportion-
ment of income made by its employees. The relative distribution there
shown differs somewhat from that known to exist for wage workers. It
therefore seemed reasonable to suppose that the apportionment of their
expenditures by persons having still higher incomes would diverge still
more widely from that of the wage earners. With a view to obtaining a
little more light on the question, a number of persons of means were re-
quested by the present investigator to state their views as to the respec-
tive shares of income which were, in general, spent by families having total
expenditures solely for consumption goods amounting to 85,000, 810,000,
820,000, and 850,000, for
1. Food for themselves and servants.
2. Clothing.
3. Fuel and light,
4. Housing, including an estimated rent for a residence occupied by the
owner.
5. Money wages of servants.
6. Automobiles and yachts, including maintenance and depreciation.
7. All other purposes.
Only about a dozen of the replies received were in a form which answered
the requirements. However, from even this limited number, it is possible
to discern, as total expenditures change, certain rather definite trends in
the percentages of income spent for the specified purposes. From these
indications, curves were plotted for each of the various groups, and such
adjustments were made as were necessary to bring the totals to unity.
The final estimates appear in Table 2D.
26 THE ESTIMATE BY SOURCES OE PRODUCTION
TABLE 2D
\N ESTIMATE OF THE PERCENTAGES OF TOTAL EXPENDITURES FOR
CONSUMPTION GOODS MADE FOR THE PURPOSES SPECIFIED
Estimate based on Study by Federal Reserve Board of Expenditures of Its Employees
and upon Replies to a Few Questionnaires Submitted by this Bureau
Total ex-
penditures
annually
for con-
sumption
goods
Total of
per cents
Food for
family,
guests and
servants
Housing,
including
rent of
homes
owned
Fuel
and
light
Auto-
mobiles,
yachts
and their
mainte-
nance
Wages of
servants
Clothing
Miscellan-
eous, in-
cluding
house
furnishings
$ 5,000
100.0
27.2
18.0
3.3
9.2
4.5
14.3
23.5
10,000
100.0
19.2
18.3
3.2
9.8
9.5
11.9
28.1
15,000
100.0
15.8
18.6
3.0
10.0
11.5
10.3
30.8
20.000
100.0
13.7
18.9
2.8
10
12.3
9.3
33.0
25,000
100.0
12.0
19.2
2.6
10.0
12.7
8.7
34.8
30,000
100.0
10.4
19.5
2.4
10.0
12.9
8.1
36.7
35,000
100.0
9.1
19.8
2 2
10.0
13.1
7.6
38.2
40,000
100.0
7.9
20.1
2.1
10.0
13.3
7.1
39.5
45,000
100.0
6.9
20.4
1.9
10.0
13.5
6.7
40.6
50,000
100.0
6.1
20.7
1.8
10.0
13.7
6.4
41.3
Were the weights the most vital factor in determining the trend of the
prices under consideration, it would be sheer folly to trust an estimate
based upon such scanty data as those upon which the tables just presented
rest. However, it is a well-known fact that prices of different classes of
commodities do not move in entirely independent paths but fluctuate in
somewhat similar ways at the same time. Since this is true, it follows that
even a large change in the weights is likely to produce no radical effect
upon the average index. Hence, if the above estimates are even approx-
imately correct, there is no reason for believing that they will not serve
well enough as weights for the purpose intended.
Our particular needs require an index applicable to groups of persons who
receive incomes from property. The industries of transportation, manu-
facturing, and mining are largely operated by corporations and the own-
ers receive their income therefrom mainly in the form of dividends or bond
interest. It appears from the Statistics of Income for 1917, published by the
Bureau of Internal Revenue, that the median net income of those re-
ceiving corporate dividends is around 825,000. Since that date, prices and
incomes have increased materially, and it appears probable that today a
family of the same social class would receive enough more income to enable
them to spend $25,000 for consumption goods in addition to what savings
they would make. For these particular industries, it seems best, therefore,
in computing an index for the purpose of reducing the money income of
the propertied classes to a basis of constant purchasing power, to use the
PRELIMINARY STUDIES 27
weights indicated in Table 2D as applicable to the $25,000 class. When,
however, certain other industries are considered, it is evident that the
average entrepreneur does not have an income in any way approximating
that of the average owner of the stock of the corporations controlling the
highly organized fields. Nevertheless, these people may be sufficiently
wealthy to cause their expenditures to differ materially in their distribu-
tion from those of the working classes. For the propertied classes deriving
their livelihood from such industries, it seems probable that the weights
based upon average expenditures of $5,000 per annum are more appropri-
ate. The relative prices shown in Table 2E have therefore been multiplied
by the weights representing the $5,000 class, and the weighted average
index thus derived is shown in Table 2G.
The division of expenditures shown in Table 2D is not carried far enough
to furnish an appropriate weight for each of the relative prices actually
available. It has been necessary, therefore, to subdivide some of the orig-
inal groups of commodities in order to arrive at the weights used in Tables
2E and 2F. This process of subdivision has perforce been based upon
rough estimates, as no accurate information on the subject has been dis-
covered.
Price data are available only for certain classes of expenditures, hence
these classes have necessarily been used as typical of all articles or services
purchased. The price estimates have been collected from a variety of
sources and have been computed with considerable care except in the case
of a few relatively unimportant items. In one or two items such as, for
example, automobile repairing, the estimates are only moderately accurate,
but they are the best obtainable.
For the groups entitled "Food," "Clothing," "House Furnishings,"
"Fuel and Light," and "Housing," the same indices have been used that
were computed for the same groups of goods used by the laboring classes.
It is, of course, true that the articles purchased by the wealthy in the way
of clothing, housing, and house furnishings, are of a very different quality
than are those used by the poorer classes. No reason is apparent, however,
why the higher priced articles should on the average, vary in a fashion
much different from that characteristic of the cheaper goods. In the
absence of any definite knowledge concerning this matter, and in view of
the paucity of data, it was felt that it would be a useless expenditure of
effort to attempt to make the indices specified fit more closely the prices
of goods bought by the wealthier classes only.
The data upon which several of the price indices for the minor groups
are based are too heterogene< >us and irregular to give one great confidence
in their accuracy.
For the reasons just stated, it is clear that the final average index must
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- P- -_
i • =
£x ..
■_
-^ Hi
: -r ./• 33
bC Z
| s
o3 «—
x ~
r B
.2 o3
§5
•- p
as C bO <u 33 c; - _£ '— ?!
t£ 0-—
/. c -
oS»cj
2 -
= - -
o
13 .-
bJD-2
33 K
x ^ ^.'
33 ;3
- * ~ - y.
— "~ '^ - cu rs
— !-t: c tc ~ 2
a i-> o S..S c
B cc ■— < cr •-
— — — ^ _ ^'
c —
~ = - y, z.= '~.~~
or - - - - =
3 ~ —_ p y. -
X
-
— ^ —
- -r tx
33 __-
g J3
= r- ^
■PC b k.
o - i,
— • — c
- - e
X c -
- .L
w "C
c cu
jq >
. ~
- —
~ i.
~ *
— p
- Ti - - -
S r p S g'
_, o
-~ - ~ -
"or Or — - '-
lillll
^ w w P^ — C^
8 o B. 3> t.
c 7~
>. ■ o
O K«
30 THE ESTIMATE BY SOURCES OF PRODUCTION
be regarded as but a crude approximation to the truth. It seems to be
established, however, that the prices of commodities bought by the wealth-
ier classes did not rise quite as sharply during 1917, 1918, and 1919 as did
the prices of those articles consumed by the poorer fraction of our popu-
lation. It is believed that the indices shown in Table 2E will at least
serve somewhat better in reducing the money income of the wealthy to
terms of purchasing power than would the Bureau of Labor Statistics
index of the "cost of living" of the working classes and distinctly better
than would any index of wholesale prices. Of course neither of the latter
types of indices have been devised for this purpose, and hence cannot be
expected to give satisfactory results if thus misapplied.
The tables on pp. 28 to 31 summarize the results obtained.
TABLE 2F
WEIGHTS USED IN COMPUTING THE INDEX OF PRICES OF COMMOD-
ITIES CONSUMED BY PERSONS SPENDING $5,000 ANNUALLY FOR
CONSUMPTION GOODS
Automobiles 4.0
Automobile Repairs 2.1
Automobile Tires 2.0
Clothing 15.8
College Room and Board 1.1
College Tuition 0.4
Food 30.0
Fuel and Light 3.6
Gasoline 2.0
House Furnishings 6.1
Housing 19.9
Hotel Bills 0.7
Magazines 0.3
Moving Picture Shows 1.2
Newspapers 0.4
Railway Passenger Fares 2.2
Servants' Wages 5.0
Street Car Fares 0.8
Telephones 0.6
Theatre Seats 0.9
Tobacco 0.9
Total 100.0
,
PRELIMINARY STUDIES
:il
TABLE 2G
A COMPARISON OF THE ESTIMATED INDICES OF THE AVERAGE PRICES
OF CONSUMPTION GOODS USED BY DIFFERENT CLASSES OF THE
POPULATION OF THE CONTINENTAL UNITED STATES
Indices c of Prices of Consumption Goods Used by
Middle
of the
Year
Manual and clerical
workers' families a
Families spending
$5,000 per
annum on consumption
goods
Families spending
$25,000 per
annum on consumption
goods b
1909
.955
.978
.984
.994
1.00
1.01
1.03
1.10
1.29
1.58
1 . 773
2.165
.956
.977
.984
.999
1 . 000
1.013
1 . 002
1.088
1.252
1.448
1.669
.973
1910
1911
.988
.995
1912
1.000
1913
1914
1915
1916
1917
1918
1919
1920
1.000
1.010
.996
1 . 074
1.198
1 . 364
1.628
" See Table 2C; indices divided by 100.
b See Table 2E; indices divided by index shown there for L913.
c Prices of 1913 = 1 .000
§ 2d. An Estimate of the Industrial Distribution of the Gainfully
Employed Persons in the Continental United States
I. The Total
The total number of gainfully employed in the United States as reported
by the Census of Occupations includes a large number of farmers' wives
and children who do a certain amount of agricultural work on the home
farm.
Nearly all members of farmers' families do some work on the home
farm or in the house and how many of them should be regarded as "gain-
fully employed" is hard to say. The proportion so reported has varied
from one census to the next with the wording of the instructions and from
one district to another at every census with the interpretation put upon
their instructions by different enumerators. Hence the figures for farmers'
wives and children at work on the home farm have no consistent meaning,
and this item in the classification of occupations has been excluded from
all the following estimates.
The ratio of the number of remaining male workers to the total popu-
lation has been calculated for each Census year and the curve obtained by
32 THE ESTIMATE BY SOURCES OF PRODUCTION
plotting these figures has been carried forward from 1910 to 1918, an allow-
ance being made for the practical cessation of immigration during the war
years and for the addition in 1918 of a considerable number of school boys
to the list of gainfully employed. By using the ratios obtained from this
curve as multipliers, products have been obtained which probably approxi-
mate the numbers of males gainfully employed in each year.
For a few industries, it has been possible to obtain annual ratios of the
number of females to the number of male employees. These ratios have
been adjusted to conform to the Census ratios for all industries in the
Census years. In the intervening years the numbers of male workers
have been multiplied by the adjusted ratios in order to obtain an estimate
for each year of the number of females working for gain. The addition
of the estimated number of females to the number of males, of course,
gives the figures for the total number of persons gainfully employed.
This number is evidently composed of entrepreneurs * and employees.
The procedure adopted has been to estimate the number of the former
and subtract it from the total in order to obtain the number working for
wages or salaries. The final results appear in the three top lines of Table
2J.
II. Entrepreneurs
Any estimate of the number of entrepreneurs in the various industrial
fields must be based primarily upon the reports of the United States Cen-
sus since State Reports seldom throw any light upon the matter. The
Census classifies the gainfully employed only by occupations but these
figures have been used as the basis of careful though necessarily somewhat
inaccurate estimates of the number of entrepreneurs in each industry.
In most instances, the occupation of an entrepreneur indicates the indus-
trial field to which he is to be assigned, hence the occupational classifica-
tion is reasonably satisfactory for the purpose at hand. For a number of
important industries such as mining, manufacturing, and agriculture,
the reports for the separate industries record the number of entrepreneurs
in each. The estimates for the other industrial fields have been based upon
the Census of Occupations. The estimates thus made for the various
occupations have been added to obtain the probable numbers engaged in
all occupations in the Census years. The respective ratios of the number
of entrepreneurs to the total population have been plotted for the various
Census years and the curve thus obtained has been projected to 1920.
By applying the ratios read from this projected curve to the estimated
1 The word "entrepreneur" is used in the customary sense — namely, as a person conduct-
ing a business at his own risk. Lawyers, peddlers, merchants, farmers, and independent
manufacturers are typical entrepreneurs. Managerial employees are not included under
this term.
PRELIMINARY S'lTDIES
33
populations for the other years, products have beeD obtained which are
believed to represent with some approach to the truth the total number of
entrepreneurs in each of the intercensal years. The estimates for the years
since 1910 have been strengthened by the figures in the Censuses of Man-
ufactures for 1914 and 1919, in the Censuses of the Electrical Industries
for 1912 and 1917, and in the Census of Agriculture for 1919. Since the
Census of Occupations for 1920 has not yet been published, it has been
necessary to assume that the apportionment of the remaining number of
entrepreneurs among the other industries has remained relatively the
same as in 1909.
TABLE 2H
\X ESTIMATE OF THE NUMBER OF ENTREPRENEURS NORMALLY OCCUPIED IN THE
PRINCIPAL INDUSTRIAL FIELDS
Industry
All industries .
Agriculture. . . .
Mining
Laundry
Construction. .
Han 1 trades.. .
1 i itory
Transportation
Banking
Unclassified
industries. . .
Thousands Attached to the Industry in the Year
1909 1910
9,550
6,330
35
16
175
228
273
29
1
2,460
9,617
6,362
34
20
171
230
272
29
4
2,492
1911 1912 1913 1914 1915 1910 L917
9 C4S
6,376
33
25
170
231
270
29
4
9,679
6,388
32
30
17(1
233
268
29
4
2.525
9,710
6,400
31
34
165
235
252
29
4
2.5(10
9,743
6,410
30
34
1 55
237
263
in
4
2,582
9,746
6,418
29
34
145
239
.'.id
28
4
2,589
9,737
6,425
."I
35
135
2 !9
256
2 s
4
9.752
0.43-'
28
36
1 31 )
I'll
253
28
4
2.597
1918
•1.757
6,438
27
36
120
244
250
2s
1
2,610
1919 1920
9,760
6,443
26
36
130
254
246
2 s
I
2,593
9,758
6,448
26
37
1211
263
212
28
4
2.590
III. Employees
In estimating the number of employees in a given industry, it is neces-
sary to distinguish sharply between the number of persons actually at
work in the field and the number of persons attached to the industry. At
all times, some of the persons normally making their living by any given
line of effort are not at their usual tasks. Fortunately for the accuracy
of our computations, the fraction of all employees not at work is usually
too small to affect the results materially, but, in times of business depres-
sion, the percentage may run very high and the effects then become of
great moment.
It is usually necessary to determine average annual earnings by dividing
the total of wages paid by the total number of employees attached to the
industry. It is sometimes only possible to estimate the average number
of employees actually working in a given field by dividing the total wage
bill by a reported average wage for the period. Evidently then, the ques-
tions of wage rates and numbers of persons employed are so closely inter-
locked that both must be studied together if an intelligent view of the
entire situation is to be obtained.
34 THE ESTIMATE BY SOURCES OF PRODUCTION
For each of several important fields of industry, the Census Bureau and
the Interstate Commerce Commission state the average ! number of per-
sons employed and the total amount paid to those persons in salaries and
wages. At first thought, it might seem that the division of the amount
paid by the average number of employees would show the actual amount
paid each employee. A little computation will, however, make it clear that
the quotient actually represents approximately the average wage received
by an employee who worked constantly during the period designated by
his employer as "full time."
This rule is necessarily modified somewhat by the existence of fractional
days of work and by overtime. If, for example, John Jones works in the
forenoon and Win. Smith in the afternoon of a given day, the chances are
that both will appear on the payroll and hence will be counted as two men.
If each received $2.00 for his work, only $4.00 is paid out. But $4.00
divided between 2 men gives only $2.00 each which is only half the full-
time daily wage.
The only large industry in which the fractional day seems to be common
enough to be of serious import is that of coal mining. In this field fractional
time seems to be almost the rule; hence the average wage for miners ob-
tained by dividing the total wage bill by the reported average number of
workers gives a quotient representing the average wage for a day much
shorter than the nominal full-time day in the mines.
In most industries, the error due to the presence of workers employed
for fractional days is probably offset almost entirely by the fact that many
of the men work longer than the standard number of hours. If, for exam-
ple, Richard Roe puts in three hours overtime and makes $6.00 instead of
the regular $4.00 per day, he is still counted as one man and hence the quo-
tient is distinctly larger than the normal full-time daily wage.
The result obtained, therefore, by dividing the recorded amounts paid
by the recorded number of workers usually represents the average amount
received by a worker who appeared for work every regular work day but
who missed the average number of fractional days and who put in the
average amount of overtime. Since in most industries, as just stated, the
amount of overtime probably about balances the time lost through ab-
sences of a part of a day, the hypothetical average employee just referred
to probably earns in the long run approximately the same amount 2 as
the one who puts in the nominal full-time day. Nevertheless, owing to
the nature^ of the data at hand, it follows that whenever a difference exists,
it is the hypothetical average employee rather than the one conforming
'The Census computes the average number by adding together the totals actually re-
ported for the 15th day of each month and dividing by twelve the sum thus obtained.
- In busy times, he would put in overtime and earn more; in slack times the reverse would
be true
PRELIMINARY STUDIES 35
to the standard length of working day announced by the employer, who
must, for the purposes of this investigation, be considered a full-time
worker.
It is evident, on the basis of the definition jusl stated, that although a
minority of employees will earn more than the full-time wage because they
miss fewer than the average number of fractional days or because they put
in over-time, far greater numbers will earn less than the full-time wage
because there will be many days when, on account of sickness, desire for
leisure, personal business matter, or lack of available work, their names
will not appear on the payroll. It follows then that the average wage, as
shown by the quotient obtained by dividing the amount paid by the aver-
age number of employees, is, as a rule, distinctly larger than the average
received by the employees who normally obtain a livelihood by working in
the given industry.
From the point of view of production costs, the directly computed
average, (which represents full-time earnings,) may be satisfactory, but
it certainly will not answer if the aim is to picture the average labor income
of the employees. In a year when many of the workers are idle for two or
three months, there will occur a striking diminution in the total demand
for necessities or customary luxuries even though the figures show that the
average full-time wage has undergone no decline. 1 A necessary prerequi-
site, therefore, to measuring the income from wages received by the aver-
age person who normally is employed in an industry is the computation
for each year of a fraction representing the ratio of the number of days
actually worked by the average employee to the number of days put in by
the hypothetical "full-time" worker.
The computation of such a fraction or ratio is fraught with great diffi-
culties, for practically no extensive data exist which show with any degree
of reliability the amount of unemployment in the various industries for
any year, to say nothing of the fact that there are available no records
comparing the various years of the decade which we are studying.
The LTnited States Census Bureau attempted in 1890 and again in 1900
to secure information in this connection, but the method used had two
serious defects: First, inquiry was made as to the number of months or
parts of months unemployed, and since it is an obvious fact that thousands
of persons are absent from work during many days of the year, yet seldom
consecutively for any considerable fraction of a month, it appears certain
that many of those recorded as full-time workers were really unemployed
for an aggregate of time not at all negligible; second, the period covered
1 If, for oxamplc, the Census wage total is divided by the Census average number employed
the resulting quotients will show no decline as long as wage rates remain constant, even if
half the workers are unemployed.
36 THE ESTIMATE BY SOURCE OF PRODUCTION
by the inquiry was a whole year, and experience demonstrates that the
ordinary informant's memory is too poor to enable him to give much infor-
mation, even for himself, to say nothing of other members of the family,
concerning brief periods of unemployment occurring several months
before. Under these circumstances, it seems safe to use the Census
figures only as relative and not as absolute measures of unemployment.
The basic data upon which all the estimates are superimposed are the
records of the number of workers employed in Massachusetts factories. 1
At first thought, it seems absurd to place such a large superstructure upon
such a narrow foundation, but a careful study of such other employment
records as are available indicates that variations in Massachusetts employ-
ment are distinctly typical of those in manufacturing throughout the
United States and that these cyclical fluctuations in employment in man-
ufacturing are similar in a large measure to those characterizing conditions
in other industrial fields. The Massachusetts records have been compiled
for many years and have all the earmarks of statistical accuracy, two
characteristics which make them unique in this field as far as the United
States is concerned.
The fundamental assumption in the present study is that workers do
not tend to shift rapidly from one branch of industry to another. If this
assumption is true it follows that a curve representing the number of
employees depending for a living upon a great industry like manufacturing
will show no sharp breaks or irregularities. A further hypothesis which
accords with the views of Mr. Hornell Hart as expressed in his monograph
on "Fluctuations in Unemployment in Cities of the United States" is that
in times when wages in any line of enterprise are very high, that industry
may attract to itself a number of persons not normally working for wages;
for example, school boys and girls, women and girls normally performing
only household duties, and casual independent workers such as agents,
peddlers, shop keepers and mechanics. The addition of such persons tends
to produce bumps on the curve representing the total number of employees
attached to all industries, a curve which would otherwise be nearly smooth.
For example, during 1917 and 1918, the aggregate number of persons
receiving salaries and wages was doubtless noticeably increased by the
addition of boys who left school to join the army and of women and girls
who, for patriotic reasons, sought employment which they believed would
help win the war.
The Census Bureau in 1890 and also 1900 enumerated on the basis of
family statements the number of persons who were unemployed in the
1 It is impossible to calculate from these figures the absolute numbers unemployed for
we 'lo not know how many have found work outside the manufacturing field. The data
arc then useful only as measures of relative employment.
PRELIMINARY STUDIES 37
preceding year and classified the unemployment into the periods one to
three months, four to six months, and seven to twelve months. The ratio
of the per cent of the workers in each industry unemployed for each of
these periods to the per cent of Massachusetts factory workers shown by
the Census to be unemployed for the same length of time was computed
by this Bureau. For each industry, six ratios were thus obtained, three
for each of the two Censuses. The six ratios were then averaged and these
averages were recorded.
The next step was to multiply the actual per cent of unemployment in
Massachusetts factories as estimated from the State Statistics of Manu-
factures for the various years by the average ratios just described. The
resulting products were the preliminary estimates of the per cents of unem-
ployment in each of the different industries in the various years of the
decade. The remainders obtained by subtracting each of these per cents
from 100 were assumed to represent the ratio of the number of those actu-
ally at work to the number of persons attached to the industry — that is,
normally making their living in this field of endeavor.
The records most commonly available show the average number
actually working in a specified industry. The procedure followed here is
to divide these average numbers by the tentative ratios just mentioned in
order to obtain a preliminary estimate of the number of employees
attached to each of the respective industries. Since it has been assumed
that the number attached to any large industry as a rule varies slowly and
regularly, the original figures have been plotted as historigrams and these
curves have been smoothed. From the smooth curves thus obtained,
numbers have been read which are assumed to represent approximately
the number of employees attached to each industry in each year. The
resulting numbers and the ratios derived by dividing the number actually
at work by the estimated number attached to the industry are shown in
Tables 21, 2J, and 2K.
After the numbers of employees had been computed for each of the
industries in which records are available these numbers were summated
for each of the various years. The total number of employees had already
been calculated by a method described on a previous page. It was, then.
only necessary to subtract the total number of employees in the recorded
industries from the total number in all industries in order to arrive at the
estimated number in the unclassified industries, an estimate shown in the
next to the last line of Table 2.J. This step completed the classification
of the gainfully employed in so far as necessary for this study.
38
rHE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 21
AN ESTIMATE OF THE AVERAGE NUMBER OF EMPLOYEES ACTUALLY AT WORK IN
CERTAIN OF THE PRINCIPAL INDUSTRIAL FIELDS OF THE CONTINENTAL UNITED
STATES
Indn.st ry
Laundry
Construction
Hand trades a. . ..
Factory b
Steam railway r . .
Pullman
Express
Transportation by
water
Street railways.
Telephone
Telegraph
Thousands at Work in
he 'i eai
1909
1910
1911
1912
1913
1914
1915
1910
140
1,510
3S9
7,40.5
155
1,456
395
7,370
159
1,368
411
7,500
169
1,459
409
7. 930
1S5
1,538
IDS
8,000
175
1,110
176
8,001
173
1,054
471
7,993
179
1,147
428
9,457
1,641
It
57
1,742
15
62
1,750
15
64
1,81.8
15
68
1,815
L'l
OS
1,005
20
04
1,575
19
64
1,744
20
72
208
212
210
224
230
225
232
237
252
143
31
266
159
33
274
180
35
282
191
38
284
214
39
278
215
39
276
20S
41
292
237
46
1917
168
1,000
4S7
10,140
1,834
19
84
239
295
203
52
1918
1 55
726
558
ID. ISO
1,937
19
88
254
292
27*
56
a Includes automobile repairing, blacksmithing, tailoring, dressmaking, millinery, shoe repairing, custom
grist and saw mills, and other similar minor industries.
b Includes lumbering and gas manufacture. c Includes switching and terminal companies.
TABLE 2J
AN ESTIMATE OF THE TOTAL NUMBER OF GAINFULLY EMPLOYED. 9 AND OF THE
AVERAGE NUMBER OF EMPLOYEES ATTACHED TO EACH OF THE PRINCIPAL IN-
DUSTRIES OF THE CONTINENTAL UNITED STATES
Industry
Total Gainfully Em
ployed 9
Total Eentrepren'rsy
Total Employee- 9
Employees by Indus
tries, Agriculture f
Mining
Laundry
Construction
Hand trades
Factory*?
Commercial electric
light & power
Steam railway*. . . .
Pullman
Express
Transportation by-
water
Street railway
Telephone
Telegraph
Banking
Unclassified indus-
tries & professions
Government d
Thousanc
s of employees in
the year
1909
1910
1911
1912
1913
37,101
9,710
27,391
1914
37.252
9.743
27,509
1915
37,522
9,746
27,776
1910
1917
33,910
9,551)
24.300
34,858
9,617
25,211
35,581
9.04S
25,933
36,282
9,679
26,603
38,101
9.737
28,364
38,681
9752
28,929
2,370
1,073
2,379
1,106
2,3ss
1 , 1 32
2,390
1,150
2,394
1,159
2,393
1,163
2,382
1,163
2,373
1,154
2,288
1,141
1.50
1,58.5
410
7,730
161
1,600
421
7,810
172
1,619
425
7,970
1S1
1.017
432
8.190
194
1,008
446
8,430
193
1,427
487
8,790
190
1.292
190
9,102
185
1,194
481
9,757
174
1,026
495
10,395
55
1,705
14
59
61
1,77.5
15
63
67
l.sis
16
00
73
1,834
16
69
79
1,836
21
71
84
1,838
22
72
89
1,840
21
73
94
1,842
20
76
98
1,856
20
85
224
260
150
32
231
272
163
34
239
282
1 85
37
243
289
205
10
248
293
218
41
250
295
226
42
252
297
230
44
253
298
242
47
256
299
267
53
150
151
102
168
173
178
180
183
186
6,823
1,565
7,376
1.620
7,685
1.671
7.9S0
1,727
s.397
1,785
8,183
1,866
8,175
1,955
S.122
2,037
7,000
2,691
1918
39.981
9.757
30.224
2,121
1.108
161
757
572
109 5
102
1,958
19
89
275
300
285
58
193
6,194
5,129
a Includes automobile repairing, blacksmithing, tailoring, dressmaking, millinery, shoe repairing, custom
grist and saw mills, and other similar minor industries.
b Includes switching and terminal companies.
<" Includes lumbering and gas manufacture.
'I Federal, state, and local, including the army and navy, public schools and government owned in-
dustries.
' Includes stock raising, market gardening, etc. ' See Table 211.
<7 Members of the family assisting their parents on the home farms are not included among the gain-
fully employed for purposes of this study.
PRELIMINARY STUDIES
39
TABLE 2K
AN ESTIMATE OF THE RATIO OF THE AVERAGE NUMBER OF EMPLOYEES AT WORK
TO THE AVERAGE NUMBER OF EMPLOYEES VTTACHED TO EACH OF CERTAIN
LEADING INDUSTRIAL FIELDS IN THE CONTINENTAL UNITED SI Ml -
Industry
Automobile repair. .
Laundry
Construction
Other hand trades a .
Factory 6
Steam railway?
Pullman
Express
Transportation by water
Street railways
Telephones . . .
Telegraphs. . . .
1999
962
935
.957
.947
958
.962
962
.963
927
. 968
. 957
964
l'JIO
980
.963
910
.931
944
981
985
.917
.977
.974
.964
1911
932
924
845
971
911
963
969
963
906
970
97(1
967
L! 1.'
.911
.931
. 992
947
.968
.990
953
.985
.919
97s
949
.968
191.1
.927
958
.956
912
.919
988
979
968
.971
983
191 I
. 977,
905
.782
978
910
873
985
sn7
899
.943
.952
943
191!
978
911
816
97.7
.878
856
922
929
994
.933
1916
939
9 10
v7:;
9 17
977.
948
936
982
980
977)
1917
973
971
'.,77
918
975
.988
979
989
934
986
982
979
191 s
9M)
.970
97.9
977
.961
.989
984
989
977
977.
971
a Includes blacksmithimr, tailoring, dressmaking, millinery, shoe repairing, custom grist and sav; mills,
and other similar minor industries.
ft Includes lumbering and gas manufacture.
e Includes switching and terminal companies.
CHAPTER 3
AGRICULTURE x
§ 3a. Sources of Information
The statistics utilized in this field are derived mainly from the Census
and from the reports of the Department of Agriculture. As this is one
of the largest of the nation 's industries, it is fortunate that the data avail-
able are both abundant and reasonably reliable. Since, unfortunately,
the returns for the Census of 1920 are not yet complete in some respects,
it has been necessary in such instances to use the preliminary estimates
for about half the States as bases for the 1919 statistics. In certain lines,
the Census figures for the volume of production for 1919 are materially
lower than are those of the Agricultural Department for the same year.
Since the Census estimates are probably the more accurate, they have
been relied upon in so far as possible. Even with the Census reports, for
twenty-three States still unavailable in some fields, it nevertheless appears
probable that the percentage of error in the figures for this industry is
lower than the like percentages for many of the other fields.
§ 3b. Method of Procedure
The method adopted in order to arrive at the net value product of the
industry has been to deduct from the gross value product all payments to
other industries for their goods or services used in agricultural production.
The remainder represents the amount left as a reward for the services of
persons or property devoted to the agricultural field. The general plan of
procedure is illustrated by the following examples.
Nearly half of the total crop yield is fed to livestock. The remainder is
either sold to outside purchasers or consumed by the farmers themselves.
Both sales and consumption evidently form part of the net income of
agriculture. In addition to crops, the agricultural industry turns out a
great quantity of livestock products in the form of draft animals, milk
cows, milk, butter, meat, eggs, honey, wool, and mohair. Farmers also
contribute each year to the national income by bringing into a state of
cultivation a large area of previously unimproved land.
Manifestly, however, this output cannot all be ascribed to the labors of
agriculturalists alone; for, in order to keep up production, farmers must
i Drs. L. C. Gray and O. C. Stine of the l*. S. Department of Agriculture have given very
helpful suggestions which have been utilized in this chapter.
40
AGRICULTURE 41
buy from other industries fertilizers, tools, machinery, automobiles, gaso-
line, harness, and saddles, and also a certain amount of bank credit and
fire insurance. Payments for these articles and services must, therefore,
be estimated and subtracted.
In certain years, farmers dispose of their livestock in large numbers,
thus bringing in an increased money income, but at the expense of reduced
inventories. Evidently, then, accuracy requires that account be taken of
the diminution in inventories in figuring up actual production for the year.
§ 3c. The Value of Animal Products
With these fundamentals in mind, we can now proceed to anatyze some
of the more important items entering into the accounts of this field. Ani-
mal products may well be considered first. By combining the reports of
the United States Department of Agriculture and the Food Administra-
tion, we are able to secure a complete estimate of the value of all meat
obtained from the larger animals. This record appears in Table 3A.
42
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 3A
THE VALUE OF THE LARGER DOMESTIC ANIMALS GROWN AND
SLAl GHTEKED IN THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
G
Year
Estimated
production
in millions
of pounds
Index of
average
meat
prices to
farmers
Index of
total value
meat pro-
duced
(Millions)
B XC
100
Estimated
total value to
farmers of all
animals
slaughtered
(Thousands)
Ratio
of
EtoD
Estimated
total value
to farmers
of all
animals
slaughtered
(Millions)
FXD
1909
1910
1911
1912
1913
1914
1915. . .
1916
1917
1918
1919
1920
19,7.52 a
17,390c
19,1316
18,249*
18,4746
17,7066
19,5406
21,0306
18,6926
22,3376
22,564 «
21,000 a
6.05^
O.SSrf
.5.74''
6.24*
7.03e
7.23«
6.64*
7.79^
11.52"
13.54*
13.87''
11.84-'
1,195
1,196
1,098
1,138
1,299
1,280
1,298
1,638
2,154
3,02.5
3,130
2,487 a
$1,381,303/
1.156
$1,381
1,382
1,269
1,314
1,501
1,480
1,500
1,892
2,489
3,497
3,618
2,874 a
a U. S. Dept. cf Agriculture, Monthly Crop Reporter, March, 1919, p. 30, and March,
1920, p. 27.
6 U. S. Food Administration, Stephen Chase, Production of Meat in the United Stairs,
p. 80.
c 0.91 of the 1911 amount, this being the ratio of the 1910 to the 1911 quantity of
livestock shipped on railways as shown by the Statistics of Railways, published by the
Interstate Commerce Commission.
'' Extended back from 1912 and forward from 1918 on the basis of the tables in the
Monthly Crop Reporters for March, 1920, p. 28, and February, 1921, p. 11.
e Monthly Crop Reporter, February, 1919, p. 19.
/From data in the Census of Manufactures for 1910, Vol. VIII, p. 380, and from the
Abstract of the Census for 1910, pp. 356 and 478, it is possible to calculate that, in 1909,
retail slaughter houses killed 4,088,000 beeves, 2,880,000 calves, 1,940,000 sheep and
lambs, 3,970,000 hogs and 135,000 goats and miscellaneous animals. If the animals
in each of these classes were on the average worth the same as the animals slaughtered
on farms, their value was $178,636,000. Wholesale slaughterhouses paid farmers
$960,726,000. From this amount should be deducted the $28,298,000, which is shown by
the Statistics of Railways to have been paid as freight on livestock, leaving $932,428,000
as returns to farmers. In addition, the Census shows that farmers slaughtered animals
worth some $270,239,000. The total value of meat animals to farmers therefore
amounted to $1,381,303,000 in 1909. No allowance is made for profits to dealers and
shippers, for it is assumed that the larger part of this class are themselves included by
the Census under the heading of agriculture.
o Rough preliminary estimate.
Dairy products also form an important part of the output of American
farms. In 1909, according to estimates based upon the Abstract of the
Census of 1910, p. 344, the butter made on farms reporting dairy cows but
,
AGRICULTURE
43
no dairy products amounted probably to about $16,530,000, in addition
to the butter valued at $122,483,000, reported as used on farms. The
Census also indicates that milk amounting in value to -5158,700,000, was
consumed on the farm as human food, making a total of 8297,713,000, in
dairy products used for sustenance by farmers and their families. This
amount added to the $473, 769,000, value of dairy products reported as
sold by farmers gives $771,482,000, as the total value of dairy products
consumed or sold off the farm by farmers in the year 1909. The method
of making estimates for the intercensal years is outlined in Tables 3B
and 3C.
TABLE 3B
AN ESTIMATE OF THE VALUE OF DAIRY PRODUCTS CONSUMED BY
FARM FAMILIES IN THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
Index of
Estimated
total value
Dairy products
dairy
Year
Index of
price of dairy
number (if
farms in
the U. S.'<
of dairy
products
consumed by
farm families
product -
consumed by
products"
consumed by
in 1909«
farm faun lies
farmers
(Thousands)
(Millions)
B X C
D X E
1900.. . .
1.000
1.000
1.000
§297,713
$298
1910.. . .
1 . 063
1 005
1 .038
318
1911.. . .
1 . (KM)
1.007
1 . 007
300
1912.. . .
1.07(1
1.009
1.086
323
1913....
1.088
1.011
1 100
327
1914.. . .
1 . 065
1.013
1.079
321
1915.. .
1.064
1.01 1
1.079
321
1916.. . .
1.118
1.015
1.135
338
1917.. . .
1.433
1.016
1 156
131
1918....
1.783
1 017
1.813
.Ml)
1919... .
2.024
1.018
2.060
613
1920. .
2.197
1.019
2 239
007
a A simple arithmetic average of the index for butter prices, (derived from the Year-
books of the Dept. of Agriculture,) and the respective indices of retail and wholesale
prices of milk as reported by the IJ. S. Bureau of Labor Statistics.
'- Based on the U. S. Census reports for 1910 and 1920, numbers for the intermediate
years being interpolated along a smooth curve.
c For mode of derivation, see the text.
o
eo
W
m
<
CO
W
i—i
*z
<1
PQ
Q
O
co
co
H
o
p
o
Oh
>-<
<!
Q
Eh
O
H
55
P
O
hH
H
o
H
W
K
H
Ph
O
W
H
CO
<
*-»
Estimated
value of
dairy prod-
ucts sold
by farmers
(Millions)
G X I
r^ ^* © cm
T}1 lO Tff lO
O © © iO
MrHTPO
CD i— I © N-
"-i *# © ©
oo cO'-^co
1— 1 ,— ^H
1— I
Ratio of
H toG
2.217/
2.149s
2 . 083 s
2.017 s
Cft ca cs> c»
CM iO © CO
iO CO ■— I iO
© oo oo i-^
t~~ i— i co > — <
00 CM iO ©
CO © iQ -*
M
Value of dairy
products sold
by farmers in
census years
(Thousands)
OS
so
co~
©
©
CO
©~
©
I— 1
i— r
O
Estimated
value of
whole milk
and cream
purchased
by factories
(Millions)
D XF
hh cc «o ©
CM CM CM CM
CD «0 t» »0
© 1^ © -fi
CM CM CM CO
"* CM ^h CO
oo Tt< r^ i>-
-*©I>00
PB,
S o o a
^h 00 CM ©
ONOM
© O i-h CM
CM CM CM CI
>-i © 0-1 t>
•— © oo oo
co co Tf io
CI CM CM CM
oo © i— ' *— i
© t^ © o
CM CM CM CO
H
Value of whole
milk and cream
purchased by
factories in
census years
(Thousands)
"a
CM
©
co~
CM
6^
CM
co
CM
w"
CM
CM
©
©"
Q
Preliminary
index of
total value
of dairy
products
soldc
© LQ -^ CM
00 CO CM hh
CO --^©©_
O •— i © i— '
r— 1 1— 1 ,— ,—
CM © © >0
co oo -r <— i
o ^©_co_
1— 1 ,— ^H ,—
O© t-^iO
i— ' t— © »o
©^© TT ©
oo'cm"©"©"
i-i CM CM CM
O
Estimated
number of
cows whose
products arc
marketed b
(Thousands)
O 00-h CM
00 LO CM ©
©~©~©"o~
OlONO
OOOCl^
© t^ CM ©
cfoV-r»-r
00 b- t~--+<
© oo -t cm
IQ 00 © CM
CM*"cM"eo~ccr
«
Estimated
number of
cows kept
principally
for milk a
(Thousands)
17,010
17,120
17,300
17,180
© LO lO LO
© © •* co
O^i-H_cq^eo
t^t^tCoo"
r-H ^H ^H ^H
© iO © CM
© CM © t^
©__C0_^O__
©~©~of©~
<
Si
03
V
3
C
r
©
i —
*—
r
CM
©
3
iO ©
T— ^H
© ©
3
f
©
—
c
c
J
3
S
0)
-a
o
a
o
3
o
c3
X!
J3
/«
co
a^ co
rt 03
S S3
o5 Si
»« 03
03 +=
af-
& b
3.3
co os
S--C
O^
'53
X!
c
O rj O — •
I'C £ 3^
3 bt Sh
c3
o3^ g
3 CS O
co *^ .
ft
4> .
OQ^Cog
Sh ^- « ft
, Pi 03
J5 co
o
3©
o^-'PQO
.2 c3
0)
U_ C c fe O §
-o £ r o r ° 2 57-s
CO .
O C3 co co O
ej co 0J OJ ^
8 cJ-S-S ?
+j
03
+j
CO
IO
CM
Sh
o
o
CM
©
t^ O
3 "" '
G "1
' >;
co
O
ft
4)
Sh
<U
btO
B . ~
o co-O
b|.
3 3
^ ° § 3 § g §
O cj
ft?
co
5
0J oo-
•+- 1 -O "*~"
u -O o s 0<
,
AGRICULTURE
45
Another important class of animal products consists of poultry and eggs.
For these articles, relatively little information is available; for the inter-
censal years. The Census figures themselves are to a considerable extent
estimates — hence no high degree of accuracy can be expected in the final
results. The interpolations recorded in Tables 3D and 3E have been
based upon shipments of poultry and eggs on the railways and receipts at
the leading markets combined with the average prices for chickens and
eggs as reported by the United States Department of Agriculture.
TABLE 3D
AN ESTIMATE OF THE VALUE OF POULTRY CONSUMED OR SOLD BY
FARM FAMILIES
A
B
C
D
i;
F
G
Year
Preliminary
index of
quantity of
poult ry
produced a
Average
price paid
farmers for
chickens b
(Cents per
lb.)
Index of
total value
of poultry
produced
B X C
10
Census
estimate
of value
of products' -
(Thousands)
Ratio of
E to D
Estimated
total net
product
(Millions)
D X F
1909. .
1910. .
1911..
1912. .
1913.
1914..
1915. .
1916. .
1917..
1918..
1919. .
1920. .
3,463
3,538
3,651
3,812
3,923
3,992
4,046
4,268
4,030
4,141
4,200 d
4,000 d
10.67
11.69
10.72
10.89
11.77
12.21
11.88
13.27
16.67
20.85
23.84
26.12
3,695
4,136
3,914
4,151
4,618
4,874
4,807
5,664
6,718
8,633
10,012
10,448
$192,500
$356,200
52. 1«
49.8/
48.0/
46.0/
44.2/
42.5/
40.8/
39.4/
38.1/
36.7/
35.6 •
34.5/
$192
206
1SS
191
204
207
196
223
256
317
356
360
°Sum of thousands of tons of poultry, game and fish originating on railways as
freight; one-tenth of cars of live poultry reaching New York City; packages of dressed
poultry reaching New York City, divided by 2,000; and 0.3 of number of farms in
United States. The last item is added to account for home consumption.
b Average of prices for 12 months — see Monthly Crop Reporter for December of each
year.
c 95 per cent of value of poultry raised, the oilier 5 per cent being allowed for losses.
See Abstract of Census of 1910, p. 353, and preliminary reports of 1920 Census for 25
States.
d Preliminary estimate.
e Computed by division.
/Interpolated along a smooth curve.
4o
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 3E
AN ESTIMATE OF THE VALUE OF POULTRY AND EGGS CONSUMED OR
SOLD BY FARM FAMILIES
A
B
C
D
E
F
Year
Millions of
dozens of eggs
not used for
hatching
• Average price
to fanners
per dozen eggs
Total value
of eggs to
farmers
(Millions)
B X C
Total value
of poultry
to farmers o
(Millions)
Total value
to farmers of
poultry and
eggs con-
sumed or sold
(Millions)
D +E
1909. . .
1910.. .
1911.. .
1912.. .
1913.. .
1914.. .
1915.. .
1916. . .
1917.. .
1918.. .
1919.. .
1920. . .
l,516a&
1,600 c
1,699 c
1,601c
1,561c
1,491c
1,691c
1,629 c
1,470 c
1,406 c
1,544 ad
1,481c
$0.1926''
. 1999 c
. 1730/
.1986/
.1922/
.2041/
.2005/
.2257/
.3112/
.3644/
.401)5''
.44150/
$292
320
294
318
300
304
339
368
457
512
628
660
$192
206
188
191
204
207
196
223
256
317
356
360
$484
520
482
509
504
512
535
591
713
829
984
1 ,020
a Number of eggs produced minus two for each fowl raised.
b Abstract of Census for 1910, p. 353.
c Interpolated upon the basis of egg receipts at 7 leading markets.
d Preliminary report of 1920, Census.
e Rough estimate.
/Interpolated upon basis of average monthly prices as reported by the Department
of Agriculture.
(/See Table 3D, Column G.
The fact is worthy of note that though the value has greatly increased,
the quantity of eggs produced has actually diminished during the decade,
indicating that the per capita egg supply available for the people of the
United States is decreasing still more rapildy.
The productions of wool and of mohair are reported for the Census years,
presumably with a reasonable degree of accuracy. The interpolation for
the intercensal years has been made by aid of the figures from the Depart-
ment of Agriculture "Desk Sheet" furnished through the courtesy of the
Bureau of Crop Estimates. There seems no reason to believe that the
figures thus arrived at are seriously in error.
,
.\( HIICULTURE
47
TABLE 3F
AN ESTIMATE OF THE VALUE OF WOOL AND MOHAIR PRODUCED IN
THE CONTINENTAL IN I'll d> STATES
A
B
C
D
E
Year
Value reported
by (lie Census
(Thousands J
Value of wool
as estimated
by the De-
partment of
Agricull ure c
(Thousand- 1
Ratio of
B to ('
Probable value
of product
(Millions)
C X D
1909. .
$66,374 «
129,000''
$ 65
72
52
55
51
53
65
80
133
173
162
125
1.021 d
958 e
.942*
.909*
.902*
887 «
.862*
850 e
827 ■
809 «
796''
7X4 «
S 66
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
69
19
50
46
47
56
68
110
140
129
98
a Abstract of Census of 1910, p. 352.
b Estimated on basis of preliminary bulletin of Census, issued April 11, 1921; allow-
ance made for mohair.
c From Desk Sheet of Bureau of Crop Estimates.
d Computed by division.
' Interpolated along a straight line.
The preliminary estimates of the Census indicate a clip of only 240,000,-
000 pounds of wool in 1919 as against 289,000,000 pounds in 1909, showing
a rather sharp decrease in the physical production of this commodity.
Most business plants have bookkeeping systems and make annual
inventories, the changes in which affed the accounts of profit and loss.
The Department of Agriculture estimates one very large item in the agri-
cultural inventory at the beginning of each year, namely, the value of live
stock on hand. The changes in this item are so large that it seems advis-
able to take them into account in making up the net totals for the agri-
cultural industry. Since many fluctuations in the total money value of
live stock arise solely from changes in prices and hence represent no real
variations in the numbers or weights of animals, it has been necessary to
use a rather devious plan of computation in order to secure figures which
show the magnitude of the chanties in the physical quantity on hand,
which have occurred between the respective inventory periods. This
computation is recorded in Table 3G.
48
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 3G
AN ESTIMATE OF THE VARIATIONS IN THE VALUE OF THE AGGREGATE
OF LIVE STOCK ON THE FARMS OF THE UNITED STATES
A
B
C
D
E
F
G
H
I
J
Agricul-
Census
tural De-
Value of
estimate
partment
Probable
Tnclex of
all live-
Gain in
Index of
Gain in
of value
estimate
value of
prices of
stock at
inventory
prices of
inventory
^ oar
of all live-
of value of
Ratio of
all live-
farm
1913
of animals
farm
at current
stock on
domestic
B to C
stock
animals
prices
at prices
animals A
prices
farms
animals''
(Millions)
Janu-
Jan.
of 1913
(Average
(Millions)
Jan. l a
on farms
C X D
ary 15 7>
(Millions)
(Millions)
for vear)
H X I
(.Millions)
Jan. 1
E
(Millions)
F
1909
$4,525
1.004
$4,543
.845
$5,375
-$587
.890
— $523
1910. . . .
$4,925 b
4,911
1.003/
4,925
1.029
4,788
+ 430
1.001
+ 430
1911. .. .
5,276
.995(7
5,250
1 . 006
5,218
+ 382
.882
+ 337
1912
5,008
.990(7
4,960
.886
5,600
- 188
.925
- 174
1913....
5,502
. 984 <7
5,412
1.000
5,412
+ 50
1.000
+ 50
1914....
5,891
.977(7
5,755
1 . 053
5,462
+ 408
1.002
+ 409
1915....
5,969
.971(7
5,800
.988
5,870
+ 109
.938
+ 102
1916. .. .
6,021
.965(7
5,810
.972
5,979
— 544
1.047
- 569
1917. .. .
6,736
.958(7
6,454
1 . 187
5,435
- 525
1.412
- 742
1918....
8,284
.953(7
7,896
1.608
4,910
4- 60
1 . 593
+ 96
1919. . . .
8,828
.946(7
8,352
1.681
4,970
+ 410
1.577
+ 646
1920
$7,996 e
8,507
.940/
7,996
1.486
5,380
85
1 . 398
- 119
a Census of 1910 was taken April 15.
b Abstract of U. S. Census of 1910, p. 312.
c Estimated from U. S. Census reports for 25 States.
d Includes horses, mules, cattle, sheep, and swine.
« Moittlrfy Crop Reporter and Yearbooks of Dept. of Agriculture.
/ Computed by division.
a Interpolated along a straight line.
h Average of indices for meat animals and for horses, weighting the former 2 and
the latter 1. Data from Monthly Crop Reporters.
In Table 3H, the values of the various animal products are summarized.
The figures used in the derivation of the estimates for honey and wax
produced and for horses sold off farms are not shown, as these are relatively
minor items and no first class data are available as a basis for interpolation.
The value of horses sold off the farms has been computed on the assump-
tion that one-fourteenth of the city supply is replaced annually. The
number of horses in cities is estimated from the Census by aid of a smooth
curve. The values per head are those stated in the Census with interpola-
tions for intercensal years based upon the Department of Agriculture
reports of farm prices for horses and mules. The numbers multiplied by
these average values are used as estimates of the total values of horses and
mules sold to supply city needs. To these totals have been added quan-
tities representing 90 per cent of the excess in the value of exports over
,
AGRICULTURE
49
imports, it being assumed that the fanners would receive 10 per cent less
than the export value.
The estimated amounts representing the production of honey and wax
have been roughly interpolated between the values recorded by the Cen-
sus in 1909 and 1919, the "Desk Sheet" furnished by the Bureau of Crop
Estimates being used as an approximate guide. Since the value of wax
produced in 1919 has not yet been reported by the Census, a slight adjust-
ment has been made in the reported honey value in order to take both into
account.
TABLE 3H
AN ESTIMATE OF THE AGGREGATE FARM VALUE OF ANIMAL PRODUCTS
PRODUCED ON THE FARMS AND RANGES OF THE CONTINENTAL
UNITED STATES
(Values in Millions of Dollars)
All ani-
Larger
animals
slaugh-
tered a
Dairy
Poultry
Wool
Honey
Horses
( lains in
Year
mal prod-
ucts
prod-
ucts b
and
eggsc
and
mohair < l
and
wax e
sold for
city use e
live-
stock in-
ventory/
1909.. . .
$2,218
$1,381
$ 771
$ 484
$ 66
$ 6
$ 31
-S523
1910.. . .
3,277
1,382
829
526
69
6
35
+ 430
1911.. . .
2,968
1,269
790
lv_>
49
6
35
+ 337
1912.. . .
2,585
1,314
845
509
50
6
35
- 171
1913.. . .
2,989
1,501
847
504
46
6
34
+ 50
1914.. . .
3,359
1,480
840
512
47
6
c»5
-f- 109
1915.. . .
3,166
1,500
861
535
56
6
105
+ L02
1916.. . .
3,041
1,892
943
591
68
7
108
— 569
1917.. . .
3,902
2,489
1,250
713
110
9
73
- 712
19 IS.. . .
6,189
3,497
1,581
829
140
12
34
4- 96
1919.. . .
7,228
3,6 IS
1,813
9S4
129
13
25
+ 646
1920. . . .
5,882 a
2,874
1,974
1,020
98
15
20
119
a See Table 3A, Column G.
'' Sum of items in Table 3B, Column F and Table 3C, Column J.
c See Table 3E, Column F.
d See Table 3F, Column E.
e For description of derivation, see the text.
/See Table 3G, Column J.
Rough preliminary figures.
The value of all animal products showed an upward trend throughout
the period until 1919. In 1920, however, there was a sharp diminution
in the total value, this being mainly occasioned by a fall in the value of
meat animals. Because of variations in the value of money, the apparent
changers in total values must, of course, not be construed to indicate cor-
responding changes in the physical output of livestock products.
50 THE ESTIMATE BY SOURCES OF PRODUCTION
§ 3d. The Value of Crops Not Fed to Live Stock
In addition to livestock products, farmers and their families consume
large quantities of fruits and vegetables, bum fuel from the farm, and sell
great amounts of gram and other vegetable products for use by other per-
sons. To calculate the net value of crops thus consumed or sold is not a
simple matter. It is first necessary to subtract the amount used for seed.
This amount has been calculated by multiplying the normal seed require-
ments per acre of each crop by the acreage in each year and deducting the
resulting amount from the crop of the year previous, since it was from
this supply that the farmer reserved his seed.
Estimates of grain fed to livestock have been based upon the 1910
Census and carried forward by aid of the reports in the Monthly Crop
Reporter 1 showing the quantities in each year not shipped outside the
county where grown.
The Census enumerators failed to secure complete reports for farm gar-
dens, hence an estimated item has been added to fill in the omission. In
1910, there were reported 707,763 gardens for which no value of products
was assigned. W. C. Funk in Farmers' Bulletin 635, published by the
Department of Agriculture, shows that the average farm garden produced
for home consumption fruit and vegetables worth $52. If the non-reported
gardens produced half as much, or $26 each, the total would be $18,624,000
for 1909. This amount has been varied in other years in proportion to
the combined value of the reported crops of beans and white and sweet
potatoes.
1 Published by the Bureau of Crop Estimates.
,
AGRICn/ITl;i:
51
TABLE 31
AN ESTIMATE OF THE VALUE OF CROPS SOLD OFT THE FARMS OR
CONST' MED DIRECTLY BY FARM FAMILIES
A
B
C
I)
E
F
G
H
1
J
Value
Net
Agricul-
Value
of
crops
fed to
of
value
Census .
estimate
of value
Of all
recorded
tural
Prob-
Value
seeds
Of all
Depart-
ment
estimate
Ratio
able
value
of all
of
non-
re-
Total
value
of all
t-ut -
i ings
and
crops
con-
sumed
Year
of value
of all
of
B to C
record-
ed crops
corded
gar-
crops
(Mil-
live-
stock
plants
for
on or
sold off
crops
(Mil-
recorded
crops c
-.Mil-
lions)
dens/
(Mil-
lions
E + F
on
farms/
(Mil-
lions)
next
year's
farms
(Mil-
( Mil-
C X D
lions)
crop.'
lions)
lions)
(Mil-
G—
lions)
(H + I)
1909 . .
$ 5,487"
$ 5,487
1 . 000 d
8 5,487
819
8 5,506
$2,601
SI 43
82,762
1910. .
5,486
.995"
5,461
17
5.17s
2,645
138
2,696
1911. .
5,562
.991 e
5,511
20
5,531
2,793
153
2.5X5
1912. .
5,842
.986*
5,762
18
5,780
2,826
139
L'.Slli
1913. .
6,133
.982«
6,020
20
6,040
2,924
1 15
2,971
1914. .
6,112
.977*
5.971
is
5,989
2,985
LS4
2,820
1915. .
0,907
.972e
6,717
20
6,737
3, 1 82
21 17
3.347
1916..
9,054
.968*
8,763
35
s.798
3,926
331
1.5 11
1917. .
13,479
. 963 e
12,983
50
13,033
6,209
395
6,429
1918. .
14,094
.959*
13,511
47
13,558
5,989
450
7,119
1919. .
$15,295 6
16,035
.954^
15.295
52
15,:; 17
6,550
434
S,3f)2
1920
10,465
.949"
9,935
45
9,980
4,ii(ll
2 g2 ■
5,094
° Statistical Abstract for 1916, pp. 155 156.
b Calculated from data in Press Summary of April 1 1, 1921, furnished by the Census.
r Monthly Crop Reporter for December and Yearbooks of the Department of Agricul-
ture.
'' Computed by division.
e Interpolated along a straight line.
/ For mode of estimation, see text.
9 Rough preliminary estimate.
Table 31 indicates that between 1914 and 1919 there was an enormous
increase in the book income of agriculturalists from the sale or consump-
tion of crops and that this book income diminished very sharply from 1919
to 1920. These fluctuations were doubtless due far more to price changes
than to variations in physical out put.
§ 3e. Payments by Agriculture for the Products of Other Industries
In computing the net value product of agriculture, it is, as before ex-
plained, necessary to deduct from the gross output amounts paid to other
recorded industries for their services. The chief deductions made are those
52 THE ESTIMATE BY SOURCES OF PRODUCTION
for the cost of agricultural implements, fertilizers, automobiles used in
farm business, harness and saddles, fire insurance, and interest paid
to banks. The estimates of these quantities have been recorded in
Table 3J.
The value of agricultural implements purchased by farmers has been
estimated for the Census years by subtracting from the values of those
reported as manufactured the excess values of exports over imports, and
multiplying the remainder by L20 1 in order to allow for the profits made
by retailers. The interpolation for the intercensal years has been based
upon an index representing the product of the tons of agricultural imple-
ments shipped on the railways (as reported by the Interstate Commerce
Commission), and the prices of agricultural implements (as compiled from
the records of the United States Department of Agriculture and the Inter-
national Harvester Company).
That not all of the implements purchased are used up in the year when
bought is evidenced by the Census report indicating an increase in the
physical supply between 1910 and 1920 amounting to about 41 per cent of
all purchases during the decade. The remaining 59 per cent has therefore
been assumed to represent the current cost to the industry.
The Census records the amount paid by farmers for fertilizer in the
Census years. For the intervening years, the amounts have been esti-
mated on the basis of the figures in the American Fertilizer Handbook, a
publication which reports for each year the approximate number of tons
of fertilizer used in the United States and also the prices of leading vari-
eties. The average price per ton has been estimated therefrom and multi-
plied by the tons used in order to obtain an estimate of the total value.
This estimate has been corrected by comparing with the amount reported
in the Census years and the interpolation has been carried out according
to the usual ratio method, using a smooth curve for estimating the ratios
in the intercensal years.
It is, of course, impossible to say just what share of the expense of auto-
mobiles used on farms should be allowed as a business cost and how much
should be charged against pleasure; nevertheless, some rough apportion-
ment must be made. According to the National Automobile Chamber of
Commerce, 2 farmers in 1919 operated 32.6 per cent of all cars. These
cars are perhaps somewhat smaller than city cars on the average but
probably make up at least one-fourth of the automobile value of the coun-
try. By combining this figure with others arrived at in the study of the
industry of repairing automobiles, one is led to the conclusion that if 40
per cent of total costs be charged to business uses, the figures presented
1 Ratio based upon a study of the Federal Trade Commission report on the Agricultural
Implement Industry.
- Fads and Figures of tl>< Automobile Industry, 1920, p. 13.
AGRICULTURE 53
in Table 3J, may represent a rough approximation to the business expense
to fanners of the automobiles which they operate.
The amount expended for harness and saddles has been estimated by a
rather complex process which presumably gives results not very far from
the truth. The gist of the plan is as follows: For the Census years 1909,
1914, and 1919, the quantity of harness and saddlery manufactured is
recorded. From this amount in each case the value of exports has been
subtracted, there being no imports recorded. It has been assumed that,
of the remainder, farmers use the same proportion as farm horses and mules
constitute of all horses and mules. The interpolations for the intercensal
years have been made on the basis of an index representing the product
of the number of horses and mules on farms and the price of harness to
farmers, both figures being taken from the Monthly Crop Reporter pub-
lished by the Agricultural Department. The customary ratio method
has been used, the ratio for the intercensal years being interpolated along
a smooth curve.
Farmers pay a considerable amount annually for fire insurance and for
interest on loans from banks, but there is no information available throw-
ing any definite light on the size of either of these quantities. The assump-
tion has been made that the excess of interest paid to banks over interesl
received therefrom amounts to 1 per cent of the total crops and animal
products sold or consumed. A study of the reports of the Comptroller
of the Currency for the smaller banks indicates that it is improbable that
the amount is much larger than this, but it may be somewhat smaller.
The cost of fire and tornado insurance has been assumed to be one-
tenth of one per cent of the value of all farm buildings. The value of the
buildings is given by the Census of 1910 and has been estimated for 1920
on the basis of the preliminary States reports already published. The
interpolation has been made along a smooth curve.
An important deduction which is omitted from the li<t here given is the
amount of taxes paid by fanners for services rendered by the various
branches of government to their business. This item has been left out
because of the impracticability of estimating what pari of the service of
government benefits the farmer as an entrepreneur and what part con-
tributes to his needs as a consumer. The failure to allow for this expense
makes the net value product of agriculture as here stated somewhat larger
than the correct figure and also makes the percentage of the value product
recorded as being paid to employees slightly smaller than it really is. The
error is, however, presumably not large enough to be of very serious
moment.
54
THE ESTIMATE BY SOURCES OF PRODUCTION.
TABLE 3J
DEDUCTIONS FROM THE GROSS VALUE PRODUCT OF AGRICULTURE ON
ACCOUNT OF BUSINESS PAYMENTS MADE TO OTHER INDUSTRIES
(Millions of dollars)
Calendar
year
Total
deduc-
tions
Value
of im-
pie-
ments
pur-
chased a
Value of
fertil-
izers pur-
chased a
Expense
for
business
use of
automo-
biles a.
Value of
harness
and sad-
dles pur-
chased a
Expense
of in-
surance
against
fire and
wind
Interest
paid to
banks
for
loans a
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
$ 319
384
404
405
449
467
446
551
785
1,031
1,276
1,300
$ 85
116
103
107
122
93
90
111
149
183
187
239
$115 b
135
160
147
161
188 &
160
162
222
294
329 6
360 ^
$ 6
9
20
32
42
58
83
116
186
274
417
400 c
$ 57 ^
57
59
58
58
57 &
64
77
116
139
177&
177
1 6
6
7
7
7
7
7
8
8
8
9
11
$ 50
60
56
54
60
62
65
76
103
133
156
110
a For mode of estimating these items, see the text.
b Derived from the Census.
c A guess.
The indications from Table 3 J are that the combined deductions form
a sum which is relatively small as compared to the net value product of
this industry.
§ 3f. The Net Value Product of Agriculture
We are now in a position to estimate the total net value product of
the industry. In making up this aggregate, it seems necessary to add to
the combined value of crops and animal products a small allowance for
the improvement in farm lands brought about by the labor of the farmer.
This item should be clearly distinguished from the increase in farm values
caused by currency inflation or relative increase in urban population. The
mode of estimating the additional land value created by the efforts of
farmers has been to subtract the farm acreage in 1910 from that in 1920,
distribute this amount among the various intervening years, and multi-
ply the estimated acreage increase in each year by the current value of
land per acre. This average land value has been calculated from the Cen-
sus reports and the index of land values found in the Department of Agri-
culture 's Monthly Crop Reporter.
Another source of income to farmers which is of considerable importance
AGRK QLTURE
oo
is the rental value of farm homes. Some time was devoted to estimating
this amount but the ultimate conclusions reached were thai the nel rent
was just about equalled by the expense for materials needed for the con-
struction of all farm buildings and fences. Under these circumstances, it
was decided to omit both items from the computation.
Table 3K summarizes the chief factors entering into the net value prod-
uct of agriculture.
TABLE 3K
AN ESTIMATE OF THE TOTAL NET VAN E PR( >1)UCT OF AGRICULTURE
IN THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
Calendar
year
Value of
animal
products "
(Millions)
Nit value
of crops
consumed
or sold off
farm c
(Millions)
Increase in
land value
due to im-
provements
by farmers d
(Millions
Business ex-
penditure for
products of
other in-
dustries '
(Millions)
Net Value
product of
agriculture
Mil liens)
B+C+D-E
1909 . .
$2,218
3,277
2,968
2,585
2,989
;;,:;.59
3,166
3,041
:;.902
6. lv.)
7,228
5,882 b
$2,762
2,696
2,5-.")
2,816
2,971
2,820
3,347
4,541
6,429
7,119
8,362
5,094
$ 25
139
219
290
376
328
310
218
174
105
520
177
S 319
384
lot
405
149
167
146
551
785
1,031
1,276
1,300
$ 4,686
5,728
5,368
5,286
5,887
6,040
6,376
7,249
9 720
1910
1911
1912
1914
1915
1916
1917
1918
12,682
1919
1 L835
1920
« See Table 3H.
b Rough preliminary figures only.
e See Table 31, Column J.
d For mode of derivation, see text.
« See Table 3J.
The net value product of agriculture evidently increased very rapidly
between 1915 and 1919, but suffered a sharp decline in 1920.
§ 3g. The Share of the Employees
It is desirable next to learn what share of this net value product is paid
out in the form of wages or salaries (including under these heads, board
and lodging furnished to employees), and also the average. wage paid per
employee. The mode of estimation used is shown in Tables 3L, 3M, and
3 N.
56
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 3L
AN ESTIMATE OF THE AGGREGATE OF WAGES AND SALARIES PAID BY
FARMERS TO EMPLOYEES
A
B
('
D
E
F
Calendar
year
Wages of farm
hands
(Census years)
(Thousands)
Index of total
payments to
farm labor c
(Thousands)
Ratio of
B toC
Estimated
total wage
of farm
hands
(Millions)
C X D
Estimated
total wages
paid to em-
ployees on
farms/
(Millions)
He
10
1909. .
1910
1911. . .
1912. . .
1913
1914
1915
1916
1917
1918
1919
1920
$651,611"
$1,363,454 &
7,918
8,000
8,546
8,710
9,100
8,980
9,330
10,170
12,890
15,390
18,720
22,000
82.29^
81.37 e
80.42 e
79.47 '
78 . 52 e
77 . 67 e
76 . 62 e
75 . 77 e
74. 72*
73. 87*
72 . 83 d
71.97*
$ 652
651
687
692
715
697
715
771
963
1,137
1,363
1,583
$ 717
716
756
761
786
767
786
848
1,059
1,251
1,500
1,742
a Census of Agriculture, 1910, Vol. V., p. 563. Includes board and lodging.
b Preliminary bulletin of the Census, June 29, 1921.
c The product of the acreage of leading crops, and the average monthly wage of
farm hands without board, as reported by the Bureau of Crop Estimates of the De-
partment of Agriculture.
d Computed by division.
e Interpolated along a straight line.
/Assumed that domestics receive one-tenth the total wages paid farm hands. The
allowance here is for only that share of domestic labor required to facilitate the pro-
ductive work of the farm.
,
AGRICULTURE
01
TABLE 3M
AN ESTIMATE OF THE NUMBER OF EMPLOYEES ON THE FARMS OF
THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
G
Year
Total wages
paid to farm
hands °
(Millions)
Estimated
average full-
time wage
for farm
hands d
Estimated
number of
full-time
hands re-
quired
(Thousands)
B
C
Estimated
fraction of
workers ac-
tually
employed c
Number of
farm hands
attached to
t In' industry
(Thousands i
D
E
Number of
employees
at tached to
the
industry e
Thousands)
1909
1910
1911. . . .
1912
1913
1914
1915
1916
1917
1918
1919
1920. . . .
S 652
651
687
692
715
697
715
771
963
1,137
1,363
1,583
$363
352
367
378
389
38(5
389
422
526 &
652
767
846
1,794
1,849
1 ,S73
1,831
1 ,837
1,809
1,838
1,825
1,832
1,744
1,778
1,872
.881
.907
.915
.894
.89.1
.882
.900
.897
.934
.959
.934
.923
2,037
2,039
2,047
2,04 S
2,052
2,051
2,042
2,034
1,961
1,818
1,903
2,028
2,376
2,379
2,388
2,390
2,394
2,393
2,382
2.373
2,288
2,121
2,220
'-'.366
a See Table 3L, Column E.
b A weighted average of summer and winter wages and of wages of different classes
of laborers. Data from the 1918 Annual Report of the Iowa Bureau of Labor, p. 139,
and from the Agricultural Department Crop Report, March, 191s, p. 24.
c A rough estimate.
d Includes value of any food and lodging furnished.
e Includes the estimated number of domestic servants required to facilitate the
productive work of the farm.
58
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 3N
AN ESTIMATE OF THE AYERAOE ANNUAL EARNINGS OF FARM EM-
PLOYEES" IN THE CONTINENTAL UNITED STATES AND THEIR
SHARE IN THE NET VALUE PRODUCT OF AGRICULTURE
A
B
C
D
E
F
G
H
Year
Total
money
wages h
(Millions)
Number
of em-
ployees
attached
to the in-
dustry <-
(Thou-
sands)
Average
annual
earnings
per em-
ployee
B
C
Index cf
prices of
goods con-
sumed by
manual
and
clerical
workers d
Purchasing
power of
average an-
nual earn-
ings at
prices of
1913
D
E
Xci value
product
of agri-
culture*
(Millions)
Per cent of
value prod-
uct paid
out in "
wages and
salaries
B
G
1909
1910.. . .
1911.. . .
191?
1913.. . .
1914.. . .
1915
1916.. . .
1917.. . .
1918.. . .
1919
1920.. . .
S 717
716
756
761
786
767
786
848
1,059
1,251
1,500
1,742
2,376
2,379
2,388
2,390
2,394
2,393
2.382
2,373
2,288
2,121
2,220
2,366
$302
301
317
319
328
321
330
357
46:;
590
675
736
955
. 978
. 984
.994
1.000
1.01
1.03
1.10
1.29
1 . 58
1.773
2.165
$316
308
322
321
328
317
320
325
359
373
381
340
$ 4,686
5,728
5,368
5,286
5,887
6,040
6,376
7,249
9,720
12,682
14,835
9,853
15.3
12.5
14.1
14.4
13.4
12.7
12.3
11.7
10.9
9.9
10.1
17.7
and domestic servants.
b See Table 3L, Column F.
c See Table 3M, Column G.
d Bureau of Labor index carried back by means cf a special study.
e See Table 3K, Column F.
The preceding tables indicate that the number of employees attached
to the industry has increased but slightly during the decade, a conclusion
which accords with the almost .stationary number of farms shown by the
Census. Average wages, when measured in terms of purchasing power,
were just a little higher in 1920 than in 1909, though the years 1917 to
1919 were marked by a noticeable increase in the prosperity of the farm
laborer. In all years, the wages of farm laborers are much lower than are
those of employees in most other lines even when an allowance is made for
board and lod»in<i' a) farm prices, bu1 Ibis differential is doubtless accounted
for to some extent by the fact that food and lodging are valued on the farm
at rates much cheaper than those which must be paid by city workers for
goods or services of equal quality. The fraction of the total net value
product paid out in salaries and wages is evidently far lower than in most
other industries, due doubtless to the large number of farm operators who
,
AGRICULTURE
59
have practically no hired employees. The percentage rose sharply in 1920,
the laborers not suffering from the price decline as severely as did the
entrepreneurs.
§ 3h. The Share of the Entrepreneurs and Other Property Owners
Table 30 shows that the entrepreneurs and other property owners
attained unusual prosperity in the years 1917 to 1919 inclusive, but that
1920 was for them materially the worst year in the decade, their income
being less than half what it was in the year previous.
TABLE 30
AN ESTIMATE OF THE SHARE OF THE ENTREPRENEURS AND OTHER
PROPERTY OWNERS" IN THE NET VALUE PRODUCT OF AGRICUL-
TURE
A
B
C
D
E
F
Year
Total net
value
product b
(Millions)
Share of
employees' 1
(Millions)
Share of entre-
preneurs and
other property
owners
(Millions)
B — C
Index of
prices of
goo Is con-
sumed by
workers and
well-t o-do
families d
Purchasing
power of share
of eni repreneurs
and other prop-
erty owners a1
price of 1913
(Millions
D
E
1909
1910
1911
$ 4,686
5,728
5,368
5,286
5,887
6,0m
6,376
7,249
9,720
12,682
14,835
9,853
$ 717
716
756
761
786
767
786
848
1,059
1,251
1,500
1,742
$ 3,969
5,012
4,612
4,525
5,101
5,273
5,590
6,401
8,661
11,432
13,335
8,111
.955
.978
.984
.995
1.000
1.011
1.023
1.097
1 . 280
1 517
1.717
2.124'
$4,156
5,124
4,687
1912
1913
4,547
5,101
1914
1915
1 >16
5.215
5,464
5,835
l r )17
1918
1919
1920
6,766
7,390
7,634
3,819'
a Includes owners of rented farms and owners of farm mortgages.
6 See Table 3K, Column F.
c See Table 3L, Column F.
d An average of the indices for the working classes and for families spending $5,000
on consumption goods, the weights used being 3 and 1 respectively.
e Rough preliminary estimate.
§ 3i. The Physical Output of Agricultural Produce
It is also of interest to see whether the output of the industry is increasing
or diminishing. This point is covered by the figures in Table 3P.
GO
THE ESTIMATE BY SOURCES OE PRODUCTION
TABLE 3P
AN ESTIMATE OF THE VALUE AT PRICES OF 1913 OF ALL PRODUCTS
CONSUMED BY FARMERS OR SOLD OPT THE FARMS OF THE CON-
TINENTAL UNITED STATES
A
B
C
D
E
F
G
H
Crops
Animals and animal products
All
products
Value at
Value at
Value at
Index of
prices at
December
1st
prices of
Value at
average
Value at
Year
prices of
December
average
Index of
prices of
1913
December
1st, 1913
prices of
average
1913
prices
1st «
(Millions)
year b
prices of
(Millions)
(Millions)
(Millions)
B
C
(Millions)
year e
E
F
D + G
1909. .
$2,762
.957^
$2,886
$2,218
.891
$2,489
$5,375
1910.
2,696
.887^
3,039
3,277
.987
3,320
6,359
1911.
2,585
.997 c
2,593
2,968
.850
3,492
6,085
1912. .
2,816
.879 c
3,204
2,585
.925
2,795
5,999
1913. .
2,971
1.000c
2,971
2,989
1.000
2,389
5,960
1914. .
2,820
.883 c
3,194
3,359
1 . 022
3,287
6,481
1915..
3,347
.969 c
3,454
3,166
.963
3,287
6,741
1916. .
4,541
1.610c
2,821
3,041
1.098
2,769
5,590
1917..
6,429
2.050c
3,136
3,902
1.557
2,506
5,642
1918..
7,119
2.101c
3,389
6,189
1.851
3,344
6,733
1919. .
8,362
2.436c
3,433
7/22S
1 . 962
3,684
7,117
1920. .
5,094
1.401c
3,636
5,882/
1.833
3,209
6,845
" See Table 31.
b See Table 3H.
c Computed from table in Monthly Crop Reporter, Dec. 1920, p. 150, weighting crops
in proportion to importance of sales or home consumption.
d Estimated on basis of index of all crops. See Yearbook of Department of Agricul-
ture, 1918, p. 701.
- Average of prices of meat animals, poultry, eggs, and dairy products weighted in
proportion to the sales of each in 1919. Data from Monthly Crop Reporter.
f Rough estimate only.
Table 3P makes it clear that the physical volume of agricultural prod-
ucts has t ended to increase slowly during the decade, 1919 being the
banner year.
It is however, of greater interest to learn whether the output per person
engaged in agriculture is increasing or diminishing and also whether the
output is or is not keeping pace with the growth of population in the United
States. The facts in this connection are shown in Table 3Q.
AGRICULTURE
61
TABLE 3Q
AN ESTIMATE FOR THE CONTINENTAL UNITED STATES OF THE OUT
PUT OF AGRICULTURAL PRODUCTS PER INHABITANT AND PER
PERSON ENGAGED IN AGRICULTURE
A
B
C
D
E
F
G
H
Thousands of Persons Engaged
Estimated
Value of Output at Prices of
in
Agriculture
Popula-
tion of
United
1913
Year
Per person
Per inhab-
itant of
the United
Sta1
F-5-E
Farmers
Em-
ployees d
Total
States/
June 30
(Millions)
Total/
(Million
engaged in
agriculture
F -r D
1909 . . .
6,330 c
2,376
8,706
90.4
$5,375
$617
$59
1910. . .
6,362 o
2,379
8,741
92 2
6,359
727
69
1911. . .
6,376 e
2,388
8,764
93.8
6,084
694
65
1912. . .
6,388 c
2,390
8,778
95.3
5,999
.is:;
63
1913. . .
6,400 c
2,394
8,794
97 3
5,960
678
til
1914. . .
6,410c
2,393
8,803
99.2
6,481
736
65
1915. . .
6,418 c
2,382
s.sOO
100.4
6,741
766
67
1916. . .
6,425 c
2,373
8,798
101.7
5,590
635
55
1917. . .
6,432 c
2,288
8,720
103.1
5,642
647
55
1918. . .
6,438 c
2,121
8,559
104.2
6,733
786
65
1919. . .
6,443 c
2,220
8,663
104.8
7.117
821
68
1920. . .
6,448 b
2,366
8,814
106.
6,845o
i , <
64
° Abstract of Census of U. S. 1910, p. 265. Number of farms is identical with num-
ber of farmers.
b Press bulletin of Bureau of Census, June 22, 1921.
c Interpolated along a smooth curve.
d See Table 3M, Column G.
e Interpolated between Census estimates by means of a special study elsewhere re-
corded.
/ See Table 3P, Column H.
o Rough estimate only.
The figures in Column G show that the gross value of the output per
person engaged in agriculture is about the same as the average annual
earnings of factory or railway employees. From this gross output, how-
ever, the agriculturalist must subtract payments for interest, insurance,
fertilizers, machinery, etc., before arriving at his net income and this nel
income includes not only payment for his services but also for the use of
any property which he may possess and for any farm work performed by
his wife or children. It seems clear then that when farm laborers and
farmers are considered as a joint group, their economic condition, if meas-
ured in monetary terms, compares unfavorably with that of the employees
of railways or of manufacturing concerns.
The last column of the table shows that gross agricultural output is just
G2
THE ESTIMATE BY SOURCES OF PRODUCTION
about keeping pace with the population of the nation, no marked trend
being discernible.
§ 3j. The Relative Position of Agriculture Among the Industries
The final question to be considered is: "Is agriculture playing an in-
creasing or diminishing role in the industry of the country?" This query
is answered by Table 3R which shows that the proportion of the total
value product of all industries produced by agriculture remained nearly
constant until 1917 and then rose very sharply. The probabilities are,
however, that the percentage will fall very materially in 1920.
TABLE 3R
THE PER CENT OF THE NET VALUE PRODUCT OF ALL INDUSTRIES IN
THE CONTINENTAL UNITED STATES PRODUCED BY AGRICULTURE
Year
Total net value
product of all
industries c
(Millions)
Net value product
of agriculture 6
(Millions)
Per cent of the net
value product originat-
ing in agriculture
1909
$28,775
31,766
31,188
33,554
35,580
33,936
36,109
45,418
53,860
60,:;<w;
65,000"
$ 4,686
5,728
5,368
5,286
5,887
6,040
6,376
7,249
9,720
12,682
14,835
9,853 o
16.3
1910.
18.0
1911.
17.2
1912.
15.8
1913
16.5
1914. .
17.8
1915
1916
17.7
16.0
1917
1918
18.0
21.0
1919
22.8"
1920
a Rough preliminary estimate only.
b See Table 3K, Column F.
c Summary compiled from the reports of the separate industries.
§ 3k. Returns for the Efforts of Farm Operators
It is a fact worthy of comment that while about thirty per cent of the
gainfully employed persons in the United States are engaged in agricul-
ture, the industry normally receives only about seventeen per cent of the
national income. In a preceding paragraph, attention has been called to
the relatively small average income received by farmers and agricultural
laborers when considered as a single class. Column D of Table 3N makes it
clear, however, that agricultural laborers receive low wages. Do farm opera-
tors secure high returns for their physical and mental effort and managerial
skill? Table 3S has been constructed with a view to answering that query.
AGRICULTURE
63
TABLE 3S
AX ESTIMATE OF THE REWARDS FOR MANAGEMENT AND LABOR RE-
CEIVED BY THE FARMERS OF THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
G
II
I
J
Year
Total
value of
farm
property
including
cash used
as working
capital ff
(Millions)
As-
sumed
in-
terest
rate
on
invest-
ment
Rewards
ascrib-
ahle to
propert y
(Mil-
lions)
BXC
Total re-
turns to
entrepre-
neurs and
other
property
owners d
(Millions)
Reward
for
farmer's
manage-
ment
and labor
(Millions;
E— D
Num-
ber of
farm-
ers e
(Thou-
sands)
Aver-
age re-
war I
per
farmer
F
G
Index
of
prices
of goods
con-
sumed
by far-
mers /
Average
reward
per
farmer
•it prices
of 1913
H
I
1901
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
$40,059 c
41,400"
42,225 c
42,917 c
45 227 c
46|619c
48,199c
52,687 c
57,110 c
64,122 c
71,848 c
78,707 b
.05
.05
. 05
.05
.05
.05
. 05
.05
.05
. 05
. 055
.085
$2,003
2,070
2,111
2,146
2,261
2,331
2,410
2,634
2,855
3,20ii
3,951
5,116
$3,969
5,012
4,612
4,525
5,101
5,273
5,590
6,401
8,660
11,432
13,335
8,111
$1,966
2,942
2,501
2,379
2,840
2,942
3,180
3,767
5,805
8,226
9,384
2,995
6,330
6,362
6.376
6,388
6,400
6,410
6,418
6,425
6,432
6,438
6, 143
6,448
$311
462
392
372
444
459
195
586
903
1,278
1,453
465
.955
.978
984
.995
1.000
1.011
1 . 023
1.097
1 . 280
1 . 547
1.747
2.124
$326
472
398
374
444
454
484
534
705
826
833
219
« Abstract of the Census of 1910, p. 265.
b Preliminary Census bulletins for 1920.
c Interpolated
d See Table 30, Column D.
e See Table 3Q, Column B.
/ See Table 30, Column E.
9 1.01 times the value of farm property as shown by the Census — the one per cent
allowance being an estimate for the cash and bank deposits held by farmers as working
capital.
Since we do not know what percentage ' of all farms are owned by active
fanners, it is impossible to ascertain either the total or average income of
this class. It is, however, feasible by aid of the material at hand, to make
a crude estimate of the amount received by the farmers of the country, as
a reward for their physical and managerial labor. Such an estimate in-
volves the assumption that a percentage return should be allowed on the
investment before calculating the payment for the services of the farmer.
This assumption is open to some criticism, but, since it is often entirely
practicable for the farmer to sell all of his property and invest it in secur-
ities, there seems to be nothing unreasonable in usine- it as a hypothesis.
It should, however, be kept firmly in mind that the amounts entered in
1 The fact that many rented farms art' owned by men who operate other farms, prevents
the computation of this percentage.
64 THE ESTIMATE BY SOURCES OF PRODUCTION
( Jolumn J arc not the average incomes of the farmers but only the amounts
which they could count as pay for their physical and managerial services.
Individual farmers who were property owners, may well have made or lost
several times the recorded sum because of a rise or fall in land values dur-
ing the year and that part of their income assigned to the interest allow-
ance on the current value of their property may have been far larger than
the remainder ascribed to managerial or physical effort or to other profits.
( 'olumn B shows a gain of 15 billions in the value of farm property from
1919 to 1920, and, while most of this nominal gain was doubtless merely
a reflection of the rise in the general price level, yet, in some sections, farm
lands probably rose in value even faster than commodities in general.
\Y< re the speculative gains in such instances added to the $219 recorded in
Column J, the average gain for farm owners in 1920 would doubtless com-
pare much more favorably with other years in the decade. In connection
with the latter point it should also be noted that the extremely low calcu-
lated reward for the farmer's labor and management in 1920 was occa-
sioned to a considerable extent by the heavy property charge resulting
from the unusually high land values and high interest rates current at that
time.
The indications from Table 3S are then that farmers, even though they
are entrepreneurs, and belong to the class usually considered to consist of
men of higher talents than mere employees, nevertheless obtain on the
average less money value in return for their efforts than do the average
employees in most lines of industry. Only in the years 1918 and 1919 did
they receive more than the average earnings for all employees in the
United States, while in 1920 their rewards fell to a mere fraction of the
average wage in other lines. Even though the same money will buy con-
siderably more of certain commodities in the country than in the city, it
nevertheless appears that the average farmer can scarcely with justice be
considered a pampered child of fortune.
.
CHAPTER 1
MINES, QUARRIES, AND OIL WELLS
$ 4a. Sources of Information
The four chief sources of information concerning this field are the Cen-
sus, the reports of the United Stales Geological Survey, the United Stales
Income Tax data, and the reports of various State Bureaus devoted to
the study of mining or labor conditions. Unfortunately, the State reports,
in most instances, are either issued irregularly or fail to furnish informa-
tion comparable for the various years under consideration. This necessa-
rily results in a distinct loss of accuracy in the estimates based thereupon.
§ 4b. The Share of the Entrepreneurs and Other Property Owners
The share of the entrepreneurs and other property owners in the net
value product consists of the rents, royalties, and interest received by pri-
vate parties from their investments in this field plus the profits derived
from the mining industry by the private or corporate entrepreneurs oper-
ating therein. In estimating the aggregate of rents and royalties, it lias
been assumed that these payments vary in proportion to the gross value
of mineral products in the United States as reported by the United States
Geological Survey. The Census of 1909 is used as a base. Royalties at a
fixed rate per ton would not increase with the price level and hence con-
tracts of this type would tend to make the estimates for the later years too
high. On the other hand, many royalties become proportionally greater
as mineral output increases in value. Contracts of this variety would
tend to offset the effects of those of the type first mentioned. Since the
relative weights of these factors arc unknown, the assumption that they
cancel each other is the best that can be made. The resulting estimates
appear in Table 4 A.
The basic estimates of profits and interest payments utilized in this
study are those shown in the 1918 report of the United States Commis-
sioner of Internal Revenue on Statistics of Income. It show-; on page 15
that interest payments by mining corporations were $67,010,715. A
study of the reports of mining corporations as given in Moody's Manual
of Corporations Statistics indicates that about 97 per cent of the net amount
of interest paid by mining corporations goes to the bondholders. The
65
66
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 4A
THE ESTIMATED AGGREGATE OF RENTS AND ROYALTIES DERIVED
FROM THE LEASE OF MINERAL RIGHTS IN THE CONTINENTAL
UNITED STATES
A
B
C
D
E
Calendar
year
Rents plus
royalties ;
Census years
(Thousands)
Gross value of min-
eral output according
to Geological Survey
(Thousands)
Ratio of
B toC
in 1909
Estimated total
of rents and
royalties
(Millions)
C XD
1909 .
$72,945"
$1,887,5826
1,992,406 6
1,927,532 6
2,243,6306
2,439,160 c
2,118,306 c
2,397,745 c
3,514,600 c
4,992,128 c
5,543,456 c
.03865
$ 73 <*
1910. .
77
1911
74
1912
1913
87
94
1914
1915
1916
82
93
136
1917
1918..
193
214
a Includes the $64,155,000 reported as royalties and rent of mines and $8,790,000
representing an estimated rent for offices, the amount being one-fifth of the item en-
tered as "Rent of cffices'and other sundry expenses." See the Abstract of the United
States Census for 1910, p. 541.
6 Statistical Abstract of the U. S., 1913, p. 217.
c Statistical Abstract of the U. S., 1919, p. 243.
total bond interest paid by corporations therefore apparently amounts to
about $65,000,000.
On a previous page, the fact has been noted that corporate enterprises
produce about 95 per cent of the entire output of the mining industry. If
their funded debt represents the same percentage of the total, it appears
that in 1918 the interest thereon for the entire mining industry must have
been approximately $65,000,000, divided by 0.95 or $68,400,000.
The assumption has been made that the interest payments in the earlier
years varied in the same ratio as did the similar payments made by 25
typical mining corporations, the records of which appear in Moody's
Manual of Corporation Securities. Since the amount is relatively very
small, its accuracy is a matter of but minor importance.
In 1918, the reported net income after the deduction of interest and
taxes, was $.304,939,703. l The percentage of the entire gross output of
minerals produced by enterprises in the corporate form increased from
86.3 2 in 1902 to 91.4 3 in 1909. It seems probable, therefore, that, by
■ Statistic* of Income, 191N, p. 16.
- U. S. Census of Mines and Quarries, 1902, p. 67.
3 U. S. Census of Mines and Quarries, 1909, p. 32.
,
MIXES QUARRIES, AND OIL WELLS
67
TABLE 4B
AN ESTIMATE OF THE TOTAL INTEREST RECEIVED ON INVESTMENTS
IN MIXES, QUARRIES, AND OIL WELLS IX THE CONTINENTAL
EXITED STATES
A
B
('
I)
E
Calendar year
Estimated
interest total
tor 1918
(Thousands)
Interesl on funded
del >t paid by 2~>
typical mining
corporal ions h
(Thousands
Ratio of
n to c
in 1918
1 Ssl imated total
interest on
investments
(Millions)
C X D
1909
1910
$68,400"
$5,496
r,.974
6,7.",:;
6,876
6,689
7,392
8,051
7.S09
7,566
8,306
8 234
145
49
1911
56
1912
1913
1914
1915
57
55
61
66
L916
ill
1917
1918
62
68
a For derivation, see the text.
b From Poor's and Moody's Manuals <■/ Corjumilion Securities.
1918, corporations had come to control 95 per cent of the value of mineral
products. If so, the total net income of the mining industry may be
estimated as about .$321,000,000, in L918.
The reports of 110 mining and oil producing corporations cited in
Moody's Analyses of Industrial Investments show that 71.72 per cent of
net earnings after the deduction of interesl charges were paid out as
dividends. If this percentage i assumed to hold for all enterprises, the
conclusion is that the total disbursed profits in 1918 amounted to 0.7172
X $321,000,000, or about $230,100,000. In earlier years, these disbursed
profits have been estimated upon the basis of the aggregate reported div-
idends of the metal mining companies reported in the Engineering and
Mining Journal and of a few coal and iron corporations for which con-
tinuous reports are given in Poor's or Moody's Manuals. These dividends,
as reported, contain many duplications due to the existence of holding
and interlocking companies and they also include payments made by some
concerns engaged largely in manufacturing. The result is that their sum
is decidedly larger than the net amount indicated by the reports of the
( oimcissioner of Internal Revenue. The mode of reduction is indicated
in Table 4C.
Not all of the profits of mining concerns are withdrawn from the busi-
ness by the owners, a very considerable fraction being saved. In the case
(>8
THE ESTIMATE BY SOURCES OF PRODUCTION
of the 25 corporations studied, the records show the fraction of the total
profits carried to surplus. The assumption is made that this fraction
applies to all mineral producing enterprises. The estimates based upon
this premise also appear in Table 4C. The reduction of these sums to a
basis of purchasing power at the price level of 1913 is shown in Table 4D.
TABLE 4C
AN ESTIMATE OF THE DISTRIBUTED PROFITS AND BUSINESS SAVINGS
OF ALL MINING CONCERNS IN THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
G
H
Cal-
endar
year
Distributed
profits as
indicated
by reports
of income
tax a
(Thousands)
Gross divi-
dends of
selected
mining and
oil produc-
ing cor-
porations b
(Millions)
Ratio
of
B toC
in 1918
Estimated
distributed
profits of
all con-
cerns
(Millions)
C XD
Ratio of
annual sur-
plus to divi-
dends in
selected
corporations
Estimated
business
savings
of all
concerns
(Millions)
E X F
Estimated
total
profits in-
cluding
savings e
(Millions)
E +G
1909..
1910. .
1911. .
1912. .
1913..
1914. .
1915..
1916.
1917. .
1918.
$230,100
$141
147
151
172
200
170
187
306
449
366
.6280
$ 88
92
95
108
125
107
117
192
282
230
. 6236 c
.3646c
. 5954 e
.3364c
.3200c
.7996c
1.0878c
. 5229 c
. 3436 d
$ 55
35
35
64
42
34
94
209
147
79
$144
127
130
173
168
141
211
402
429
309
a For derivation, see text .
b These items are the respective sums cf the total dividends reported in the January
numbers of The Engineering and Mining Journal for mines of metals other than iron
and of the dividends of eight important coal and iron producing corporations as re-
ported in Moody's Manual of Corporal ion Securities.
c Calculated from the records of 25 typical mining corporations as reported in Moody's
Manual of Corporation Securities.
>' Calculated from the records cf 110 selected mining and oil corporations reported in
Moody's Analyses of Industrial Investments, 1920. This ratio corresponds quite closely
to one calculated from the reports <f the 25 typical corporations for the same year.
• Mr. W. It. Ingalls, one of our Directors, in an unpublished study on The Value of
the Minis of the United States, estimates the average annual net earnings of the mines
in the years 1911 to 1913 at $330,000,000, and is therefore inclined to think that the
figures in Column H are somewhat too low for the years mentioned. He reaches his
result by using as a basis the reports of the U. S. Bureau of Internal Revenue on the
total income, before deducting Federal taxes, of all mining corporations in 1916. Under
the law at that time, each corporation had to report its income separately; hence if one
corporation paid dividends to another corporation, this income was duplicated in the
totals, making them too large. As Mr. Ingalls states, the 8330,000,000 is the amount
before any allowance is made for depletion. It also takes in the earnings of metallur-
gical works which we have attempted to exclude. For our purposes, taxes must be
deducted; while Mr. Ingalls has used the income figures as they stand before taking
out the tax payments. In view of the facts just cited, it is evident that there may be
no real discrepancy between the estimates of Mr. Ingalls and the ones here presente I.
,
MIXES, QUARRIES AND OIL WELLS
69
TABLE 4D
AN ESTIMATE OF THE PURCHASING POWER OF THE BUSINESS SAVINGS
OF CONCERNS OPERATING MINES, QUARRIES, AND OIL WELLS
A
B
C
D
Calendar
year
Estimated total
savings
(Millions)
Index of construc-
t ion cos
(Base, 1913)
Equivalent of savings
measured in new con-
struction at prices of
1913
(Thousands)
B -=-C
1909
$ 55
35
35
64
42
34
94
209
147
79
.927
.953
.945
983
l.ooo
.((00
.992
1.194
1 . 47:5
1.499
$ 59
1910
36
1911
37
1912
1913
1914
66
42
36
1915
1916
1917
1918
94
175
100
53
a See Table 4C, Column G.
b Based upon Bureau of Labor Statist ics indices, combined after weigb.1 ing as follows:
union scale of wages, 3; wholesale prices of metals and metal products, 2; lumber and
building materials, 1.
The notable feature brought out by Tables 4C and 4D is the enormous
increase in savings during the period immediately preceding the entrance
of the United States into the war and the sharp decline thereafter. The
figures in the last column of 'Fable 4D show that this increase remains
very large even after values are corrected for changes in the price level.
Table 4E summarizes the disbursements to the entrepreneurs and
owners of property used in the mining industry.
It is evident that the revenues derived from mining increase 1 materially
during the latter years of the decade under consideration. Since this
increase is presumably due primarily to war conditions, it is doubtful that
it represents any permanent tendency. In fact available reports of min-
ing corporations indicate that in 1919 and 1920 the earnings of many
companies are much lower and in some instances heavy deficits have
The Census of 1909 indicates tli.e our estimates are more likely to be too high than
too low, for it shows total returns to entrepreneurs and investors of only $164,218,893;
and from this amount an allowance for depletion must be deducted to arrive at lin-
net gain. Both the dividends shown in Column C and the value of mineral output.
as estimated by the U. S. Geological Survey (see Table IA. Column C) point to an
increase from 1909 to 1913 of something less than one-third over the L909 figures; and
this increase corresponds with the estimates recorded in Column E. Corporate savings
increased less rapidly than dividend payments. There appears, then, to be QO suffi-
cient reason for modifying the estimates here presented.
70
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 4E
AN ESTIMATE < >F THE TOTAL REVENUES DERIVED BY ENTREPRENEURS
AND PROPERTY OWNERS FROM MINES, QUARRIES, AND OIL WELLS
A
B
C
D
E
F
G
Cal-
endar
year
Profits
with-
drawn n
(Millions)
Total
rents and
royalties ''
(Millions)
Interest •'
(except
on bank
loans)
(Millions)
Total revenues
withdrawn by
entrepreneurs
and other prop-
erty owners
(Millions)
B + C+D
Indices of
prices of con-
sumption goods
used by well-
to-do classes''
Value of
revenues with-
drawn at price
of 1913
(Millions)
E -i- F
1909. .
1910.
1911. .
1912.
1913. .
1914.
1915. .
1916. .
1917
1918. .
$ 88
92
95
108
125
107
117
192
2S2
230
$ 73
77
74
87
94
82
93
136
193
214
$45
49
56
57
55
61
66
64
62
68
$207
219
225
251
275
249
276
392
537
512
.965
.983
.990
1.000
1.000
1.011
.999
1.081
1 . 225
1.406
$214
222
227
251
275
247
276
363
438
364
a See Table 4C, Column E.
b See Table 4 A, Column E.
<• See Table 4B, Column E.
d Simple arithmetic average of indices for classes spending respectively $5,000 and
$25,000 per annum.
occurred. There is also, of course, a question as to whether in calculating
the profits reported, sufficient allowances were made for exhaustion of the
properties. A failure to make such deductions would necessarily exagger-
ate the nominal profits to an equal amount.
§ 4c. Total Wages and Salaries
The share of the value product which requires the greatest amount of
labor to estimate is that going to the employees. To arrive at figures hav-
ing any validity whatever, it was necessary to depend mostly upon State
reports and many of these are very incomplete. The process followed is
summarized in Tables 4F and 4G for the coal mining industry while all
other mines are dealt with in Table 4H.
,
MIXES, QUARRIES, AND OIL WELLS
71
TABLE 4F
AX ESTIMATE OF TOTAL WAGES AND SALARIES PAID IN THE
BITUMINOUS COAL INDUSTRY* OF THE CONTINENTAL UNITED
STATES
(Values in Millions of Dollars)
A
B
C D
E
F
G
H
Estimated total payments to employees
based upon reports from
Index cf
total wages
paid
B+C+D
2
Total
wages
and
salaries
paid in
Census
years
Ratio of
F to E
Total
Cal-
endar
year
Pennsyl-
vania De-
partment of
Internal
Affairs a
Kansas and
West Vir-
ginia Bureau
of Mines,
and Ohioc
estimates h
Michigan
Department
of Labor'/
salaries
and
wages
paid
EXG
1909. .
1910. .
1911. .
1912. .
1913. .
1914. .
1915. .
1916. .
1917. .
1918. .
$277
337
328
370
398
355
319
434
613
865
$319
348
338
365
409
359
357
416
547
634
$ 457
538
561
593
681
630
634
723
889
1,211
$ 825
954
'.117
1,032
1,148
1,029
993
1,212
1,604
2,104
$290/
.3515
$290
335
333
363
101
362
349
426
564
711)
o Product of the total value of bituminous c< al produced in the U. S. (as shown by
the Statistical Abstract), and the ratio of wage and salary payments to the value of
the coal produced (as indicated by the Pennsylvania reports for each year).
''Obtained by calculating an average full time annual wage for miners in each of
the three States, computing the mean of the three averages and multiplying it by the
estimated number of full time employees in the United States as reported by the U. S.
Bureau of Mines.
''Wages in the Hocking Valley field estimated from data in the Monthly Labor
lui ivw for December, 1919, pp. 225-226.
d The product of the number of tons mined (as reported by the V. S. Geological
Survey) times the cost per ton cf mining coal in Michigan. Since Michigan rates are
apparently abnormally high, and that state is a relatively small producer, this estimate
is only given one-half the weight of the other two.
'• Includes the small fiel Is in the West producing anthracite.
/To the $315,997,000 in \va<j;es reported in the ( 'ensus (if Mines and Quarries f( r
1909, p. 183, $159,000 has been added to cover the wages ( f Western anthracite mine-.
an 1 $12,108,000 has been deducted to pay for the COSt of powder purchased by the
miners. Since the ('ensus estimates that 1.72 per cent of the bituminous miners were
already counted in manufacturing (Census of Mine.-, L909, p. 17) the remainder just
obtained lias been multiplied by 0.9528.
72
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 4G
AX ESTIMATE OF TOTAL \\ AC IIS VXD SALARIES PAID EX THE
ANTHRACITE FIELD AND IN ALL COAL MINES
Calendar
year
B
1909
1910.
1911.
1912.
1913.
1914.
1915.
1916 .
1917.
1918.
Average pay-
ments to em-
I >1< >yees per long
ton mined
$1,240"
1.254«
1.250a
1.345 «
1.340«»
1.340&
1.330c
1.548<*
1.468''
1.919<*
C
Total long
tons mined e
(Thousands)
72,38 [
75,433
80,771
75,323
81,719
81,090
79,400
78,195
88,939
88,238
D
Total wages
and salaries
in the
anthracite
industry
(Millions)
B XC
E
$ 90
95
101
101
109
109
106
121
131
169
Total wages
and salaries
in the bitu-
minous in-
dustry/
(Millions)
S2!)0
335
333
363
404
362
349
426
564
740
Total wages
and salaries
in the coal
mining
industry
(Millions)
D + E
$380
430
434
464
513
470
455
548
695
909
a Annual Report, of Pa. Secretary of Internal Affairs, Part III.
b Interpolated.
c Annual Report of Pa. Commissioner of Labor and Industry, Part I.
'' Pa. Depart incut of Internal Affairs, Report, on Productive industries.
r Statistical Abstract of United Slates.
f See Table 4F, Column H.
Statistics pertaining to the mines of stone, metals, and miscellaneous
minerals are very scattered and disjointed; hence the estimates presented
in Table 4H represent a combination pieced together from various sources.
The fundamental assumption involved is that wages are roughly propor-
tional to the value of output.
MINES, QUARRIES, AND OIL WELLS
73
TABLE 4H
AX ESTIMATE OF TOTAL WAGES AND SALARIES FOR ALL EMPLOYEES
OF MINES, QUARRIES, AND OIL WELLS EXCEPT COAL MINES
A
B
C
D
E
F
G
H
Calen-
dar
year
Index of
daily
wages a
Days of
labor per-
formed in
metal mines
and quarries
oftheU.S.6
(Thousands
Ratio of
Value of min-
eral products
(except COal)
to value of
metal and
quarry
products'*
Index of
total wages
paid in
metal
mines and
quarries
BXCX D
Estimated
wages and
salaries in
( !ensus year
(Thousands
Ratio of
1 bo 1.
Total
wages and
salaries
paid
(Million,)
E XO
1,000
1,000
1909 . . .
1910 .. .
1911 .. .
1912 . . .
1913 . . .
1914 . . .
1915 . . .
1916 . . .
1917 . . .
1918 . . .
.905
.910
.951
.980
1.000
.953
.998
1.153
1.387
1 . 568
67,680 c
71,000 c
71,1526
76,650«»
81,2206
63,242 6
67,3336
80,6736
79,0836
72,0886
1.330
1 334
1 . 369
1.341
1.378
1.447
1.418
1.307
1 . 333
1 382
81 '
86
93
101
112
s?
95
122
1 16
156
$232,148/
2.851
$232
246
264
287
319
249
272
347
117
1 15
° Estimated on the basis of wages in the iron minesof Itasca and St. Louis Counties
Minn. (Biennial Reports of Minn. Bureau of Labor), in miscellaneous mines in Pa.
(Reports of Secretary of Internal Affairs and of Commissioner of Labor and [ndustrj .
in the gold mines of the U. S. (U. S. Bureau of Mine-;, Bulletin 144, p. 62), and in
Tenn. metal mines and quarries (Annual Reports of Tenn. Mining Department).
6 See U. S. Bureau of Mines, Technical Papers 245 and 252.
r Estimated as being proportional to the value of metal and quarry products.
d Based upon reports of the U. S. Geological Survey and the U. S. Census of M
(mil Quarries.
■ si thousands equals the product of B, C, and I) in 1909.
f% 13,7 16,537, duplicated in the Census of Mfg., (see Census of Mints and Quarries,
1909, p. 17) has been added to $379,720,000, the total wages in coal mining (see Table
4G), and the sum has been deducted from $655,584,467, the amount reported in the
Census of Mines and Quarries for 1909.
§ 4d. Number of Employees and Average Earnings
Wo are interested not only in the total wages and salaries paid, but also
in the total number of persons required to operate the mines, quarries,
and oil wells of the United States.
The United States Bureau of Mines in connection with its statistics of
mine accident:; shows the number of men at work in the principal classes
of mines and quarries each year. These numbers have been compared
with the numbers in 1909 working in the maximum month in each industry
as shown by the United States Census of Mines and Quarries. Alter con-
sidering these quantities and making allowances for the number of workers
in miscellaneous industries not covered by the reports of the Bureau of
74
THE ESTIMATE BY SOURCES OF PRODUCTION
Alines, the figures entered in Table 41 have been arrived at.
regarded merely as rough approximations to the truth.
They must bv
TABLE 41
TOTAL NUMBER OF EMPLOYEES ATTACHED TO THE INDUSTRY AND
TOTAL AND AVERAGE WAGES PAID IN THE MINES, QUARRIES, AND
OIL WELLS OF THE CONTINENTAL UNITED STATES
A
B
C
1)
E
V
G
H
I
J
Employees attached
Ratio of
Total
Average
Wage
s and sal
anes
to industry c
total
share
annual
Calen-
(
Millions,
(Thousands)
share of
of em-
compen-
dar
employees
ployees
sation
year
Of coal
Of other
Of all
Coal
Other
All
to total
(Mil-
per em-
miners"
miners b
miners
B + C
$ 612
mines
725
mines
mines
E+ F
1,073
wages and
salaries il
lions)
1.050XD
ployee
I -G
1909 . .
$380
$232
348
1.050
$ 643
$ 599
1910 .
430
246
676
740
366
1,106
711
642
1911 .
434
264
698
751
381
1,132
733
647
1912 . .
464
287
752
759
391
1,150
790
687
1913 . .
5.13
319
832
764
395
1,159
874
755
1914 . .
470
249
719
767
396
1,103
755
649
1915 . .
455
272
727
771
392
1,163
764
656
1916 . .
548
347
894
774
380
1,154
939
814
1917 . .
695
417
1,112
776
365
1,141
1,169
1,025
19 IS . .
909
445
1,354
779
329
1,108
1,422
1,283
a Table 4G, Column F.
b Table 4H, Column H.
c For derivation, see text.
d Part of mining is done under contract, the Census of Mines and Quarries, for 1909,
p. 21, showing $30,690,000 for contract work, being 5 per cent of the wage bill of 612
millions. The total pay of employees evidently amounts therefore to 105 per cent of
the wages and salaries paid.
§ 4e. Total Net Value Product and Share of Employees
We are now in a position to estimate the total net value product of the
industry, and the estimates thereof for the various years are recorded in
Table 4 J.
The results indicate that the share of the value product going to the
emplo3^ees tends to be a little less than three-fourths of the whole and that
their relative share diminished materially in 191(3 and 1917, but showed
signs of recovery in 1918.
To some of the employees, however, the average purchasing power of
their annual earnings is a matter of as much interest as is the relative size
of their share of the value product,. 1 The employers' direct interest, on
1 Dr. H. W. Laidler, a Director of the Bureau says: " An increasing number of progressive
employees feel that the question of the proportion of the return to employees is of greater
importance than the actual size of that return."
S
MINES, QUARRIES, AND OIL WELLS
75
TABLE 4 J
AN ESTIMATE OF THE NET VALEE PRODUCT OF THE MIXES, QCARRIES,
AND OIL WELLS OF THE CONTINENTAL UNITED STATES AND THE
PER CENT THEREOF GOING TO THE EMPLOYEES
Millions of dollars
A
B
C
D
E
F
Calen-
Total net
Per cent of
dar
Profits''
Interest
Compensa-
value
\ alue prod-
year
Rents and
(including
on funded
tion of
product
uct going to
royalties °
savings)
debt*
employees ''
A + B +
C + D
employees
101)1)
E "
1909.. . .
$ 73
$144
$45
$ 643
$ 904
71.0
1910.. . .
77
127
49
711
964
73.7
1911.. . .
74
130
56
733
993
73.8
1912... .
87
173
57
790
1,108
71.4
1913....
94
168
55
874
1,191
73.4
1914....
82
141
61
755
1,039
72.7
1915. . . .
93
211
66
764
1,133
67.4
1916.. .
136
402
64
939
1,541
60.9
1917.. . .
193
429
62
1,169
1.S53
63 . 1
1918... .
214
309
68
1,422
2,013
70 . 6
« See Table 4A, Column E.
b See Table 4C, Column H.
c See Table 4B, Column E.
d See Table 41, Column I.
the other hand, centers mainly upon questions pertaining to the efficiency
of the workers in producing output. Table 4K throws light upon the situ-
ation in both these connections.
§ 4f. The Mineral Output Compared to Earnings and Population
As a measure of the output of the mining industry, the index of physical
production prepared by Professor Edmund E. Day has been used, as it is
presumably the best criterion available. It i-; possible that it exaggerates
a trifle the expansion of the mining industry during the war years, for it
is based upon data concerning the production of leading minerals, and
some of the minor industries producing materials for building apparently
declined while the larger fields were expanding. However, the minerals
covered include such a large proportion of the total that it is improbable
that any error from this source is large enough to be a matter of serious
moment and, at any rate, its effect would not be either continuous or
cumulative; hence, it seems that the figures are amply accurate for the
purposes at hand.
70
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 4K
AN ESTIMATE OF THE PURCHASING POWER OF THE EARNINGS OF THE
AVERAGE EMPLOYEE COMPARED WITH THE AVERAGE OUTPUT
PER EMPLOYEE
A
B
C
D
E
F
G
Calen-
dar
year
Average
annual
earnings
per em-
ployee"
Index of
prices of
goods
purchased
by workers''
Average
earnings
at prices
of 1913
B
C
Index of
physical
production
of minerals d
Total num-
ber of em-
ployees
attached
to industry
(Millions)
Index of
output per
employee
E
F
1909
1910. .. .
1911
1912
1913. ...
1914. ...
1915. ...
1916. .. .
1917
1918. .
$ 599
642
647
687
755
649
656
814
1,025
1,283
.955
.978
.984
.994
1.000
1.01
1.03
1.10
1.29
1.58
$627
656
658
691
755
643
637
740
795
812
675
717
692
771
809
721
810
950
986
995
1.073
1.106
1 . 132
1 . 150
1.159
1 . 163
1.163
1 . 154
1.141
1 108
629
648
611
670
698
620
696
823
864
898
« See Table 41, Column J.
b Bureau of Labor Statistics index extended back by special investigation.
c See Table 41, Column G.
d Day, Edmund E., Review of Economic Statistics, 1921. An Index of the Physical
Volume of Production, p. 22; multiplied by a suitable factor to make comparison easy.
Table 4K shows a sharp gain in the purchasing power of the average
miner's wage beginning with the year 1916. At the same time, a marked
increase in physical output is noticeable; in fact the production appears to
have increased to a considerably greater extent than the earnings. Fur-
ther investigation would be necessary in order to determine whether the
larger output was the result mainly of a smaller number of days lost per
year, more strenuous effort put forth, or an improvement in mining
machinery.
Another subject of general interest is the relation between the output
of minerals and the population of the country.
According to Professor Day's index, our mineral output increased dur-
ing the decade far more rapidly than population. This fact is brought
out in Table 4L.
Table 4L indicates that the exploitation of our mineral resources is
proceeding more rapidly than is our growth in population. The large
increase in output in 1916, 1917, and 1918 presumably was called forth
mostly in response to war requirements and hence may have added little
or nothing to the permanent national industrial equipment.
,
MIXES, QUARRIES, AND OIL WELLS
77
TABLE 4L
THE RELATIVE CHANCES IN THE PER CAPITA PRODUCTION OF
MINERALS IN THE CONTINENTAL UNITED STATES
A
B
C
D
E
Calendar year
Population of the United
States
Day's index of
physical produc-
tion of minerals &
Index of per capita
physical production
of minerals
100D
Thousands °
Index
C
1909
1910
90,370
92,229
93)811
95,338
97,278
99,194
100,428
101,722
103.059
101,182
100.0
102.1
103.8
105.4
107.7
109.8
111.1
112.5
114.1
115.3
100.0
106.4
102.6
114.4
119.9
107.0
120.1
110.9
1 16.4
1 17.6
100.0
104.2
1911
1912
98.8
108.4
1913
1914
1915
111.3
97.4
108 1
1916. .
125.2
1917
128.3
1918
128.0
a See Sec. 2a.
6 Adjusted from the figures on p. 22 of Edmund E. Day's. An Index of the Physical
Volume of Production, Harvard Committee on Economic Research, 1921.
It is well to keep in mind that while an increase in mineral output is a
necessary concomitant of industrial progress, it nevertheless is far from
representing a clear gain since it necessarily involves a diminution in the
inventory of resources upon which the nation must depend in the future.
CHAPTER 5
FACTORY PRODUCTION
(Covering that part of the private Manufacturing Industry included in
the totals presented by the United States Census of 1914.)
§ 5a. Importance of the Industry
This field covered in 1900 more than 90 per cent 1 of the entire manu-
facturing industry, 2 and in 1914 the operations carried on therein increased
by nearly ten billions of dollars, the value of the materials worked upon.
This, then, is a division of the first magnitude, and it is highly important
that all estimates therefor be made with the highest practicable degree of
accuracy.
Fortunately, statistics of manufacture of different types are abundant.
While it is, of course, impossible to obtain an analysis from year to year
of the data for the United States as a whole, it seems feasible to make a
fairly close estimate of the value of the total output of the factories of the
nation for each year since 1909.
§ 5b. The Gross Value of the Products
The distinction between the gross value of the output and the net value
product of the manufacturing industry is both theoretically sharp and
practically important. The gross value consists merely of the summation
of the values of the respective outputs of all the different factories. This
evidently includes a great amount of duplication, for one factory ordi-
narily works on the materials turned out by another plant. The net value
product, on the other hand, is the added value resulting from the services
of persons and material things employed in the manufacturing industry.
The plan adopted for estimating the gross annual value of the output is
as follows: —
1. Forty-four indicators have been selected, each believed to represent
fairly well the course of production in some particular branch of the man-
ufacturing industry. Except in two cases, only those indicators have been
used for which annual figures are available for each year from 1909 to
1 Compare with the Census of Manufactures for 1900, Volume 7, Part I, page xxxvii.
- The hand trades arc included in the general field of manufacturing but are not enu-
merated by the Census.
78
FACTORY PRODUCTION" 79
1918 inclusive. In these two instances, adjustments have been made for
the years for which informal ion is lacking.
2. Every indicator has been reduced to the form of an index number
based upon the output for 1909.
3. Each index number has been multiplied by a weight representing
the value of the output in 1914 in the field which the indicator represents.
By summating the products and dividing by the sum of the weights, an
average index number has been obtained for cadi year. These average
index numbers presumably portray with reasonable accuracy the changes
in production taking place from year to year in the manufacturing field.
While the indicators chosen seem to give a correct picture of the cyclical
fluctuations in manufacturing, their trend diverges slightly from that indi-
cated by the Censuses of 1909, 1914, and 1919 — in other words, the rate of
growth of the manufacturing industry of the country as a whole seem- to
be a trifle greater than the rate of growth of the -ample industries chosen.
While the divergence is so small as to be relatively unimportant, the accu-
racy can presumably be improved by making the trend conform to that
indicated by the Census figures. This aim has been accomplished in the
following manner: —
The respective ratios of the Census figures to the estimated indices have
been ascertained for 1909, 1914, and 1919, and these ratio- have been con-
sidered the determining points of a smooth curve. A ratio has been read
from this smooth curve for each year from 1909 to 1918. The estimated
average 1 indices for the various years have been multiplied by the corre-
sponding ratios, and the products thus obtained are believed to represent
close approximations to the gross values, on the Census basis, of manu-
factured products turned out for the various years. The operations
described are indicated in Table 5B.
In the computation of the average index of output mentioned in para-
graph 3, the indicators listed in Table 5A were used with the weights there
stated. The general source of the information is cited in each case.
In some instances, the quantity rather than the value of the product is
given in the report cited. In such cases, the quantity has been multiplied
by the best obtainable price figure for the same year, and the product thus
derived has been used to represent the fluctuations in the average value of
the gross output. The citations in Table 5A -how the origin of both price
and quantity data when both are used. Volume and page references have
not been given because it seems unnecessary to burden this report with such
a mass of detail.
Each field of manufacture has been weighted in proportion to the gross
"Value of Products" as shown in the Abstract of the Census of Manufac-
tures for 1914. This general weight has been apportioned among the
80
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 5A
THE SOURCES OF INFORMATION, THE INDICATORS USED, AND THE
WEIGHTS ASSIGNED IN COMPUTING AN AVERAGE INDEX OF GROSS
OUTPUT
Source of Information
Food and Kindred Products.
Yearbook of U. S. Department of
Agriculture.
Chase, Stephen, Production of Meat
in U. S.; Food Administration,
Bureau of Animal Industry Re-
ports; Yearbooks of Department
of Agriculture; and Statistical Ab-
stract of U. S.
Statistical Abstract of U. S.
Statistical Abstract of U. S.
Statistical Abstract of U. S.
Statistical Abstract of U. S.
Statistical Abstract of U. S. and
Yearbook of Dept. of Agriculture.
Textiles and their Products.
Statistical Abstract of U. S.
Statistical Abstract of U. S.
Statistical Abstract of U. S. and Bul-
letin 200, U. S. Bureau of Labor.
Massachusetts Statistics of Manu-
factures.
Massachusetts Statistics of Manu-
factures.
Iron and Steel and their Products.
Statistical Report of American Iron
& Steel Institute.
Lumber and ns Remanupactures.
U. S. Census, Statistical Abstract of
U. S.; Bulletins 673 and 768 of
Department of Agriculture.
U. S. Census
Massachusetts Statistics of Manufac-
tures.
Weight
G75
1,293
770
193
48
1,639
289
444
1,434
649
444
444
3,223
1,184
256
160
Indicator
VALUE OF
Animal Products.
Meat Produced.
Sugar Consumed.
Coffee Consumed.
Crude Chocolate Imported.
Wheat Retained for Consumption.
Butter Receipts at five large cities.
Unmanufactured Silk Imported.
Cotton Manufactures.
Woolen Manufactures.
Men's Clothing Manufactured in
Massachusetts.
Women's Clothing Manufactured
in Massachusetts.
Pig Iron Consumed plus Crude
Steel and Finished Rolled Prod-
ucts produced.
Lumber Product of All Mills-
Lumber not Used in Building.
Furniture Produced in Massachu-
setts.
FACTORY PRODUCTION*
81
TABLE 5A— Continued
Source of Information
Weight
Indicator
Leather and its Finished Products.
Massachusetts Statistics of Manu-
factures.
."u.-,
VALUE OF
Boots and Shoes Produced in Mass.
Massachusetts Statistics of Manu-
factures.
Massachusetts Statistics of Manu-
factures.
298
155
Leather Produced in Massachu-
setts.
Cut Stock and Findings Produced
in Mass.
Massachusetts Statistics of Manu-
factures.
77
Bolting Leather Produced in Mas-
sachusetts.
Paper and Printing.
Mass. Statistics of Manufactures.
99
Paper Boxes Produced.
Mass. Statistics of Manufactures.
15
Envelopes Produced.
Mass. Statistics of Manufactures.
204
Paper and Wood Pulp.
Mass. Statistics of Manufactures.
44
Miscellaneous Paper Goods.
Mass. Statistics of Manufactures.
525
Newspaper and Periodical Publish-
ing.
Annual Report of South Carolina
Commissioner of Agriculture;
Commerce & Industries.
146
Printing & Publishing.
Bulletin 758, Department of Agri-
culture; U. S. Census Bulletins on
Forest Products; Statistical Ab-
stract of U. S.
423
Pulp W'ood Consumption of U. S.
Liquors and Beverages.
Statistical Abstract of U. S.
23
Domestic Wine Consumed.
Statistical Abstract of U. S.
509
Fermented Liquors Produced.
Statistical Abstract of U. S.
124
Whiskey Produced.
Statistical Abstract of U. S.
116
( Jommercial Alcohol Produced.
Chemicals, Stove, Clay, and Glass.
Statistical Abstract of U. S.
1,778
Mineral Products other than Coal
and Metals.
Statistical Abstract of U. S.
262
Alcohol Produced.
Statistical Abstract of U. S.
157
Sulphuric Acid Produced.
Statistical Abstract of U. S.
261
Cottonseed Oil and Cake Produced.
Moody's Analyses of Investments,
1919.
157
Gross Revenues, Dupont Pou 'ei
Company.
82 THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 5A— Continued
Source of Information
Weight
Indicator
Metals Other tfian Iron.
Statistical Abstract of U. S.
1,417
VALUE OF
Metallic Products other than Pig
Iron.
Tobacco Manufactures.
Statistical Abstract of U. S. and Year-
book, Dept. of Agriculture.
490
Estimated Value of Tobacco Man-
ufactures.
Vehicles for Land Transportation.
National Auto. Chamber of Com-
merce, — Facts & Figures of the
Automobile Industry Manual of
Statistics, 1918.
23S
Gross Earnings American Car &
Foundry Company.
Poor's Manual of Industrials;
Moody's Analyses of Investments.
10
Gross Sales, Brill & Company.
Railroad Repair Shops.
Interstate Commerce Commission.
Statistics of Railways.
55.3
Total Maintenance of Railroad
Equipment.
Private Shipbuilding.
Mass. Statistics of Manufactures.
186
Shipbuilding in Massachusetts.
Paving Materials.
Geological Survey — Mineral Re-
sources of U. S.
36
Asnhalt Produced in the U. S.
various indicators in accordance with the share of the total industry that
appears to be best typified by the indicator in question. Thus, the manu-
facturing of "Food and Kindred Products" is given a weight of 4,817
because products of that type in the United States in 1914 were valued at
that many millions of dollars. This entire weight is divided among seven
indicators. Although the seven indicators combined manifestly represent
directly but a fraction of the food manufacturing field, the sum of their
weights is, nevertheless, made to total 4,817, so that each of the great
divisions of manufacturing may be represented in proportion to its impor-
tance in making up the average index.
There is ground for contending that the weighting should be based upon
the "Value Added by Manufacture" rather than upon the "Value of
Products." Since, however, the available indicators nearly all represent
the gross value of output, and since an index of gross output is the end in
view, it has been decided to use this gross value as a basis of weighting.
Obviously, no two investigators would choose weights according to exactly
the same standard but, as Bowley demonstrates in his Elements of Statistics,
when the number of variables to be averaged is rather large, the exact size
FACTORY PRODUCTION
83
of the weights is a matter of secondary importance. It seems probable,
therefore, that the weights chosen answer the purpose sufficiently well.
Evidently many of the criteria used measure the output of the manu-
facturing industry only indirectly. For example, the value of meat pro-
duced is used to measure the magnitude of the slaughtering and meat
packing industry; the amount of coffee imported indicates the extent of
coffee roasting and grinding; and the imports of raw silks give an index
of the activity of the silk factories. It is doubtful if direct records of meal
packing, coffee grinding, and silk weaving would give much more repre-
sentative indices of the value of the output. Their superiority would pre-
sumably be but slight at best.
The final steps in the computation of the index of gross output for the
Continental United States are shown in Table 5B.
TABLE 5B
THE ESTIMATED GROSS VALUE OF THE GOODS TURNED OUT BY
FACTORIES COVERED BY THE PRINCIPAL REPORT OF THE CENSUS
OF 1914
For the Continental United States
A
B
C
D
E
F
Date
Indices of
annual output
computed
from forty-
four indica-
tors d
Value of gross
output as
shown by
the census
(Millions)
Ratio of
census output
to estimated
index of
output
C 4- B
Estimated
ratio of
actual output
to indices of
output
(Hundreds)
Estimated
value of gross
output
(Millions)
B XE
1909 ....
1910
1911
1912
1913. . ..
1914
1915. . ..
1916. ...
1917. ...
1918. . ..
1919. . ..
100.0
105 .
102.5
115.2
123.2
115.0
133.7
202.8
261.7
284.2
278.1
$20,6726
24,2466
62,588 «
206,721
210,830
225,100
2067 c
2072 a
2078 a
2088 a
2095 a
2108 c
2126"
2149a
2181a
22 1 7 a
2251c
§20,672 6
21,770
21,300
21.050
25,810
24,246 6
28,430
43,580
57,080
63,000
62.5XN'
a Interpolated along a smooth curve.
6 Abstract of United Stales Census of Manufactures, 1914, p. 16.
c See Column D.
d For list of indicators, see Table 5A.
e Preliminary bulletin of Census of Manufactures for 1919, May 24, 1921.
The representative character of the average index computed from the
forty-four indicators is reasonably well established by the entries in Col-
umn D, which show that the ratios of the Census totals to the index are
nearly the same in 1909 and 1914 and not greatly different in 1919. If
84 THE ESTIMATE BY SOURCES OF PRODUCTIOK
they were fairly reliable criteria for that ten-year period, there is every
reason to suppose? that they are equally dependable for the intervening
years. It seems safe to assume, therefore, that the figures presented in
Column F show rather accurately for each year the gross value of the out-
put of that part of the manufacturing industry of the United States covered
by the quinquennial Census.
§ 5c. The Division of the Net Value Product in the Census Years
Since, for reasons previously stated, the size of the gross output does
not measure accurately the productiveness of the manufacturing industry
itself, this last quantity must be arrived at by ascertaining the increase in
value brought about by the operations of manufacture. This increase in
value is eventually divided among the entrepreneurs, employees, and
outside investors in the industry.
From the Census, it seems possible to estimate, with a moderate degree
of accuracy, the shares of each of the classes just mentioned. The share
of the entrepreneurs is assumed to equal the value of the gross product less
all expenses and an allowance for depreciation. The Census Bureau has
made no estimates of the depreciation occurring in the factories of the
country. Some writers contend that a depreciation allowance has no
basis of fact; in other words, that it is a mere bookkeeping device used to
conceal accumulated profits. According to this point of view, manufactur-
ing plants do not depreciate but, as a rule, continually improve in quality,
owing to the replacement of obsolete machinery by modern equipment,
and hence, not only should there be no depreciation account, but large sums
that have been charged to repairs ought to have been carried to surplus.
Opponents of this view may admit the physical improvement of the plant
but nevertheless believe that depreciation accounts are necessary to cover
the large losses which occur through bad investments.
A little consideration will force one to the conclusion that this issue
resolves itself into the question as to whether surplus accounts as reported
are too large or too small. Since manufacturing concerns usually make
depreciation allowances in their accounts before computing their annual
surpluses, and since the surpluses arrived at by their accounting systems
seem, on the average, to be correctly reported, 1 it follows that correspond-
ing depreciation allowances should be applied to the Census figures in
order to obtain the correct amounts for profits.
In order to obtain a reasonable basis for estimating depreciation, the
allowances for this purpose made by a large number of manufacturing
corporations (as reported in Moody's Manual) were summated for 1914,
and the sums were compared with the aggregate total nominal investment
1 For discussion of this point see § lg of this volume.
FACTORY PRODUCTION
85
in the selected concerns. The depreciation allowance amounted in 1914 to
2.927 per cent. A separate estimate for 1909 was not calculated for the
TABLE 5C
THE APPROXIMATE DISTRIBUTION OF THE VALUE PRODUCT OF THAT
PART OF THE MANUFACTURING INDUSTRY INCLUDED BY THE
CENSUS BUREAU IN THE TOTALS FOR 190'.) AND 1914
Millions of dollars
Item
Census of
1909
1914
Value of Gross Output
$20,672"
$ 939 «
3,427 a
52 ^
12,143a
1,946 a
539 c
$24,246 &
$ 1,288 b
4,078^
Expenses:
Services:
Salaries
Wages
Interest Paid to Banks
47/,
Materials
14,368*
2,344/
Miscellaneous
Depreciation
667 d
Share of Entrepreneurs and Interest on
Funded Debt
19,046
$ 1,626
22,792
$ 1,454
Distribution of Value of Product:
Share of Employees:
Wages and Salaries
$4,366*
44 a
$4,410
1,626
107 9
106 i
$5,366 *
Payments to Workers for Contract
Work e
50 b
Total Share of Employees.
$5,416
1,454
140''
Share of Entrepreneurs and Other In-
vestors:
Gross Profits and Bond Interest
Rent of Factories
Other Rent and Royalties
141 >
Total
1,839
$ 6,249
1,735
Total Value Product of Manufacturing
Industry
$ 7,151
a Abstract of the U. S. Census for 1910, p. 438.
b Abstract of the U. S. Census of Manufactures, 1914, pp. 516-519.
e 2.927 per cent of the capital of $18,428,270,000.
d 2.927 per cent of the capital of 822,790,979,937.
e One-fourth of amount paid for contract work.
/Includes $1,563,000,000 estimated "Other Miscellaneous" expenses not recorded
by the Census of 1914. Missing item assumed to constitute same ratio to other ex-
penses as in 1909, namely 7.03 per cent; total expenses reported by 1914 Census equal
$20,515,000,000.
a U. S. Census of Manufactures for 1910, Vol. VIII. pp. 518 Y20.
'' Estimated from a study of the reports (recorded in Moody's Manual) of sixty-one
representat ive manufacturing corporations.
* Arbitrarily assumed thai other rents and royalties paid to private parties are just
as large as the reported rent of factories.
86 THE ESTIMATE BY SOURCES OF PRODUCTION
reason that it was felt that, at that date, the custom of reporting depreci-
ation in the published accounts had not developed sufficiently to make the
data reliable. For this reason, the same percentage was used for 1909 as
for 1914, and in each case, 2.927 per cent of the total capitalization, as
reported by the Census, has been deducted from gross receipts as a depre-
ciation allowance.
It is evident that the entries in Table 5C are not exact but are subject
to a considerable degree of error. The depreciation allowance, as has
already been explained, is only an approximation. The assumption that
25 per cent of the payments for contract work are virtually wages has been
made after going through the list of industries given in the 1914 Census
and selecting those like the clothing industry in which the payments are
presumably made for work done at home by members of the working class.
Such a rough method of estimate is perhaps amply good when one con-
siders the relatively small size of the items involved. Nevertheless, an
appreciable amount of error is likely to creep in at this point.
The items for rent and royalties are included in the items making up
the value product ascribed to the industry on the assumption that these
payments are made to property owners not represented in any other sec-
tion of this estimate. It has been assumed, for example, that few of the
buildings leased for factory purposes are owned by other manufacturing
concerns. Concrete evidence along this line is lacking; hence, guesses are
substituted. The size of the item entitled "Other Rents and Royalties"
in 1914, is also unknown and the figure inserted may be far from the truth.
The doubtful items just discussed are not large enough to make any con-
siderable relative change in the product, even if the errors in these minor
items are a maximum and all in the same direction. Such errors might,
however, vitiate to some extent the accuracy of the figures purporting to
show the divisions of the net product between employees and other claim-
ants. As a matter of fact, the errors probably cancel each other to some
extent; hence, it is hoped that, for the Census years, the apportionment
of the value product between employees and the other claimants thereto
is exact enough to answer the needs of most students of the subject. Cen-
sus figures exist, however, only for three years in the period. What changes
took place between those dates?
§ 5d. Mode of Estimating the Net Value Product for Intercensal Years
Data upon which one can base estimates as to the changes occurring
from year to year in the apportionment of the value product between the
different classes of claimants are by no means abundant. Iowa issues
statistics concerning its manufacturing industries, but only biennially.
Since that State is devoted primarily to agriculture and only incidentally
FACTORY PRODUCTION 87
to manufacturing, and since half the years are missing, its reports have
not been utilized. South Carolina and Pennsylvania publish annual
reports. In both of these States, a considerable share of the smaller estab-
lishments apparently did not report hi the earlier years. Nevertheless,
the data from these States are valuable, since South Carolina well repre-
sents the extensive textile business of the South, while Pennsylvania stands
for the iron and steel industry, the products of which played such an
important part in the recent war. It is Massachusetts, however, which
furnishes the most complete and probably the most accurate statistics
of manufactures compiled by any State in the Union. Unfortunately,
its manufactures, while extremely varied, consist to a disproportionate
degree of shoes and textiles, the latter being already represented by the
South Carolina data. In order, therefore, to secure the maximum advan-
tage from the existence of such a useful body of data, it was deemed best
to re-weight the Massachusetts figures in a manner which makes the dif-
ferent industries for that State have the same relative rank as the like indus-
tries in the nation as a whole. The actual process used is as follows: —
Those Massachusetts industries have been chosen which best repre-
sent the given field of production. All the items in the data for the speci-
fied Massachusetts industry have been multiplied by the ratio of the 1914
value of the output in the United States to the value of the output in the
chosen Massachusetts industry in the same year. The sums of the result-
ing products are thus made comparable in size to the corresponding aggre-
gates for the country as a whole. The totals obtained in this way from the
Massachusetts data show the relative changes that would have occurred
from year to year in the gross value of output, in the stock of materials
used, and in the amount of wages paid during the year, if each of these
items in each of the great fields of the manufacturing industry in the
United States as a whole had changed at the same rate as did the corre-
sponding fields in Massachusetts.
Owing to the less detailed nature of the information from Pennsylvania
and South Carolina, it was not deemed worth while to re-weight the figures
for those states in the same manner. For the reasons just stated, in those
instances in which the figures for the three States have been combined, th<>
Massachusetts figures have been weighted somewhat more heavily thai
the relative size of its manufacturing industries would apparently warrant.
In this manner, indices and ratios have been derived which have been used
as a basis for estimating figures for intercensal years.
§ 5e. The Share of the Employees
In attempting to estimate the amount paid to employees in the form of
salaries and wages the assumption has been made that variations in the
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FACTORY PRODUCTION
S'.l
ratio of wage payments to gross value of output are satisfactory as criteria
to be used in interpolation. Only preliminary figures for the 1919 Census
are as yet available. When this Census is complete, it will be possible to
secure a slightly higher degree of accuracy in all estimates after 1914, but
it is believed that the present indices for these last few years are approxi-
mately correct. The procedure is recorded in Table 5D.
Work done at home under the contract system, a procedure frequently
followed in the clothing industry for example, is often akin to piece work
in a factory. The contractors in such instances, furnish no property of
moment and are virtually wage earners. As previously stated, the basic
estimates as to the extent of such work are very crude. Table 5E is con-
structed on the principle that contract work has formed a very slowly
but steadily varying ratio to payments for wages and salaries. Since the
amounts dealt with are relatively very small, errors in the results are of
little consequence.
TABLE 5E
AN ESTIMATE OF THE TOTAL SHARE OF THE EMPLOYEES IX THE NET
VALUE PRODUCT OF THAT PART OF THE MANUFACTURING FIELD
COVERED BY THE CENSUS OF 1914
A
B
C
D
E
Year
Estimated
total of wages
and salaries"
(Millions)
Estimated
payments for
labor done
under contract
(Millions)
(One-fourth
of census
items)
Estimated ratio
of all payments
for labor to sum
of wages and
salaries
B + C
B
Estimated sum
of all payments
for labor
(Millions)
B X D
1909
$ 4,366
4,790
4,805
5,310
5,890
5,306
5,892
8,442
10,530
12,410
13,273
$44.76
49.7 c
1.0102d
1.0100c
1.00! 17 <
1.0096c
1.0095c
1.0093 d
1.0090c
1.0089<
1 0086 '
1 ,0085«
I. 0083 <
$ 4,410
1910
1911
1,838
4,852
1912. .
5,361
1913. .
5,946
1914
5,416
L915
5,945
1916. .
8,517
1917.
10.621
1919
12,515
13,383
a See Table 51).
b U. S. Census of Manufactures, 1910, Vol. VIII, pp. 518-519.
c Abstract of the Census of Manufactures, 1914, pp. 516-517.
<l Computed.
c Interpolated along a curve.
90
THE ESTIMATE BY SOURCES OF PRODUCTION
A complete estimate would include in Table 5E payments made to
employees as pensions or as damages for injuries suffered. However, no
information is at hand concerning these amounts, and, since they are not
large enough to be of serious moment, no adjustments have been made for
these missing quantities.
In order to estimate the average amount of money received by an em-
ployee as wages or salaries during each year, it is necessary first to calcu-
late the number of employees attached to the industry. The estimates of
this number have been made in accordance with the principles laid down
in Sec. 2d. Tables 5F and 5G set forth the conclusions derived.
TABLE 5F
THE ESTIMATED NUMBER OF EMPLOYEES ENGAGED IN THAT PART
OF THE MANUFACTURING FIELD INCLUDED IN THE PRINCIPAL
TABLES OF THE 1914 CENSUS
A
B
C
D
E
F
G
Calen-
dar
Number em-
ployed as
shown by
Index of
number
employed in
factories of
Ratio of
B toC
Estimated
number ac-
tually at
work
Estimated
fract ion of
employees
attached tc
industry
Estimated
number of
employees
attached to
year
(Thousands)
CXD
industry
census
various
states b
actually
at work e
(Thousands)
E -4- F
1909 . . .
7,405,313 a
969
7,642 c
7,405
.958
7,730
1910. . .
955
7,717d
7,370
.944
7,810
1911. . .
964
7,780 a-
7,500
.941
7,970
1912. . .
1,009
7,859 d
7,930
.968
8,190
1913. . .
1,007
7,944 d
8,000
.949
8,430
1914. . .
8,000,554 a
1,000
8,001 e
8,001
.910
8,790
1915. . .
982
8,139 d
7,993
.878
9,102
1916. . .
1,140
8,296 d
9,457
.969
9,757
1917. . .
1,203
8,429 a"
10,140
.975
10,395
1918. . .
1,220
8,590-/
10,480
. 961
10,905
1919. . .
10,374,000/
1,188
8,732 c
10,374
. 934
11,017
a Abstract of Census of Manufactures, 1914, p. 428.
b Estimates for Massachusetts, South Carolina, New York, Pennsylvania, and
Wisconsin for years after 1914. For years 1909 to 1912, only Massachusetts and South
Carolina furnished reports.
c Computed by division.
d Interpolated along a smooth curve.
« See Section 2d for method of estimate.
/ Preliminary estimate by Mr. E. F. Hartley, Statistician for the U. S. Census of
Manufactures.
From Table 5G, it appears that the economic welfare of the employees
in this line of production has improved quite decidedly since 1914. It is also
a fact of interest that the average number of employees increased rather
rapidly between 1915 and 1918.
FACTORY PRODUCTION
91
TABLE 5G
THE ESTIMATED AVERAGE COMPENSATION RECEIVED BY THE EM
PLOYEES ATTACHED TO THAT PART OF THE MANUFACTURING
FIELD INCLUDED IN THE PRINCIPAL TABLES OF THE 1914 CENSUS
Calen-
dar
year
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
B
Total compen-
sation for
labor"
(Millions)
5 4,410
4,838
l.s.YJ
5,361
5,946
5,416
5,945
8,517
10,621
12,515
Estimated
number of
employees at-
tached to
industry b
(Thousands)
7,730
7.S10
7.970
8,190
8,430
S.790
9,102
9,757
10,395
10,905
D
Average annual
compensation
per employee
B -f- C
> 571
(320
609
655
71 15
616
(353
873
1,022
1,148
E
Index of prices
of goods con-
sumed by
manual and
clerical
workers c
Purchasing
I lower of aver-
age annual
compensation
at prices of 1913
D ~ E
.955
978
.984
.994
1.00
1.01
1.03
1.10
1.29
1 58
$597
634
619
659
705
610
634
794
792
726
a See Table 5E.
b See Table 5F.
e See Table 2C.
§ 5f. The Share of the Entrepreneurs and Other Property Owners
The first item dealt with in the share of the propertied classes is the rela-
tively unimportant one of rents and royalties paid to private parties for
leased property. The assumption that the net amounts were two-thirds '
of the totals reported by the Census as being paid for the rent of factories
gives an estimate for 1909 of $71,050,000, and for 1914 of 893,800,000. It
seems reasonable that rents and royalties should vary in proportion to
the number of employees and the general rent level. Xo figures for business
rents are available; hence, it has been necessary to fall back on the index
of residence rents compiled by the United States Bureau of Labor Statistics.
Since it was a period of nearly stationary prices, it is assumed that rents
remained unchanged from 1909 to 1913.
Table 5H shows the rough estimates of rent paid arrived at by the appli-
cation of these decidedly tenuous assumptions.
It is much more difficult to estimate correctly the share of the net value
product going to the entrepreneurs and investors than it is to find the
amount going to labor. Table 5C indicates thai it' we include business
savings as part of the income of the entrepreneurs that they and the bond-
1 Assumed that one-third of the gross rent goes to pay for taxes, repairs, and maintenai
92
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 5H
A ROUGH ESTIMATE OF THE PAYMENTS MADE TO PRIVATE INDIVID-
UALS IN THE FORM OF RENTS AND ROYALTIES BY THE MANUFAC-
TURING INDUSTRIES COVERED BY THE MAIN REPORT OF THE
CENSUS OF 1914
(For the Continental United States)
A
B
C
D
E
F
G
Estimated
Rent, paid to
Thousands
total rents
individuals
of
Index of
Composite
Ratio of
B toE
and royal-
Year
for the use
employees
residence
index
ties paid
of factories
attached to
rents
C X D
(Millions)
(Thousands)
industry c
E X F
1,000
1909
$71,050«
7,730
l.OOrf
7,730
9.18/
$ 71
1910
7,810
1 . 00 d
7,810
9.48(7
74
1911
7,970
1.00'/
7,970
9.79(7
78
1912
8,190
1 . 00 d
8,190
9.89<7
81
1913
8,430
1 . 00 ■
8,430
10.44(7
88
1914
93,8006
8,790
1.00<=
8,790
10.69/
94
1915
9,102
l.Ole
9,193
10.66(7
98
1916
9,757
1.02«
9,952
11.05o
110
1917
10,395
l.Ole
10,499
11.33ff
119
1918
10,905
1 . 05 •
11,450
11.969
137 .
a U. S. Census of Manufactures for 1910, Vol. VIII, p. 129; estimated that two-thirds
of rent was paid to individuals.
b Abstract of Census of Manufactures of V. S. in 1914, p. 517; estimated that two-
thirds of rent was paid to individuals.
c See Table 5F.
d No data; therefore assumed.
e U. S. Bureau of Labor Statistics, Monthly Labor Review, various numbers in 1920-
1921.
/ Computed by division.
a Interpolated along a straight line.
holders together received $1,626,000,000 in 1909 and $1,454,000,000, in
1914. In 1918, the first year in which the Income Tax Bureau presents for
manufacturing corporations figures answering our needs, these corporations
showed, after paying taxes, net earnings of $2,422,074,926. If we estimate
the interest on the funded debt as being 80 per cent of all interest paid, it
constitutes an addition of about $430,500,000, making a total of approx-
imately $2,852,575,000.' By means of a smooth curve based upon the
fractions for 1904, 1909, and 1914, it is estimated that, in 1918, corpora-
tions produced 84.7 per cent of all value added by the factories in this field.
If we divide by 0.847, we arrive at a figure of about $3,366,000,000, as
representing the share going in 1918 to both private and corporate entre-
i U. S. Bureau of Internal Revenue Statistics of Income, 1918, p. 16,
FACTORY PRODUCTION
93
preneurs and to holders of the funded debt. The gross output of the fac-
tories, in this year, has been estimated a1 ^il.olo.OOO.OOO. 1 If this figure
is correct, the ratio of the share of the classes mentioned to the gross value
of output is about 0.0551.
TABLE 51
RETURNS TO ENTREPRENEURS AND HOLDERS OF THE FUNDED DEBT
IN THAT PART OF THE MANUFACTURING FIELD COVERED BY THE
MAIN REPORT OF THE CENSUS OF 1914 INTERPOLATED UPON THE
BASIS OF THE AVERAGE NET EARNINGS OF SIXTY-SIX TYPICAL
MANUFACTURING CORPORATIONS
(In the Continental United States)
A
B
C
D
E
Year
Returns to
ent repreneurs
and In (Mors
of the
funded debt
(Millions)
Index repre-
senting net
earnings plus
bond interest
of 66 typical
corporations b
Ratio of
B to ('
(Millions)
First approxima-
tion to the share
of entrepreneurs
and private cred-
itors in the value
product
(Millions)
C X D
1909
1910
$1,626°
1,454 a
3,366 e
100.0
118.7
90.7
117.4
132.5
106.4
131.2
253 . 9
304.9
228.6
16.26c
15.40-/
14. 70^
14.16d
13.80d
13.67c
13.79a 1
14.00 a -
14.43 d
14.72*
81.626
1,828
1,333
1,663
1,829
1,454
1,810
3,555
1,399
3,366
1911
1912
1913
1914
1915
1916
1917
1918
a See Table 5C.
b Computed from data in Poor's and Moody's Manuals of Statistics. Corporations
were classified according to size and both totals and a set of indices were obtained for
each group. The index series here given is composed of the respective medians for
the specified years of the indices for the various groups.
c Computed by division.
d Interpolated along a smooth curve.
e For origin of this figure, see text.
The difference between the items in the second and third columns of
Table 5J casts suspicion upon the accuracy of the Census figures. Why
should a group of typical corporations show from 1 1 to 13 per cent of their
gross output going to profits when the Census data for the same years
indicate only (i to 8 per cent for the same? Most of the discrepancy pre-
sumably arises from the fact that the gross output as reported by the ( )en-
sus contains much more duplication than does that reported by corpora-
tions. The Census is taken factory by factory, each plant stat ing the value
' Sec Table 5B.
94
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 5J
RETURNS TO ENTREPRENEURS AND HOLDERS OF THE FUNDED DEBT
IN THAT PART OF THE MANUFACTURING FIELD COVERED BY THE
TOTALS FOR THE CENSUS OF 1914 INTERPOLATED UPON THE BASIS
OF THE AVERAGE RATIO OF EARNINGS" TO GROSS OUTPUT IN THE
CASE OF 31 TYPICAL CORPORATIONS
A
B
C
D
E
F
G
Ratio of share of entre-
Estimated
Second ap-
preneurs and bond-
ratio of
proximation
holders to gross value
share of en-
to the share
Year
of output
Ratio of
trepreneurs
and bond-
Estimated
gross output/
of entrepre-
neurs and
BtoC
According
As shown
holders to
(Millions)
holders of
to U. S.
by cor-
gross output
funded debt
Government
porate
C XD
(Millions)
figures
reports c
E X F
1909
.0787&
.133
.592d
.0787
$20,672
$1,626
1910
.145
.589"
.0854
21,770
1,859
1911
.121
.585e
.0708
21,300
1,507
1912
.135
. 567 e
.0765
24,050
1,839
1913
.143
.557 c
.0797
25,810
2,056
1914
.0600^
.109
.550d
.0600
24,246
1,454
1915
.124
.527 *
.0654
28,430
1,860
1916
.182
.503'
.0916
43,580
3,994
1917
.162
.480<-
.0778
57,080
4,444
1918
.0534ff
.117
. 456 d
.0534
63,000
3,366
a Earnings equal total of bond interest, dividends, and amount carried to surplus.
b See Table 5C for figures from which ratios are derived.
e The ratio was computed from reports in Poor's and Moody's Manuals for each
corporation for each year. The median of the ratios for each year was ascertained
and is here recorded.
d Computed by division.
e Interpolated along a smooth curve.
/ See Table 5B.
a For derivation, see text.
of its output. The large corporations of today, are highly integrated.
Thus, a steel company, in reporting its gross sales, does not duplicate the
value of the gross outputs of the iron mines, blast furnaces, etc., operated
as separate units. But, though the values of outputs of subsidiary plants
are not combined to give a grand total of output, the net earnings of all
the parts of a corporation may be totaled to arrive at the reported net
earnings. The following example may serve to illustrate the situation.
Holding Company A operates a series of four factories. Plant 2 uses the
output of Plant 1; Plant 3 takes the output of Plant 2; and Plant 4 is the
only one selling any final product to outsiders.
From the following table, a computation by the Census method would
show the ratio of profit to gross value of output to be ^V or .105.
FACTORY PRODUCTION
95
Plant
Operating
expenses
Gross value
of output
Profits
1
9
11
14
17
10
12
16
19
1
2
1
:i
2
4
2
Total
51
57
6
In the report of Corporation A, however, the gross sales would be re-
ported as only the amount sold to outsiders from the finishing plant, No.
4, or 19; while the net profit would still be reckoned as 6. This would
give a ratio of ^ or .316, approximately three times that indicated by the
Census method.
There is no way of knowing whether the discrepancy between the
ratios derived from the Census and from corporation reports does or does
not arise wholly from this difference in accounting, but it is not improbable
that this is the chief cause for the dissimilarity of the ratios.
In Tables 51 and 5J, there are derived two distinct estimates of the share
in the income from manufacturing going to the entrepreneurs and holders
of the funded debt. An average of these two estimates, equal weight being
given to each, appears in Column B of Table 5K. This table also shows
the distribution of the share of the entrepreneurs and holders of the funded
debt, divided into three parts, these parts being estimated from the annual
reports of forty-six typical corporations.
The evidence in Table 5K indicates that, as might be expected, the
funded debt has consumed a relatively fixed quantity of the net earnings
while distributed profits and savings have varied greatly. A better pic-
ture of the significant facts is shown in Table 5L in which the nominal
amounts have been converted into purchasing power at the prices of 1913.
The reasons for choosing the particular price indices used for converting
purposes are as follows: stockholders in factories probably possess about
the same average income as stockholders in general, and the income tax
reports indicate that, in 1919, about as much in dividends went to persons
with income above $40,000 per annum as to all below that figure; therefore
the $25,000 average expenditure seems a reasonable criterion. Surpluses
of manufacturing concerns normally are put into new plant ; hence an
index of construction costs appears to be the logical correcting factor to
apply to business savings in this field.
to
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98
THE ESTIMATE BY SOURCES OF PRODUCTION
Table 5L indicates that the purchasing power of the actual disburse-
ments to the propertied classes has shown a somewhat upward tendency
throughout the decade and that the savings made by the business enter-
prises in this field increased to very unusual proportions during the years
1916 to 1917 and remained moderately high even in 1918.
§ 5g. The Fraction of the Net Value Product Paid Out as Wages or
Salaries
Table 5M measures the fraction of the net value product of the industry
going to the employees.
TABLE 5M
THE ESTIMATED NET VALUE PRODUCT AND THE SHARE THEREOF
GOING TO THE EMPLOYEES
For that Part of the Manufacturing Industry Included in the Principal Tables of the
1914 Census
A
B
C
D
E
F
Amounts
Per cent of
distributed to
Compensa-
Total net
net value
Calendar
entrepreneurs
Business
tion paid to
value prod-
product
year
and other
savings"
employees b
uct
going to
property
(Millions)
(Millions)
(Millions)
the em-
owners a
B + C + D
ployees
(Millions)
D + E
1909
$1,185
$ 512
$ 4,410
$ 6,107
72.2
71.6
1910
1,319
599
4,838
6,756
1911
1,222
276
4,852
6,350
76.4
1912.
1,309
525
5,361
7,195
74.5
1913
1,455
575
5,946
7,976
74.5
1914
1,410
137
5,416
6,964
77.8
1915
1,197
739
5,945
7,881
75.4
1916
1,567
2,320
8,517
12,403
68.7
1917
2,220
2,116
10,621
14,957
71.0
1918
2,078
1,424
12,515
16,018
78.1
a See Table 5L, Column E.
b See Table 5E, Column E.
The last column of Table 5M makes it clear that the employees have
been receiving from two-thirds to three-fourths of the net value product
of manufacturing. While their relative share was low in 1916 and 1917,
it reached a higher limit in 1918 than at any previous time in the decade.
Questions concerning changes in the efficiency of the employees cannot
be answered without further research.
,
CHAPTER 6
SIM MARY OF THE HAND TRADES
§ 6a. Introduction
Prior to and including the census of 1900, the reports of the Census
Bureau covered the activities of "the hand trades." Since that date, the
study of industries of this type has been omitted because of the large
expense per establishment involved in the collection of data. A< a result,
it has been necessary to base most of the estimates for this study upon the
1900 Census figures. Exceptions to this rule are the power laundries, and
custom grist and saw mills (trades for which later census reports have given
information), and the construction industry and automobile repair indus-
try, the estimates for which have been made largely from other sources
than the Census.
The problem of estimating the net value products of the hand trades has
been disproportionately laborious, but because of the paucity of reliable
information available, has, nevertheless, not produced results of any high
degree of reliability. On the contrary, the totals presented in the accom-
panying tables must be regarded merely as very rough approximations to
the actual quantities which they are supposed to represent. Laundries,
perhaps, form an exception to this general rule, the information concern-
ing them being so much more complete that the figures presented here may
be regarded as moderately reliable.-
Since it is felt that the estimates for the individual trades are so inaccu-
rate, and since theinteresl in the facts concerning most of them is presum-
ably not very widespread, it seems that the expense of publishing a de-
scription of the special procedure used for each trade or group of trades is
scarcely warranted; hence a summary only is given except in the case of
the construction industry. Suffice it to say that the estimates for the
separate fields have, in every instance, been made with as great a degree
of care as the nature of the data available seems to justify.
The figures for the construction industry are published in detail in
Chapter VII, not because the estimates for that field are of a quality
superior to the others, but because construction is the largesl of the hand
trades and is at present a subject attracting wide attention.
99
100
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 6A
A ROUGH ESTIMATE OF THE TOTAL OF WAGES AND SALARIES RECEIVED BY
EMPLOYEES IN THE HAND TRADES OF THE CONTINENTAL UNITED STATES
Millions of Dollars
Black-
Repair
of sewing
C ustom
smithing,
machines,
All
Con-
tailoring,
Repair
bicycle
Laun-
Shoe
Custom
type-
Custom
Custom
Year
hand
struc-
millinery,
of auto-
repairing,
dries
repair-
dress-
writers,
grist
saw
trades
tion
dyeing
and
cleaning
mobiles
cabinet
making
and taxi-
dermy
ing
making
locks,
clocks
and
jewelry
mills
mills
1909
$1,487
$1,192
$ 87
$ 34
$51
$ 63
$13
$33
$10
$1
$2
1910
1,472
1,146
93
48
54
71
13
34
11
1
2
1911
1,443
1,104
93
55
54
74
14
35
11
1
1
1912
1,580
1,218
96
67
55
80
15
35
11
1
1
1913
1,667
1,270
102
75
57
91
16
36
11
1
1
1914
1,336
932
103
90
58
86
15
38
11
1
1
1915
1,352
927
108
102
58
90
15
37
12
2
1
1916
1,545
1,066
141
106
60
96
20
38
14
1
2
1917
1,575
973
204
153
61
98
23
41
18
3
2
1918
1,744
964
276
220
86
106
27
41
20
2
2
1919
306
91
34
47
25
TABLE 6B
A ROUGH ESTIMATE OF THE TOTAL SHARE OF THE EMPLOYEES IN THE NET VALUE
PRODUCT OF THE HAND TRADES OF THE CONTINENTAL UNITED STATES
(Wages and Salaries, Plus Payments for Contract Work)
Millions of Dollars
Black-
Repair
of sewing
Custom
smithing,
machines.
All
Con-
tailoring.
Repair
bicycle
Laun-
Shoe
Custom
type-
Custom
Custom
\ ear
hand
struc-
millinery,
of auto-
repairing,
dries
repair-
dress-
writers,
grist
saw
trades
tion
dyeing
and
cleaning
mobiles
cabinet
making,
and taxi-
dermy
ing
making
locks,
clocks
and
jewelry
mills
mills
1909
$1,498
$1,192
$ 97
$ 34
$52
$ 63
$13
$33
$11
$1
$2
1910
1,485
1,146
104
48
55
72
14
34
11
1
2
1911
1,455
1,104
103
55
55
71
14
35
11
1
1
1912
1,593
1,218
107
67
56
SO
15
36
11
1
1
1913
1,681
1,276
114
75
58
91
16
36
11
1
1
1914
1,350
932
115
90
59
86
15
39
11
1
1
1915
1,366
927
120
102
59
91
15
38
12
2
1
1916
1,563
1,066
157
106
61
97
20
3S
14
1
2
1917
1,601
973
227
153
62
99
24
41
IS
3
2
191S
1,77s
9(14
307
220
88
106
28
41
20
2
2
1919
340
92
34
47
26
,
SUMMARY OF THE HAND TRADES
101
TABLE 6C
ROUGH ESTIMATE OF THE NET VALUE PRODUCT O] THE HAND TRADES IN
CONTINENTAL UNITED STATES
THE
Millions of Dollars
Custom
Black-
smithing,
Repair
of sewing
machines,
All
Con-
tailoring,
Repair
bicycle
Laun-
Shoe
Custom
t\ pe-
Custom
Custom
Year
hand
struc-
millinery,
of auto-
repairing,
dries
repair-
dress-
writers,
grist
saw
trades
tion
dyeing,
mobiles
cabinet
making,
ing
making
locks.
mills
mills
and
clocks,
cleaning
and taxi-
dermy
and
jewelry
1909
$2,615
S 1.959
$209
S 59
$124
$98
S 53
$68
$33
S <s
$4
1910
2,521
1,806
223
/.)
131
116
55
69
33
9
4
1911
2,484
1,734
222
91
133
128
57
72
34
10
3
1912
2,685
1,885
230
11 1
135
144
61
72
34
8
4
1913
2,521
1,669
244
122
139
162
64
71
31
8
4
1914
2,292
1,413
247
149
142
157
60
7s
34
8
3
1915
2,326
1,413
258
171
142
154
61
i i
36
11
3
1916
2,702
1,647
337
184
146
171
82
~s
43
10
4
1917
2,601
1,267
488
266
148
175
94
84
r,<\
19
1
1918
2,984
1,280
661
367
210
191
111
83
hi
15
1919
732
222
137
97
77
§ 6b. Analysis
Table 6D contains an analysis of the combined results presented in the
immediately preceding tables. It shows that there has probably been
relatively little change in the size of the fraction of the total product of
this group of industries received by the employees, the share remaining in
the neighborhood of three-fifths of the whole. It also appears that while
the average nominal wage has risen sharply throughout the decade, there
has been but little increase in the earnings when measured in terms of
money of constant purchasing power.
102
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 6D
AX ESTIMATE OF THE SHARE OF THE EMPLOYEES IN THE NET VALUE
PRODUCT OF ALL HAND TRADES COMBINED
A
B
C
D
E
F
G
H
Purchasing
Per cent of
Total num-
Average
Index of
power of
Share of
net value
ber of
annual
prices of
the average
Net value
em-
product
employees
earnings
goods
annual
\ ea r
product a
ployees b
going to
normally
per
consumed
earnings
(Millions)
(Millions)
employees
;it Inched to
employee
by manual
per
100C
hand trades
C
and
employee
B
(Thousands)
E
clerical
workers c
F
G
1909
$2,615
$1,498
57.3
2,144
$ 699
. 955
$732
1910
2.521
1,485
58.9
2,182
681
.978
696
1911
2,484
1,455
58.6
2,215
657
. 984
667
1912
2,685
1,593
59.3
2,230
714
.994
719
1913
2,521
1,681
66 . 7
2,248
748
1.000
748
1914
2,292
1,350
58 . 9
2,108
640
1.01
634
1915
2,326
1,366
58 . 7
1,972
693
1 . 03
673
1916
2,702
1,563
57 . 8
1,861
840
1.10
763
1917
2,601
1,601
61.6
1,695
945
1.29
732
1918
2,984
1,778
59 . 6
1 ,489
1,194
1 . 58
756
a See Table 6C.
b See Table 6B.
e See Table 2C.
S
CHAPTER 7
THE CONSTRUCTION INDUSTRY 1
(Shipbuilding Excluded)
§ 7a. Introduction.
This is one of the so-called hand trades of which the Census Bureau has
taken no cognizance since 1900. Even in that year, according to state-
ments in the Census volume, reports were not secured from a large pro-
portion of the smaller concerns; hence the Census totals for 1900 cannot
be taken to represent the size of the industry at thai date Without any
definite Census base to build upon, it is impossible to follow the usual
method of extending the data therefrom by means of other available cri-
teria. The actual amount of construction done in each year must, then,
be estimated from sources other than the Census.
§ 7b. Sources of Data
Search has thus far revealed only two extensive collections of data con-
cerning the volume of building. A record of building permits issued in the
principal cities is kept by certain financial newspapers. These data throw
no light upon construction in the rural districts and do not include con-
tracts let by the Federal Government. The F. W. Dodge Company,
publishers of The American Contractor, compiles figures supposed to rep-
resent for certain well-defined sections of the country the total volume of
contracts let each year. It appears probable, however, that some of the
smaller contracts fail to appear in their records and that the records were
much more incomplete in former years than at present.
Both of these sources of data are, therefore, more or less unsatisfactory,
but, since nothing better is al hand,'-' they must form the basis for estimat-
ing the amount of construction undertaken in each year. The way in
which these sources have been used is described in the following pages.
§ 7c. The Volume of Construction
From the reports cf building permit-; quoted in The Statistical Abstracts
1 Includes construction of buildings, highways, bridges, new railways, docks, etc.
2 The bulletin entitled Statistics of Incomi published by the Bureau of Internal Revenue
gives data concerning gross construction by corporations, but such a large proportion <>f
building is dune by individuals that it seems impracticable to obtain from these Qgures totals
re] n senting the entire industry.
in:;
104 THE ESTIMATE BY SOURCES OF PRODUCTION
of the United States for various years, an estimate has been made of the
building permits issued by the list of cities cited in the 1916 number. The
population of these cities in 1910 and 1920 can be ascertained from the
Census reports and the fraction of the population of the entire United
States residing in these cities in the various years has been closely approx-
imated by aid of a smooth curve. The tentative assumption has been made
that the amount of building per capita in these cities is typical of the coun-
try as a whole, and an estimate for the entire nation has been made upon
this basis.
However, these building-permit records do not include the construction
contracts awarded by the Federal Government, hence it is necessary to
add estimates for this source. A careful study has been made of the records
of the Federal Departments and certain information for recent years has
also been secured through the courtesy of Mr. Homer Hoyt, formerly with
the Building Materials Division of the War Industries Board. The esti-
mates derived from these sources are shown in Table 7A and are there con-
verted to indices based upon the value for 1918.
The method just described gives an estimated gross construction value
in 1918 of $2,979,000,000. The F. W. Dodge Company reports contracts
in 1918 aggregating $1,655,099,000, for that part of the United States,
east of the Missouri and north of the Ohio. The wealth of the whole
nation is estimated from the Census of Wealth, Debt, and Taxation to
have been in 1918 about 1.685 times as great as that of the reporting ter-
ritory. If construction is in proportion to wealth, then the total contracts
let in the United States should have been about $2,786,000,000, in 1918.
It seems probable that the rural population does not build quite as much
in proportion as do the inhabitants of great cities, and because of the difficul-
ties involved it also appears unlikely that the F. W. Dodge Company gets
a record of every building contract made. Furthermore, many buildings
are constructed without any contract. Under the circumstances, therefore,
it seems well to average the estimate for 1918 made on the basis of build-
ing permits with that of the F. W. Dodge Company. The resulting aver-
age is $2,766,000,000. This figure has been multiplied by the construction
index previously described in order to approximate the amount of construc-
tion in the United States for each year. The results appear in Table 7 A.
,
THE CONSTRUCTION INDUSTRY
KC,
TABLE 7A
THE VALUE OF CONSTRUCTION WORK IN THE CONTINENTAL UNITED
STATES AS ESTIMATED FROM THE F. W. DODGE COMPANY'S RE-
PORTS ON CONTRACTS LET AND THE BUILDING PERMITS ISSUED
IN LEADING CITIES
Building
F. W.
permits
Ratio of
Private
Federal
Con-
Sum of
Dodge
Esti-
issued in
popula-
building
govern-
preced-
Co.'s est i-
mated
Year
a selected
tion of
in L. S.;
ment con-
si met ion
work by
ing three
Iliate nt
value of
list a of
given
estimated
struct inn
columns
total
consl ruc-
large
cities to
from
in U. S.<*
railways-/
(Millions)
(Mil-
construc-
tion work
cities
that of
permits' -
(Millions)
lions)
tion
in U.S./
(Millions)
U. S.6
(Millions)
(Millions)
(Millions)
1909. .
$772
.2181
$3,540
$ 123
$16
$3,679
$3,708
1910.
726
.2193
3,311
122
38
3,471
:;.!98
1911. .
701
.2210
3,172
143
41
3,356
3,383
1912. .
754
.2231
3,380
139
29
3.5 is
3,576
1913..
686
.2242
3,060
153
44
3.257
3,283
1914. .
631
. 2257
2,796
154
26
2,976
3,000
1915. .
654
.2279
2,870
131
20
3,021
3,045
1916..
840
.2298
3,656
90
53
3,799
3,829
1917. .
603
.2315
2,605
419
63
3,087
3.111
1918..
363
.2333
1,556
1,161
28
2,745
$2,786
'-'.7()6e
a For list, see the Statistical Abstract of the U. S. for 1916; figures partly estimated.
b Calculated by aid of smooth curves.
c Calculated by dividing items in the second column by those in the third.
d Compiled from records of various Departments; shipbuilding and railway work
excluded.
e Average of figures in two preceding columns.
/The ratio of 2,766 to 2,745 is 1.008. The items in the second column piece ling
have been multiplied by 1.008 to obtain the items in this column.
9 Equals two-thirds of amounts appropriated by railways for "Additions to Physical
Property." See Statistics of Railways by Interstate Commerce Commission.
§ 7d. The Aggregate of Wages and Salaries
Although the information concerning the volume of construction is
scanty and unreliable enough, that pertaining to the division of the gross
receipts between employees, entrepreneurs and other property owners
in this field, and other industries contributing materials or supplies to
this industry, is still less adequate.
Contractors in this field do not care to make public either their profits
or an itemized list of their expenses. Only one concern has been discovered
which publishes annual reports, and even these reports do not extend over
the period desired. This concern, the United Stales Realty Co., is fortu-
nately a large operator and carries on building enterprises of different types
in various parts of the United Slab's. It is possible, therefore, that its
financial history may be rather typical of that of construction companies
106
THE ESTIMATE BY SOURCES OF PRODUCTION
in general. However, this is an assumption resting upon decidedly slender
foundations.
The Department of Internal Affairs of Pennsylvania shows in its annual
report the relationship between the amount paid for wages and salaries
and the gross value of construction for each year. Although fluctuations
from year to year doubtless are not uniform in the various sections of the
country, it seems probable that the trend of the Pennsylvania ratios does
not differ widely from that of the country as a whole. In the absence of
more complete data, it has been necessary to rely solely upon these figures
in calculating the amount of the payments for wages and salaries.
Under these circumstances, it is clear that estimates of the various
shares in the net value product of the building industry are necessarily
very crude. The method of deriving such estimates as are possible from
the fragmentary information available is described in the following pages.
Table 7B furnishes an estimate of the amount paid by the industry to
employees in the form of wages and salaries. It is based wholly upon the
assumption that the Pennsylvania ratio of this amount to the gross value
of construction is the same as the average ratio for the entire United States.
TABLE 7B
AN ESTIMATE OF THE TOTAL AMOUNT RECEIVED IN THE FORM OF
WAGES AND SALARIES BY EMPLOYEES ENGAGED IN THE CON-
STRUCTION INDUSTRY
Calendar year
Gross value i f
construction in the
Continental
United States a
(Millions)
Fraction of gross
value going to em-
ployees
Total payments for
wages and salaries e
(Millions)
1909
1910. .
$3,708
3,498
3,383
3,576
3,283
3,000
3,015
3,829
3,111
2,766
.321.V/
.3276<*
.3263 d
.3406a
. 3888 b
.3107''
.30436
. 2785 c
.31276
.34846
SI, 192
1,146
1,104
1,218
1,276
932
1911
1912
1913
1914
1915
1916
927
1,086
973
964
1917
1918
a See Table 7 A.
b Assumed to be same as in Pennsylvania; see Reports of Pa. Commissioner of Labor
and Industry and Report on Productive Industries for 1919 by the Pa. Dept. of In-
ternal Affairs.
c Based on ratio of wages in 1916 to those in 1915 in State of Pennsylvania.
d Interpolated between fraet ion of gross out put going to employees in the U. S. according
to the < Vnsus of 1900 (.2685) and the Pa. figures for 1913. Changes in the hourly wage
rate for building labor were used as aids in the interpolation. For wage rates, see Table 7C.
« Product of two preceding columns.
S
THE CONSTRUCTION INDUSTRY 107
§ 7e. The Share of the Entrepreneurs and Other Property Owners:
First Estimate
The next step necessary was the computation of the share going to
entrepreneurs and other property owners. The starting point was the
partial census of the building industry in 1900. In Volume 7, Part 1, page
ccxlvi, of the Manufactures Census for that year, there is given a summary
of the findings. It shows a payment of $1 00,898,680, for wages and $321,-
339,847, for materials. Depreciation was assumed to have been high and
has been estimated at 10' ( annually on the capital invested. This would
give a depreciation allowance of 819, 372,504. By adding this amount to
the reported expenses of production and deducting the sum from the gros-
value of the products, the amount received by the entrepreneurs for their
services and for the use of their invested resources was estimated at
$119,767,815.
A foundation having thus been laid, the next essential was to estimate
the relative shares of the leading productive agents for the different years.
The steps in order were as follows: —
First, a weighted index of wages per hour in the building trades was
computed from the data furnished in Bulletins 131 and 259 of the United
States Bureau of Labor. The weights used for the different occupations
correspond to the number of men engaged in each trade in 1910 as esti-
mated from the data in the Census of Occupations. They are as follows: —
Bricklayers 156
Building Laborers 686
Carpenters 696
Hod Carriers 170
Inside Wiremen 50
Painters 278
Plasterers 50
Plumbers & Gasfitters 105
Steam Fitters 35
Stone Masons 39
Structural Iron Workers II
StoneCutters 10
The indices for each trade were reduced to a common base, then multi-
plied by the weights specified, and an average of the indices obtained.
This average index appeals in 'Fable 7C.
Average index numbers for the price of building materials were taken
from page 179 of Bulletin 149 of the Bureau of Labor Statistics and from
108
THE ESTIMATE BY SOURCES OF PRODUCTION
the Statistical Abstracts of the United States for 1918 and 1919 on pages
578 and 568 respectively. These indices were converted by division to
the common base 1913.
The profits from construction are shown in the annual reports of the
United States Realty Company. This company also derives a large income
from rentals. General expenses were divided in proportion to the respec-
tive receipts from these two sources and the fraction apportioned to con-
struction was subtracted from the profits from that field. Unfortunately,
the operations of the United States Realty Company only go back to 1904,
hence it was necessary to manufacture a figure to represent 1899. This
quantity was assumed to bear the same ratio to the actual profits for 1909
as the average index of the prices of wages and materials in 1899 bears to
the corresponding average in 1909. The imaginary quantity thus com-
puted for 1899 was $903,000.
An estimate of net profits having been thus arrived at for each year, the
actual amounts were next converted to an index number based upon the
year 1913. Table 7C shows the net results of the operations just described.
TABLE 7C
AN ESTIMATE OF THE RELATIVE VARIATIONS IN PAYMENTS GOING
TO SOME OF THE LEADING AGENTS OF PRODUCTION IN THE CON-
STRUCTION INDUSTRY
(For the Continental United States)
Estimated net profits
of the United States
Realty Company
derived from
construction &
Indices of comparative change
(Base 1913)
Year
Profits of
U. S. Realty
Company
Wages per hour
of building
workers c
Prices of
materials c
1899
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$ 903,000 a
1,215,000
1,102,000
931,000
1,113,000
1,038,000
892,000
796,000
392,000
947,000
1,485,000
.870
1.171
1 . 062
.897
1.072
1.000
.859
.767
.378
.912
1.431
.663
.918
.949
.960
.973
1.000
1.017
1.024
1.065
1.147
1.288
.696
.911
1.010
.996
.976
1.000
.97
.94
1.01
1.24
1.506
a Assumed; see text for basis.
b Calculated from Annual Reports.
c From U. S. Bureau of Labor Statistics data; for description, see text.
An effort was next made to use the data just presented to ascertain the
fraction of the gross value of the output of the industry going to entre-
S
THE CONSTRUCTION INDUSTRY
109
preneurs and other property owners. As a first step, the actual values
representing each productive agent in 1899 were multiplied by the indices
shown in Table 7C. The next step was to reduce the resulting products
to percentages of the gross output for each year. In 1899, 85.40 per cent
of the gross value of the product went to the three factors, wages, materials
and the entrepreneur. 1 For want of better evidence, this percentage was
assumed to have remained constant. The calculated percentages for each
year were therefore made to total 85.40. The results derived appeal' in
Table 7D.
TABLE 7D
ESTIMATES OF THE PERCENTAGE OF THE GROSS VALUE OF CON-
STRUCTION GOING TO EACH OF THREE IMPORTANT AGENTS IN
THE VARIOUS YEARS
(For the Continental United States)
Year
Relative amounts b in millions of
dollars
Percentage of gross value of
construction e
Profits
Wages
Mate-
rials
Total
Profits
Wages
Mate-
rials
Total
1899
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
104.2
140.3
127.2
107.4
128 . 4
119.8a
102.9
91.9
45.3
109.2
171.4
126.6
175.2
181.2
183.3
185 . 7
190.9a
194.1
195.5
203.3
219.0
245.9
223.6
292.7
324.5
320.0
313.6
321.3a
311.7
302 .
324.5
398.4
483.9
454.4
COS. 2
632 . 9
610.7
627.7
632.0a
608.7
589 . 4
573.1
726.6
901.2
19.58
19.71
17.18
15.03
17.51
16.20
14.44
13.34
6.58
12. S3
16.23
23.78
24.61
24.41
25.62
25 . 28
25.76
27.20
28 29
30 '31
25.72
23 30
42.04
11 OS
43.81
11 75
42.61
43.44
43.76
43.77
48.51
46 85
15 87
85.40
85.40
85 40
85 . 40
85 40
85.40
85 40
85 . 40
85 40
85 40
85 40
a Amounts as shown in Census of 1900; here used as liases.
li Derived by multiplying the bases by the indices recorded in Table 7( '.
c The mode of deriving these percentages is illustrated by the following proportion
representing profits in 1899:— 1.042: 4.544:: 19.58: 85.40.
From data furnished on pages ccxlvi and 50 of Volume 7, Part 1, of the
Census of Manufactures for 1900, the following estimates have been de-
rived for the construction industry: —
i The entrepreneurs' share includes not only net profits but also all gains due to resources
of any sort invested in the construction industry.
110
THE ESTIMATE BY SOURCES OF PRODUCTION
Item Thousands
Wages $190,899
Salaries 8,652
Land rent a 966
Building renta 1,098
Interest paid to private parties (assumed to be two-
thirds of all interest) 5,064
Profits 119,768
Total Value Product in 1899 $326,447
a Assumed to be five per cent of the value of this type of assets devoted to the industry.
From the above estimates, it appears that the total share of entrepre-
neurs and investors is about 1.054 times that of entrepreneurs alone.
The percentages shown in the sixth column of Table 7D have therefore
been multiplied by this factor to obtain estimates of the proportion of the
gross value of construction going to the propertied classes.
TABLE 7E
FIRST ESTIMATE OF THE TOTAL SHARE OF ENTREPRENEURS AND
OTHER PROPERTY OWNERS; BASED UPON THE CENSUS OF 1900
AND THE PROFITS OF THE UNITED STATES REALTY COMPANY
A
B
C
D
E
Calendar
year
Fraction of
gross value
constituting
profits a
Fraction of
gross value
going to
entrepreneurs
and other
property owners
1.054 X B6
Gross value of
construction c
(Millions)
Share of entre-
preneurs and
other property
owners
C X D
1909
1910
1911
.1971
.1718
. 1503
. 1751
.1620
.1444
. 1334
. 0ii5S
.1283
. 1623
.2077
.1811
. 15S4
. 1S46
. 1708
. 1522
.1408
.0iJ94
.1352
.1711
$3,708
3,498
3,383
3,576
3,283
3,000
3,015
3,829
3,111
2,766
$770
633
536
1912
1913
660
561
1914
1915
1916
1917
1318
456
428
266
421
473
a See Table 7D.
b For explanation of ratio, see text.
c See Table 7A.
§ 7f. The Share of the Entrepreneurs and Other Property Owners:
Second Estimate
Because of the unreliability of the basis for the fractions recorded in
Column C of Table 7E, it seems desirable to make another and independent
THE CONSTRUCTION INDUSTRY
111
estimate of the share of the entrepreneurs and other possessors of property.
This has been done by first estimating certain expenses incurred by the
builders and subtracting the amounts thus arrived at from the gross value
of the output. Table 7F illustrates the modus operandi.
TABLE 7F
SECOND ESTIMATE OF THE SHARE OF THE ENTREPRENEURS AND
OTHER PROPERTY OWNERS; DERIVED BY SUBTRACTING CERTAIN
EXPENSES FROM THE GROSS VALUE OF CONSTRUCTION
(Millions of Dollars)
A
B
C
D
E
F
G
Payments not going to entrepreneurs or property
owners
Gross
value of
construc-
tion d
Share of
Calen-
dar
year
Cost of
materials a
Wages and
salaries
paid b
Miscel-
laneous
expenses
0.16
(B + C) c
Total
B + C + D
entrepre-
neurs and
property
owners
F — E
1909 . . .
1910. . .
1911. . .
1912. . .
1913 .
1914.
1915. . .
1916. . .
1917. . .
L918. . .
$1,346
1,277
1,187
1,284
1,360
1,219
1,229
1,462
1,565
1,283
SI, 192
1,146
1,104
1,218
1,276
932
927
1,066
973
964
$406
387
367
400
422
344
345
401
405
359
$2,944
2,810
2,658
2,902
3,058
2,495
2,501
2,932
2,9 11
2,606
$3,708
3,498
3,383
3,576
3,283
3,000
3,045
3,829
3,111
2,766
-764
688
725
674
225
505
544
897
167
160
a Excludes those used in shipbuilding; calculate 1 from data given in the Census
reports on manufactures, the Government bulletins on forestry, the reports of the
Geological Survey on The Mineral Resources of the United States, various numbers of
The Statistical Abstract, and the Annual Reports of the Secretary of the Navy.
b See Table 7B.
c Ratio in 1899 according to the Census of 1900.
d Sec Table 7A.
It is improbable that the actual fluctuations in the share of the entre-
preneurs and property owners were as violent as those shown in Column ( I
of Table 7F. However, since I here seems to be no better criterion by which
to adjust the estimates, the best course seems to be to leave them as they
stand, remembering meanwhile that they are not accurate enough to por-
tray anything more than general tendencies.
§ 7g. Purchasing Power of Share of Entrepreneurs and Other Property
Owners
In Table 7G, the two estimates of the share of property and entrepre-
neurial effort have been averaged and reduced to a basis of constant pur-
112
THE ESTIMATE BY SOURCES OF PRODUCTION
chasing power by dividing by a price index representing estimated changes
in expenditures of families having annual total expenses of $5,000. The
estimate of the fraction of the net value product received by the employees
appears in Table 7H.
TABLE 7G
FINAL ESTIMATE OF THE SHARE OF THE ENTREPRENEURS AND
PROPERTY OWNERS IN THE NET VALUE PRODUCT OF THE CON-
STRUCTION INDUSTRY
Index of
Purchasing
Estimate
based on
Estimate
obtained bv
Average c
of two
prices of
goods con-
sumed by
families
spending
$5,000 per
power oi
share of
entrepreneurs
Calendar
profits of the
deduction of
preceding
and property
year
U. S. Realty
Co .a
(Millions)
expenses b
(Millions)
estimates/
(Millions)
owners at
prices of
1913*
annum d
(Millions)
1909
$770
$764
$767
.956
$802
1910
633
688
661
.977
677
1911
536
725
631
.984
641
1912
660
674
667
.999
668
1913
561
225
393
1.000
393
1914
456
505
481
1.013
475
1915
428
544
486
1.002
485
1916
266
897
581
1.088
534
1917
421
167
294
1.252
235
1918
473
160
317
1.448
219
a See Table 7E.
b See Table 7F.
c Simple arithmetic average.
d See Table 2G.
e Money value divided by price index.
/In the opinion of Col. M. C. Rorty (a director of this Bureau), these figures are
too high.
<*
THE CONSTRUCTION INDUSTRY
113
TABLE 7H
THE ESTIMATED NET VALUE PRODUCT OF THE CONSTRUCTION
INDUSTRY AND THE SHARE THEREOF GOING TO THE EMPLOYEES
Calendar year
Share of entre-
preneurs and
other property
owners a
(Millions)
Share of em-
ployees b
(Millions)
Total net value
product
(Millions)
Per cent of net
value product
going to the
employees
1909 ....
$767
661
631
667
393
481
486
581
294
317
$1,192
1,146
1,104
1,218
1,276
932
927
1,066
973
964
$1,959
1,806
1,734
1,885
1,669
1,413
1,413
1,647
1,267
1,280
60 8
1910
63 4
1911
63 6
1912
64 6
1913
1914
1915
1916
1917
1918
76.5
66.0
65.6
64.7
76.8
75.2
a See Table 7G.
b See Table 7B.
The last column of Table 7H indicates that the employees receive from
three-fifths to four-fifths of the net value product and that this proportion
has been an increasing one during the decade under consideration.
From the standpoint of the average employee, it is a matter of much
moment to know whether he is able to buy more or less with his wages than
he could have done a decade ago. The data are too unreliable to be de-
pended upon to give more than a broad outline of the changes that have
occurred. The estimates appear in Table 71.
114
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 71
THE PURCHASING POWER OF THE ESTIMATED COMPENSATION RE-
CEIVED BY THE AVERAGE EMPLOYEE IN THE CONSTRUCTION
INDUSTRY
A
B
C
D
E
F
G
H
I
Average
number
Fraction
Number
Average
Index of
Purchas-
Total
salaries
and wages
paid a
(Millions)
Average
full time
annual
of em-
of
attached
pay per
prices of
ing power
Cal-
endar
ployees
number
to
employee
goods pur-
of annual
actually
working
attached
to
industry
(Thou-
attached
to
chased by
manual
earnings
at prices
year
compen-
sation b
(Thou-
industry
sands)
industry
and
of 1913
sands)
actually
D
B
clerical
G
B
working c
E
F
workers
H
C
1,585
1909
$1,192
$ 7S6
1,516
.957
$ 752
.955 c
$787
1910
1,146
787
1.456
.910
1,600
716
.978 c
732
1911
1,104
807
1,368
.845
1,619
682
.984 c
693
1912
1,218
835
1,458
.902
1,617
753
.994 c
758
1913
1,276
830
1,537
.956
1,608
793
1 . 000 d
793
1914
932
835
1.116
. 782
1,427
653
1.01'/
647
1915
927
879
1,054
.816
1,292
717
1.03'<*
696
1916
1,066
930
1,146
.960
1,194
893
1 . 10 d
812
1917
973
973
1,000
.975
1,026
948
1.29''
735
1918
964
1,328
726
.959
757
1,273
1.58<*
806
a See Table 7B.
b Based on average wages in construction industry in Pa., average pay of carpenti rx
employed by railways, and the union scale of wages as shown by the records of the
U. S. Bureau of Labor Statistics.
c Method of calculation described in a separate report.
d U. S. Bureau of Labor Statistics index.
So far as can be judged by the rather crude estimates just presented,
the economic condition of the building workers has grown neither better
nor worse during the decade under consideration.
§ 7h. The Total Value of Construction
It is a matter of interest to compare the gross amount of construction
taking place in the United States with the growth in the population. A
comparison with total population is of less significance than one with the
increase in the number of inhabitants; for one of the prime reasons for new
construction is the need of transportation, business buildings, housing and
other accommodations for the additional members of the population.
The fact should be kept in mind that no inconsiderable share of the con-
struction work during 1917 and 1918 went to meet the temporary needs
of war and hence added little to the total permanent improvements in the
S
THE CONSTRUCTION INDUSTRY
115
country. Table 7J compares the gross figures only, as it is impracticable
to segregate that part of the work which was transitory in nature.
TABLE 7J
THE RELATION OF CONSTRUCTION TO POPULATION AND POPULATION
GROWTH IN TIIK CONTINENTAL UNITED STATES
Calen-
dar
year
1901).
mm.
mn.
1912.
1913.
1914.
1915.
191G..
1917..
L918.
B
Gross
value
of con-
st motion «
(Millions)
S3. 70S
3,498
3,383
3,576
3,283
3,000
3.04.",
3,829
3,111
2,700
C
Index of
construc-
tion
costs b
939
.970
.960
.987
1.000
.969
.980
1.126
371
481
D
( 1 1 OSS
value of
const mo-
tion at .
prices of
1913
(Millions)
_B
C
$3,948
3,000
3,502
3,623
3,283
3.096
3,107
3,401
2,209
1,868
E
Population
of Conti-
nental
U. S. in
thousands c
90,370
92,220
93,811
95,338
97,278
90,191
100,12s
101,722
103,059
104,182
F
G
Value of
per capita
Incn
construc-
in popula-
tion at
tion since
prices of
preceding
1913
year**
D
(Thou-
E
sands)
$44
1,783
39
1.730
37
1.530
38
1,690
37
2.020
31
1,560
31
1.210
33
1,330
22
1,250
18
050
II
'ruc-
tion per
additional
person at
prices of
1913
D
G
82,214
2,084
2.2S!)
2. 1 1 1
1,625
1.985
2,5' N
2.557
1,815
2,874
a See Table 7 A.
b Derived by averaging indices representing respectively the hourly wages of building
labor, the prices of lumber and building materi lis, and the prices of metals and metal
products, using weights 2, 2, and 1 respectively. For data, see Table 7C of this re-
port, and Bulletin 269 of the U. S. Bureau of Labor Statistics.
c Derivation described in Sec. 2a.
d See the lasl column of Table 2A for data from which this is derived.
The indications are quite clear thai the volume of construction per
capita has declined almost steadily throughout the decade and, wore the
temporary war construction for 1917 and 1918 omitted from consideration,
the building shortage in those years might be found to be considerable.
However, the amount of construction work per additional member of the
population has not fallen off. It is unfortunate that the paucity of data
concerning the construction industry does not permit of more accurate
estimates but it is hoped that even these rough approximations may give
a general idea of the situation in this important field.
CHAPTER 8
SUMMARY OF TRANSPORTATION
The tables which follow combine the data for the various reported
branches of transportation and give totals for the whole field. It is believed
that such totals may be of interest to those persons who desire to view the
situation from its broader aspects. The totals are all obtained by com-
bining the similar items in the corresponding tables in the separate reports.
TABLE 8A
THE SHARE OF THE ENTREPRENEURS AND OTHER PROPERTY OWNERS
IN THE NET VALUE PRODUCT OF THE TRANSPORTATION INDUSTRY a
A
B
C
D
E
F
G
Net dis-
bursements
to entre-
preneurs
and other
property
owners 6
(Millions)
Business
savings &
(Millions)
Total share
of entre-
preneurs
and other
property
owners
(Millions)
B + C
Purchasing power in millions at
prices of 1913 of
Year
Net dis-
bursements
to entre-
preneurs
and other
property
owners &
Business
savings b
Total share
of entre-
preneurs
and other
property
owners
E + F
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$879
974
1,013
1,054
1,107
1,107
1,097
1,157
1,192
1.120
$244
257
167
170
91
24
261
453
363
157
$1,124
1.231
Liso
1,224
1,198
1,131
1 ,359
1,611
1 ,555
1,277
$904
987
1,019
1,054
1,107
1,095
1,102
1,077
991
SI 7
$265
271
178
173
91
24
262
380
250
107
$1,170
1,258
1,196
1,227
1,198
1,119
1,363
1,456
1,241
924
a Includes Railways, Switching and Terminal Cos., Express Cos., Street and Electric
Railways, Electric Light and Power Plants, Telegraphs, Telephones, Transportation
by Water, and the Pullman Co.
b Aggregate of similar items in separate industrial reports.
A study of Tables 8A, 8B, and 8C makes it clear that while, for the owners
of transportation enterprises, 1915 and 1916 were relatively prosperous
years, 1917 showed a marked falling off in their gains and 1918 was dis-
116
SUM M A R Y OF TRA N S 1 'ORTATIOX
117
TABLE 8B
THE SHAKE OF THE EMPLOYEES IX THE NET VALUE PRODUCT OF THE
TRANSP< >RTATII ).\ 1 X DUSTRY "
A
B
C
D
Year
The total ne1
value product b
(Millions)
Total share of
the employees '>
(Millions)
Per cent of net
value product
paid to employees
as compensation
for services
100 c
B
1909
$2,765
3,029
3,069
3,249
3,336
3.170
3,428
4,028
4,539
5,232
$1,611
1.798
l.ss'.l
2,025
2,138
2,040
2,069
2.117
2. '.is. - .
59.3
1910
59.4
1911
1912 .
61.5
62 . 3
1913
1914.
64.1
61.4
1915
1916
1917
1918
1919
60. 1
60.0
65.8
75.6
a For industries included see Table 8A, note (a).
b Aggregate of similar items in separate industrial reports.
tinctly the worst year of the decade. Currency inflation, coupled with
rate regulation, was presumably largely responsible for this state of affairs.
On the other hand, in 1915 the percentage of the net value product
going to the employees fell below normal while the purchasing power of
their average annual earnings did likewise. By 1918, however, this per-
centage had risen far above the average level for the decade and the pur-
chasing power of the average earnings had also increased to a figure dis-
tinctly higher than that for any preceding year of the period.
118
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 8C
THE AVERAGE ANNUAL EARNINGS PER EMPLOYEE ATTACHED TO THE
TRANSPORT ATK )N INDUSTRY c
A
B
C
D
Average an-
nual earnings
per employee
B -=- C
E
F
Year
Total share
of the em-
ployees" 6
(Millions)
Number of
employees
normally at-
tached to the
transporta-
tion field &
(Thousands)
Index of prices
of goods
bought by
manual and
clerical
workers
.955
.978
.984
.994
1.00
1.01
1.03
1.10
1.29
1.58
Purchasing
power of aver-
age annual
earnings per
employee
D ^E
1909 . . .
1910 . . .
1911 . . .
1912 . . .
1913 . . .
1914 .. .
1915 . . .
1916 . . .
1917 .. .
1918 . .
$1,641
1,798
1,889
2,025
2,138
2,040
2,069
2,417
2,985
3,956
2,499
2,614
2,709
2,768
2,805
2,828
2,846
2,S72
2,933
3,075
S 657
CSS
697
731
762
721
727
842
1,017
1.286
$688
703
709
736
762
714
706
765
789
814
a See Table 8B, Column C.
b Aggregate of similar items in separate industrial reports.
c For industries included see Table 8 A, note (a).
CHAPTER 9
STEAM RAILWAY, SWITCHING AND TERMINAL COMPANIES
§ 9a. Nature of Available Information
The Interstate Commerce Commission, for a number of years, has
required the railways of the country to render annual statements of their
business. While the accounts for the large roads (designated as ( 'lass I),
are fairly complete for each year, the form of the summary reports for
"all roads considered as one system" has changed materially from time
to time, making it somewhat difficult to obtain strictly comparable figures.
Many of the minor items have been grouped together in these condense 1
summaries and, in such instances, it cannot be determined to which cate-
gories they should be assigned. The data for the switching and terminal
companies are not recorded until recent years. Here and there, items are
omitted. Owing to these shortcomings of the data, it is certain that the
figures presented herewith contain many inaccuracies.
Fortunately, however, the major items of interest, namely those record-
ing the funded debt, dividends, compensation to employees, additions to
physical property, and amounts carried to surplus have been reported
each year and presumably the figures are fairly comparable throughout.
These items combined apparently constitute at least 95 per cent of the
value dealt with. Under these circumstance-, one feels safe in saying that,
outside of definite errors ! which may exist in the statistics furnished to the
Interstate Commerce Commission, the figures herewith presented are
sufficiently accurate to show the main facts desired. A computation,
in which an entirely distinct method of approach was used, showed a value
product differing by not over two or three per cent from that obtained by
the process finally determined upon except in 1909 and L910, years in
which the classification of the data was less complete than at later periods.
§ 9b. Method of Utilizing Data
The theory underlying the selection of the data chosen to represenl the
value product of the industry is as follows: The amount carried to surplus
is the joint property of the stockholders and constitutes part of the saving
made from current earnings. Other items which similarly enter into sav-
1 The place where error is most Likely is in the amounts recorded as representing the annual
surplus. Errors in depreciation accounts give rise to equally large errors in the annual sur-
plus. It is impossible to say whether the depreciation allowances are too Large or too small.
119
120 THE ESTIMATE BY SOURCES OF PRODUCTION
ings are funds set aside to compensate for the original sale of stock below
par, and additions made to the sinking fund. These are offset to some
extent by bond premiums written off and by receipts from sinking funds
accumulated in earlier years. These receipts evidently represent the
productivity of the past rather than of the present. The fact that the dis-
counts now written off were, in the past, losses to the corporation, does not
alter the fact that the assets now cancelling these discounts are part of the
current earnings and represent savings for the stockholders which might
be paid out in dividends if the directors thought that policy advisable.
Sums set aside from earnings for additions and betterments to the physical
property have also been included in the share of the stockholders because
they likewise represent savings from current income.
Items classified merely as "Miscellaneous Appropriations from Income"
have not been included in the current income for it is assumed that most
of this account represents funds set aside to cover losses of one sort or
another, due perhaps to depreciation, obsolescence, or bad investments.
Changes in the designations and classification of various appropriations
make it impossible to allocate them correctly. A careful endeavor has been
made to include or exclude corresponding items in each year and it is be-
lieved that this task has been accomplished with a fair degree of success.
The amounts in doubt are too small to invalidate any of the main conclu-
sions of this report, even if some of the items have been misplaced.
The income distributed by the railways in the form of interest and divi-
dends is partly derived from inter-corporate payments and partly derived
from bond interest and dividends received on the stock of corporations out-
side the railway field. Payments from one railway to another should evi-
dently be deducted and since, in dealing with other industries, it has been
assumed that their dividends and bonds interest have been paid to individ-
uals, it would evidently be a duplication again to include this income here.
For this reason, all bond interest and dividends received from stocks
owned have been deducted from the similar items paid out by the rail-
ways. The remainders represent only payments made possible by the
operation of railways and do not include returns from the investments of
railways in other industries. Salaries and wages paid are evidently individ-
ual gains made possible by railway activity and hence must be included.
A trivial item appearing in the later accounts is entitled "Uncollectible
Revenues." This quantity, in each case, has been assumed to constitute
a part of the net value product of the railway field, for it represents a valu-
able service received by someone, and this condition is not altered by the
fact that the railway company has not been paid therefor.
Since the year 1915, the Interstate Commerce Commission has included
in the Statistics of Railways a summary of the reports of switching and ter-
STEAM RY., SWITCHING AND TERMINAL COS.
121
TABLE 9A
ESTIMATES' OF THE AMOUNTS SAVED FROM CURRENT REVENUES BY THE ST] \M
RAILWAY, SWITCHING AND TERMINAL COMPANIES OF THE CONTINENTAL DNITED
STATES
(Millions of Dollars)
Net reduction
Additions and
Net addition
Balance
:arried
of security
betterments to
to sinking
Total savings
discounts «
physical property
funds'*
Year
Switch-
Switch-
Switch-
Switch-
Switch-
Rail-
ing and
Rail-
ing and
Rail-
ing and
Rail-
ing and
Rail-
ing and
ways
termi-
nal COS.
ways
termi-
nal cos.
« ays
termi-
nal i
ways
termi-
nal cos.
ways
termi-
Ending
June 30
1909. . .
20. 3'/
c
LM 9*
c
7.2o
c
79* !•'■
c
131.6
1910. . .
26. 7d
c
57 Si
c
9 . 5 To
c
122.0'
c
216
1911. . .
18. 7 d
c
62 3«
c
l:;. '.'•/■
c
23 •"•■
c
1 Is 1
191-'
17. 6 c
c
44. 2e
c
11.'/'
c
ii 0<
c
7'i 5
1913. . .
32.1/
c
66 1 '
c
30.6/
c
32 7/
c
161 8
1914
15 5/
c
tn 5/
c
11 5/
c
-■121.1/
c
:,<\ 6
1915. . .
17 9fl
0.07
30.7(7
0.2»»
10 1.7
3 m
36 7 7
I 2 m
21 7
1 8
1910. . .
25. 9h
0.22
76 5*
0.2n
is 0*
7 n
191.4»
6. 0«
311.8
7 1
Calendar
1916
21.7 i
O.oi
84 1 i
3>
H 8 «
ii 8'
188. 1»
3 2i
309 n
4.8
1917. . .
19.8*
0.5«
95 1-
1 0«
10 8 V
(is
151 , "'
—1.6 s
280 t
II 5
1918*.
G.8t
O.Gf
43.1.;
0.3»
9 7.'/
6t>
53 5 "
2 1i'
113 1
:; 8
R = Interstate Commerce Commission — Statistics of Railwa
""Amortization of Discount" plus "Stork and Debt Discount Extinguished" minus "l:
Premium on Funded Del it."
6 "Appropriation to Sinking and Other Reserve Fun Is" minus "Income from Sinking and Other Re-
serve Funds."
c Item not given in reports of Interstate Commerce Commission.
d Assumed to hear the .same ratio as in 1912 (viz. .0642) to the sum of "Surplus" and "Dividends Paid."
e R. 1912, pp. 51-52.
/R. 1914. p. 52.
a R. 1915, p. 49.
h R. 1916 (fiscal year), p. 51.
* R. 1910 (calendar year), p. 53; figures for switching and terminal companies arrived at by deducting
railway data from combined figures.
i Item for Class I Operating and Non-Operating roads multiplied by 1.013, the ratio for 1910 of the
total to Class I for this item.
ft R. 1909, ]>. 72.
' R. 1910, p. 69.
m H. 1915, p. 58.
" R. 1916 (fiscal year), p. 00.
o Assumed to vary in same proportion from year 1910 as does the sum of "Surplus" and "Dividi nds
Paid."
/' Equals "Sinking and redemption funds chargeable to income" plus ^ppri priati ins for other re-
serves."
9 R. 1911, p. 53.
r Includes "Advances to weak lines to cover deficits."
s R. 1917, pp. 36-37.
' "Corporate" statistics for roads under Federal control combined with figures I mtrolled road-.
« Item for Class I Operating and N'on » Operating roads multiplied bj 0.97, the ratio in 1916; see Note « .
v R. 191.S, pp. in 17.
i" 97% of 159.3 the increase in "Balance" during the year of Class 1 Operating Operating
roads. This is the ratio in 1916: Classes n and III both showing decreases in assets.
x Net corporate income total appropriations for year; after 1910, equals the balance at the end of the
year less the balance at the beginning of the yi
V The ratio of this item for all roads to the same item for ( llass I < (perating and Non-( Operating roads
was 1.028 in 1916. The Item for this year has been multiplied by that ratio to obtain the amount here
entered.
2 The item for this year is that for Class I Operating and N'on ' Ipi rating road-. No adjustment has
been made, for the 1916 records show the appropriations by other classes of road- to have been negligible
* The ratio in 1916 of this item for all to the same item for Class I Operating and Non-Operating roads
was 1.051; hence the item for this year for Class I road- has been multiplied by this ratio.
t Item for Class I Operating and Non-Operating roads multiplied by 1.003, the ratio for 1910 of the
total to Class I for this item.
m
CC
W
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Estim;
total :
railw
witchin
termi
compa
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s '*. a .a 3.* 8*!
o >S 0-2 a^^-o 5 > bo M
* 5£ £^-^h:f=-£ c£ o o
I S IS lo« £~^£'i-i: t ^S^ : r£ C^
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5 c-o.ac^o S «^ c-Sc-^'c -.£"S- c o ~^ ^o
m -r. o c; os a-. OS * «« o> os os £ a £.2 ~ = — ~;r; °i ^ ^
^^^^^^^h n,OrtHHgg H 'B j.Es g o) z;o
^-....~£--d>^-' /: - c, ~;-* ^"- ,
H QfQf 02 03o2Qf . E-i -s aJ of ^ ^ « " « G O < ^ O ^ <n d ** o
►-Jo ut3»^co*i £•«. -^jj S s o "a en «- w ~ s a cr- = o;
-*< 3 CD oi
F-t cc "is ^ .a .a
1 2 1 THE ESTIMATE BY SOURCES OF PRODUCTION
minal companies. The total value product of this field is only about two
per cent as large as that of the railways — hence, it has been deemed suffi-
ciently exact to make the adjustment for the years preceding 1915 by the
simple method of multiplying the railway figures by appropriate factors
derived form a study of the ratios in 1915 and 1916.
§ 9c. The Net Value Product and Its Distribution
The estimates derived from the reports of the Interstate Commerce
Commission through the application of the theories and methods just
described are presented in Tables 9A, 9B, 9C, 9D, and 9E.
Table 9E shows the recorded amounts going to each of the principal
classes of recipients during the fiscal years from 1909 to 1916, and also
estimates for the calendar years from 1909 to the latest report published
by the Interstate Commerce Commission. These estimates have been
made simply by averaging the data for the adjoining fiscal years. This
process tends to smooth out to a degree the irregularities due to cyclical
or chance causes, but it makes the direction of the trend more evident.
Perhaps the most significant column in Table 9E is the last. This
shows that the employees have been receiving from three-fifths to three-
fourths of the net value product of the industry, the fraction varying
materially from year to year but indicating no definite trend until 1917
when a sharp upward movement begins and continues through 1918.
§ 9d. The Physical Output per Employee
Table 9F illustrates the development of important phases of railway
activity. The data have been estimated for the calendar years in order to
make them comparable with other fields of industry.
X
STEAM RY., SWITCHING AND TERMINAL COS.
1 25
TABLE 9C
THE ESTIMATED SHARE OF EMPLOYEES IX THE ANNUAL VALUE PRODUCT OF THE
STEAM RAILWAY, SWITCHING, AND TERMINAL COMPANIES O] 1 III. < < (NTINENTAL
UNITED STATES
(Millr .: D illars)
Compensation paid for services
Estimated
Relief and
Switching and terminal
I Estimated
. . impanies
Esti-
payments to
pensions
Year
mated
employees
for em-
total share
Railways
Ratio t i
Esti-
mate 1
1, all
for personal
ployees ™
of em-
Amounts
R. R.
injuries o
ployees
reporte 1
compen-
panics
sation
amount J
Ending
June 30
1909. .
S 988fl
.02 Me
M
SI, 01 2
S 9m
S2»i
024
1910. .
1.1440
0246«
28
1.172
11 a
3»
1,185
1911. .
1,2ns -/
,0248e
30
1,238
■■',!'
1,2
1912. .
1,252!/
0250«
31
1,284
13 a
1,300
1913. .
1,381ft
0252 c
35
1,416
14 r
[r
1,433
1914. .
1,381 i
0254 e
35
1,416
1 5 ?
4*
1,436
1915. .
1,173/
36. la
0256 d
30
1,20 1
12*
:>'
! 220
1916. .
1,4016
36 46
11259'/
36
1.440'
1
1,458
Calendar
1910. .
1.507 c
39.8c
. 02 , '
10
1,547
1 1 -■
1.500
1917. .
1,917 k
0264 e
51
1,9 18
16a:
i V
1.990
19 IS. .
2,0702
,0264e
70
2,740
15
8
2.703
R ■= Interstate Commerce Commission — S •
a R. 1915, I). 31.
b R. 1916, p. lo.
c R. 1910, pp. 32-34.
<1 Computed.
e Assumed to vary along a smooth curve.
/Compensation to railway employees multiplie 1 by assume 1 ratios.
9 R. 1912, p. 29.
ft R. 1914, p. 29. Data adjusted for absence of Class III roads on basis o p iportion of v*
by i hose roads in 1914.
i R. 1914, p. 29.
5 R. 1915, p. 31; wages adjusted by assuming that tin' missing Class III wages are of the same relative
importance as Class III operating expenses.
k 1918 Report of Railway Wage Commission, p. 102.
I Last figure correol — original data carried to more decimals.
m ]{. 1909, pp. 75-79.
" R. 1910, pp. 73-70.
o iv ; of total paid fur all injuries to persons; assumed that employees get this amount,
persons 25% and attorneys 30%. The last amount is not i he pro lucl ol tic- railway in lustry, according
to our classification.
P H. 1911, pp. 5S-00.
1912, pp. 56-58.
1913, pp. 51 57.
{. 1911. ,ip. 59-61.
1 R.
'■ R.
» R.
' R. 1915, pp. 05-70.
■ti R. 1916, fiscal year, pp. 07 89
v R. 1910 (Calendar year), pp. 66 70.
"' Data for Class I roads only— others do not rep >rt; amounts doubtless negligible.
X R. 1017, pp. 10-43; figures lor Cla<s 1 roads adjuste 1 on basi i I'M 1 '! ratios to represent all roa Is.
V If. 1917, p. 13.
s R. 1918, p. 21; figures for Class I roads multiplied by 1.025, the 1910 ratio of wages on all roa
wages on ('hiss I roads only.
* Figures for Class I roads multiplied by 1.020 the ratio in 1916 -.1 all road- • I roads only.
R. 1918, pp. 55-59.
12G
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 9D
MISCELLANEOUS ITEMS l\ THE \ \l.l K PRODUCT OF THE PRIVATELY
OPERATED RAILWAY, SWITCHING, AND TERMINAL COMPANIES OF
THE CONTINENTAL UNITED STATES
(Millions of Dollars)
Uncollectible revenues reported
Damages
paid to non-
employees
for personal
injuries
Estimated
total of
miscellane-
ous items
Year
Switching &
terminal
companies
Railways
Estimated
total, all
companies
Ending
June 30
1909
1910
1911.
1912.
1913
1914..
1915..
1916
Calendar
1916
1917
1918.
.006'
. 006 m
.007"
.005P
.003*
0.7b
0.8"
0.8"
0.7p
0.6'
0.69
0.0 9 '
0.79
0.79
0.8 9
0.89
0.7
0.8
0.8
0.7
0.6
5.2a
5.9&
6.5 c
7 .Qd
7.6*
8.0/
6.89
6.9''
7.5*
8.7i
8.3*
5.8
6.5
7.2
7.7
8.4
8.8
7.5
7.7
8.3
9.4
8.9
R. = Interstate Commerce Commission—
a R. 1909, pp. 75-79.
b R. 1910, pp. 73-76.
cR. 1911, pp. 58-60.
d R. 1912, pp. 56-5S.
c R. 1913, pp. 54-57.
/R. 1914, pp. 59-61.
o R. 1915, pp. 65-70.
h R. 1916 (fiscal year), pp. 67-89.
» R. 1916 (calendar year), pp. 66-76.
i R. 1917, pp. 40-43, figures for Class I
roads adjusted on basis of ratio in
1916.
Statistics of Railways.
* R. 1918, pp. 55-59, figures for Class I
roads multiplied by 1.020, the rati 3
in 1916 of all roads to Class I roa Is.
l R. 1915, p. 58.
m R. 1916 (fiscal year), p. 63.
» R. 1916 (fiscal year), p. 51.
° R. 1916 (calendar year), p. 53.
v R. 1917, pp. 34-36.
9 Roughly estimated.
T Estimated at 25% of all amounts paid
for personal injuries.
■ R. 1918, p. 46.
t R. 1918, p. 43.
,
p
<
d
i— i
x
Q
H
i-H
r*
►—
-
K
-
O
-
o
-
-
"A
H
<!
Eh
02
Q
H
H
l-H
<i
H
H *
R c
°
rH to
S -|
O I
■a
Q
H
K
Per cent
of net
value
product
going
to em-
ployees f
59.5
60.1
62.4
03.7
65.8
65.7
60.9
60.3
i- —
■- i-
'O t>
Estimated
total net
annual value
product d
LO 01
/ ©
rH of
— — .
1—1 —
DC Tl
— —
~ i N
CO
- CO
cr. -.
— IO
of c i
2,984
3,570
1,702
2,010
2,049
2,045
2,246
2,117
1,925
2,470
Share of
employees c
o -*
H CM
t^ cc
01 M
— f
-.-. -ri
— co
to
T. -~
CO ~
co >-o
os .:
03 I-
pH
i—l rH
O —
CO o
• O
oi co
co co
CC CO
— —
C DC
•M —
H
cellaneous
items o
CO t-
t^ X
C5 GO
X X
cr. cr.
i
eo t^
t^ 00
00 cs
t^ X
P
CO
1*
0)
"o
.4
>>
3
o
V
CO
0)
,3
Receipts and
savings
combined
B + C
iO CO
-r O
l> 00
CO O
CO 1^
00 i-
co /-
t^ CO
852 e
1,023
— A
/ r
cr. i-
CO X'
t^ —
CO X
CO 00
oo co
T}< Ol
O t^
00 —
X 'O
T. Q
Net dividends
and bond
interest
00 CO
CO CO
Ui CO
-r o
CO O
CO -
"O Tl
/ O
as
O O
y_ o
'"a
:: Ti
~ f-
rj
-a -a
GO 00
co os
-a -a
t- ©
CO CO
SO CO
o -a
C. O
co co
CO t^
ca aj
>0> CO
1- X
CO O
•H
o
4)
03
ffl
Corporate
savings
- o
© n
iC i- 1
i~
. a>
— —
e> as
— i-
^: —
Tl —
-a -o
HH O
CO oi
--1 CM
JO o
— oo
—
-a -i
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^ 1
as a>
—
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co
<
5h
cs c
O i—
Cl 05
i— i i—i
— Ol
— —
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CO —
OS c
i—i rH
i—l rH
c cr.
r— 1—1
i - r
r— 1 r—
OS OS
- — 1 —
i
I o
-- M S o
".£ 3 w
-i "-9
- o
o '-i
os os
— OI
1—1 — 1
cr- ©
CO -*
1— c —
OS 3!
iT CO
— 1—1
os r.
+
-
+
p
"S
ci
it
c=
c
-3
Sj
if
X
~'
u
_ —
^
_ :-
-
+J
rrj >.
r~
c3
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,5
u o
;;
- s
■ w
-
c ~
i.
F
-
b
c
-
-
-.
—
T.
09
.- z
' ■- z
E
/.
c:
PmrJ 2;fO o
- - -. ~ g . | . d
_r ^ _i I - • 3
^ ^ ^ TC "= — ' r -
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-- - ~ -- - I
- c ^ = " = =-
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f. I. f. —
C3 ^ « "53 V **n ai
L28
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 9F
MEASURES OF ACTIVITY OF STEAM RAILWAY, SWITCHING, AND
TERMINAL COMPANIES ESTIMATED FOR THE CALENDAR YEARS
(Data for the Adjoining Fiscal Years a Averaged)
Wages and
salaries paid
Number of em-
ployees = actually
Revenue freight
carried
Passenger traffic
(Billions of
employees
at work
(Billions of
Year
(Mil
ions)
(Thousands)
ton miles)
passeng
er nines;
Year
Calen-
dar year
Year
Calen-
dar year
Year
Calen-
Year
Calen-
ending
June 30 b
ending
June 30
ending
June 30
219/
dar
year
237 '
ending
June 30
dar
year
1!);)'.).
$1,012
$1,092
1,540 d
1,641
29 . 1 /
30.7'
1910.
1,172
1,205
1,742-/
1,742
255/
25 U
32 . 3 i
32.8'
1911. .
1,238
1,261
1,742 «
1,750
254/
259'
3 5.2/
33.2'
1912. .
1 ,284
1,350
1,759'/
1,817
264/
234'
33.1/
34.1'
1913
1,416
1,410
1,876/
1,814
301/
297 '
31.6/
35.4'
1914.
1,416
1,310
1,753''
1,604
288/
233 '
35.3/
34.0'
1915.
1,203
1,322
1,456/
1.575
274 *
309 '
31.8*
33.2'
1916.
1,440
1,547 1>
l,695ff
1,744''
340 *
385 '■
33 . 6 *
35 . *
1917. .
1,9686
1,834 i
397^'
40.0^
1918. .
2,741''
L.937™
409 *
43. 2k
R. = Interstate Commerce Commission — Statistics of Railways.
a Years ending June 30.
6 See Table 9C.
f In 1915 and 1916, the switching and terminal companies employed about 2.4',',
as many men as the railways; hence for other years the number of railway employees
has been multiplied by 1.024.
-/ Statistical Abstract of U. S. for 1919, p. 34 I.
« R. 1911, p. 26.
/ R. 1913, p. 23 and 1915, p. 26. Adjusted to include Class III roads on the basis
of the 1912 ratio.
a R. 1916 (fiscal year), pp. 25-26.
h R. 1916 (calendar year), pp. 25-26.
» R. 1917, p. 19.
/ Statistical Abstract of U. S. for 1919, p. 797.
* R. 1918, p. 37.
' Average of figures for two overlapping fiscal years.
m R. 1918, pp. 20-22.
There has been much discussion concerning the growing efficiency or
inefficiency of railway labor during the last decade. Certain facts concern-
ing this issue have been brought out by our investigation and are presented
in Table 9G.
This Table shows a very marked growth in the output per employee,
especially in the amount of freight transported, the increase being just
about fifty per cent from 1909 to 1917. Whether this change was the result
of inventive genius, a better supply of equipment, more effective manage-
ment, or greater diligence on the part of the employees, is a subject still
open for investigation. The fact is clear, however, that in, 1917, the aver-
,
STEAM RY., SWITCHING AND TERMINAL COS.
129
TABLE 9G
THE AVERAGE OUTFIT PER EMPLOYEE ACTUALLY AT WORK FOR
STEAM RAILWAY, SWITCHING, AND TERMINAL COMPANIES COM
BINEDa
(Estimates for ( lalendar Yi
Calen-
dar
year
1909.
1910.
1911.
1912.
1913.
1914.
1915.
1916.
1917.
1918.
Number of
ton miles of
freight per
employee
144,400
140,000
147,91)1)
156,100
103.500
176,300
1911,01)0
209,100
216,600
211,000
Passenger
miles pet-
employee
IS, 720
18,810
18,950
18,750
19,500
21, ISO
21,050
20,090
21,810
22,310
Value product
per employee
at prices
current in
given year
$1,131
1,165
1,169
1,181
1,202
1,260
1,396
1,490
1,627
1,843
[ndex of
prices of rail-
service '<
Base, 191 1
102.3
102.2
102.0
100.7
100.0
100.0
99.3
98 5c
99 7c
117.9c
Value product
per employee
at prices
of 1914'^
$1,106
l.l 1)
l.l 11
1,173
1,202
1,260
1,406
1,513
1,632
1,563
a For sources of data, see Tables 9E and 9F. The figures here given are obtained
by division of the other items by those in the fifth column of Table 9F.
6 The price index here given is proportional to the combined value of 10 freight ton
miles and 1 passenger mile. This ratio represents the approximate proportion of eac i
factor in the output of 1917, and is fairly representative for all years. Data for pairs
of fiscal years have been averaged to obtain estimates for calendar years. See Statistical
Abstract' of U. S. for 1919, p. 332.
c Interstate Commerce Commission, Statistics of Railways, 19 IS, p. 37.
d Value product at current prices divided by the index of prices of railway service.
age railway employee moved much more traffic and obtained a materially
larger value product for the industry than he did in 1909, and the increase
in the value product was real and not merely a reflection of increase I
prices for the service furnished.
§ 9e. Growths of Railway Service and of Population Compared
Another interesting comparison is that of the relative growths of railway
service and of population. There has been great complaint concerning a
shortage of railway equipment and service. Is this complaint due to the
fact that we have less service per capita than formerly or does it mean thai
our demand has increased? 'Fable 9H gives a fairly definite answer to this
query.
It is clear that, from 1009 to 1014, the growth of railway service jusl
about kept pace with population but that, since 1915, the supply of rail-
way service has far outstripped the growth in numbers of people, with the
result that, in 1017, the output was nearly fifty per cent larger than in
130
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 9H
THE PER CAPITA SERVICE RENDERED TO THE PEOPLE OF THE CON-
TINENTAL UNITED STATES BY THE RAILWAY, SWITCHING, AND
TERMINAL COMPANIES a
Calendar
year
Estimated
population of
the Continental
United States
(Thousands) b
Freight
carried;
Ton miles
per capita
Passenger
miles
traveled per
capita
Net value produced per
capita by railway industry
At prices
current in
given year
$20.54
22.00
21.82
22.51
22.42
20.38
21.89
25.54
28 . 96
34.27
At prices
of 1914 c
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
90,370
92,229
93,811
95,338
97,278
99,194
100,428
101,722
103,059
104,182
2,621
2,758
2,760
2,976
3,050
•
2,851
3,075
3,585
3,853
3.924
340
355
354
357
364
343
330
344
:;ss
415
$20 . 08
21.53
21.39
22.35
22.42
20.38
21.93
25.93
29.05
29.07
" For origin of data, see Tables 9E and 9F.
b Read from a smooth curve based upon Census figures.
c Figures in preceding column divided by price index shown in Table 9G.
1914. If the supply of railway service is inadequate, it appears, therefore,
that this condition arises from an increasing demand and not from a
diminishing supply.
§ 9f. The Purchasing Power of the Shares in the Net Value Product
Table 9E showed how the net value product has been divided among the
principal classes of claimants thereto, but the absolute amounts there
recorded have relatively little significance, because of the radical changes
in the purchasing power of money which have taken place during the last
decade. In order to give meaning to these figures, it is necessary to
divide them by appropriate price indices. In Table 91, this process has
been applied to the compensation of the employees and in Table 9J, the
share of the security holders and other property owners is similarly dealt
with. The price indices employed for this purpose are those described in
§§ 2b and 2c. The reasons for their use have been stated in § Ik and need
not be repeated here.
S
STEAM RY, SWITCHING AND TERMINAL COS
TABLE SI
131
THE NUMBER OF EMPLOYEES AND THE AVERAGE COMPENSATION
RECEIVED BY THEM FROM RAILWAYS, SWITCHING, AND TERMINAL
COMPANIES
A
B
C
D
E
F
G
H
Estimated
Estimated
Estimated
Average
Average in-
Average
number of
fraction of
number of
Total com-
dex of prices
annual
Calen-
employees
full time
employees
pensation
annual
of goods
compen-
dar
actually
that
attached to
paid to
<■< )!ii[ nata-
tion per
employee
E 4-D
boughl by
- :t ion at
year
at work a
average
industry
employees*
manual and
the prices
(Thou-
worker was
(Thousands)
(Millions)
clerical
of 1913
sands)
employed b
B -f- C
workers d
F -^-G
1909. .
1,641
.962
1,705
$1,105
S 648
.955
$679
1910. .
1,742
.981
1,77.'»
1,219
687
.978
702
1911. .
1,750
.963
1,818
1.277
7D2
.984
713
1912. .
1,817
.990
1,834
1,367
745
.994
750
1913..
1,814
.988
1,836
1,434
781
1 . 000
781
1914. .
1,604
.873
1,838
1,328
723
1 01
716
1915
1,575
. 856
1,840
1,339
72s
1 03
707
1916. .
1,744
.947
1,842
1,566
850
1.10
77:-!
1917. .
1,834
.988
1,856
1,990
1,072
1.29
831
1918. .
1 ,937
.989
1,958
2,763
1,411
1.58
893
a See Table 9F.
b See § 2d.
c See Table 9E.
d See Table 2C.
The figures in Table 91 show that the average annual compensation
paid by railways to their employees has risen materially since 1909, the
increase up to 1918, when measured in purchasing power, amounting to
something over thirty per cent. During this period, therefore, the increase
in money earnings more than kept pace with the rise in the value of com-
modities consumed by the working classes. The facts brought out do not
show, however, whether this increase in earning power has resulted from
a monopolistic organization of wage earners, from increased efficiency of
the wage earners, from an increase in the supply of railway equipmenl as
compared to railway laborers, from a general increase in the wage level, or
from some entirely different cause.
The purchasing power of the total share of the security holders increased
rather steadily up to 1914, but, since that date has fallen materially, until
in 1918, it was smaller than in 1909. This change in the total tells nothing
concerning the income per dollar invested. Since, however, it is believed
that the total investment in the railway business has been increasing-, it
appears that the recent decline in the total income of the security holders
must have been accompanied by a considerably greater fall in the returns
per unit of investment.
132
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 9J
THE PURCHASING POWER OF THE ESTIMATED SHARE OF THE SECURITY
HOLDERS IN THE VALUE PRODUCT OF STEAM RAILWAYS, SWITCH-
ING, AND TERMINAL COMPANIES IN THE CONTINENTAL UNITED
STATES
Disbursements to security holders
Corporate savings
Calendar
year
Amount
in
dollars d
Index of
prices of
articles
consumed
by wealthy
classes"
Purchas-
ing power
in terms
of prices
of 1913 c
Amount
in
dollars**
Index of
construc-
tion costs b
Value of
construc-
tion pur-
chasable
at prices
of 1913 c
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$568
633
664
650
685
702
680
709
704
682
.973
.988
. 995
1.009
1.000
1.010
.996
1.074
1.198
1.364
$584
640
667
650
685
695
683
661
587
500
$177
171
100
88
20
—17
172
314
281
117
.927
.953
.945
.983
1.000
■ 960
.992
1.194
1 473
1.499
$191
179
105
90
20
—18
173
263
191
78
a See Table 2E, based upon families spending $25,000, each annually.
b For derivation see Table 5L, note g.
c Amount in dollars divided by the price index.
d See Table 9E.
,
CHAPTER 10
PULLMAN CAR TRANSPORTATION
§ 10a. Available Information
This adjunct of the railway industry has been covered in moderate
detail by the Interstate Commerce Commission in its statistics for each
year since 1910. The reports for dates preceding 1916 are for fiscal years;
hence, in order to reduce the information to a calendar year basis, the sim-
ple, though somewhat inaccurate, expedient of averaging the items for
the two overlapping fiscal years has been adopted. For 101(5 and later
periods, the accounts have been kept for the calendar years, and therefore
require no adjustment in this respect. No complete information for years
preceding 1911 is available, but the rough estimates shown in the accom-
panying tables have been based upon the annual financial reports of the
Pullman Company as they are quoted in Moody's Manual of Industrials
for 1919.
§ 10b. The Share of the Stockholders
Following the customary procedure, the first step is to ascertain the
total disbursements to investors of income arising from the operations of
this industry. To arrive at this figure, the receipts from other corporations
in the form of dividends or interest on funded debt have been subtracted
from the dividends paid by the Pullman Company. The amounts shown
by the reports of the Interstate Commerce Commission to have been
"carried forward to the credit of profit and loss" are regarded as net cor-
porate savings for the year. These savings, plus the net amounts dis-
bursed in the form of dividends, are assumed to represent the (Mil ire share
of the stockholders in this industry. Table 10A sets forth the tacts in this
connection.
In Table 10R the same items have been adjusted to -how the purchasing
power of the income of the stockholders if prices had remained stationary
at the level of 1913. This method gives a far clearer picture of the changes
which have actually occurred in the share under consideration, than does
a comparison of the crude money income for the various years.
A study of the two following tables shows that, while the nominal share
of the stockholders has been diminishing to a moderate degree, the fall in
the purchasing power of this share has been very marked. Although
133
134
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 10A
THE ESTIMATED a SHARE OF THE STOCKHOLDERS IN THE VALUE PROD-
UCT OF PULLMAN TRANSPORTATION IN THE CONTINENTAL UNITED
STATES
(Values in Thousands of Dollars)
A
B
C
D
. ^et
dividends
paid
B — C
E
F
Year
Gross
dividends
paid
$8,100'"'
8,875 ac
9,442 ab
9,440 «b
9,440 °-b
9,468 ab
9,501 «b
9,529 b
9,544 b
9,511''
Received
from other
companies
as dividends
or interest on
funded debt
$190 d
190 d
191 ab
196 ab
190"'-
188 ab
189 ab
ISO b
217 b
337 b
Corporate
savings e
Total share
of stockhold-
ers
D + E
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$7,910
8,685
9,251
9,244
9,250
9,280
9,312
9,349
9,297
9,207
$9,500"/
7,850 af
2,414 «b
3,126 ab
3,308 ab
2,486 «b
2,607 ab
2,174 b
3,862 b
787 b
$17,410
16,535
11,665
12,370
12,558
11,766
11,919
11,533
13,159
9,994
a Averages of the quantities for the two calendar years overlapping on the fiscal year.
b Data taken from last page of each of the respective annual Preliminary Abstracts
of Statistics of Common Carriers, Compiled by the Interstate Commerce Commission.
c Dividends as shown by Moody's Manual of Industrials multiplied by 0.965, this
being the ratio thereto, in 1911, of the amounts reported to the Interstate Commerce
Commission as paid in dividends.
d A guess based on the records for the succeeding six years.
e Entitled by the Interstate Commerce Commission "Balance Carried Forward to
Credit of Profit and Loss."
/The average surplus for 1911, 1912, and 1913 shown by the Interstate Commerce
Commission reports was 2.349 times as great as that shown by the report in Moody's
Manual of Statistics. The items in the latter report for 1909 and 1910 have therefore
been multiplied by 2.349. It is not unlikely that the results thus obtained are consider-
ably in error.
figures showing the actual investments have not been compiled, it appears
that the total amount invested in the industry has been constantly grow-
ing larger through accumulations of surplus or savings, hence the decline
in income per unit of invested resources is, necessarily, steeper than the
fall indicated by the figures recorded in the last column of Table 10B.
<*
PULLMAN CAR TRANSPORTATION
135
TABLE 10B
THE PURCHASING POWER OF THE STOCKHOLDERS' SHARE OF THE
INCOME OF THE IMLLMAN COMPANY
A
B
C
D
E
F
Index of
consl ruc-
i ion
COStS c
G
Cal-
en-
dar
year
Net divi-
dends paid
by Pullman
Company a
(Thousands)
Index of prices
of consumption
goods pur-
chased by
families spend-
ing $25,000
annually
therefor &
Purchasing
power of
dividends at
prices of
1913
(Thousands)
B
C
Corpora
savings
of Pullman
( Jompany ■<
(Thousands
Purchasing
power of cor-
porate savings
at price- (if
^ 1913
(Thousands)
E
F
1909
1910
1911
1912
1913
1914
1915
1916
1917
19 IS
$7,910
8,685
9,251
9,244
9,250
9,280
9,312
9,349
9,297
9,207
.973
.988
.995
1.000
1.000
1.010
.996
1.074
1 . 198
1.364
$8,129
8,790
9,297
9,244
9,250
9,188
9,349
8,705
7,760
6,750
$9,500
7,850
2, 1 14
3,126
3,308
2,4 sr,
2,607
2,174
3,862
7s7
.920
.962
.941
.9 17
1.000
.939
.998
1.200
1.453
1 550
S 1 1 ».326
vl 60
3,233
3,308
2,566
2,612
1.S12
2,658
.-, IS
« See Table 10 A.
b Computed by means of a special study; see Table 21'].
''Arithmetic average of indices; wages of building laborers (see § 7e), weighted 9
and the Bureau of Labor Statistics indices shown in Bulletin 269 weighted as follows:
Metals and metal products 5, Doors, Small plate glass, Window-glass, Maple (hard .
Oak (white quartered), and Lead Carbonate, each 1.
§ 10c. Share of the Employees in the Net Value Product
The next problem is to ascertain the number of the employees and the
share of the total value product which they receive. Part of the pay of
Pullman employees comes in the form of lips directly from the passengers
and hence does not appear on the records of the company. This is, never-
theless, quite evidently part of the value product of the industry, for it is
considered by everyone as part of bis expenses of travel. An estimate for
tips is therefore included here as part of the share of the employees. The
figures appear in Table IOC.
130
Till: ESTIMATE BY SOURCES OF PRODUCTION
TABLE IOC
THE ESTIMATED SHARE OF THE EMPLOYEES IN THE VALUE PRODUCT
ARISING FROM PULLMAN TRANSPORTATION
Number of
Average
Total wages
Total tips
employees at
rate of pay
paid to em-
paid to
Total share
^ ear
work on
per day for
ployees
porters h
of employees »
June 30th
employees
(Thousands)
(Thousands)
(Thousands)
1909. . . .
13,800 a
$1.65 d
$ 7,910 ffe
$2,352 ae
$10,262
1910.. . .
14,770a
1.68 d
8,820 ge
2,520 ae
11,340
1911.. . .
15,024 b
1 . 73 be
9,175/
2,563 «
11,738
1912.. . .
15,129 b
1 . 84 be
9,827/
2,724 e
12,551
1913.. . .
20,812 b
1.96 be
14,399 /
2,854 e
17,253
1914.. . .
20,1106
1.96 ^
13,914/
2,823 e
16,737
1915.. . .
19,106 b
1.94 be
13,084/
2,926 e
16,010
1916.. . .
19,894 b
2.04b
14,326/
3,053
17,379
1917.. .
19,276 be
2 . 23 b
15,174/
3,802
18.976
1918. . . .
18,985 be
3.05b
20,440/
3,883
24,323
a Assumed to vary in proportion to total revenues, using the quantities in 1911 as a
base.
b Taken from last page of each of the annual Preliminary Abstracts of Statistics of
Common Carriers, published by the Interstate Commerce Commission.
c Average of the numbers reported employed at the beginning and at the end of the
year.
d Total wages divided by total number of employees.
e Averages of the quantities for the two fiscal years overlapping on the calendar year.
/ Product of the items in the two preceding columns multiplied by 353, this figure
being the estimated number of days per year for which an employee is paid. Most of
the employees work by the month, but a minority are employed by the day.
o Assumed to vary in proportion to operating expenses, using the quantities in 1911
as a base.
h Assumed to equal 20 cents per berth passenger; number of berth passengers as
recorded in the Annual Preliminary Abstracts of Statistics of Common Carriers pub-
lished by the Interstate Commerce Commission.
» Sum of items in two preceding columns.
Table 10D combines the data of Tables 10 A and 10C and shows the
relative shares of the value products of this industry going respectively
to the employees and to the stockholders. The figures in the last column
show a rapid increase in the fraction of the value product which the em-
ployees receive as their share, the increase in 1918 being very striking.
,
PULLMAN CAR TRANSPORTATION
137
TABLE 10D
THE ESTIMATED VALUE PRODUCT ARISING FROM PULLMAN TRANS
PORTATION AND THE DIVISION OF THIS PRODUCT BETWEEN THE
EMPLOYEES AND THE STOCKHOLDERS
Thousands of dollars
Per rent of the
Year
Share of
stockholders a
Share of
employees b
Total value
product of i lii-
iiidustry
value product wing
to the employees
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$17,410
16,535
11,665
12,370
12,558
11,766
11,919
11,533
13,159
9,994
$10,262
11,340
11,738
12,551
17,253
16,737
16,010
17,379
18,976
24,323
$27,672
27,875
23,403
21,921
29,811
28,503
27,92!)
28,912
32,135
31,317
37.1
40.7
50.2
50.4
58.0
53 . 7
57.3
60.1
59.1
70 . 9
a See Table 10A.
b See Table IOC.
§ 10d. Average Annual Earnings of Employees
An increase in the relative share of the product does not necessarily
indicate an absolute gain in the average well being of the workers. Table
10E represents an effort to show whether the economic condition of the
employees in the Pullman industry has improved or grown worse during
the decade under consideration.
138
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 10E
THE ESTIMATED NUMBER OF EMPLOYEES ATTACHED TO THE PULL-
MAX INDUSTRY AND THE PURCHASING POWER OF THE AVERAGE
INCOME WHICH THEY DERIVE THEREFROM
A
B
C
D
E
F
G
H
Index of
Estimated
prices of
Average
Number
Estimated
number of
Total
Average
goods
earnings
of em-
fraction of
employees
earnings of
earnings
con-
in pur-
Year
ployees
employees
attached
employees a
per em-
sumed by
chasing
actually
actually
to indus-
(Thou-
ployee
manual
power
working a
working b
try
BtC
sands)
E ■*■ D
and
clerical
workers c
F + G
1909
13,800
.962
14,340
$10,262
$ 716
. 955
$749
1910
14.770
.982
15,040
11,340
754
.978
771
1911
15,024
.969
15,500
11,738
757
.984
770
1912
15,129
.953
15,880
12,551
790
.994
795
1913
20,812
.979
21,250
17,253
812
1.00
812
1914
20,110
.935
21,500
16,737
778
1.01
771
1915
19,100
.904
21,130
16,010
758
1.03
736
1916
19,894
.975
20,400
17,379
852
1.10
774
1917
19,276
.979
19,680
18,976
964
1.29
747
1918
18,985
.984
19,300
24,323
1,260
1.58
798
a See Table IOC.
b A rough estimate derived by means of a special study; see § 2d.
c The U. S. Bureau of Labor Statistics index carried back by means of a special
study; see Table 2C.
Table 10E makes it clear that while the Pullman employees received
a much higher average money compensation in 1918 than in 1909, the
purchasing power of their income from labor was but slightly higher at
that date than in the first year mentioned.
§ lOe. The Annual Output per Employee
Average earnings are of great importance from the standpoint of the
employees. The employer, on the other hand, is likely to view labor
largely in its relationship to production. He is interested in the amount
of work accomplished per employee hired. Apparently the best measure
of this ratio obtainable from the records of the Pullman industry is the
number of car days in proportion to the number of employees. Car days
are used instead of car miles because the Pullman employees have little to
do with moving the cars in which they work. The number of employees
actually working rather than the number attached to the industry is
chosen as a divisor, not only because the figures for the former are more
PULLMAN CAR TRANSPORTATION
139
TABLE 10F
THE RELATION OF THE NUMBER OF CAR DAYS TO THE NUMBER OF
EMPLOYEES ACTUALLY AT WORK IN THE PULLMAN INDUSTRY
a Averages of the quantities for the two fiscal years overlapping on the calendar
year.
b Data incomplete, hence no significant ratios can be computed for these years.
c Taken from the last page of each of the annual Preliminary Abstracts of Statistics
of Common Carriers, published by the Interstate Commerce Commission.
d See Table IOC.
accurate, but also because the employer pays wages only to those actually
at work.
While the output per employee varies greatly from year to year, there
appears to be no definite trend either upward or downward. One is not
justified, therefore, in concluding that the output per Pullman employee
has either increased or diminished during the eight years covered by this
study.
§ lOf. Relative Growths of Pullman Service and Population
The final inquiry in this investigation has as its end an attempt to answer
the question, "Is the Pullman service keeping pace with the growth of
population?" Table 10G throws light upon this matter. For this purpose,
car miles have been compared to population; for, apparently, the car mile
is the factor in which the public is most interested. The fact should be
noted, however, that any changes in the per capita volume of service
measured on this basis are to be ascribed as much to the railways as to the
Pullman companies, since the cooperation of both is necessary to produce
Pullman car mileage.
140
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 10G
PULLMAN CAR MILEAGE PER CAPITA IN THE CONTINENTAL
UNITED STATES
Year
Number of ear miles
(Thousands)
Population of the
United States d
(Thousands)
Car miles per
capita
1909.
a
a
641,723 6c
674,375 6c
704,341 be
700,623 6c
708,323 6c
714,9166
775,407 6
697,213 6
93,811
95,338
97,278
99,194
100,428
101,722
103,059
104,182
1910
1911.
6 84
1912.
7 07
1913
1914
1915
7.24
7.06
7 05
1916. .
7 03
1917
7 52
1918
6.69
a Information lacking; hence, no significant ratios can be computed for these years.
6 Taken from the last page of each of the annual Preliminary Abstracts of Statistics
of Common Carriers, published by the Interstate Commerce Commission.
c Averages of the quantities for the two fiscal years overlapping on the calendar year.
d Estimated by means of a special study; see § 2a.
Table 10G shows that Pullman service varies with demand and fluctu-
ates to a considerable degree. The years 1917 and 1918 showed large oscil-
lations, presumably due to war conditions. The figures as a whole, scarcely
indicate either an upward or downward trend in the amount of service
furnished per capita.
,
CHAPTER 11
EXPRESS COMPANIES
§ 11a. Introduction
A very good annual report entitled "Statistics of Express Companies"
is published by the Interstate Commerce Commission. This report makes
it possible to obtain a fairly complete and accurate statement of the amount
and distribution of the value product of this branch of industry.
§ lib. Disbursements to Security Holders and Building Owners
The withdrawals from the Express business by entrepreneurs and inves-
tors consist of dividends and bond interest. Owners of buildings obtain a
considerable revenue from the rent of those buildings which are devoted
to the Express business. These items together constitute the value with-
drawals going to entrepreneurs and other property owners.
The dividends and interest received by security holders in Express Com-
panies originate to no small degree in dividends and interest on bonds paid
to the Express Companies by other corporations. For the reasons set
forth in § 9b, the Express Companies must be thought of merely as
agents who pass this income along to the final recipients. Table 11A has
been constructed on this basis. It reveals the great irregularity in the
amounts paid as bond interest or dividends and shows the rapid decline
during the decade in the total disbursements to the security holders.
§ lie. Total Share of Security Holders and Building Owners
The share of the security holders and other property owners in the cur-
rent income consists of receipts in hand plus corporate savings. Table 1 1 B
shows that, during seven years out of the ten, the corporations diminished
their assets, — in other words, part or all of the dividends declared wen 4
paid out of past savings rather than from current earnings. In 101S, the
deficit became far larger than the total withdrawals, the propertied classes
losing during the year on their Express Company interests ^14,003,000.
In order to make the magnitude of the various sums show the change-;
in the ability of the propertied classes to buy consumption goods with that
part of their income received from Express Companies in the various years,
each item has been divided by a price index representing the approximate
HI
142
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 11A
DISBURSEMENTS TO ENTREPRENEURS AND OTHER PROPERTY OWNERS
OF VALUE PRODUCT ORIGINATING IN THE EXPRESS INDUSTRY
Values in Thousands of Dollars
Year
Total
dividends «
and bond
interest paid
by Express
Companies
Dividends
and bond
interest
received by
Express Com-
panies from
other cor-
porations
$3,417 c
4,233 d
4,689 <-
4,522/
4,095 a
3,203 h
3,134 i
3,677/
3,722/
1,405 k
Dividends
and bond
interest
originating
in Express
industry "
$17,101
20,132
7,027
3,938
3,403
2,244
3,456
12,387
1,254
747
Rents paid
for use of
offices b
Total with-
drawals by
entrepreneurs
and other
property
owners
1909'"
1910'"
1911 w. . . .
1912"'. . . .
1913'"
1914'". .. .
1915'". .. .
1916
1917
1918
$20,518 e
24,365 d
11,716 r
8,460/
7,501 g
5,452 h
6,590 i
16,064/
4,976/
2,152 A-
$1,567 c
1,641 d
1,771 «
1,949/
2,066 a
2,093 h
2,080 i
2,127/
2,264/
2,435 *
$18,668
21,773
8,798
5,887
5,472
4,337
5,536
14,514
3,518
3,182
a Paid either from current income or surplus.
1> The amount here entered is 70 per cent of the amount paid by the Express Com-
panies, the assumption being that only this fraction accrues as net rent to the owners
of the offices, the rest being necessary to cover depreciation, repairs, etc.
E. = Annual Report on the Statistics of Express Companies, by the Interstate Com-
merce Commission.
c E. for 1910, pp. 15 and 26. h E. for 1914, pp. 13 and 21.
13 and 23. * E. for 1915-16, pp. 11, 12 and 17.
13 and 23. i E. for 1916-17, pp. 11, 12 and 17.
13 and 23. *= E. for 1918, pp. 11, 13, and 15.
13 and 21.
m Each of the quantities stated is half of the sum for the two fiscal years which
overlap on the given calendar year.
" Excess of items in second column over those in third.
d E. for 1911, pp.
e E. for 1912, pp.
/E. for 1913, pp.
o E. for 1914, pp.
average relative prices of consumption goods purchased at each date by
the wealthier classes of the population of the United States.
S
EXPRESS COMPANIES
143
TABLE 11B
TOTAL SHARE OF ENTREPRENEURS AND OTHER PROPERTY OWNERS
IN THE VALUE PRODUCT OF THE EXPRESS INDUSTRY
(AMOUNTS WITHDRAWN, PLUS CORPORATE SAVINGS
A
B
C
1)
E
F
G
H
Value in
thousands of dollars
Values in
thousands
at
die given date
Index of
prices of
Index of
at prices
of 1913 'i
Amounts
Year
Amounts
goods
whole-
dis-
disbursed
Cor-
consumed
sale
bursed
Corporate
Total
to
porate
by
prices'
to
savings
share
property
savings 6
wealthy
families
property
D -J- F
owners a
owners
C +■ E
1909 c . .
$15,698
$18,668
—$2,970
. 973
07
$19,186
—83,062
1910c . .
14,895
21,773
— 6,s;s
.988
.99
22,(137
— 6,947
1911c . .
11,054
8,798
2,256
995
95
8,842
2,375
1912c . .
7,983
5,887
2,096
1 000
1.01
5,887
2.075
1913 c . .
4,816
5,472
— 656
1.000
1.00
5,172
— 656
1914c . .
3,830
4,337
— 507
1.010
1.00
1,294
— 1,507
1915 c . .
8,692
5,536
3,156
.996
1.01
5,558
3,125
1916....
10,957
I 1.514
— 3,557
1 071
121
13, 514
— 2,869
1917...
2,162
3,518
— 1,356
1 198
1 . 76
2.937
— 770
1918....
-14,003
3,182
-17,185
1 364
1.96
2,333
— 8,768
a See Table 11 A, last column.
b Includes "Income appropriations for investment in physical property" plus " Bal-
ance transferred to profit and loss" minus "Dividend appropriations of surplus." For
data, see the "Income" and "Profit and Loss" accounts in the various Annual Re-
ports by the Interstate Commerce Commission, on The Statistic* <>f Express Compa
c Each of the quantities stated is half of the sum for the two fiscal years which overlap
on the given calendar year.
d Money values divided by the respective price indices.
e U. S. Bureau of Labor Statistics, Bulletin 269, on Wholesale Prices, p. 15.
§ lid. The Share of the Employees
Table 11C indicates the amount of the value product of each year going
to employees. This consists largely of wages and salaries, but there is
included an important item entitled "Commissions." The auditor of tin-
American Railway Express Company states that practically all of this
amount is paid to railway agents at small stations as compensation for
their efforts in handling Express business. It has been arbitrarily assumed
that 70 per cent of the amount paid by Express Companies for "Injuries
to Persons" reaches the pockets of employees. The amount is too -mall
to be of moment. Similarly, there is included the trivial item of "Pen-
sions." The combination of the above items gives the estimated total share
of the employees.
144
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 11C
THE SHARE OF THE EMPLOYEES IN THE TOTAL VALUE PRODUCT OF
THE EXPRESS INDUSTRY
(Values in Thousands of Dollars)
A
B
C
D
E
F
G
H
I
Total
Index of
prices of
goods
bought by
manual
and
clerical
workers d
Share of
Indem-
compen-
Total
employ-
Year
Wages
and
salaries a
nity for
person-
al in-
Pen-
sions a
sation
to full
time em-
Com-
mis-
sions a
share of
em-
ployees
ees at
price
level of
juries ob
ployees
E+F
1913
B+C+D
$6,922
G - H
1909 C
$36,230
$104
$125
$36,459
$43,381
.955
$45,425
1910 c
39,238
134
135
39,507
7,489
46,996
.978
48,053
1911 c
42,445
146
151
42,742
7,906
50,648
.984
51,472
1912 c
45,710
151
164
46,025
8,173
54,198
.994
54,525
1913 c
46,774
172
181
47,127
7,988
55,115
1.000
55,115
1914c
43,926
190
209
44,325
7,320
51,645
1.01
51,134
1915 c
44,510
200
245
44,955
7,421
52,376
1.03
50,850
1916
52,345
238
275
52,858
8,502
61,360
1.10
55,796
1917
64,356
312
310
64,978
. 9,382
74,360
1.29
57,643
1918
82,437
449
317
83,203
10,240
93,443
1.58
59,141
a All data taken from the "Analyses of Operating Expenses" in the Annual Reports
by the Interstate Commerce Commission on The Statistics of Express Companies.
b 70 per cent of payments made by Express Companies.
c Each of the quantities stated is half of the sum for the two fiscal years which over-
lap on the given calendar year.
d U. S. Bureau of Labor Statistics index carried back by this Bureau. For details
see Table 2C.
Table 11C shows that, while the share of the property owners has been
diminishing, labor has been getting an increasing absolute share in the
product of the Express industry. Since the number of employees is not
recorded, there is no way of determining accurately whether the compen-
sation per employee has increased or diminished during the decade.
§ lie. The Total Net Value Product and Its Distribution
In Table 11D appears an estimate of the entire value product of the
Express industry. To the shares of the propertied classes and of the em-
ployees has been added a small item entitled "Uncollectible Revenue
from Transportation." This has been done because the value received by
the shipper in such cases is evidently a part of his income and also a part
of the product of the Express industry; although it does not accrue to
either the Express Companies or their employees. However, the amount
is too small to be of consequence.
EXPRESS COMPANIES
TABLE 11D
145
THE ESTIMATED NET VALUE PRODUCT PER CAPITA OF THE EXPRESS
INDUSTRY IN THE CONTINENTAL EXITED STATES AND THE PER
CENT OF THE NET PRODUCT GOING TO THE EMPLOYEES
A
B
C
D
E
F
G
II
I
J
(A
mounts in
.housands)
Per capita
Uncol-
of value
Population
Value
product
Share of
lectible
Total
product
of United
product
Index of
at prices
entrepre-
Share of
charges
value
going to
States/
per
prices of
of Express
neurs and
employees^
for
product of
em-
(Thou-
capita
Express
service
other
trans-
industry
ployees
sands)
E-f-G
service
in 1913
property
porta-
B+C+D
C-^E
100 H
owners b
tion
I
1909«
$15,698
$43,381
$20 e
$59,099
73.4
90,370
$0.65
100.0
$0.65
1910«
14,895
46,996
20 *
61,911
75.9
92,229
.67
100.0
.67
1911a
11,054
50,648
20 '
61,722
82 1
93,811
.66
100.0
.66
1912a
7,983
54,198
20 e
62,201
S7.1
95,338
.65
100.0
.65
1913a
4,816
55,115
20 «
59,951
91.9
97,278
.62
100.0
.62
1914a
3,830
51,645
20 d
55,495
93.1
99,194
.56
100.0
.56
1915a
8,692
52,376
28 d
61,096
85.7
100,428
.61
89.5
us
1916
10,957
61,360
11 d
72,358
84.8
101,722
.71
89 5
.79
1917
2,162
74,360
71 d
76,593
97.1
103,059
.74
89.5
.83
1918
-14,003
93,443
76 d
79,516
117.5
104,182
.76
98.6
.77
a Each of the quantities stated is half of the sum for those two fiscal years which
overlap on the given calendar year.
& See Table 11B.
e See Table 11C.
d From Income Accounts in Annual Reports of the Interstate Commerce Commis-
sion on the Statistics of Express Companies.
e Assumed same as in 1914.
/ See Table 2A.
a Roughlv estimated from the Reports of the Interstate Commerce Commission, Vol.
XXXV, p. 6, and Vol. L, p. 385.
The conclusion to be drawn from Table 11D is that during the decade
the amount of service rendered by the Express Companies has more than
kept pace with the growth of population. The index of prices of Express
service is based on very poor data and hence the figures in the last column
of Table 11D are not accurate. However, it seems probable that the broad
conclusion just stated accords with the facts.
Column F of the table shows that the relative share of labor in the value
product of the industry increased greatly, until, in 1918, it absorbed not
only the entire value product but also fourteen millions of dollars from the
assets which the companies had accumulated in past years. This means
that it was necessary to draw upon the value products of other industries
in order to obtain sufficient income to pay the employees for the work
done in carrying on the Express business. This draft on other industries
was possible because the Express Companies had in former years accumu-
lated large surpluses mainly in the form of investments, or, in other words,
146 THE ESTIMATE BY SOURCES OF PRODUCTION
claims to assets employed in other fields. Stocks and bonds of outside cor-
porations are examples of such claims. Such securities can, of course, be
readily sold and the money thus obtained may be used to meet current-
expenses.
§ llf. The Number of Employees
As previously mentioned, no record has been found of the number of
employees engaged in this field of work, yet it is essential for the general
purposes of this study that the number be estimated. The United States
Bureau of Labor Statistics in its bulletins on The Union Scales of Wages
and Hours of Labor gives rates for teamsters in all sections of the country.
The Interstate Commerce Commission, in its Statistics of Railways,
presents figures which enable one to compute the average salaries for
office workers from year to year. It has been assumed that a combination
of the rates for teamsters and office workers, 1 giving the former twice the
weight of the latter, might represent fairly well the average earnings of
Express employees for full time work. Before 1913, only the railway data
are available, hence the average has been carried back for earlier years
in proportion to the variations in those figures only. The results of this
computation are presented in Table HE.
The average fraction of those employees attached to the industry who
were at work in the various years has been assumed to be very similar to
that calculated as representing the railway workers. Certain adjustments
have been made in order to make the fractions conform to the idea that
the number of persons attached to any industry normally tends to vary
along a smooth curve rather than in an irregular fashion. Table HE
shows the estimates which have been arrived at. This completes the usual
list of inquiries in so far as the nature of the available data will permit.
1 Office workers include division officers, clerks, and station agents, masters, and employees.
,
express companies
147
TABLE HE
AN ESTIMATE OF THE NUMBER OK PERSONS NORMALLY DEPENDENT
FOR A LIVIN( I UP< )N EM PLOYM ENT WITH THE ENPK 1 ■:>> COM PA N I ES
OF THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
Calendar
year
Total wages
and salaries
paid«
(Thousands)
Estimated
average an-
nual full-time
money wa<je '>
Estimated
average
number of
employees
actually
at work
B - C
Estimated
fraction of
those attached
to industry
actually at
\vi >rk c
Estimated
number of
employees
attached to
industrv
D -i- E
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$36,230
39,238
42,445
45.710
46,774
43,926
44,510
52,345
64,356
82,437
$640
635
663
670
6S4
698
699
728
770
938
56,609
61,900
64,020
68,224
68,383
(53,648
63,678
71,902
v;.579
87,sm->
.963
.985
.963
.9S5
.968
.887
.869
.94S
.989
. 989
5S,7S4
62,800
66,430
69,263
70,611
71,756
73,277
75,845
si. 509
88,863
a See Table 11C, Column B.
b For mode of derivation, see text.
c Derived by a special study described in Sec. 2d.
CHAPTER 12
STREET AND ELECTRIC RAILWAYS
§ 12a. Census Data Available
The task of estimating the value product of the street and electric rail-
ways of the country is made relatively easy by the existence of three Cen-
suses taken in 1907, 1912, and 1917 respectively. These Censuses seem
very complete and give most of the information in the form necessary for
this study.
§ 12b. Share of Security Holders and Other Property Owners
In the Census of Electric Railways, the term "gross income" means the
amount remaining from the entire income after operating expenses and
taxes have been paid. Since it is evident that practically all the value
product of this industry must arise from the activities of operating com-
panies only, the gross income of this class of companies is taken as a start-
ing point. From this sum, however, must be deducted a number of items
before arriving at the amounts available for disbursement to security
holders or as payment for leased property. These items may be enumer-
ated as follows: —
1. Income received as dividends or interest on the bonds of other corpo-
rations. Such amounts must be deducted because, under the plan of pro-
cedure determined upon, they are counted in the value product of the
industry in which the paying corporation is engaged.
2. Taxes and expenses of lessor street railway companies. These
amounts are deducted because they do not go to investors in street rail-
ways.
3. Interest on unfunded debt, This is presumably paid mostly to banks
and will be considered in their income when dealing with that field.
4. Miscellaneous debits. Items under this head are stated by the Cen-
sus to consist mainly of taxes on securities, losses incurred, etc. These
items evidently are deductions from the amounts going to investors in the
street railway field.
Table 12A shows the net results of these calculations for the Census
years.
148
STREET AND ELECTRIC RAILWAYS
149
TABLE 12A
THE SHARE OF SECURITY AND PROPERTY OWNERS IX THE NET VALUE
PRODUCT OF THE STREET AND ELECTRIC RAILWAYS OF THE CON
TINENTAL UNITED STATES IN Till. CENSUS YEARS
(Values in Thousands of Dollars )
a See text for description.
b U. S. Census of Street and Electric Railways for 1917, pp. 13-14.
c U. S. Census of Street and Electric Railways for 1907, pp. 123-125; 142.
d U. S. Census of Street and Electric Railways for 1912, pp. 236; 245; 250.
« U. S. Census of Street and Electric Railways for 1917, pp. 1 I; 7s; 83.
/The interest on the unfunded debt was estimated at 9.9' ' of all interest, this being
an average of the percentages for 1907 and 1917. The estimated amount for 1912 was
9,710 thousands of dollars.
The interpolation of the share of entrepreneurs and other property
owners for the intercensal years is shown in Table 12B. It is based upon
the assumption that changes in the net share are proportionate to changes
in the net operating revenue of the companies. Since the two quantities
are so nearly identical, the error from this assumption is certain to be
slight.
The figures for net operating revenue for intercensal years since 1913
are taken from the estimates made by the Deputy Public Service Com-
missioner of New York. These estimates are said to have been made after
extensive investigation. For the years 1909 to 1913 inclusive, he presents
no information; hence use has been made of a compilation of the data
shown in the annual reports of a number of the leading street railways
of the United States.
It is believed that the final estimates derived in the manner just stated
are close to the truth and are sufficiently accurate for all practical pur-
poses. The figures appear in Table 12B.
150
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 12B
THE ESTIMATED AGGREGATE OF THE INTEREST, RENT, DIVIDENDS,
AND SAVINGS OF THE STREET AND ELECTRIC RAILWAYS OF THE
CONTINENTAL UNITED STATES
(Values in Thousands of Dollars)
A
B
C
Interest,
divi-
dends.
and sur-
plus of
28 typi-
cal com-
panies b
$45,855
52,189
55,310
58,150
61,430
D
E
F
G
Ratio of
F toE
H
Year
Net
operating
revenue
of all
com-
panies;
census
figures a
Ratio of
B toC
Estimated
net
operating
revenue
BX D
Sum of
interest
dividends
rent and
surplus;
Census
years /
Estimated
sum of in-
terest
dividends
rent and
surplus
EX G
1907. . . .
1909. . . .
1910.. . .
1911.. ..
1912. . . .
1913.. ..
1914.. . .
1916.. . .
1917.. . .
1918. . . .
$166,879
234,615
257,230
3.639c
3.71.V
3.748d
3 . 785 d
3.819c
$166,879 a
193,900
207,300
220,100
234,615 «
239,138 c
243,661 e
248,185 «
252,707 c
257,230 a
155,669*
$132,138
188,885
2)5,159
.792 c
.799?
.801?
.8049
.805 c
.805fl
.804ff
.802(7
.803!/
.793 c
.791'/
$132,138/
154,800
166,100
177,000
18S.885/
192,400
195,900
199,100
202,100
205,159/
123,630
a U. S. Census of Street and Electric Railways, for 1917, pp. 13-14.
b Computed from data appearing in Poor's and Moody's Manual of Statistics.
c Computed.
d Interpolated along a straight line.
e Estimated by Alfred M. Barrett, Public Service Commissioner of New York. See
Annalist, Jan. 5, 1920, p. 22.
/See Table 12 A.
g Read from a smooth curve.
§ 12c. Share of the Employees
The Census reports separately wages and salaries for the different
Census years, but it is stated that the distinctions between the two have
perhaps changed somewhat and hence are of little value. For this reason,
both are here combined. Since data for the intercensal years 1909, 1910,
and 1911 are unavailable, estimates for those years have been made on
the assumption that wages have varied along a smooth curve. In an indus-
try as stable as that of street railways, and in a period characterized by
no radical changes, this method should be fairly accurate. For the later
years, the estimates of wages used are those furnished by Public Service
Commissioner Barrett, and by the statistician of the American Electric
Railway Association. Table 12C sets forth the evidence as it appears.
STREET AND ELECTRIC RAILWAYS
151
TABLE 12C
THE ESTIMATED DIVISION OF THE VALUE PRODUCT OF THE STREET
AND ELECTRIC RAILWAYS OF THE CONTINENTAL EXITED STATES
(Values in Thousands of Dollars)
Per cent of
Wages and
salaries paid
Rents, interest,
Total value
value product
Year
dividends,
and surplus A
product of
industry »
going to
employees, as
wages and salaries
1907
$150,991 a
$132,138
283,129
53.3
1909
170,900/
154,800
325,700
52.5
1910
180,960/
166,100
347,060
52.1
1911
191,400/
177,001)
368,400
52 .
1912
200,891 a
188,885
3S9.776
51.5
1913
213,950 a
192,400
406,350
52.7
1914
223,930 cb
195,900
419,830
53.3
1915
222,220 cb
199,100
421,320
52.7
1916
242,250*
202,100
444,350
54.5
1917
267,240 a
205,159
172,399
56.6
1918
313,749 c
123,600
137,349
71.7
a U. S. Census of Street ami Ehclrir Railu-n/s for 1917, p. 13.
b Estimated from Aera, on basis of percentage change in cost of conducting trans-
portation.
c Aera, Mar. 1917, p. 925.
d Aera, Mar. 1918, p. 795.
e Estimated. in Aera, Aug. 1919, pp. 47-52.
/ Interpolated along a smooth curve
a Assumed to varv in proportion to operating expenses: see Barrett, Alfred M.,
Annalist, Jan. 5, 1920, p. 22.
h See Table 12B.
* Sum of two preceding columns.
§ 12d. Corporate Savings
Table 12C shows that, at the close of the period studied, there was a
great increase in the share of the employees as contra ited with ;i sharp
contraction in the share of property. As a rule, the corporate owners
reserve a certain proportion of earnings as savings or "surplus." In l'.HS.
however, the surplus disappeared and part of the distribution to stock
and bond holders was made out of previous savings.
The estimates of the surplus for other years than those covered by the
Census are interpolated on the basis of the reported surpluses of the
twenty-eight representative companies previously mentioned and of the
estimates of Public Service Commissioner Barrett. The figures appear in
Table 12D.
They show that the percentage of corporate 1 earnings saved fell sharply
after 1911, but that about one-twentieth of the income was saved up to
152
THE ESTIMATE BY SOURCES OF PRODUCTION
1918, when a deficit occurred about equal to the savings of a normal year
in the decade.
TABLE 12D
THE ESTIMATED CORPORATE SAVINGS OF THE STREET AND ELECTRIC
RAILWAY COMPANIES OF THE CONTINENTAL UNITED STATES
(Values in Thousands of Dollars)
A
B
C
D
E
F
G
Year
Surplus of
all com-
panies in
census
years a
Surplus of
28 typical
companies b
Ratio of
B toC
Estimated
savings of
all com-
panies
CXD
Total
share of
entre-
preneurs
and
property /
Per cent of
share of en-
trepreneurs
and prop-
erty owners
saved
by corpo-
rations, as
surplus
E -S--F
1907 . . .
1909 . . .
1910
1911. . .
1912. . .
1913. . .
1914. . .
1915. . .
1916. . .
1917. . .
1918. . .
$14,303
16,663
8,506
$7,038
7,261
8,968
9,117
9,550
6,392
2.032c
1 . 920 d
1 861 d
1.801d
1 745 c
1.686**
814,303 a
13,940
16,690
16.420
16,663 a
10,770
13,300 e
11,700 «
10,000 e
8,506 o
-12,100 «
$132,138
154,800
166,100
177,000
iss.ssr,
192,403
195,900
199,100
202,100
2D5.159
123,600
10.8
9.0
10.0
9.3
8.8
5.6
6.8
5.9
4.9
4.1
—9.8
a U. S. Census of Street and Electric Railways, 1917, p. 14.
b Compiled from Poor's and Moody's Manuals.
c Computed.
d Interpolated along a straight line.
f Adjusted slightly to include surplus of lessor companies, but primarily the estimates
of Alfred M. Barrett, in the Annalist, Jan. 5, 1920, p. 22.
/ See Table 12B.
§ 12e. Average Annual Earning of Employees
The next question of interest is whether the average annual earnings of
the employees attached to the industry are, in general, growing larger or
smaller as the years pass. Since the purchasing power of the dollar has
changed so greatly during the decade, it is also essential that the nominal
money wage received by the average employee attached to the industry be
divided by a suitable price index in order to ascertain the relative amount^
which the various money payments would purchase on the dates when they
were made. These two processes have been carried out in Table 12E.
S
STREET AND ELECTRIC RAILWAYS
153
TABLE 12E
THE AVERAGE NUMBER OF KLECTRIC RAILWAY EMPLOYEES AND THE
AVERAGE ANNUAL PAY WHICH THEY RECEIVE FROM THE EMPLOY-
ING COMPANIES
A
B
C
D
E
F
G
II
Year
Estimated
average
number of
employees
actually
at work/
1 Istimated
fraction of
full time
worked on
the average''
Estimated
number of
employees
at taehed to
industry
B-HC
Estimated
total wa ■
ami salaries "
(Thousands)
Average
money
earnings
per year ''
EvD
Average
price index
of goods
consumed
by manual
and clerical
workers e
Purchasing
power of
annual
earnings at
prices oi
1913
F-hG
1907
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
221,429(7
251,800/
266,100/
273,600/
282,461 a
284,100/
278,200 /
276,000 /
292,300 /
294,826 o
292,400/
.987
.968
.977
.970
.978
.971
. 942
.929
.982
.986
.977
224,300 b
260,000 c
272,200 e
282,000 e
289,000 6
292,500 c
295,000 e
296,700 c
298,000 c
299,0006
299,700 c
SI 70,900
180,960
1! 11, 400
200,891
213,950
223,930
222,220
242,250
2i '.7, 2 J n
313,749
S657
665
679
695
731
759
749
813
VI 1
1047
95 5
97 8
98 1
99 1
100.
101.
103.
110.
129.
i:.s
$688
680
690
699
731
751
727
739
693
663
a See Table 12C.
b Equals B -=- C.
c Read from a smooth curve.
d Derived by means of a special study; se s § 2d.
e Bureau of Labor index for middle of year, c intinued back from 1913 to 1999 by
special investigation by this Bureau; see Table 2C.
/ Equals C X D.
o U. S. Census of Electric Railways, 1917, p. 13.
The fractions which have been estimated as representing the propor-
tions of those normally employed, who are at work, are based upon rather
slender evidence. Probably, however, they do not diverge far from the
truth. Their derivation is described in Chapter 2.
The results of the computations recorded in Table 12E show a distinct
increase in the purchasing power of earnings during the first half of the
decade and an equally distinct decline from 1914 to 1918. The conclu-
sion must be that, during the latter period, either the employee- grew
worse off economically, or else there was a lowering in the grade of labor
employed.
§ 12f. Purchasing Power of Share of Security Holders and Property
Owners
It seems probable, then, that the employees were not quite as well off in
1918 as in 1909, but how about the investors? Owing to the variations in
154
THE ESTIMATE BY SOURCES OF PRODUCTION
the price level, a mere statement of the number of dollars which the latter
received throws but little light upon the question. It is essential that the
amounts in money be reduced to a basis of purchasing power, if an intelli-
gent answer is to be given. This has been done in Table 12F. The price
index used for the correction represents approximately the changes in the
value of consumption goods used by the wealthy, since the majority of the
stock in most corporations is held by persons having large incomes.
TABLE 12F
THE PURCHASING POWER OF THE BUSINESS SAVINGS AND OF THE
DISBURSEMENTS MADE TO THE PROPERTY OWNERS FROM THE
NET VALUE PRODUCT OF THE STREET AND ELECTRIC RAILWAY
INDUSTRY
(Values in Thousands of Dollars)
Corporate savings
Bond interest, dividends, and rent
Year
Actual
value b
Index of
construc-
tion costs a
Value at
prices of
1913 «
Actual
amount
paidc
Index of
prices of
articles used
by families
spending
$25,000
annually d
Value at
prices of
1913 e
1909 . .
1910 . .
1911 .
1912 . .
1913 .
1914 . .
1915 . .
1916 ..
1917 ..
1918 . .
$13,940
16,690
16,420
16,663
10,770
13,300
11,700
10,000
8,506
—12,100
.927
.953
.945
.983
1.000
.960
.992
1.194
1.473
1.499
$15,038
17,513
17,376
16,951
10,770
13,852
11,794
8,375
5,775
-8,067
$140,860
149,410
160,580
172,222
181,630
182,600
187,400
192,100
196,653
135,700
.973
.988
.995
1.000
1.000
1.010
.996
1.074
1.198
1.364
$144,769
151,225
161,387
172,222
181,630
ISO, 792
188,152
178,864
164,151
99,487
a Data derived from reports of the United States Bureau of Labor Statistics. Weights
used: Building labor 3, metals and implements 2, building materials 1.
b See Table 12D.
c Entire share of propertied classes less corporate savings; see Table 12B.
d Derived by a special study; see Table 2E.
e Obtained by dividing the money values by the price index.
Table 12F shows how very sharp has been the fall in the purchasing
power of the income of the investors in street railways. Much more calcu-
lation is necessary to ascertain the decline in the real earnings per dollar
invested. However, it seems quite certain that the investment has been
all the time increasing rather than diminishing; hence it is evident, that
from 1910 to 1918, street railway securities were constantly giving poorer
and poorer returns on the investment.
STREET AND ELECTRIC RAILWAYS
155
§ 12g. The Average Output per Employee
Another query of interest is whether the output per employee has been
increasing or diminishing during the decade under discussion. An increase
in output might he due either to greater efficiency in management, better
equipment, or greater skill or effort on the part of the employees. At
present, only the facts and not the causes will be considered. The best
measure of output is believed to be the car mile, which also seems to repre-
sent the best criterion of service rendered by the company. Cars have
changed only moderately in size during the decade under discussion but
there has apparently been some increase in capacity and it is not certain
that the number of passengers crowded into a car may not have varied
greatly. No record of seat miles is obtainable; hence the car mile is used
as the nearest approximation to this ideal measure of service rendered.
Table 12G shows roughly the facts both as to service per employee and
service rendered per capita for the population of the Continental United
States.
TABLE 12G
THE ESTIMATED NUMBER OF REVENUE CAR MILES PER EMPLOYEE
AND PER CAPITA FOR THE STREET AND ELECTRIC RAILWAYS OF
THE CONTINENTAL UNITED STATES
Year
Revenue car
miles
(Thousands)
1,617,731a
Number of
employees
actually
at work/
Revenue car
miles per
employee
Population of
Continental
Unit <-i 1 States ■>
(Thousands)
87,321 «
Revenue car
miles per
inhabitant
of the
United States
1907
221,429
7,303
IS. 53
1909
1,725,000 b
251,800
6,851
90,370
19.09
1910
1,785,0006
266,100
6,708
92,229
19.35
1911
1,845,000 6
273,600
6,743
93,811
19.67
1912
1,921,620 a
282,461
6,803
95,338
20.16
1913
_'.il()0,0006
28 1.100
7,040
97,278
20.56
1914
2,068,000 c
278,200
7.!:'.!
99,194
20.85
1915
2,022,00 1
276,000
7,326
100,428
20 13
1916
2,1 10,000 d
292,300
7,219
101,722
20 7 1
1917
2,139,802 a
294,826
7,258
103,059
20 76
1918
2,051,356 '
292,400
7,013
104,182
r.i 69
a Census of Electric Railways, 1017, pp. 12-13.
6 Roughly estimated by aid of a smooth curve.
c Estimated from tallies in Aera, March, 1917, p. 925.
d Estimated from tables in Aera, March, 1918, p. 796.
e Estimated from records of 345 companies; see Aera, Aug 1919, p. 17.
/See Table L2E.
g Figures derived from a special study; see § 2a.
' Statistical Abstract of the U. S., 1918, p. 776.
156 THE ESTIMATE BY SOURCES OF PRODUCTION
Tabic 12G indicates that the output per employee declined noticeably
from 1907 to 1910, that, after that date, it varied irregularly, but in
most years did not differ greatly from the 1907 rate. Since cars have
probably increased somewhat in size it is not unlikely that the passenger
miles per employee were greater in number in 1918 than in 1907. As to
the effort involved in moving a car a mile, it may be noted that it has been
affected by several varying forces. Larger cars require more work in
collecting fares but improved devices lessen the physical work of manipu-
lating the machinery. The car mile may then perhaps be a fairly satis-
factory gauge of work performed, even though conditions have changed
somewhat during the period studied.
§ 12h. Relative Growths of Street Car Service and National Population
The last column of the table shows that up to 1914 street railway ser-
vice was growing faster than population but that since that date the two
rates of growth have been about equal, with an actual decline occurring in
1918 in the car mileage per capita. This change in the amount of service
per person in the United States has doubtless been the result of several
independent forces acting simultaneously. The chief force tending to send
the per capita amount of service upward is the relatively rapid growth
of the urban as compared to the rural population. This tends to increase
the average street car patronage among the general population, for, as
cities grow larger, not only must a larger percentage of their inhabitants
ride to work, but also each person who rides must, on the average, travel
more miles to reach the business district.
Two forces acting in the opposite direction which have been especially
potent in restricting traffic since 1914 are the increase in the automobile-
owning percentage of the population and the competition of automobile
busses with the street railways. During the period since 1917, the growth
of street railway traffic has been further hampered by the fact that exten-
sions could not readily be financed because of low net income arising from
fixed rates of fare and higher costs of operation. In 1918, a further re-
stricting factor of some moment was the difficulty of obtaining sufficient
employees to keep the service in full operation.
Despite the decline in service occurring at the close of the recorded
period, it seems probable that the car mileage per capita may again
increase at a rate similar to that prevailing before 1915. The actual in-
crease during the decade in service is probably slightly greater than the
figures show, for it is presumably true that the average seating capacity
of cars has grown somewhat in the interim.
S
CHAPTER 13
PRIVATE ELECTRIC LIGHT AND POWER COMPANIES
§ 13a. The Census Data
The Census Bureau secures records from electric light and power com-
panies at five year intervals. Censuses were taken in 1907, 1912, and 1917. l
This spacing of time is such that estimates for each year of the period under
consideration can be made with a reasonable degree of accuracy. The
Census data, of course, were not collect ed with a view to answering the
questions brought forward in our particular inquiry and hence are not
entirely adapted to our needs. It is believed, however, that the official
figures afford a basis for estimates that serve the present purpose fairly
well.
The methods of interpolation used, of course, give only approximation-:
but, owing to the advantageous location of the Census dates, it is not
likely that they have given rise to errors of any moment.
There are doubtless certain inaccuracies in the amounts recorded for
the Census years themselves. For example, some rent and some interest
on short time loans are doubtless paid to individuals, and employees
receive some recompense for injuries. Presumably, however, all of these
amounts are quite small. On the whole, it is believed that the figures
shown in the study approximate the facts rather closely.
The way in which the Census figures have been used is shown in Tabic
13 A.
Certain explanations are necessary concerning the nature of some of the
items in Table 13A. For the reasons stated in Section 9b, income received
as interest or dividends from other companies is not included in the value
product of this industry. The income from operations less expense's
should give the gain which is to be distributed among the owners of the
plants. Interest paid to bondholders is included among "Expenses."
To arrive at the gains of all investors, this item should be added to the
dividends paid from operating receipts.
The Census records small payments for damages and legal expenses.
Evidently, money paid for land- flooded or property destroyed represents
'Professor Edniond E. Lincoln of Harvard University, who has turn in charge of this
part of the Census, has kindly criticised the results here presented. While he cannot be
held responsible for the estimates given, bis suggestions were must helpful and the report
has been materially improved by their incorporation.
157
158
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 13A
THE CENSUS FIGURES FOR THE ITEMS COMPOSING THE NET VALUE
PRODUCT OF PRIVATE ELECTRIC LIGHT AND POWER PLANTS IN
THE CONTINENTAL UNITED STATES
Millions of dollars
Item
Census of
1907
1912
1917
Gross Income from Operation
Total Expenses d
$159.7 a
123.0*
$274 . b
216.0/
$477 . 8 c
391. Off
Net Profits from Operation
$ 36.7
$ 58.0
$ 86.8"
Payments to Employees:'
$21.2''
10.7''
$33 . ''
22 . 6 >*
$52 0^
34.4''
Total
Payments to Investors : i
Interest on Funded Debt. .
$31.9
26.8*
$55.6
$58.0
40.5'
$86.4
$86.9
61.0 m
Total
$63 . 5
$98 . 5
$147.9
Total Value Product of Industry. . . .
$95.4
$154.1
$234.3
Per cent of Value Product Received
by Employees
33.4
36.1
36.9
« U. S. Census of Central Electric Light, and Power Stations, 1907, p. 159. In 1912
33.4 per cent of "All Other Income" was from investments. The same percentage (or
$1,880,000), has been deducted in 1907.
b U. S. Census of Central Elec. Light and Power Stations, 1912, p. 89.
c U. S. Census of Central Elec. Light and Power Stations, 1917, p. 155; interest and
dividends from investments excluded.
d Excludes sinking and reserve funds.
« In 1912, sinking and reserve funds constituted 1.69 per cent of miscellaneous ex-
penses, hence 1.69 per cent of the 1907 miscellaneous expenses, or $834,000 have been
deducted.
/ U. S. Census of Central Elec. Light and Power Stations, 1912, p. 95.
o U. S. Census of Central Elec. Light and Power Stations, 1917, pp. 160-161.
h U. S. Census of Central Elec. Light and Power Stations, 1917, p. 120.
* There should be included here any amounts paid to employees as compensation for
injuries. Professor Edmond E. Lincoln, special statistician for the Census Bureau in
this line, assures us that this amount is less than $100,000; hence no entry has been
made.
i No item is entered under this head for rents because Professor Lincoln states that
the amount of rent going to individuals is "wholly negligible" practically all being paid
"for stations, equipment of various kinds, use of lines and conduits, water privilege,
etc."
k United Slates Census of Elec. Light and Power Stations, 1907, p. 61.
'4.5% on funded debt, the rate being estimated from the U. S. Census of Central
Electric Light and Power Stations for 1917, pp. 103 and 115.
m 4.7% on funded debt, the rate being estimated from the references cited under
" Fraction over A.
<*
PRIVATE ELECTRIC LIGHT AND POWER COMPANIES 159
no net gain and therefore adds nothing to private revenues. Some dam-
ages doubtless are paid to injured employees, but the amount is stated
by authority to be negligible.
By the process just described, it is believed that, for the Census years,
the respective shares of the value product of the industry going to the
persons working for hire and to the persons who take the risk and expect
to secure remuneration for the investment of their efforts or property
from the residuum of the net receipts have been fairly well differentiated.
If the share of the employees is divided by the total value product of the
industry and the quotient is multiplied by 100, the resulting product repre-
sents the approximate percentage of the value product going to the em-
ployees, — a group that, by contract, holds the primary claim against the
net product of the enterprise.
§ 13b. The Net Value Product and Its Distribution
Table 13A completes the inquiry for the Census years, but, under the
plan of campaign determined upon, it is necessary to estimate the value
product and its distribution for each year from 1909 to 1918. Some basis
of interpolation is therefore essential. The criteria depended upon for
this purpose are derived from the annual reports of 19 typical electric
light and power companies as quoted in Moody's Manual. The respec-
tive totals of net earnings, operating expenses, interest on funded debt,
dividends, and corporate surplus have been calculated for each year from
1907 to 1918 for the entire group of corporations and are recorded in Tables
13B and 13C.
It is assumed that the ratio of profits of all concerns to the net earnings
of the 19 typical corporations is a relatively stable quantity and that its
changes can therefore, be well depicted by a smooth curve determined by
the ratios for 1907, 1912 and 1917. Similarly it is assumed that the respec-
tive ratios of salaries and wages paid by all plants to the total operating
expenses of the 19 selected corporations are relatively fixed, varying along a
smooth curve rather than oscillating violently, and that the same holds
true of the ratio of bond interest paid by all concerns to the interest on the
funded debt reported by the -ample corporations. The treatment of the
data according to these assumptions yields the results set forth in Tables
13B, 13C, and 13D.
160
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 13B
AN ESTIMATE OF THE TOTAL NET PROFITS OF PRIVATE ELECTRIC
LIGHT AND POWER PLANTS IN THE CONTINENTAL UNITED
STATES
A
B
C
D
Ratio of total
E
Total net
Total net profit
Estimated d net
earnings of 19
of all private
net profits to
profit of all
Year
typical electric
plants as shown
net earnings of
private plants
companies <*
by Census d
typical
BX D
(Thousands)
(Thousands)
companies
(Thousands)
1907
$15,652
$36,704
2 . 345 b
$35,704
1909
18,438
2.310c
42,600
1910
21,422
2.303c
49,330
1911
23,023
2 . 300 c
52,950
1912
25,293
58,046
2.2956
58,046
1913
26,884
2.322c
62,420
1914
27,747
2 . 362 c
65,550
1915
31,154
2.420c
75,400
1916
34,585
2.489 c
86,100
1917
33,798
86,857
2.570 6
86,857
1918
33,898
2 . 655 c
90,000
a Compiled from various numbers of Moody's Manual of Corporation Securities.
b Computed by division.
c Interpolated along a smooth curve.
d For references, see Table 13A.
^
PRIVATE ELECTRIC LIGHT AND POWER COMPANIES 1(31
TABLE 13C
AN ESTIMATE OF SALARIES AND WAGES PAID BY PRIVATE ELECTRIC
LIGHT AND POWER COMPANIES IN THE INTERCENSAL YEARS
Total op-
Salaries
Ratio of
Estimated
Wages
Ratio of
Estimated
erating ex-
paid by
salaries
total
paid by
wages
total
penses of
all plants
paid by
salaries
all plan! -
paid by all
wages
Year
19 typical
(Census
all plants
paid by .-ill
(Census
plants to
paid by
electric
figures d)
to expenses
plants e
figures d)
expenses
all plants '■
companies "■
(Thou-
of typical
(Thou-
(Thou-
of typical
(Thou-
(Thousands)
sands)
companies
sands)
sands)
companies
sands)
1937. . .
$23,571
$10,739
. 456 b
$10,739 ^
$21,19o
.899 6
$21,196^
1939. ..
27,740
.541c
15,000
893 c
24,850
1910. . .
31,734
.574 c
18,220
892 c
28,300
1911. . .
33,571
.596 c
20,000
.883 c
29,800
1912. . .
37,338
22,637
.606 6
2_\f>37<'
33,021
.8846
33,021 d
1913.
39,804
.602 c
23,980
.878 c
31,940
1914...
42,458
.593<-
25,190
. S 17 e
:; »,800
1915. . .
44,078
.582 c
25,660
.858c
37,800
1916...
50,615
.562 c
28,460
842«
12,600
1917.. .
62,825
34,439
.548 6
34,439 d
52,035
s 1 > b
52,035 d
1918...
72,220
525 c
37,970
.811c
58,550
a Compiled from various numbers of Moody's Manu d of Corporation S • iriti ■
6 Computed.
c Interpolated along a smooth curve.
d See Table 13A for references.
e Operating expenses of typical companies multiplied by the appropriate ratio.
162
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 13D
AN ESTIMATE OF THE PAYMENTS OF BOND INTEREST MADE BY
PRIVATE ELECTRIC LIGHT AND POWER COMPANIES IN THE IN-
TERCENSAL YEARS
A
B
C
D
E
Year
Index of
interest on
funded debt
paid by 15 re-
porting cor-
porations a
Bond interest
paid by all
plants. (Census
figures b)
(Thousands)
Ratio of C
to B
Estimated bond
interest paid
by all plants
(Thousands)
BXD
1907
1909. . .
20,692
20,038
22,096
23,965
24,520
25,415
24,675
27,055
29,350
30,000
33,382
$26,842
40,450
01,000
1 . 297 e
1.432d
1.503^
1 . 575 d
1.650c
1 . 724 d
1.800 d
1 . 880 d
1 . 957 d
2.033c
2.108^
$26,842
28,705
33,218
37,757
40,450
43,816
44,415
50,861
57,453
61,000
1910
1911. . . .
1912. .
1913.
1914
1915
1916.. .
1917..
1918
70,368
a Compiled from various numbers of Poor's and Moody's Manual of Public Utilities.
b For references, see Table 13A.
c Computed by division.
d Read from a smooth curve.
It is of interest to note the fact that the industry shows an unusually
steady increase in all lines throughout the decade. Profits, wages, and
bond interest have each nearly trebled. No violent fluctuation appeared
anywhere.
The next step in the usual procedure followed in these studies is to
divide the total share of entrepreneurs and property owners into two parts ;
namely, disbursements, and business savings. This apportionment has
been based upon the proportionate division of the net gain of the previously
mentioned reporting corporations between dividends and corporate savings.
The corporations were separated into three classes based upon size.
Ratios were separately computed from the totals of each class and the arith-
metic average of these three ratios is the quantity here presented. This
method prevents the domination of the results by the large corporations
which probably form a much larger proportion of the sample than of the
industry as a whole.
**
PRIVATE ELECTRIC LIGHT AND POWER COMPANIES 163
TABLE 13E
AN ESTIMATE OF THE TOTAL DISBURSEMENTS MADE TO THE STOCK
AXD BOND HOLDERS BY PRIVATE ELECTRIC LIGHT AND POWER
PLANTS
A
B
C
D
E
F ,
G
Calendar
year
Xct profits
of all com-
panies «
(Thou-
sands)
Fracl ion of
uel profits
saved by
sample cor-
porations
Savings
of all
concerns
(Thou-
sands)
CXB
Dividends
of all
concerns
(Thou-
sands)
B — D
Bond
interest
paid by all
concerns b
(Thou-
sands)
Total dis-
bursements
ments to
stock
and bond
holders
(Thou-
sands)
E + F
1907
1909
1910
1911
1912
1913
1914
1915
1916
1917.
1918
$36,704
42,000
49,330
52,950
58,040
62,420
65,550
75,400
86,100
86,857
90,000
.5346
.3072
.3634
3251
.2974
.3208
. 1939
.3064
.3691
. 2888
.225:;
$19,622
13,087
17,925
17,215
17,203
20, 021
12,710
23,104
31,784
25. 088
20,282
$17,082
29.51:;
31,405
35,735
40,783
42,396
52,840
52.290
54,316
61,769
69,71s
$26,842
28,705
33,218
37,757
40,450
43,816
11.115
50,861
57,453
61,000
70,368
$43,924
58,21s
64,623
73,492
81.233
86,212
97.255
103,157
111,769
122,769
HO.OSli
a See last column of Table 13B.
b See Table 13D, Column E.
It is now in order to measure the purchasing power of that share of the
total value product of the industry which was paid to the stock and bond
holders. This is done in Table 13F.
164
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 13F
THE PURCHASING POWER OF THE SHARE OF THE STOCK AND BOND
HOLDERS IN THE VALUE PRODUCT OF PRIVATE ELECTRIC LIGHT
AND POWER PLANTS
A
. B
C
D
E
F
G
Corporate savings
Interest and dividends paid
Calendar
year
Thousands
of dollars o
Index of
construc-
tion costs b
Value
at prices
of 1913
(Thou-
sands)
B
C
Thousands
of dollars c
Index of
prices of
goods used
by the
wealthier
classes d
Value
at prices
of 1913
(Thou-
sands)
E
F
1909 ....
1910. . . .
1911
1912
1913. . . .
1914
1915
1916
1917
1918
$13,087
17,925
17,215
17,263
20,024
12,710
23,104
31,784
25,088
20,282
.927
.953
.945
.983
1.000
1.013
1 . 002
1 . 088
1 . 252
1.448
$14,118
18,809
18,217
17,562
20,024
12,547
23,058
29,213
20,038
14,007
$58,218
64,623
73,492
81,233
86,212
97,255
103,157
111,769
122,769
140,086
.965
.983
.990
1.000
1.000
1.011
0.999
1.081
1.225
1.406
$60,330
65,741
74,234
81,233
86,212
96,197
103,260
103,394
100,220
99,634
a See Table 13E, Column D.
b Indices derived from Bureau of Labor Statistics combined, with weights assigned
as follows: Building labor 3, Metals and metal products 2, Building materials 1.
c See Table 13E, Column G.
d An average of the indices for those classes spending respectively $5,000 and $25,000
annually for consumption goods. See § 2c.
Table 13F indicates that when price variations are eliminated corpo-
rate savings show little difference at the beginning and end of the decade ;
but that the disbursements to investors rose sharply during the first half
of the period and then became nearly stationary, presumably because of
the prevalence of relatively fixed rates in the face of rising costs of operation.
Table 13G is devoted to showing the fraction of the net value product
going to the employees.
S
PRIVATE ELECTRIC LIGHT AND POWER COMPANIES 165
TABLE 13G
THE ESTIMATED TOTAL VALUE PRODUCT OF PRIVATE ELECTRIC
LIGHT AND POWER PLANTS AND ITS DISTRIBUTION
(Continental United States, 1909-1918)
(Values all in thousands of dollars)
Share of stock and bond holders
Share of
employees.
Salaries
and wages e
Total value
product of
industry d
Per cent
Year
Retained in
business a
(Savings)
Amounts
withdrawn
from
business b
Total
of value
product
going to
employees
1907
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$19,622
13,087
17,925
17,215
17,263
20,024
12,710
23,104
31,784
25,088
20,282
$43,924
58,218
64,623
73,492
81,233
86,212
97,255
103,157
111,769
122,769
140,086
$63,546
71,305
82,548
90,707
98,496
106,236
109,965
120,261
143,553
147,857
160,368
$31,935
39,850
46,520
49,800
55,658
58,920
61,990
63,460
71,060
86,474
96,520
$95,431
111,155
129,068
140,507
15 1.1 51
165,156
171,955
189,721
214,613
234,331
256,888
33.5
35 . 8
36.0
35.4
36.1
35 . 7
36.0
33.4
33.1
36.9
37.6
a See Table 13E, Column D.
b See Table 13E, Column G.
c Derived from Table 13C by combining wages and salaries.
d Sum of two preceding columns.
It is clear that the employees receive a smaller share of the value product
in this industry than in most other fields. This may be due to the large
amount of investment per employee, the small amount of labor required
per unit of output, or perhaps to some other reason. That it is not pri-
marily the result of paving much lower average wages than other industries
is indicated by the entries in Table 13H.
166
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 13H
AN ESTIMATE OF THE AVERAGE ANNUAL EARNINGS OF EMPLOYEES
OF PRIVATE ELECTRIC LIGHT AND POWER COMPANIES
A
B
C
D
E
F
G
H
Call n-
dar year
Average
number
of em-
ployees
actually
at work
Fraction
of those
attached
to in-
dustry
actually
working
Number
attached
to in-
dustry
B
C
Total
wages
and sal-
aries
paid c
(Thou-
sands)
Average
annual
earnings
per em-
ployee 6 at-
tached to
industry
E
D
Index of
prices of
goods con-
sumed by
manual and
clerical
workers /
.955
.978
.984
.994
1.000
1.01
1.03
1 10
1.29
1.58
Annual
average
earnings
at prices
of 1913
F
G
1907. . ..
1909. .. .
1910 .. .
1911. .. .
1912. . . .
1913. . . .
1914. ...
1915. ...
1916. . . .
1917. . . .
1918. . . .
42,066 a
71,395 a
94,679 a
.96 6
.98 6
.97''
43,920^
55,000 d
60,500'/
67,000'/
72,830 e
78,500 d
84,100'/
N'.t.OOO'/
94,000'/
97,700'-
101,500'/
$31,935
39,850
46,520
49,800
55,658
58,920
61,990
63,460
71,060
86,47 t
96,520
$727
725
769
743
764
751
737
713
756
8S5
951
$759
786
755
769
751
730
692
687
686
602
a U. S. Census of Electric Light and Power Stations, p. 120.
6 Roughly estimated.
c Computed by division.
d Interpolated' along a smooth curve.
' See Table 13G.
/ Bureau of Labor Statistics index carried back by means of a special study; see
Table 2C.
It is evident that the purchasing power of the average earnings has
failed to keep pace with the rising price level. Whether this is due to the
substitution of a poorer grade of employees or a failure to raise wage rates
in proportion to the increase in the price level is not indicated by the data
at hand.
It seems impracticable to measure with any degree of accuracy the
output per employee or per capita for other periods than the Census years.
Those years are so spaced, however, that a comparison based thereon
answers many of the essential queries. The data appear in Table 131.
S
PRIVATE ELECTRIC LIGHT AND POWER COMPANIES 167
TABLE 131
NUMBER OF KILOWATT HOURS PRODUCED PER EMPLOYEE AND PER
CAPITA BY PRIVATE ELECTRIC LIGHT AND POWER PLANTS
a U. S. Census of Central Electric Light and Power Stations, 1917, pp. 7~> and 120.
6 Estimated by means of a special study; sec § 2a.
c Census estimate quoted in Statistical Abstract of U. S., 1910, p. 076.
A glance at the table shows a remarkable increase in the amount of cur-
rent generated for each employee at work, and also for each person in the
country. Whether any part or all of the increased production per employee
is due to greater diligence on the part of the average worker could only be
determined by further investigation. It is clear that electrical energy
produced by commercial plants is playing a rapidly increasing role in
meeting the power requirements of our industries.
CHAPTER 14
TELEGRAPHS 1
§ 14a. The Census Figures
The Telegraph industry was covered by the Census in 1907, 1912, and
1917, years admirably located so far as the period 1909 to 1918 is concerned
and the figures are in a form so well adapted to the needs of this investiga-
tion that estimates for the Census years may be made with reasonable
accuracy. The Census presents the figures for wireless telegraphs in a cat-
egory separate from that dealing with land telegraphs and ocean cables,
but all have been combined in the study here presented. Table 14A
covers the Census data.
§ 14b. Disbursements to Stock and Bond Holders
The entries in Table 14A are presumably fairly close to the truth. The
next problem is to interpolate estimates for the intercensal years. Most
of the telegraph industry is in the hands of the Western Union and the
Mackay Companies; hence it would seem an exceedingly simple matter to
use their records for the purpose mentioned. As a matter of fact, accurate
interpolation by this method is impossible. Some of the obstacles are as
follows:
1 . The Mackay Company is a holding company and it does not present
a consolidated account or reports for most of its subsidiaries.
2. Much of the recorded business of both companies has apparently
been excluded from the Census, the reason for the exclusion not being
ascertainable, but presumably duplication in accounts has been discovered.
3. The accounts of the Mackay subsidiaries are not presented in suffi-
cient detail to answer our purposes.
4. The fiscal years of the corporations do not correspond with the calen-
dar years.
The net result is that the corporation reports and Census figures for the
same years show no resemblance to each other. It has, however, been felt
that the use of the corporation statistics, unsatisfactory as they are, will
give slightly better results than would direct interpolations along smooth
curves — hence the usual procedure has been followed, the criteria chosen
being indicated in the tables. The reader is warned, however, against
1 Mr. William A. Countryman of the Census Bureau has been kind enough to read over
this report and offer valuable suggestions, most of which have been adopted.
168
TELEGRAPHS
TABLE 14A
1G9
THE ESTIMATED VALUE PRODUCT IN THE CENSUS YEARS OF THE
TELEGRAPH INDUSTRY IN THE CONTINENTAL UNITED STATES
Year
1907
1912
1917
Dividend Payment s.« (Thousands)
$ 7,477
2,653
$ 6,180
2,769
S 9,928
2,584
Total Payments for Interest and Dividends (Thousands
Receipts of Interest and Dividends from Other Corpo-
$10,130
1,415
$ 8,949
780
$12,512
2,547
Interest and Dividend Payments Originating in the
Telegraph Industrv. (Thousands)
$ 8,715
1,221
S 8,169
1,686
S 9,965
_'. I9S
Rent of Offices and Real Estate.** (Thousands)
Total Disbursements to Property Owners. (Thousands)
Savings e of All Companies/* (Thousands)
$ 9,936
2,173
$ 9,855
209
$12,463
8,625
$12 109
$10,064
$21, OSS
$17 890
$25,609
50*
$40,105
330*
Estimated Other Compensation to Employees^ (Thou-
sands)
10'<
$ 1 7 900
$25,659
$40,435
Average Number of Emplovees Actually at Work
Average Pull-time Annual Compensation per Employee
28,210
$635
38,253
s< 171
52,160
$775
SUMMARY,
Total Share of Property. (Thousands)
Total Share of Employees. (Thousands)
$12,109
17,900
$10,064
L'."»,659
$2 LOSS
40 435
Total Value Product of Industrv. (Thousands)
Per Cent of Value Product Going to Employees
$30,009
59.6
$35,723
71.8
$61,523
65 6
T. = United States Census of Telegraphs.
a T. 1917, pp. 16, 23, and 25.
6 T. 1917, pp. 16, 23, and 25; a study of the income statements of the Western Union
and Mackay Companies shows thai practically the entire amount recorded by the
Census as "Interest" must be bond interest. The items here given fail to include the
mortgage interest paid by the wireless companies. The exact amounts are unknown
but they are too small to be of moment.
c T. 1917, pp. 16, and 25. The consolidated balance sheet shows such large holdings
fif securities that apparently the Census item "Income from other sources" must con-
sist primarily of bond interest and dividends; see T. 1!U7, pp. 22 23. This item is not
reported for wireless companies; hence it is assumed to be* negligible and is omitted from
consideration.
d T. 1917, pp. 17 and 23. A small item was added in each year for estimated rent
paid by wireless stations. The estimates were tit), 56, and 63 thousands of dollars for
the respective Census years beginning with 1907. The estimates were based on as-
sumed annual rents per station of 8500 in 1007, §750 in 1912, and $1,000 in 1917. The
final estimate of total gross rents was multiplied by 0.7 in order to obtain a figure for
net rents, the 0.3 being allowed for repairs, depreciation, etc.
c Commonly called "Corporate surplus."
/T. 1917, pp. 14, 22, and 25.
170
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 14A NOTES— Continued^
g Pensions, compensation for injuries, etc.
/( Pure guesses.
» An organized system of benefits was initiated by the Western Union Co. in 1916;
for amount, see Standard Corporation Record card for 1920, No. VV1.
attaching too great importance to apparent fluctuations from year to year
as, in some instances, such variations in the figures are doubtless due
wholly to purely accidental errors. Were it not that the data are all tied
TABLE 14B
THE ESTIMATED GROSS DISBURSEMENTS IN THE FORM OF DIVIDENDS
AND INTEREST ON THE FUNDED DEBT MADE BY ALL TELEGRAPH
CORPORATIONS IN THE CONTINENTAL UNITED STATES
Dividend payments in thousands
Interest payments in thousands
of dollars
of dollars
A
B
C
D
E
F
G
II
I
Divi-
Interest
Esti-
plus
Combined
Esti-
paid by
mated
interest
Census
dividends
mated
Census
Western
interest
(Thou-
Cal-
figures,
of West-
Ratio
divi-
figures,
Union
Ratio
on
sands of
endar
all
ern Union
of
dends of
all
and the
of
funded
dollars)
year
com-
and
B toC
all com-
com-
Com-
F to G
debt of
E + I
panies a
Mack ay
CosM
panies
DXC
panies a
mercial
( lablec
all com-
panies
CosM
GXH
1907
7,477
6,947
1 . 070 d
7,477 a
2,653
9,576
.2770-/
2,653 a
10,130
1909
6,62:1
,933<"
6,180
9,710
.2861 «
2,778
8,958
1910
7,05!)
. 894 e
6,310
9,711
. 2887 «
2,804
9,114
1911
7,060
. 88 1 '
6,240
9,700
.2901e
2,814
9,054
1912
6,1X0
7,061
S75 d
6,180a
2,769
9,503
.2914d
2,769 a
8,949
1913
7,061
.872«
6,160
9,337
. 2900 e
2,708
8,868
1914
8,058
. 872 e
7,026
9,337
. 2870 e
2,680
9,706
1915
9,055
.871*
7,887
9,336
2823 e
2,636
10,523
1916
10,054
. 870 e
8,747
9,332
■2775 <■
2,590
11,337
1917
9,928
11,407
.870d
9,928 a
2,584
9,332
.2769d
2,584 a
12,512
1918
11,371
. 868 e
9,865
9,332
. 2760 e
2,576
12,441
1919
11,338
867 «
9,835
9,332
. 2754 e
2,570
12,405
a See Table 14A. The Census apparently excludes interest charges on bonds secured
by foreign cable lines and dividends paid to foreign investors.
b Figures for fiscal years 1907 to 1912 inclusive adjusted to calendar years by aver-
aging. Data from Poor's and Moody's Manuals of Public Utilities.
c The Commercial Cable Co. is a subsidiary of the Mackay Cos.
d Computed.
e Read from a smooth curve.
to the Census at five year intervals, the whole study might well be regarded
as practically worthless. As it is, it cannot well go far astray in the rela-
tively brief spaces of time intervening between Census years.
Not all of the payments to stock and bond holders are made from income
^
TELEGRAPHS
171
originating in the Telegraph field, for Telegraph Companies hold many
income bearing securities of outside concerns. Income derived from
these securities must be deducted, .since, according to our plan of operation,
it is assigned to the field in which it originates and must not be duplicated.
Some of these receipts may represent merely intercorporate payments
TABLE 14C
THE ESTIMATED NET DISBURSEMENTS OF DIVIDENDS VXD INTEREST
OX THE FUNDED DEBT MADE BY ALL TELEGRAPH CORPORATIONS
IN THE COXTIXEXTAL UNITED STATES
A
B
c
D
E
F
o
( lalendar
year
Receipts
from
dividends
and bond
interest
of other
corpora-
tions in
Census
years a
(Thou-
sands)
$1,415
780
2,517
Income of
WCstern
Union ( 'o.
from loans
and invest-
ments
(Thou-
sands)
Hat LO of
BtoC
Estimated
income of
all com-
panies
from
divi lends
and bond
interest
(Thou-
sands)
CXD
( rross divi-
dends and
interesl
on funded
debt paid/
(Thou-
sands
Payments of
dividends
and interest
on funded
debt
originating
in telegraph
industry
(Thousands)
F — E
1907
1909
1910
1911
L912
1913
Kill
1915
L916
1917
litis
1919
$1,460 e
1,640 c
1,408 6
1,5036
1,1826
1,116 6
1,0236
1,3046
1.702 6
1,4856
1,3916
1,607 6
.97 d
.NO'
. 75 ■
.70*
.66 '
.73«
93 e
1.30«
1 DO-'
1 72'/
1.80
1 86 «
•81,415
1,311
1,055
1,051
780
815
952
1,697
2.725
2,5 17
2,510
2,993
810,130
8,958
9,11 1
9,054
8,949
8,8uS
!>.706
10,523
1 1 .337
12,512
12.111
12,405
$8,715
7,647
8,059
8,003
8,169
8,053
8,754
8,826
8,612
9,965
9,931
9,412
a See Table 14 A.
6 Moody's Manual of Public Utilities for 1920, pp. 1130 1 L32.
c Assumed that ratio of this income to that of 1910 is the same as the ratio of net
earnings for the same years — data are missing.
d Computed.
e Read from a smooth curve.
/See Table 14B.
within the industry. Such payments, of course, must be eliminated.
Table 14C represents an attempt to get rid of all duplication and arrive
at the actual net disbursements made in the form of interest and dividends.
To the net disbursements in the form of dividends and interest must be
added the rents paid for offices and real estate if we are to arrive at the
172
THE ESTIMATE BY SOURCES OF PRODUCTION
total net payments going to individuals who have property claims against
the industry. Rents have been assumed to vary roughly in proportion to
the gross revenues of the Western Union Company, the theory being that
more business requires more office space and that gross revenues measure
TABLE 14D
THE ESTIMATED TOTAL DISBURSEMENTS TO ENTREPRENEURS AND
OTHER PROPERTY OWNERS MADE BY THE TELEGRAPH INDUSTRY
OF THE CONTINENTAL UNITED STATES
A
B
C
D
E
F
G
Total dis-
Net pay-
bursements
Rent of
Gross earn-
Estimated
rent paid
for offices
(Thousands)
CX D
ments of
to entre-
Cal-
offices and
ings of
dividends
preneurs
endar
real estate
Western
Ratio of
and interest
and other
year
in Census
years a
Union
Company &
B toC
on funded
debt g
property
owners
(Thousands)
(Thousands)
(Thou-
(Thou-
sands)
sands)
E + F
1907..
$1,221
$30,719
.0397d
$1,221/
$8,715
$ 9,936
1909. .
31,647
.0393e
1,244
7,647
8,891
1910..
34,116
. 0390 e
1,331
8,059
9,390
1911. .
38,570
. 0387 «
1,493
8,003
9,496
1912. .
1,686
44,024
. 0383 d
1,686 /
8,169
9,855
1913..
45,784
. 0374 «
1,712
8,053
9,765
1914..
46,21 i5
. 0360 <■
1,666
8,754
10,420
1915..
51,172
. 0345 «
1,765
8,826
10,591
1916. .
61,919
. 0334 «
2,068
8,612
10,680
1917. .
2,498
76,996
. 0324 d
2,498 /
9,965
12,463
1918. .
86,702 h
.0319"
2,766
9,931
12,697
1919. .
103,756 c
.0315 «■
3,268
9,412
12,6S0
a See Table 14A.
b Amounts for fiscal years 1907-1912 averaged to obtain estimates for calendar
years. Data derived from Poor's and Moody's Manuals of Public Utilities.
c Data from card issued Jan. 17, 1921, by Standard Corporation Service.
d Computed.
e Read from smooth curve.
/ Census figures — see Table 14A.
o See Table 14C.
* Other income of $1,391,128 subtracted from gross income as reported in Statistical
Abstract of U. S. for 1919, p. 321. "Other Income" reported in Moody's Manual of
Public Utilities for 1920, p. 1161.
the value of business done. It has also been assumed that 30 per cent of
the gross rent is necessary to cover expenses of operating the buildings
and allowances for depreciation, leaving only 70 per cent as net income
from the investment in the buildings and land. The final estimates appear
in Table 14D.
^
TELEGRAPHS
173
§ 14c. Corporate Savings
The estimates presented in the preceding tables, while probably inac-
curate, nevertheless presumably approach the truth. No estimate is,
however, complete if the corporate savings are left out. It may be true
that these companies have saved much in addition to their normal surplus
by charging improvements to operating expenses. Whether this possi-
TABLE HE
THE ESTIMATED TOTAL SHARE OF THE ENTREPRENEURS AND OTHER
PROPERTY OWNERS IN THE VALUE PR< >DUCT ( >F TELEGRAPH ( '< >M
PANIES IN THE CONTINENTAL UNITED STATES, A CRUDE APPROXI-
MATION TO THE CORPORATE SAVINGS OF THESE COMPANIES
BEING INCLUDED
Amounts
in Thousands of Dollars
Total disburse-
Reported
Total dis-
ments to
Calen-
Corporate
surplus of
Estimated
bursements
propertied
dar
savings, as
Marconi,
corporate
of interest on
classes and cor-
year
reported by
Mackay, and
savings of all
funded debt,
porate surplus
the Census a
Western Union
companies
dividends
(Sum of two
Companies b
and rent e
preceding
columns)
1907. .
$2,173
$ 111
12,173 c
S 9,936
§12,109
1909 .
2,758
5,000 d
8,891
13,891
1910. .
2,507
4,200 d
9,390
13,590
1911. . .
1,728
2,500<*
9,496
11,996
1912. . .
209
820
209 c
9,855
10,064
1913. .
540
300 d
9,765
10,065
1914. . .
649
1,000'/
10,420
11,420
1915. . .
5,508
7,000'/
10,591
17,591
1916. . .
6,228
8,100'/
10,680
18,780
1917. . .
8,625
7,383/
8,625 '•
12,463
21,088
1918. . .
4,637/
5,410-/
12,697
is, 107
1919. . .
6,101/
7,130 /
12,680
19,810
a See Table 14 A.
b Compiled from the annual reports represented in Poor's and Moody's Manuals
of Public Utilities. Amounts for fiscal years adjusted by averaging to obtain estimates
for the calendar years.
c Census figures — see Table 1 1 A.
d Crudely estimated bv aid of a smooth curve.
« See Table 14D.
/ Surplus of Western Union Co. only.
bility has been duly considered and guarded against in compiling the Cen-
sus reports, is not known. It is certain, however, that the published cor-
poration reports of surplus show no resemblance to the ones given by the
Census. It has proved impossible, therefore, to interpolate the estimates
174
THE ESTIMATE BY SOURCES OF PRODUCTION
for the surplus according to the usual rules. The best that can be done
with the data at hand is to adjust the figures roughly so that the principal
fluctuations shown by the corporation reports are given consideration.
These crude results appear in Table 14E.
§ 14d. Purchasing Power of Share of Property Owners and Entrepreneurs
The purchasing power of the income received by property owners is
arrived at by dividing the number of dollars by an index of the average
TABLE 14F
THE PURCHASING POWER OF THAT PART OF THE INCOME DERIVED
FROM THE TELEGRAPH INDUSTRY OF THE CONTINENTAL UNITED
STATES DISBURSED TO ENTREPRENEURS AND OTHER PROPERTY
OWNERS OR SAVED BY THE CORPORATIONS
(Amounts in Thousands of Dollars)
A
B
C
D
E
F
G
Calen-
dar
year
Disburse-
ments to en-
trepreneurs
and other
property
owners a
Index of
prices of
goods con-
sumed by
wealthy
classes c
Purchasing
power at
prices of
1913
B -h C
Corporate
savings b
Index of
construction
costs d
< '< instructive
power of
corporate
savings at
prices of 1913
E -=- F
1907 . . .
L909 .. .
1910 . . .
1911 . . .
1912 ...
1913 . . .
1914 .. .
1915 . . .
1916 . . .
1917 .. .
1918 . . .
1919 .. .
$ 9,936
8,891
9,390
9,496
9,855
9,765
10,420
10,591
10,680
12,463
12,697
12,680
.973
.988
.995
1.000
1.000
1.010
.996
1.074
1.198
1.364
1.628
$ 9,138
9,504
9,544
9,855
9,765
10,317
10,634
9,944
10,403
9,309
7,789
$2,173
5,000
4,200
2,500
209
300
1,000
7,000
8,100
8,625
5,410
7,130
1.023
.881
.903
.903
.982
1.000
.968
1.059
1.336
1.495
1.525
1.607
82,124
5,675
4,651
2,769
213
300
1,033
6,610
6,063
5,769
3,548
4,437
a See Table 14D; includes interest, dividends, and rents.
b See Table 14E.
c See Table 2E; represents families spending on the average, $25,000 per annum.
d Worked out by the statistical department of the American Telephone and Tele-
graph Co.
prices of commodities consumed by the well-to-do classes. This opera-
tion has been carried out and the results appear in Table 14F.
A glance at Table 14F makes it evident that the lean period for the
owners of the telegraph industry was in 1912 and 1913. This was followed
by a period of prosperity; although, in 1918, the share of the property
owners again declined slightly, only to recover again in 1919.
<*
TELEGRAPHS
175
§ 14e. The Number of Employees and Their Share in the Value Product
The corporate reports of the telegraph companies do not show either the
number of employees or the amounts paid in wages. They do not even tell
how many messages have been sent. It is, therefore, impossible to inter-
polate these quantities between the years in which we have Census data
TABLE 14G
THE ESTIMATED SHARE OF THE EMPLOYEES IN THE VALUE PRODUCT
OF THE TELEGRAPH INDUSTRY OF THE CONTINENTAL UNITED
STATES
A
B
C
D
E
F
G
Calendar
year
Wages and
salaries paid
in Census
years a
(Thousands)
Total operat-
ing expenses
of the West-
ern Union
Co.W
(Thousands)
Ratio of
Bto C
Esl imated
total wages
and salaries
(Thousands)
CX D
Estimated
benefits
paid to
employees/
(Thou-
sands)
Total com-
pensation of
employees
Thou-
sands)
E + F
1907
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
$17,890
25,609
40,105
$18,641
21,904
28,334
33,063
39,521
42,327
10.579
10,973
18,728
62,783
76,713
78,6 16
.960 c
.706'/
.673^/
. 657 d
.648c
. 647 d
.615'/
.643'/
.612'/
. 639 e
.639'/
638 d
$ 17,890 «
17,580
19,070
21.710
25,609 «
27,390
26,200
26,320
31,260
40,105 ■
49,000
50,160
$ 10
20
30
40
50
60
70
80
330
330
330
330
§17,900
17,600
19,100
21,750
25,659
27,450
26,270
26,400
3 1.5'. »0
40,435
1H.330
50,490
a See Table 11 A.
b Figures for fiscal years 1907 to 1912 averaged to obtain estimates for calendar years;
for data see Poor's and Moody's Manuals of Public Utilities.
c Computed.
d Head from a smooth curve.
e Census figures - sec Table 1 IA.
/The Western Union Co. established a system of benefits in 1916. See Cards \Y1
and 2, of Standard Corporation Record Service. Before that date, payments were
probably rather insignificant. The amounts entered for years previous to 1916 are
pure guesses.
with any degree of precision. Since, however, an estimate must be made,
recourse has been had to the assumptions that the wages are proportional
to total operating expenses and that the number of employees varies in
proportion to a combination of the total volume of business done, and the
number of offices operated. This index is chosen because it is evident
that the number of offices is a matter of fundamental moment in this con-
176
THE ESTIMATE BY SOURCES OF PRODUCTION
nection, and it seems reasonable to suppose that, in times of flush business,
the companies would find it imperative to increase somewhat the average
number of employees per office. The fact that the index maintains a
fairly constant ratio to the Census figures seems to show that it has some
merit. The attempt is made to measure the volume of business by dividing
the gross revenues by an index representing the price of messages. No
record has been found showing any changes in the rates for messages until
March 31, 1919; hence, during the period 1909 to 1918, this price index
has been assumed to be constant.
The application of these assumptions appears in Tables 14G and 14H.
TABLE 14H
THE ESTIMATED TOTAL ANNUAL VALUE PRODUCT OF THE TELEGRAPH
INDUSTRY OF THE CONTINENTAL UNITED STATES AND THE PRI-
MARY DIVISION OF THIS PRODUCT
Values in thousands of dollars
Calendar
year
Total value
product
Total compensa-
tion of
employees a
Disbursements to
property owners
and corporate
surplus b
Per cent of value
product going
to employees
1907
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
$30,009
31,491
32,690
33,746
35,723
37,515
37,690
43,991
50,370
61,523
67,437
70,300
$17,900
17,600
19,100
21,750
25,659
27,450
26,270
26,400
31,590
40,435
49,330
50,490
$12,109
13,891
13,590
11,996
10,064
10,065
11,420
17,591
18,780
21,088
18,107
19,810
59.6
55.9
58.4
64.5
71.8
73.2
69.7
60.0
62.7
65.7
73.1
71.8
a See Table 14G, Column G.
b See Table 14E, last column.
The compilation of Table 14G makes it possible to ascertain what frac-
tion of the total value product of the telegraph industry goes to compen-
sate the employees for their efforts. The facts in this connection appear
in Table 14H.
The general conclusion must be that, while the percentages have fluctu-
ated violently, the employees since 1911, have tended to receive a greater
and the property owners, a lesser share of the total value product than was
the case during the period 1907 to 1911.
,*
TELEGRAPHS
177
§ 14f. Average Annual Earnings of Employees
Tables 141 and 14J throw light on the changes that have occurred in
the size of the average reward of employees in the telegraph industry.
TABLE 141
THE ESTIMATED NUMBER OF PERSONS AT WORK FOR OR NORMALLY
EMPLOYEE BY THE TELEGRAPH ( '< >MPANIES OF THE CONTINENTAL
UNITED STATES
A
B
C
D
E
F
G
H
I
J
K
Cal-
endar
year
Average
number
employed
in
Census
years <*
Gross
operating
revenues
of Western
Union
Company''
(Thou-
sands)
Index
of
tele-
graph
rates c
Index of
physical
volume
of
business
C
D
Twice
the
number
of
\Wstern
Union
Tele-
graph
offices/
Adjust-
ment
index for
number of
employees
E + F
Ratio of
B to G
Esti-
mated
number
of em-
ploy ees
actually
at work
G X II
of
number
attached
to
industry
who
were
actually
working?
Estimated
number
of em-
ployees
attached
to
industry
I-f-J
1907
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
28,210
38,253
52,160
$30,719
31,647
34,116
38,570
44,024
45,784
46,265
51,172
61,919
76,996
86,702
103,756
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.15
30,719
31,647
34,116
38,570
44,024
45,784
46,265
51,172
61,919
76,996
86,702
90,223
48,613
49,156
49,751
50,318
51,392
50,120
51,568
50,284
50,468
50,932
50,904
50,318
79,332
S0.803
83,867
88,888
95,416
95,904
97,833
101,456
112,387
127,928
137,606
140,511
.3556c
. 382 1 d
.3913''
.3971d
. 4009 c
.4025^
. 4031 d
.4061 d
A072d
.4077 c
.4083 d
.4087 d
28,210
30,900
32,SL > ()
35,300
38,253
38,600
39,470
41.200
15,760
52, 160
56,185
57,440
.976
964
964
.967
'.Mis
.950
943
.933
975
979
.971
.980''
28,800
32,050
34,050
36,500
39,500
40,650
41,850
44.150
46,920
53,300
57,870
58,600*
a Census figures — see Table 14A.
b See Table 14D, Column C.
c Computed.
d Read from a smooth curve.
> For origin, see text. Hates were raised 20 per cent on March 31, 1919.
f Statistical Abstract of the U. S. and Moody's Manual of Public Utilities.
o Estimated by means of a special study recorded in Table 2K.
h Tentative estimate only.
It is evident that among the regular employees of every industry, there
are, at any given time, a considerable number who are not at work. This
being true, the average number at work is necessarily always consider-
ably less than the number who depend on the industry for a livelihood.
The Census records only the number actually at work. In the last col-
umns of Table 141, this item has been adjusted in a way intended to give
an approximation to the number attached to the industry. The mode of
adjustment used is described in § 2d.
178
THE ESTIMATE BY SOURCES OF PRODUCTION
Table 14J is devoted to an estimate of the average amount received
annually by each employee commonly employed by telegraph companies
and the purchasing power of that amount on the basis of prices of 1913.
TABLE 14J
THE ESTIMATED AVERAGE ANNUAL COMPENSATION OF WORKERS
NORMALLY EMPLOYED IN THE TELEGRAPH INDUSTRY OF THE
CONTINENTAL UNITED STATES
A
B
C
D
E
F
Year
Estimated
total
compensa-
tion paid to
employees «
(Thousands)
Estimated
number of
employees
normally
attached
to this
industry &
Average
money com-
pensation
per employee
B -=-C
Average
index of
prices
of com-
modities
bought by
manual and
clerical
workers
Annual com-
pensation of
the average
employee in
dollars of
1913 value
D -=-E
1909
1910
1911
1912
1913
1914
1916
1917
1918
1919
$17,600
19,100
21,750
25,659
27,450
26,270
26,400
31,590
40,435
49,330
50,490
32,050
34,050
36,500
39,500
40,650
41,850
44,150
46,920
53,300
57,870
58,600 c
8549
561
5'. Mi
650
675
628
598
673
759
852
862 c
. 955
.978
. 984
,994
1 . 000
1.01
1.03
1.10
1.29
1.58
1.773
S575
574
606
654
675
622
581
612
588
539
486
a See Table 14G.
b See Table 141.
c Tentative estimate only.
The errors in the data are too great to permit of drawing any conclu-
sions from the minor fluctuations in the recorded wage, but apparently
the purchasing power of the average employee's compensation tended
somewhat downward after 1913, and in 1919 was no higher than it was in
1909. It is then evident that a gain in the percentage of the value product
received does not necessarily mean an improvement in the general eco-
nomic welfare of those employed in an industry.
<*
CHAPTER 15
TELEPHONES
§ 15a. Introduction
Census Bureau reports on the telephone industry in 1907, 1912, and 1917
appear to be fairly complete, covering most facts of importance for all
enterprises of any considerable size, and collecting a few facts concerning
practically all telephone plants in the United States. This study is ba
upon the Census reports for those years. The American Telephone and
Telegraph Company controls about four-fifths of the telephone business
of the country, hence most interpolations have been made upon the basis
of the reports of its operations as given in Poor's or Moody's Manuals of
Public Utilities.
§ 15b. Share of Entrepreneurs and Other Property Owners
In this, as in other similar fields, the value product is estimated by ascer-
taining those sums which have originated through the activities of this
particular industry and which have been disbursed to individuals or
secured by the corporations engaged in the telephone business. To ascer-
tain the amounts actually originating in the telephone industry, it is nec-
essary first to deduct from gross payments of bond interest and dividends
items of the same nature received from other corporations, since such items
are accounted for in the field in which they originated.
Following our standard plan of procedure, it is next necessary to esti-
mate the share of the entrepreneurs and other property owners in t he value
product for the intercensal years. Since the Bell system practically dom-
inates the field, interpolations have been made on the basis of the consoli-
dated financial statistics of the Bell companies as presented in Poor's
and Moody's Manuals of Public Utilities. The computations are shown
in Table 15B.
Table 15B shows that disbursements and surplus as measured in money
both increased from 1907 to 1916 but that, since that date, although dis-
bursements have continued to grow, less has been saved. However, these
figures need to be corrected for changes in the price level. Table l.">( ' has
been constructed to show the approximate equivalent in consumption
goods which the property owners could buy with their share of the prod-
uct for each of the various years.
179
180 THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 15A
THE ESTIMATED SHARE OF THE VALUE PRODUCT OF THE TELEPHONE
INDUSTRY OF THE CONTINENTAL UNITED STATES IN THE CENSUS
YEARS DISBURSED TO THE PROPERTY OWNERS OR SAVED BY THE
OWNING CORPORATIONS
1. Interest on Funded Debt a plus Dividends paid
by Larger n Companies. (In Thousands)
2. Interest on Funded Debt plus Dividends Re-
ceived by Larger Companies. (In Thousands).
3. Payments by larger Companies of Dividends and
Interest Originating in the Telephone Industry.''
(In Thousands)
4. Net < Rent Paid by Larger Companies to Individ-
uals. (In Thousands)
Dividends, Rent, and Interest on the Funded
Debt Arising from the Operations of the Larger
Companies.*' (In Thousands)
C. Estimated Ratio of Dividend, Rent, and Interest
Payments of All Companies to Those of Larger
Companies only
7. Estimated Dividends, Rent, and Interest on the
Funded Debt Originating in the Entire Tele
phone Industry. (In Thousands)
1907
116 b
$ 1,025 b
$35,091
$ 1,092(7
$30,183
1 . 009 i
$36,500
1912
8. Savings or Corporate Surplus of the Larger Com-
panies. (In Thousands)
9. Estimated Savings of All Companies. v (In Thou-
sands)
10. Estimated Total Savings plus Disbursements to
the Property Owners.Q (In Thousands)
$19,926 b
$20,120
$56,620
$51,361 cd
$ 4,365<*
$46,996
$ 1,597 <**
$48,593
1 . 0577 ! >n
$51,500
$17,206 d
$18,210
$69,710
1917
$66,561 «
$ 4,496 «/
$62,065
$ 1,413 m
$63,478
1.050*
$66,580
$14,127 e
$14,840
$81,420
T. = U. S. Census of Telephones.
a Includes beside bond interest, small amount paid as interest on real estate mort-
gages, b T. 1907, p. 65.
c In 1907, 76.7 per cent of all interest was interest on the funded debt and mortgages;
in 1917 the percentage had increased to 94.4. The percentage in 1912 was assumed to
be an average of these two, or 85.55 per cent. This percentage amounts to 17,240
thousands of dollars.
d T. 1912, p. 45. e T. 1917, p. 42.
/Telephone officials state that the item of "Interest from Other Sources" includes
but very small amounts of interest on bonds. It is assumed therefore that only 5 per
cent, or 160 thousands of dollars, has been accounted for in the reports of other industries.
o The item of "Rent of Offices and Real Estate," as given in T. 1912, p. 46, cannot
be used here, for it includes a large estimate for the rent of real estate owned by the
telephone companies; hence actual rent paid is assumed to equal 0.684 X Rent in 1912,
this being the ratio of the total operating expenses of 1907 to those of 1912.
h "Rent of Offices and Other Real Estate."
* Estimated on the basis of information obtained from telephone officials as being
47 per cent of all rentals.
J Assumed to vary in proportion to income; see T. 1907, p. 14.
k Assumed to vary as total revenue; see T. 1917, p. 10.
S
TELEPHONES
181
TABLE 15A NOTES —Continued
1 Ratio obtained by following process: Ratio of wire mileage of small companies to
large was .0646 in 1912 and .0560 in 1917. Ratio of revenue of small to Large com-
panies was .050 in 1917. Then X : .050 :: .0648 : .0560. Therefore X = .0577. The
ratio sought is 1 + X, or 1.0577.
m T. 1912, p. 12. " Based on Census classification.
Product of items in the two preceding line.-.; equivalent to all net disbursements to
the propertied classes.
v Assumed that savings vary in the same proportion as do disbursements to property
owners; hence the items in line 9 are the products of those in lines and 8. In general
this item may be too large because some small companies may have failed and their
losses escaped the Census records or because some companies have not allowed enough
for depreciation, or it may be too small because they charged new construction to op-
erating expenses. Col. M. C. Rorty believes the recorded decline in savings is largely
the result of erroneous accounting. Complete evidence being lacking, however, it
seems best to accept the Census figures.
i Equals receipts as dividends, interest, and rent plus their claims to an ultimate
division of the corporate savings; in other words the sum of the items in lines 7 and 9.
T Difference of items in two preceding lines.
« Sum of items in two preceding lines.
1 The net rent is estimated as 70 per cent of the gross on the ground that 30 per cent
is required to cover maintenance and depreciation.
TABLE 15B
THE CORPORATE SAVINGS AND THE AMOUNTS PAID TO ENTRE-
PRENEURS AND OTHER PROPERTY OWNERS FROM THE VALUE
PRODUCT OF THE TELEPHONE INDUSTRY OF THE CONTINENTAL
UNITED STATES ESTIMATED FOR EACH YEAR
A
B
C
D
E
F
<;
H
I
Bstimated
total dis-
Bond in-
total dis-
iated
Estimated
bursements
terest and
bursemi nts
savings 1 >1
Surplus
savings oi
to
dividends
in
all com-
of Bell
all com-
\ear
propertied
paid by Hill
BtC
propertied
panies m
( 'ompanies c
F ~ G
panies
classes in
Companies *
classes
( ensus
(Thousands
(Thou-
Census
years <*
(Thousands i
(Thousan Is)
C X D
years •'
(Thousan Is)
san
G X 11
(Thousands)
1907
$36,500
.$28,317 b
1.289<*
$36,500
$20,120
$12,5246
1.607'/
$20,120
1909
34,132
1.233<
42,085
14,236
1.515'
21,624
1910
36,718
1.211*
44,465
1 1,277
1.470*
211.' is?
1911
39,578
1.191'
47,2:1'',
12,009
1.425 «
17,113
1912
51,500
43,665
1.179*/
51,500
18,210
13,221
l.377d
18,210
1913
46,955
1.165'
5 1.70:;
11,735
1.303<
15,291
1914
49,215
1.155
56,878
10,002
1.213-
12,432
1915
50,99: 1
1.115-
5S.100
15,189
1.100'
17,619
1916
53,539
1.139*
60,981
22,079
1 090*
24,066
1917
66,580
58,683
1 135 d
66,580
14,840
13,852
1.07!'/
14,840
1918
62,846
1. 128 «
70,x<)()
12,213
1.070/
13.06S
1919
67,533
1.123*
75,840
12,118
1.069/
12,954
a See Table 15A. b Poor's Manual of Public Utilities, 1914, pp. 1092, 1096.
e See Moody's Manual of Public Utilities, 1920, p. 1363.
d Computed by division. ■ Read from a smooth curve.
/Computed by study of surpluses of non-Bell companies as recorded in Moody's
Manuals.
See Table 15A; also note p attached to that table.
182
THE ESTIMATE BY SOURCES OF PRODUCTION
The price index used in reducing corporate savings to a basis of pur-
chasing power is one intended approximately to represent construction
costs. It is a composite of indices representing hourly wages of labor and
prices of the commodities used in the construction of telephone plants,
weighted in proportion to the amount of each commodity used. The index
was worked out by the statistical department of the American Telephone
and Telegraph Company.
TABLE 15C
THE PURCHASING POWER OF THE CORPORATE SAVINGS AND THE
DISBURSEMENTS MADE TO ENTREPRENEURS AND OTHER PROP-
ERTY OWNERS FROM THE NET VALUE PRODUCT OF THE TELE-
PHONE INDUSTRY
Disbursements to entrepreneurs
and other property owners
Corporate savings
A
B
C
D
E
F
G
Year
Rent,
dividends,
and bond
interest «
(Thou-
sands
Index of
prices of
consump-
tion goods
purchased
by wealthy
classes b
Base, 1913
Value at
prices of
1913
(Thou-
sands)
B -r C
Corporate
savings a
(Thou-
sands)
Index of
construc-
tion costs c
Value at
prices of
1913
(Thou-
sands)
E + F
1907. . .
1909. . .
1910.. .
1911..
1912.. .
1913.. .
1914.. .
1915.. .
1916.. .
1917.. .
1918.. .
1919.. .
$36,500
42,085
44,465
47,256
51,500
54,703
56,878
58,400
60,981
66,580
70,890
75,840
.973
.988
.995
1.000
1.000
1.010
.996
1.074
1.198
1.364
1.628
$43,253
45,005
47,493
51,500
54,703
56,315
58,635
56,779
55,576
51,972
46,585
$20,120
21,624
20,987
17,113
18,210
15,291
12,432
17,619
24,066
14,840
13,068
12,954
1 . 023
.881
.903
.903
.982
1.000
.968
1 . 059
1.336
1.495
1 525
1 . 607
$19,668
24,545
23,241
18,951
18,544
15,291
12,843
16,637
18.013
9,926
8,569
8,061
a See Table 15B.
b See Table 2E; applies to families spending on the average $25,000 annually for
consumption goods.
c Calculated by the statistical department, of the American Telephone and Telegraph
Co., and furnished to the Bureau through the kindness of Col. M. C. Rorty.
A study of Table 15C shows that corporate savings have declined to
half their former money value and to only a little over one-third of the
purchasing power which they had at the beginning of the decade. This
decline in savings has been going on at the same time that dividends have
TELEPHONES
]-:;
been increasing somewhat. The purchasing power of the disbursements
to the investors and property owners tended to increase until 1916, but,
since that date, has fallen off sharply.
§ 15c. The Net Value Product and Its Distribution
The estimated net value product of the telephone industry is made up
of four parts: namely, the corporate 1 savings, the disbursements to entre-
TABLE 15D
AN ESTIMATE OF THE VALUE PRODUCT OF THE TELEPHONE INDUS-
TRY IN THE CONTINENTAL UNITED STATES AND THE SHARE OF
THE EMPLOYEES THEREIN
Total pay-
Total share
Total salaries
ments to
of entrepre-
and wages
paid to
employees
as esti-
neurs and
other own-
Uncollect-
Total net
Per *•< -lit of
total value
product
going to
employees
Year
employees
mated from
ers oi prop-
ible
value
as estimated
reports of
erty used
revenues*/
product
from Census
telephone
in the
(Thousands
(Thousands
reports
companies/
industry e
(Thousands)
(Thou-
(Thou-
sands)
sands
1907 . . .
$68,279 a
871,737
S56,620
S 784
8129,141
55 5
1909.
81,160
63,709
912
145,811
.-,.-) 7
1910. . .
91,677
65,452
1.020
158,1 19
58
1911 . . .
103,140
64,369
1.104
L68.613
61.2
1912. . .
101,400 cb
112,653
69,710
1,188
183,.-).-, 1
61.4
1913. . .
126,027
69,994
1,285
197,306
63.9
1914. . .
129,255
69,310
1,380
199. Mi:,
64 6
1915. . .
127,598
76,019
1 . 180
20.-,. 097
62.2
1916. . .
153,526
85,047
1,590
210,163
63.9
1917. . .
175,670 d
172,740
81,420
1,731
255,891
07 :,
1918. . .
191,169
83,958
1,900
280,027
69 3
1919. . .
245,420
88,794
2,080
336,294
73.0
a U. S. Census of Telephones, 1907, p. 16.
i> 101,400 = 90,011 (the number employed by large systems), X 1.0577. The ratio
1.0577 is used because it is the best comparison at hand. Its computation is described
in Note 1, Table 15A.
c U. S. Census of Telephones, 1912, p. 48.
d U. S. Census of Telephones, 1917, p. 10.
« See Table 15B, Column E, plus Column I.
/ For derivation, see text.
o Based on U. S. Census, interpolations for intercensal years male by aid of a
smooth curve.
* Sum of items in three columns immediately preceding.
preneurs and other property owners already discussed, the share of the
employees, and the uncollectible revenues, the last mentioned item repre-
senting valuable services received by consumers for which the recipients
184 THE ESTIMATE BY SOURCES OF PRODUCTION
have failed to make recompense. These four shares have been added and
the sum appears in Table 15D.
The largest share in the value product of the telephone industry con-
sists of the payments made to employees. These payments consist mainly
of wages and salaries, but the employees also receive a considerable sum
in the form of benefits and pensions. The totals as presented in Table
15D have been derived from reports of the important telephone compa-
nies. The closeness of these results to the Census figures makes it highly
probable that both sets are approximately accurate. The reason for using
these data rather than the Census figures themselves, is that the figures
presented here are largely secured from a compilation of actual payments
for each year, while the Census data are based upon estimates only.
The last column of Table 15D shows that the employees have been get-
ting a steadily increasing share of the value product until, in 1919, their
share absorbed nearly three-fourths of the net income arising from the
industry.
But to know the share of the total product received does not tell whether
each employee is better or worse off than before. This depends upon
the number of employees as well as upon the total amount paid to em-
ployees.
§ 15d. The Number of Employees
Table 15E represents an estimate of the average number of employees
attached to the telephone industry in each year. The estimate of the
fraction of workers actually employed is based upon assumptions none too
well established. 1 However, the internal evidence of the data apparently
tends to substantiate the approximate correctness of the fraction presented.
It is believed, therefore, that the figures shown in Table 15E are not very
far from the truth.
3 See § 2d.
S
TELEPHONES
L85
TABLE 15E
THE ESTIMATED NUMBER OF EMPLOYEES ATTACHED TO THE
TELEPHONE 1XDISTRY OF THE CONTINENTAL UNITED STATES
A
B
c
D
E
F
G
Number of
employees
of all
telephone
systems
actually
Estimated
Estimated
Estimated
number ol
fraction
Est imated
number of
employees
of number
number of
Year
employees
B -7-C
actually
attached
employees
of Bell
at work
to industry
attached
Telephone
in all
who are
to industry
Companies'/
systems
actually
EtF
CX D
employed
1907. . . .
144.169 a
102,100
1.412"
144,169
.982
146,800
1909 . . .
101,300
1.412/
143, 0(10
.957
149,500
1910
112,500
1.413 '
159,000
.974
103.200
1911. . . .
127,200
1.414/
179,800
.970
185,300
1912. .. .
194,000 6
137,100
1.415<
194,000
.949
204,500
1913
151,200
1114 /
213.mii)
. 983
217.500
1914. . . .
152.000
1.413/
214,800
.952
225,000
1915. . . .
147,200
1.412/
2D7.900
.901
230,000
1916
168,100
1.411/
237,200
.980
212,000
1917
262,629 c
1 si 1,100
1.411-
202,029
9S2
207,400
1918
197,000
1.411/
278,000
.975
285,200
1919. ..
204,100
1.411/
288,000
982o
293,000 9
" U. S. Census of Telephones, 1907, p. 16.
b U. S. Census of Telephones, 1912, p. 48, .-hows larger companies to have 90.011
employees. This number has been multiplied by 1.0577, the ratio obtained in Table 1.
note 1.
c U. S. Census of Telephones, 1917, p. 10.
d Read from smooth curve based on recorded number of employees on December
31st, of each year, as shown in Poor's and Moody's Manuals.
e Computed.
/Interpolated along a smooth curve.
a Tentative estimate only.
§ 15e. Average Annual Earnings of Employees
With estimates available of the total amount paid to employees by
telephone companies and of 1 ho total number of employees attached to the
industry, it is only necessary to divide the first item by the second in order
to arrive at the average amount paid to each employee This average,
however, means little until it is divided by an index of the prices of such
consumption goods as are purchased by employees. The results of com-
putations along these lines are shown in Table 15F.
Column D of this table makes it evident that the average employee is a1
present receiving many more dollars per annum than was formerly the
case. However, each of these dollars has bought so much less in recent
186
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 15F
THE PURCHASING POWER OF THE COMPENSATION OF THE AVERAGE
EMPLOYEE ATTACHED TO THE TELEPHONE INDUSTRY IN THE
CONTINENTAL UNITED STATES
A
B
C
D
E
F
Year
Estimated
total of
payments
to employees a
(Thousands)
Estimated
number of
employees
attached
to industry b
Estimated
amount paid
to average
employee
attached to
industry e
B -r- C
Index of
prices of
consumption
goods bought
by manual
and clerical
workers c
Estimated
purchasing
power of
compensa-
tion paid
to average
employee e
DvE
1907
1909
$71,737
81,160
91,677
103,140
112,653
126,027
129,255
127,598
153,526
172,740
194,169
245,420
146,800
149,500
163,200
185,300
204,500
217,500
225,600
230,000
242,000
267,400
285,200
293,000-/
$489
543
562
557
551
579
573
555
634
646
6S1
838 d
.955
.978
.984
.994
1.000
1.01
1.03
1.10
1.29
1.58
1 773
$569
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919. . .
575
566
554
579
567
539
576
501
431
473 d
a See Table 15D
6 See Table 15E.
includes wages, salaries, pensions, c< mpensation for injuries, etc.
Bureau of Labor index extended back through special study by this Bureau. See
Table 2C.
d Tentative estimate only.
e The decline in the average wage and its purchasing power is accounted for largely
if not entirely by the large increase in the number of female as compared to male em-
ployees, the former constituting only 54 per cent of the total in 1907, but 70 per cent
in 1920.
years that the actual purchasing power of the average employee's income
from the telephone business was materially less in 1919 than it was in 1913.
This decline in the average is, however, at least partly due to the fact that,
during this decade, women have constituted a rapidly increasing fraction
of the total number of telephone employees.
§ 15f. The Efficiency of the Employees
The increase or diminution in the efficiency of the telephone worker as a
producer cannot be measured exactly because we have no record of the
changes in the amount of effort required to transmit a message and also
because an increase or decrease in efficiency is as likely to be a result of
TELEPHONES 187
better or worse equipment as of greater personal effort or effectiveness.
For example, long telephone lines evidently take more effort to build
and keep in repair than do short ones. It is more work to facilitate the
passage of messages when several connections are necessary, than when
only one is required. Nevertheless it seems worth while roughly to pic-
ture the results obtained under conditions as they exisi .
In the absence of any more accurate criterion, it seems that the m< --
sage mile might be used as a reasonable unit for measuring work accom-
plished by the telephone force. However, the number of message miles
is not given and must be computed. The fact that millions of messages do
not pass through an exchange vitiates to a degree I he accuracy of the esti-
mates presented. Nevertheless, it is not probable that this unknown
item affects materially the relative comparison for different years, even
though it undoubtedly prevents the possibility of obtaining an accurate
measurement of the absolute number of message miles for any single year.
The necessary assumptions in computing the number of message miles
are based upon the fact that if every telephone were connected through an
independent line directly with the central station, the average distance
traveled by each message would approximately equal twice the number of
miles of wire divided by the number of telephones. This quotient is used
as a relative indicator of the distance that each message travels and is
probably serviceable for that purpose even though its absolute value is of
little significance. When the number of messages sent is multiplied by
this index, the product gives some idea of the total distance through which
telephone messages are transmitted; in other words, it is a crude approxi-
mation to the physical product of the industry. The facts are presented
in Table 15G.
L88
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 15G
A COMPARISON FOR DIFFERENT YEARS OF THE PHYSICAL OUTPUT
PER EMPLOYEE IN THE TELEPHONE INDUSTRY
A
B.
Total
C
D
E
F
G
H
I
J
Daily
Approximate
messages
sent; as
ex-
change
Esti-
mated
Thou-
Mes-
Twice the
number of
message miles
esti-
mated
sands
of em-
number
of miles
Year
tions by
B-C
millions
of
per em-
ployee
(Thou-
sands)
E -F
Thou-
from
Bell
ployees
of wire
Total
sand
Census
Com-
messages
actually
per tele-
in bil-
per
data
(Mil-
panies
(Thou-
CXD
at work/
phone ;
lions
EX H
em-
ployee
lions)
sands)
690 d
I -T- F
1907
12,500 a
18,130
12,500 a
141
86.7
4.25ff
53.1
368
1909
19,925
670 «
13,350
143
93.4
4.40
58.7
411
1910
21,681
662 •
14,o53
159
90.3
4.49
64.4
405
1911
2:;, 484
657 «
15,429
180
85 . 8
4.57
70.5
392
1912
16,753 b
25,572
655 d
16,753 6
194
86.4
4 . 64 *
77.7
401
1913
26,431
659 «
17.418
21 1
si.. 5
4.71
82 .
384
1914
27,049
669 «
18,09(1
215
84 . 2
4.77
86.3
402
1915
25,184
681 «
17,150
21 18
82 . 5
4.83
82.8
398
1916
28,530
695 e
19,828
237
83.6
4.88
96.8
408
1917
21,846 c
30,845
709 d
21,846 <
263
83.2
4 . 92 i
107 .5
409
1918
31,264
723 «
22.(104
278
81.3
4.97
112.3
404
1919
29,561
738 e
21,816
2SS
75 7
5.01
109.3
380
a Assumed that latio of messages to telephones was same for non-reporting as for
reporting companies. Under this assumption, messages on non-reporting lines amounted
to 1,127 millions. See U. S. Census of Telephones, 1907, p. 14.
b Assumptions same as for 1907, making the estimated number of messages on non-
reporting lines 3,018 millions. See U. S. Census of Telephones, 1912, p. 13.
c U. S. Census of Telephones, 1917, p. 10.
d Computed.
■ Mead from smooth curve.
/See Table 15E.
g U. S. Census of Telephones, 1907, p. 14.
h U. S. Census of Telephones, 1912, p. 13.
i U. S. Census of Telephones, 1917, p. 10.
J If message travels to central office and to another station the number here recorded
should represent the approximate distance traveled by the message.
Although the number of messages per employee has declined materially,
the trend of the number of message miles per employee has remained
nearly constant. It does not appear, therefore, that there is any reason to
believe that the efficiency of telephone employees shows any downward
tendency. This statement is not controverted by the exceptionally low
record in 1919 since this probably represents a temporary phenomenon
rather than a permanent decline in output.
TELEPHONES
L89
§ 15g. Telephone Revenue Compared for Residence and Business
Telephones
It is an interesting fact that, during I he earlier part of the decade, 1 here
was little change in the proportion of revenue arising from residence and
from business telephones respectively. Since L915, however, business
telephones have slowly but steadily grown in relative importance as rev-
enue producers. This change is indicated by the data in Table 15H.
TABLE 15H
PER CENT OF THE OPERATING REVENUE OF TELEPHONE COMPANIES
DERIVED RESPECTIVELY FROM BUSINESS AND RESIDENCE STA
TIONSa
Per cent derived from
Year
Residence
telephones
Business
telephones
All telephones
1910
44.18
■11 35
Ills
11 13
44.27
11 11
43 65
13 16
L-2 80
41.96
55.82
55.65
55 82
55 . 87
55 . 73
55.89
56 :;.".
56.84
57 20
58.04
inn nit
1911
101) 00
1912
1913
100 00
100 00
1914
inn 00
1915
1916
1917
100 1
101) ii I
100 00
1918
loo 00
1919
LOO 00
a Computed from reports furnished by telephone companies. The percentages are
not exact, but are presumably approximately correct.
§ 15h. Relative Growth of Telephone Service and Population
It is also of interest to know whet her telephone service is or is not
keeping pace with the growth of our population. Table 151 shows the
probable facts in this connection.
190
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 151
THE ESTIMATED RELATIVE AMOUNT OF SERVICE PER PERSON IN THE
CONTINENTAL UNITED STATES RENDERED BY THE TELEPHONE
INDUSTRY
Year
Billions
of messages
sent a
Billions
of message
miles a
Thousands
of persons
in the
Continental
United States c
Messages
per
inhabitant
Message
miles per
inhabitant
1907
12.5
53.1
87,321 b
143
608
1909
1910
1911
1912
13.4
14.4
15.4
16.8
58.7
64.4
70.5
77.7
90,370
92,229
93,811
95,338
148
156
164
176
650
699
752
815
1913
1914
1915
1916
17.4
18.1
17.1
19.8
82.0
86.3
82.8
96.8
97,278
99,194
100,428
101,722
179
182
171
195
843
870
825
951
1917
1918
1919
21.8
22 . 6
21.8
107.5
112.3
109.3
103,059
104,182
104,847
212
217
208
1,043
1,078
1,042
a See Table 15G.
6 Statistical Abstract of U. S. for 1918, p. 776.
c See Table 2A.
Table 151 makes it clear that telephone service, whether measured by
messages or message-miles, is increasing very much faster than popula-
tion — in other words, we are, as a nation, coming to depend more and
more upon the telephone as a means of communication.
^
CHAPTER 16
TRANSPORTATION BY WATER
§ 16a. Sources of Information
The Census Bureau covered this field in the years 1906 and 1916, but
the financial statistics presented are far from having the degree of com-
pleteness desired. The records of gross income, and of wages and sala-
ries paid would, however, be of great assistance in solving our problems
were it not that some of the totals presented are evidently very far from the
truth. That serious errors really exist is clear if one compares the average
wages paid to employees on land as shown by the Censuses of 1906 and
1916. The Census record indicates that this average wage declined, dur-
ing the decade, from $665 to $450. All other sources agree, however, in
showing that the period was characterized by sharply rising wages. An
inquiiy concerning this peculiarity of the data was sent to the Census
Bureau and elicited the reply that the Census of 1916 was taken under
difficulties due to the rapid shift in the personnel of the employees in water
transportation. The Census Bureau officials, however, felt confident that
the amounts stated as paid for wages and salaries are approximately cor-
rect, even though the number of employees may be materially in error.
This belief, however, seems contrary to the facts for it involves the assump-
tion that the number of employees diminished greatly during the decade.
Overwhelming evidence including that in the Census report itself, proves
that the number not only did not diminish but actually increased to a
marked degree.
As a matter of fact, it appears that the Census data, as regards the num-
ber of employees, approximate the truth, but that the 1916 figures, because
of the failure to include sufficient allowances for board and lodging, under-
state the total pay of employees on vessels.
For the reasons just stated, the assumption has been made that the Cen-
sus figures for the average number of persons actually employed are, in
each instance, reasonably accurate, and that the 1906 record is a correct
picture of the average earnings of land workers at that date. It has also
been assumed that the record of gross earnings is reasonably accurate for
each of the Census years. These are the only Census figures which seem
to be adapted to our particular needs.
It has been necessary to supplement the data thus obtained by material
191
192 THE ESTIMATE BY SOURCES OF PRODUCTION
derived from the reports of the Commissioner of Navigation and of the
United States Shipping Board, and from the fragmentary information
concerning steamship companies which appears in Poor's and Moody's
Manuals of Corporation Securities.
§ 16b. Assumptions Made
The assumption has been made that the share of entrepreneurs and other
property owners in the income arising from transportation by water com-
prises nothing but interest on bonds, dividends on stocks or distributed
profits and business savings. There are doubtless other payments mack;
directly to private parties, but of these we have no record, and they are
probably not large enough materially to affect the totals. Similarly, the
share of the employees is assumed to consist only of the money wages and
salaries received plus an allowance for board and lodging furnished. Most
of the figures are probably so inaccurate that further attempts at refine-
ment in the assumptions made would be futile.
§ 16c. Mode of Estimating Gross Earnings
In estimating gross earnings for the intercensal years, recourse has been
had to the use of a sequence of ratios. For each shipping company, the
reports of which are shown in Poor's Manual, the ratio of the gross earn-
ings for the given year to the earnings for the preceding year has been cal-
culated and recorded. Earnings for the year 1909 have, however, been
compared with those of 1906, (the Census year), the years 1907 and
1908 being skipped because, in this study, there is no attempt to derive
estimates for years preceding 1909. Few shipping concerns have pub-
lished reports for each year since 1900, hence the derivation of an accurate
index of gross earnings is impossible. Under these circumstances, we have
been forced to take the median of all the ratios for a given year as repre-
senting the proportionate change in gross earnings from the preceding
period. These median ratios for the different years have been converted
into an index on the base 190G by a continued process of multiplication
beginning with the ratio of 1909 to 1906, next applying thereto the ratio
of 1910 to 1909, and so on. It can be demonstrated mathematically that
an index computed in this manner tends, in the course of time, to rise
above the true index. This tendency has been corrected by tying the in-
dices thus derived to the Census estimates of total gross earnings; a proc-
ess by which the upward slope is diminished materially and the error of
the type just mentioned is presumably thus eliminated. The final estimate
of gross earnings appears in Table 16A.
Having arrived at an approximate set of totals of gross earnings, the
next step is to utilize these estimates as bases for computing the share of
TRANSPORTATION BY WATER
193
TABLE 16A
THE ESTIMATED GROSS EARNINGS OF ALL PRIVATE CONCERNS IN
THE CONTINENTAL EXITED STATES ENGAGED IN TRANSPORTA-
TION BY WATER
A
B
C
D
E
Gross income
Index of
Esi imated gross
gross earnings
earnings of all
Year
in thousands
estimated fi
Rati i "f
as reported
reports of about
I', to C
c mcerns
(Thousands)
CX D
by the Census <*
twenty
corporations''
1906
$294,855
1.00
294,855 c
$294,855 a
1909
1.00
280,500 d
28 1.500
1910
1.10
27.V 700"'
303,300
1911
1.13
270,800 <*
306,0 10
1912
1.27
266,100 d
338,0 i i
L913
1.39
261,200''
:;t;;,ooo
1914
1.29
256,600^
331,000
1915
1.51
251,700 d
380,000
1916. .
563,736
2.28
247,300 c
563,73 i
1917
2 . 03
2(2. 100 d
192.0 1 1
1918
1 79
237,400 d
425,000
1919. . . .
3.05
232,500 d
709,00 i
a Census of Transportation by Water, 1910, page 57.
6 Lor derivation, see text.
c Gomputed by division.
d Interpolated along a straight line.
the entrepreneurs and property owners in the value product of each year.
The mode of attack is as follows:
§ 16d. The Share of the Owners and Investors
For each shipping corporation dealt with in Poor's or Moody's Mama! .
the reports of which appear in such form as to make it possible, i hree ratios
have been computed for each year; namely, the respective ratios of bond
interest paid, dividends paid, and added surplus, to the gross earnings of
the same year. In the case of bond interest, a weighted median of these
ratios has been ascertained for each year, large companies like the Inter-
national Mercantile Marine naturally having been given more weighl than
small concerns like the Montauk Steamship Company. The same proce-
dure has been followed in obtaining the yearly medians of the ratios of
surplus to gross earnings. 1 In the case of dividends, however, it was neces-
sary to compute a weighted arithmetic average instead of a weighted
1 The median was used because it eliminated die extreme variations in some of the samples.
These extremes were not believed to lie representative.
194
THE ESTIMATE BY SOURCES OF PRODUCTION
median of the ratios; for, in certain lean years, even though a few corpora-
tions paid very considerable dividends, the median ratio was zero.
The products obtained by multiplying the estimated gross earnings for
the various years by the ratios obtained in the manner just described are
believed to approximate the actual amounts falling into the respective
categories. Table 16B shows the ratios and the estimated size of the vari-
ous amounts which go to make up the share of the entrepreneurs and other
property owners in the annual value product.
TABLE 16B
THE ESTIMATED SHARE OF ENTREPRENEURS AND OTHER PROPERTY
OWNERS IN THE ANNUAL VALUE PRODUCT OF THE PRIVATE IN-
DUSTRY OF TRANSPORTATION BY WATER
Estimated
gross
earnings
in
thou-
sands a
$280,500
303,300
306,000
338,000
363,000
331,000
380,000
563,736
492,000
425,000
709,000
Average ratio & to gross
earnings of
Estimated share of entrepreneurs
and other property owners c
(Thousands)
Calendar
Bond
in-
terest
paid
Divi-
dends
paid
Amounts
carried
to
surplus
year
Interest
on fund-
ed debt
Profits
dis-
bursed
Busi-
ness
savings
Total
1909
1910. . . .
1911. . . .
1912. . . .
1913
1914. . . .
1915. . . .
1916. . . .
1917. . . .
1918. . . .
1919. .. .
.0691
. 0623
.0503
.0521
.0501
.0502
.0407
.0374
. 0304
.0293
.0259
. 0286
. 0550
. 0543
.0424
.0378
.0543
.0479
.0418
.1028
.1013
1124
.0246
.0835
.0307
.0725
.060S
— .0021
.0649
.1189
.0463
.0699
.0166
$19,380
18,900
15,400
17,620
18,200
16,600
15,470
15,000 d
14,960
12,460
15,000 <i
$ 8,025
16,680
16,620
14,320
13,720
17,983
18,203
23,550
50,603
43,050
79,703
$ 6,900
25,320
9,400
24,510
22,070
—695
24,660
67,030
22,790
29,720
11,770
$34,305
60,900
41,420
53,450
53,990
33, S85
58,330
105,580
88,350
85,230
106,470
a See Table 16A.
b For mode of derivation, see text.
c Gross earnings multiplied by the appropriate ratios.
d Arbitrarily assumed, because original products seem too large, since it is unlikely
that bond interest would change greatly from year to year.
While the share of the entrepreneurs and other property owners has
increased greatly in terms of dollars, the change in their ability to secure
commodities has been somewhat less striking. That such is the case is
made 1 clear by a study of Table 16C in which the current income of these
classes has been converted into terms of purchasing power at the price
level of 1913.
S
TRANSPORTATION BY WATER
195
TABLE 16C
THE RELATIVE PURCHASING POWER IN TERMS OF CONSUMPTION
GOODS OF THAT PART OF THE INCOME OF ENTREPRENEURS AND
OTHER PROPERTY OWNERS DERIVED FROM TRANSPORTATION BY
WATER
Disbursements to entrepreneurs
and other property owners
Business savings
Profits
Index
Amount of
Calendar
and
of prices
Purchasing
construc-
year
interest
of goods
power
Amount in
Index of
tion pur-
on funded
consumed
.it prices
t bousands
c instruc-
chasable
debt a
by
of 1913
of dollars c
tion costs <*
at prices
(Thou-
wealthier
(Thousands)
of 1913
sands)
families''
(Thousands)
1909
$27,405
.964
$28,428
$ 6,900
.927
$ 7.11:;
1910
35,580
. 982
36,232
25,320
953
26,56 1
1911
32,020
.989
32,376
9,400
. 9 15
9,947
1912
31,940
.999
31,972
21,510
.983
24,934
1913
31,920
1.000
31,920
22,070
1.000
-•-'.070
1914
34,580
1.011
34,208
—695
.960
-721
1915
33,670
.999
33,701
24,660
.992
24,859
1916
38,550
1.081
35,661
67,030
1.194
56,139
1917
65,560
1.225
53,518
22.790
1.473
15.472
1918
55,51n
1.406
39,481
29,720
1.499
19,827
1919
91.700
1.648
57, Hil
11,770
1 5 17
7,370
a Combination of the items in two columns of Table 16B.
b An average of the indices for families spending respectively 85,003 and S25,033
per annum for consumption goods.
c See Table 16B.
d An average of the U. S. Bureau of Labor Statistics indices for building lab >r, build-
ing materials, and metals, the weights used being, in the order named, 3, 1, and 2.
§ 16e. The Share of the Employees
The next step necessary is to ascertain the share of the product going to
the employees in each year of the period. This end can apparently best be
attained if the employees are first divided into the two classes used by the
Census, namely those working on land and those employed on vessels.
It seems clear that the number of men required about the docks must
vary in proportion to the amount of shipping to be handled. The criterion
which has suggested itself as being the besi adapted to measuring accu-
rately shipping activity at our ports, is the tonnage of vessels entered and
cleared. This tonnage is recorded for the foreign trade but not for the
coastwise. In order to give some weight to the latter, the plan has been
adopted of using a combination index constructed by adding to the sum
of the tonnage in the foreign trade entered and cleared, one-fifth of the
freight tonnage passing through the Sault Ste Marie Canal and five times
196
THE ESTIMATE BY SOURCES OF PRODUCTION
the tonnage of the vessels engaged in the coastwise trade. The "Soo"
* Janal traffic is weighted low because the handling of the grain and iron ore,
which constitutes the bulk of the tonnage, requires relatively little labor.
The weighting for coastwise vessels assumes that there are on the average
five cargo handlings per year. However, the three indicators used vary so
similarly that the relative size of the weights assigned is not a matter of
great importance. The foreign trade figures for the period preceding 1918
TABLE 16D
THE ESTIMATED NUMBER AND EARNINGS OF LAND EMPLOYEES
ENGAGED IN THE INDUSTRY OF TRANSPORTATION BY WATER
A
B
C
D
E
F
G
Calendar
year
Number at
work as
reported
by the
Census
Index of
tonnage
loaded
and
unloaded b
Ratio of
B toC
Estimated
number
at work
CX D
Estimated
average
annual pay
Estimated
total wages
and salaries
EX F
1906
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
47,419 a
83,581 a
109.8
123.0
128.5
133.2
145 . 6
154.2
144.4
144.9
153.2
146.7
144.6
432 c
475 d
48S d
500 d
512 &
522 d
530''
538 d
545 e
552 d
556 d
47,419 a
58,450
62,750
66,592
74,480
80,460
76,540
77,980
83,581 a
80,900
80,400
$ 663^
664 e
665 «
666 «
698 e
732 e
732 e
731 «
808 e
840 e
1,012 «
$31,456 a
38,800
41,720
44,360
52,000
58,900
56,050
57,030
67,560
67,940
81,400
a U. S. Census of Transportation by Water, 1916, p. 59.
b For mode of derivation, see the text .
c Computed by division.
d Interpolated along a smooth curve.
e Assumed to vary from the 1906 wage in the same proportion as did the daily wages
for longshoremen. See text for explanation.
are reported for years ending June 30, hence the pairs of fiscal years have
been averaged in each case to give an estimate for the calendar year on
which they overlap. These estimates for the calendar years have been
combined with the other indicators in deriving the index used.
It has been assumed that the employees on land received, on the aver-
age in 1906, the $605, reported by the Census of Transportation by Water.
This amount has been varied for the other years on the basis of the change
in the daily rates of pay at New York City from 1906 to 1914 l and since
■ Estimated from data given on page 80 of The Longshoreman, by Charles B. Barnes.
TRANSPORTATION BY WATER 197
that date, in the daily rate- for all sections of our coast. 1 The New York
City rates have been weighted more heavily than the others because of the
importance of this port .
The next necessary step in the procedure is to estimate the wages of the
employees on vessels. Now it seems probable that the Census figures, as
to the number of men employed, are approximately correct. The inter-
polation for the intercensal years has been on the basis of the reported
tonnage of the American merchant marine, which seems to constitute a
satisfactory criterion.
In computing the wage payments, it was, for reasons previously stated,
found necessary to ignore the Census figures. Fortunately, the Annua!
Reports of the United States Commissioner of Navigation give detailed
information each year concerning the wages paid to different classes of
workers. From these reports, a median of monthly wages paid to able-
bodied seamen on American steamships has been computed for each year.
To this median wage has been added in each instance an allowance for
board and lodging, this allowance having been made to vary in proportion
to the food index computed by the United States Bureau of Labor Sta-
tistics.
On pages 188-9 and in Chapter IX of H. B. Drury's report on Marine
and Dock Labor, statistics are given which enable one to compute, with a
reasonable degree of accuracy, the ratio of the average pay of the entire
ship's crew, including officers, to the average pay of able-bodied seamen.
By applying this ratio, an estimate has been made of the average annual
pay of workers on vessels. The final estimates appear in Table, ltd'.
1 From fhr report dated December 31, 1918, of The National Adjustment Commission
of the l r . S. Shipping Board, p. 21, and from p 150 of Bulletin l'7 1 of the United States Bun au
of Labor Statistics on The Union Scales of Wages and Hours »f Labor, May 15, 191!).
198
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 16E
THE ESTIMATED NUMBER AND EARNINGS OF THE EMPLOYEES ON
THE VESSELS OF THE AMERICAN MERCHANT MARINE
A
B
C
D
E
F
G
H
I
Number
reported
by U. S.
Census
Tonnage
of mer-
chant
marine
of the
U. S.6
(Thou-
sands)
Ratio of
B to C
Esti-
mated
number
of men
actually
at work
CXD
Monthly wages of
able seamen on
American steam
vessels
Esti-
mated
average
annual
earnings
of all
em-
ployees'?
Estimated
total
wages and
Year
Median
money
wage e
Esti-
mated
wage in-
cluding
board
and
lodging
salaries in
thousands
paid to
employees
on vessels
EXH
1906
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
140,929"
153,301a
6,675
7,389
7,508
7,639
7,714
7,887
7,929
8,389
8,470
8,871
9,925
12,907
02111c
. 02019 d
.01990'/
. 01958 d
. 01930 d
.01900'/
01X70'/
. 01839 d
,01810c
. 01780 d
.01752'/
.01722 d
140,929
149,200
149,400
149,600
148,900
149,900
148,300
154,300
153,301
157,900
173,900
222,200
$25.84
28.75
30 . 00
30.00
30 . 00
30.00
30.00
35.00
47.60
58.85
68.75
75.00/
$45.24
51.72
54.02
53 . 73
55.74
55 . 74
56.37
61.25
77.15
96.73
112.17
123.53/
$ 788
901
941
936
971
971
982
1,067
1,344
1,685 '
1,954
2,152/
$111,000
134,400
140,600
140,000
144,520
145,500
145,700
164,600
203,100
263,000
339,800
478,200/
a U. S. Census of Transportation by Water, 1916, p. 59.
6 Statistical Abstract of U. S. for 1919, p. 361.
c Computed by division.
d Interpolated along a straight line.
f Medians of wages for some 50 classes of able seamen. Data from Annual Reports
of the U. S. Commissioner of Navigation. The items recorded are the averages of
medians for the pairs of fiscal years overlapping on the calendar year.
/ Preliminary figures.
o Items in column G multiplied by 17.42. For explanation, see text.
<*
TRANSPORTATION BY WATER
L99
§ 16f. The Net Value Product and Its Division
We are now prepared to estimate the value producl of the industry of
Transportation by Water. The figures appear in Table 16F.
TABLE 16F
THE ESTIMATED TOTAL VALUE PR< (DUCT OF THE INDUSTRY OF TR VXS
PORTATION BY WATER AND THE PER CENT THEREOF GOING TO
THE EMPLOYEES
Calendar
year
Total value
product a
(Thousands)
Total share of
entrepreneurs
and investors b
(Thousands)
Total wages and
salaries paid <•
(Thousands)
Per cent of
value product
going to
employees
1909
$207,505
243,220
225,780
252,970
258,390
235,635
279,960
379,240
422,290
506,430
$ 34,305
60/. 100
£1,420
56,450
53,990
33,885
58,330
105,580
88,350
85,230
$173,200
182,320
184,360
196,520
204,400
201,750
221,630
273,660
333,940
421,200
83 . 5
1910
1911
75
81.7
1912
1913
1914
77.7
79.1
85.6
1915
1916
1917
1918
79.2
72.2
79.1
83.2
a Sum of the two following columns.
b See Table 16B.
c Sum of the last column in Table 16D and the last column in Table 16E.
It is clear that the employees in this line of work receive a high percent-
age of the value product as compared to those in many of the other fields.
No tendency is apparent for their relative share either to increase or dimin-
ish as the years pass.
§ 16g. The Average Annual Earnings of Employees
The usual estimates of the numbers of men attached to the industry.
the fluctuations in the average money earnings, and the purchasing power
of these earnings on the basis of the prices of 1913 appear in Table 16G.
200
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 16G
THE PURCHASING POWER OF THE AVERAGE ANNUAL EARNINGS OF
THE EMPLOYEES IN THE PRIVATE INDUSTRY OF TRANSPORTATION
BY WATER
A
Calendar
3 ear
1900 .
1909.
1910.
1911.
1912
1913 .
1914
1915.
1916.
1917.
1918.
B
Estimated
average
number of
employees
actually
at work c
188,348 a
207,650
212,150
216,192
223,380
230,360
224,840
232,280
236,882 a
238,800
254,300
C
Estimated
fraction of
persons at-
tached to
industry
actually at
work <l
.927
.917
.906
.919
.930
.899
.922
^936
.934
. 925
D
Estimated
number of
employees
normally
attached to
the industry
B
C
224,002
231,352
238,623
243,01 is
247,699
250,100
251,931
253,079
255,675
275,000
E
Total
wages and
salaries
paid b
(Thousands)
$142,456
173,200
182,320
184,360
196,520
204,400
201,750
221,630
273,660
333,940
421,200
F
Average
annual earn-
ings per
employee
attached to
industry
E
D
I 773
788
773
808
825
807
880
1,081
1,306
1,532
G
Index of
prices of
goods con-
sumed by
manual and
clerical
workers e
.955
.978
.984
.994
1.000
1.01
1.03
1.10
1.29
1.58
H
Purchasing
power of
earnings at
prices of
1913
F
G
$ 810
806
785
813
825
799
854
983
1,012
969
a U. S. Census of Transportation by Water, 1916, p. 59.
b See Table 16F.
c The sum of the items in Column E, Table 16D, and in Column E, Table 16E.
d Estimated in § 2d.
e The Bureau of Labor Statistics index carried back by means of a special study
made by this Bureau; see § 2b.
Table 16G records clearly a marked gain in the economic welfare of the
employees in the years 1915, 1916, and 1917. The other years of the period
show no changes of moment in this respect. On the whole, the employees
were evidently veiy much better off in 1918 than in 1909.
X
TRANSPORTATION BY WATER
201
§ 16h. The Tonnage of the American Merchant Marine
The final step is to note the changes in the supply of American merchant
shipping which have occurred during the years under consideration.
Table 16H sets forth the facts as indicated by the official reports.
TABLE 16H
THE TONNAGE OF THE AMERICAN MERCHANT MARINE AS COMPARED
TO THE POPULATION OF THE CONTINENTAL UNITED STATES
Year
1909.
1910.
1911 .
1912.
L913.
1914.
1915
1916.
1917.
1918.
1919.
Tonnage
afloat a
7,388,755
7,508,082
7,638,790
7,714, is;;
7,886,551
7,928,688
8,389,429
8,469,649
8,871,037
9,924.r» is
12,907,300
Population
in thousands h
90,370
! 12,229
93,811
95,338
97,278
99,194
100,428
101,722
L03.059
104, 182
101,847
Tonnage per
capita
0.0MS
.081 1
.081 1
.0809
.0X11
.0799
.0835
.0833
.0861
.0953
.1231
a Statistical Abstract of the U. S. , 1919, p. 361.
b Sec Table 2A.
This table shows that the merchant marine just about kept pace with
population until the beginning of the European War. A moderate rela-
tive increase in 1915 and 1917 was followed by a large growth in 1918 and
a tremendous expansion in 1919. The reasons for this development are
too well known to require comment.
CHAPTER 17
BANKING x
§ 17a. Sources of Information
The data for this chapter are derived mainly from the Annual Reports
of the Comptroller of the Currency. Unfortunately, the reports for banks
other than national are incomplete in many respects and, even in the case
of national banks, we have extremely meager information concerning the
number of employees. Under the circumstances, the results obtained by
this study must be considered as only moderately near the truth.
§ 17b. The Composition of the Net Value Product
The value product of the banking industry is distributed in the form of
dividends to stockholders, additions to surplus, interest to depositors, and
wages to employees. There is also a relatively small item representing
donations to the Red Cross. Most of the interest paid on deposits other
than savings doubtless is paid to business enterprises and is taken into
account in the study of the various fields of industry. It has been arbi-
trarily assumed that an increase of 20 per cent in the interest paid by sav-
ings banks will be sufficient to cover those interest payments made to
individuals which are utilized to defray living expenses or which enter into
their private as opposed to their business resources.
§ 17c. Net vs. Gross Dividends
A large part of the amount paid in dividends by the bank consists merely
in amounts passed along which are received from other industrial fields as
returns for investments therein. Since such amounts have already been
counted once, they must evidently be deducted here. The manner of esti-
mating the net dividends originating in the banking field appears in Table
17A.
§ 17d. Undivided Profits
The net gains of the banking industry have to a large extent been kept
in the business as surplus or undivided profits. The amounts of these items
1 The figures cited in this report are those given for all banks and include banks in the
[sland Possessions. Their business is less than half a per cent, of the whole and is probably
much less than the business of non-reporting banks in the Continental U. S. Under these
circumstances, it has been deemed unnecessary to take the trouble to deduct the figures
for the Island banks from the summaries.
202
BANKING
203
TABLE 17A
AX ESTIMATE OF THE AMOUNT OF THOSE DIVIDENDS PUD BY THE
HANKS OF THE UNITED STATES WHICH ORIGINATE IN THE BANK
ING BUSINESS
A
B
C
D
E
F
G
H
I
J
Calen-
dar
year
Loans
r<
(Mi
discounts and
^discounts
ddlc (if year)
Dividends paid by
Face
value
of cor-
porate
securities
held by
banks c
(Millions)
Esti-
mated
average
yield on
securities
(Rate)
Estimated
income
from
securities
(Thousands
Gx H
Estimated
dividends
originat-
Of
national
banks a
(Thou-
sands)
Of all
banks e
(Thou-
sands)
Ratio
ot
C toB
2.244
2.294
2.314
2.333
2.371
2.37S
2.361
2.320
2 299
2.219
2.295
National
banks 6
(Thou-
sands)
All banks*
(Thou-
sands)
D X E
ing in
banking
(Thou-
sands)
F — I
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
x.-,,o:;i;
5,430
5,611
5,954
6,143
6,430
6,660
7,679
8,958
10,148 rf
1 1,024 d
$11,303
12,459
12,: is:;
13,892
14,568
15,2XX
15,722
17,812
20.594
22,515
25,301
$99,446
110,292
117,493
120,103
120,427
117,327
114,216
120,131
127,65s
132, (is:;
141,600
$223,157
253,(1 111
271,879
280,200
285,532
279,004
269,664
278,704
293,486
291,121
325,300
$2,669
2,670
3,029
3.218
3,275
3,357
3.417
3,957
4,257
4,147
4,234
.05
.05
.05
,05
.05
.05
.05
,05
.05
05
.052
$133,455
13V,, is!
151,151
160,907
163,735
1(57,869
170,s:;_>
197,855
212.S5S
207,:; I 1 1
220,151
SS9.702
119,529
120,428
119,293
121,797
111,135
98,832
80,849
80,628
87,075
105.119
a Annual Report of the Comptroller of the Currency, 1919, Volume II, pp. 2.)2-303.
b Average of pairs of fiscal years; Annual Report of the Comptroller of the Cur-
rency, 1920, Volume I, p. 49.
« This item has been estimated by a series of rather complex calculations from the
various Annual Reports of the United States Comptroller of the Currency. Since 1915,
the reports have been incomplete and the errors may therefore be considerable.
<i Annual Report of the Comptroller of the Currency, 1919. Volume I, p. 175.
« Ibid., p. 186.
arc recorded in Table 17B as are also their approximate values at the 1913
price level, were they distributed to the stockholders.
The striking fact brought out by Table 17B is the very rapid gain in bank
surplus during the latter part of the decade, this gain being accompanied
by a considerable decline in the purchasing power of the net dividends dis-
bursed and of the interest paid on savings deposits. 1 Obviously, this
increase in surplus account has materially strengthened the financial situ-
ation of the banks.
' See Table 17C.
204
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 17B
THE GROWTH IN SURPLUS AND UNDIVIDED PROFITS AND THE TOTAL
ANNUAL GAIN OF THE STOCKHOLDERS OF ALL BANKS IN THE
UNITED STATES
A
B
C
D
E
F
Business savings
Dividends
originating in the
banking busi-
ness c
(Thousands)
Total share of
stockholders,
including
business savings
(Thousands)
B + E
Year
Thousands
of dollars «
Index of
wholesale
prices b
Value at
prices of 1913
B
C
1909
1910
1911
1912
$ 95,500
115,500
106,850
92,100
.97
.99
.95
1.01
$ 98,453
116,666
112,474
91,188
$ 89,702
119,529
120,428
119,293
$185,202
235,029
227,278
211,393
1913
1914
1915
1916
55,150
61,450
68,750
123,500
1.00
1.00
1.01
1.24
55,150
61,450
68,069
99,596
121,797
111,135
98,832
80,849
176,947
172,585
167,582
204,349
1917
1918
1919
152,550
194,100
333,600
1.76
1.96
2.12
86,676
99,031
157,358
80,628
87,075
105,149
233,178
281,175
438,749
a Annual Report of the Comptroller of the Currency, 1919, Vol. I, p. 18.
6 See p. 15 of Bulletin 269, of the U. S. Bureau of Labor Statistics.
e See Table 17A, Column J.
§ 17e. The Purchasing Power of Dividends and Interest
The next step necessary is to measure the purchasing power at a con-
stant price level of the dividends originating in banking and of the interest
paid on savings accounts. This computation appears in Table 17C.
^
BANKING
TABLE 17C
20/
AN ESTIMATE OF THE PURCHASING POWER OF DIVIDENDS ORIGINAT-
ING IN THE BUSINESS AND INTEREST PAID ON SAVINGS DEPOSITS
BY THE BANKS OF Till-] UNITED STATES
A
B
C
D
E
F
G
Purchasing
Cal-
Dividends
Index of
Purchasing
power of
Interest
Index of
prices of
goods con-
sumed by
working
classes ■'
power of
interest
en-
dar
year
originating
in banking
(Thou-
sands)
prices oi
goods con-
sumed by
wealthier-
classes b
dividends
at prices
of 1913
B
C
on savings
deposits r
(Thou-
sands)
on savings
deposits at
prices of
1913
E
T
1909
$ 89,702
. 965
$ 92,955
$133,680
. 955
8139,979
1910
119,529
.983
121,596
1 16,568
.978
1 19,865
1911
120,428
.990
121,611
151.920
.984
154,390
1912
119,293
1.000
119,293
160,660
.994
161,630
1913
121,797
1.000
121,797
170,749
1.000
170,749
1914
111,135
1.011
109,926
178,441
1.01
176,674
1915
98,832
.999
98,931
181,133
1.03
175,857
1916
80,849
1.081
74,791
185,070
1.10
168,245
1917
80,628
1.225
65,819
197,600
1.29
153, 178
1918
87,075
1 . 406
61,931
199,191
1.58
126,070
1919
105,119
1.648
63,804
214,747
1 773
121,121
« See Table 17A, Column J.
b Average of indices for classes spending annually for consumption goods $5,003
and $25,009 respectively.
f The amounts in this column are derived from the Annual Reports of the Comp-
troller of the Currency by multiplying the reported deposits in savings banks by 1.2,
in order to allow for savings in other banks, and by assuming that the interest paid
amounted to 3 per cent of these deposits. To this sum has been added the interest
on postal savings deposits. The last named quantity is reported for 1920 and estimated
for earlier years on the basis of deposits. Colonel M. C. Rorty suggests that the ratio
of 1.2 is low for recent years as savings in other banks have been increasing rapidly of
late.
d Bureau of Labor Statistics index carried back for earlier years — see Table 2C.
§ 17f. Employees, Salaries, and Wages
According to a special report made in 1918, the National banks of the
United States employed in that year 8(5,845 persons. If the employees in
other banks were as numerous in proportion to the volume of loans and
discounts, it follows that all banks gave employment to about 192,500
persons in 1918 or about 6.66 employees per bank. The estimates of the
numbers employed in the other years are made on the basis that in each
year the average bunk employed 6.66 persons, that being the ease in
1918.
Presumably, unemployment is not an important factor in the banking
200
THE ESTIMATE BY SOURCES OF PRODUCTION
field, hence no distinction has been made between the number of employees
actually at work and the number attached to the industry.
The total amounts paid for salaries and wages by National banks have
been reported by the Comptroller of the Currency since 1917. It has been
assumed that, previous to that date, these payments varied in proportion
to the total expenses of the same class of banks. It has further been
assumed that the ratio of salary and wage payments to the volume of
combined loans and discounts was the same for other banks as for
National banks. The figures resulting from these assumptions and cal-
culations appear in Table 17D.
TABLE 17D
AN ESTIMATE FOR THE BANKS OF THE UNITED STATES OF THE
NUMBER OF EMPLOYEES AND THE WAGES AND SALARIES PAID
A
B
C
D
E
F
Calendar
year
Salaries
and wages
paid by all
banks a
(Thou-
sands)
Number of
employees
attached
to industry a
Average an-
nual earnings
per employee
B
C
Index of
prices of
articles con-
sumed by
manual and
clerical
workers
Purchasing
power of an-
nual earnings
at prices of
1913
D
E
1909
1910
1911
1912
1913
1914
1915
1916.
1917
1918
1919
$115,400
122,700
136,900
148,900
160,900
164,100
183,400
214,300
230,200
281,300
361,650
149,900
153,900
162,300
167,860
173,000
178,150
180,300
183,200
186,000
192,500
194,000
$ 770
797
843
887
930
921
1,017
1,170
1,238
1,461
1,864
.955
.978
.984
.994
1.00
1.01
1.03
1.10
1.29
1.58
1.773
$ 807
815
857
892
930
912
987
1,064
959
925
1,051
a For mode of derivation, see the text.
The figures in Column F of Table 17D indicate that the economic condi-
tion of the employees has improved noticeably during the decade. How-
ever, the reader is warned against attaching great importance thereto, as
the assumptions made are too numerous to permit of the results being
anything more than rough approximations to the truth.
§ 17g. The Share of Salaries and Wages in the Value Product
It is now possible for us to estimate the fraction of the value product of
the banking industry going to the employees. This is done in Table 17E.
S
BANKING
207
TABLE 17E
AN ESTIMATE OF THE DIVISION OF THE NET VALUE PR( >DU< IT ARISING
FROM BANKING
A
B
C
D
E
F
G
Calendar
year
Share of
stock-
holders a
(Millions)
Share of
holders of
savings
accounts '>
Millions)
Share of
Red Cross
(Millions)
Shire of
employees d
(Millions)
Total nel
value product
(Millions)
B+C+D+E
Per cent
of value
product
going to
employees
ion] :
F
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
L919
$185
235
227
211
177
173
11 iS
204
233
281
439
$134
147
152
161
171
179
181
185
198
199
215
Ml
5
3
$115
123
137
149
161
164
183
214
230
281
362
S 434
501
516
521
509
515
532
604
661
767
1,018
' 26.6
24.3
26.5
28.6
31.6
31.9
34.5
35.5
34.8
36 . 7
35 5
a Sea Column F of Table 17B.
b See Column E of Table 17C.
c Estimated from the Annual Reports of the U. S. Comptroller of the Currency;
averages for pairs of fiscal years.
d See Column B of Table 17D; comprises wages and salaries only.
It is clear that not only did the value product of the industry nearly
double during the decade, but apparently the per cent of that product
going to the employees increased steadily throughout the period. Again,
however, it must be kept in mind that information concerning the em-
ployees is too scanty to justify laying much stress on this tentative con-
clusion. It is certain, however, that the relative share of the employees
in the net value product is much smaller than in the fields of manufacturing
or transportation.
§ 17h. Banking Facilities Compared to Population and Income
It is a matter of interest to note whether or not the people of the United
States are becoming increasingly dependent upon banking facilities in the
conduct of their business. Table 17F presents certain facts that bear
upon this problem.
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BANKING
209
Column F of Table 17F makes it clear that batik accommodation is jusl
about keeping pace with population, but that it is not growing quite as
rapidly as the total income of the people of the nation.
>j 17i. Changes in the Volume of Business per Bank
It is also worth while to ascertain whether or not there is a tendency
for banks to grow larger on the average. If so, it should be apparent in the
average of loans and deposits per bank. The facts are set forth in Table
17G.
TABLE 17G
THE AVERAGE VOLUME OF COMBINED LOANS AND INDIVIDUAL
DEPOSITS IN THE BANKS OF THE UNITED STATES
A
B
C
D
E
F
Middle
of
year
Sum of loans
and individual
deposits a
(Millions)
Number of
banks a
Loans and
deposits per
bank
(Millions)
B
C
Index of
wholesale
prices '>
Purchasing
power of loans
and deposits
per bank at
prices of 1913
(Millions)
D -=- E
1909
1910
1911
1912. . . .
1913
1914. . . .
1915
1916... .
1917...
1918. . . .
1919...
$25,338
27,742
28,889
30,916
32,044
33,806
34,857
40,585
46,884
50,322
58,366
22,491
23,095
24,392
25,195
25,993
20,705
27,062
27,513
27,923
28,880
29,123
$1.13
1.20
1.18
1.23
1.23
1.26
1.29
1.48
1.68
1.74
2.00
.97
.99
.95
1.01
1.00
1.00
1.01
1.24
1.76
1.96
2.12
SI. 17
1.21
1.24
1.22
1.23
1.26
1.28
1.19
.95
so
.94
a Annual Report of U. S. Comptroller of the Currency, 1919, Volume I, p. I so.
b U. S. Bureau of Labor Statistics, Bulletin 269, p. 15.
It is clear that, on the average, a bank could finance less business at the
end of the decade than in the earlier years. If, as is sometimes asserted,
there is increasing; concentration in the banking business, it must then lie
in greater control of some banks by others and not in the growth in the
size of the average bank, since this still remains a relatively small concern.
CHAPTER 18
ALL BRANCHES OF GOVERNMENT
§ 18a. The Components of the Net Value Product
In dealing with, the product of government, the same criterion is used
that has been applied in the industrial fields previously studied; namely,
what Look or money income do individuals, as such, derive therefrom?
Evidently, governmental units expend great amounts for wages and sal-
aries, but they pay no dividends. Large sums are, however, disbursed in
interest, mostly to private individuals but to no inconsiderable extent to
banks. The interest going to banks must not be included in the govern-
mental value product since it is already accounted for as a receipt in the
banking industry. In this study, the net value product of government
will, then, he considered simply as the total of wages, salaries, pensions,
gratuities, and interest paid to private individuals.
Because of the nature of the available statistics government expendi-
tures have been divided into four main classes:
1. Federal.
2. State and County.
3. City and Village.
4. School Districts.
§ 18b. The Number of Employees
One of the most difficult parts of the study has been to estimate the
number of employees engaged in each of these governmental fields. For
the United States Government, the sources made use of are the Official
Register, the Statistical Abstract, and the Annual Reports of the Secretary
of War and of the Postmaster General. While the results are not highly
accurate, it is almost certain that the errors in the estimates of the number
of Federal employees are relatively small.
It is difficult, however, to obtain any reasonably accurate figures con-
cerning the numbers of State and County employees. The United States
Census of Occupations gives practically no aid, for it records only offi-
cials, * leaving out of account the army of clerks, stenographers, etc., who
far outnumber those who are their superiors in rank. The desired num-
ber has therefore been estimated by ascertaining from a study of The
> Even these are doubtless often entered under their professions.
210
ALL BRANCHES OF GOVERNMENT 211
Census of Wealth, Debt and Taxation and of The Financial Statistics of
States, the approximate total amounts paid as wages and salaries in the
various years and then dividing these totals by the average compensa-
tion for the services of State and County employees in New York as approx-
imated from the reports of the State Civil Service Commission. While we
have no reason for believing that New York salaries are especially non-
representative, a much wider base would be necessary before one could feel
confidence in the results. However, time was lacking to utilize fully the
scanty and ill-assorted material scattered through some of the State
reports, or to canvass thoroughly all of the State records in the hope of
finding better organized results which perchance may there exist. Even
the rather crude analysis here made represents the results of several weeks
of search and calculation.
The determination of the number of city and village employees offered
a problem only slightly less difficult of solution. Using the United States
Census reports and interpolating by aid of the police and fire department
records of several large cities, it was found possible to approximate reason-
ably well the number of policemen and firemen in all cities. It is believed
therefore that the results in this field are satisfactory. The number of
other city employees was estimated by first calculating the total wages
and salaries paid to city employees, using for this purpose the reports of
the auditors or comptrollers of various cities, and the Financial Statistics
of Cities published by the United States Census Bureau. The total for
each year was divided by an average wage estimated from the same sources
in order to obtain the approximate number of employees attached to the
industry. In this instance, a large quantity of usable data were found
and the results are therefore somewhat more dependable than in the case
of the States and Counties, although they are far from exact. Table ISA
summarizes the estimates.
In calculating the number of school employees, the reports of the United
States Commissioner of Education were the chief sources relied upon.
These reports give practically complete data for the common schools and
fairly satisfactory information concerning more advanced institutions.
The number of other school employees is, however, estimated from frag-
mentary evidence. The results as a whole are, therefore, only moderately
accurate.
212
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 18A
\\ ESTIMATE b OF THE NUMBER OF PERSONS EMPLOYED BY THE
VARIOUS BRANCHES OF GOVERNMENT IN THE CONTINENTAL
UNITED STATES
Thousands of employees attach
sd to various branches of government
Ml
United States
States
Cities and villages
Year
Police
School
Army,
Postal
General
and
and fire
Municipal
General
districts"
navy and
service
govern-
Coun-
depart-
utilities
govern-
marines
ment
ties a
ments
ment
1909
1,565
135
280
142
161
96
29
149
573
1910
1,620
133
283
144
173
97
30
169
591
1911
1,671
137
283
147
184
100
31
LSI
607
1912
1,727
145
287
148
195
102
32
192
626
1913
1,785
148
291
150
211
108
33
200
644
1914
1,866
159
293
160
231
108
34
212
669
1915
1,955
166
296
174
250
111
35
228
694
1916
2,037
200
298
190
255
112
36
232
714
1917
2,691
786
300
232
253
115
37
235
733
1918
5,129
3,038
290
433
254
114
39
238
724
a Teachers employed by States are included under ''School Districts."
b For derivation of the items in this table see the text.
§ 18c. The Amount Paid in Wages or Salaries
As previously stated, information is very incomplete concerning the
amount of salaries paid by governmental units. The Departments of the
Federal Government rarely give the complete totals anywhere in their
reports and, in many instances, wages and other expenses are so confused
that they cannot be separated. The results here given must, therefore, be
regarded only as approximations to the truth, although the existence of
reliable data for important payments made by the Department of Agri-
culture, the army and navy, and the Post Office Department make it
improbable that the errors in this field are unduly large.
The estimates for States and Counties are made by assuming that the
proportion of their total expenditures going as wages and salaries is the
same as in the State of New York. The total expenditures are estimated
from the Census reports on the Financial Statistics of States and on Wealth,
Debt, and Taxation. The result cannot be deemed more than a reasonable
approximation.
The salary and wage payments to employees by the general government
of cities and villages are computed on the basis of the records of the sample
cities of Chicago, Cincinnati, Providence and San Francisco. The as-
sumption has been made that wages and salaries absorb the same propor-
tion of general governmental costs in other cities as in the average of these
,*
ALL BRANCHES OF GOVERNMENT
213
four. The total general governmental costs are estimated from the figures
appearing in The Financial Statistics of Cities. The results here stated
must be considered as rather rough approximations to the truth.
The estimates for the pay of employees of municipal utilities, being com-
puted along somewhat similar lines, are only slightly more accurate.
The figures for policemen and firemen are, however, believed to be much
nearer the truth, being based upon the rather reasonable assumption that
average wages in New York, Chicago, Boston, Charleston, and Wash-
ington (the cities for which records are available), are fairly typical for
the entire nation. The figures for school employees are greatly streng-
thened by the fact that the United States Commissioner of Education
presents nearly complete data for teachers in the public schools. The
chief possibility of error arises from the lack of any but extremely fragmen-
tary data concerning the amounts paid for the services of janitors and
other non-teaching employees of school districts, colleges, and universities.
The general results are summarized in Table 18B.
TABLE 18B
AN ESTIMATE 6 OF THE TOTAL AMOUNTS DISBURSED BY VARIOUS
BRANCHES OF GOVERNMENT IN DIRECT PAYMENT FOR THE SERV
ICES OF EMPLOYEES
Millions
of Dollars Paid by
All
branches
of govern-
Federal government
States
and
Cities and villages
Calen-
dar
Army,
navy and
Posl
.Miscel-
laneous
Police
and lire
Municipal
Miscella-
neous civil
| Schools
year
ment
marine
office De-
civil de-
counties
depart-
utilities
depart-
corps "
partment
partments
ments
ment s
1909. .
$1,157
$ 113
$153
$148
$151
$113
$25
$158
$290
1910.
1,236
110
1G0
157
166
122
26
180
316
1911. .
1,300
112
166
156
181
126
26
196
337
1912.
1,378
119
174
156
199
132
27
210
362
1913. .
1,470
123
187
163
222
137
30
221
:;s:
1914. .
1 ,571
128
199
177
250
141
:;:;
229
11 1
1915. .
1.684
133
206
194
276
1 11
33
256
411
1916.
1,814
1 82
21 1
211
287
1 16
35
2iil
176
1917. .
2,530
769
220
271
293
151
37
268
52 1
1918. .
1,591
2,391
243
572
305
164
39
299
578
ii Includes allowance for board, lodging, clothing, etc., furnished.
i> For derivation, see text.
§ 18d. The Average Annual Earnings of Employees
The division of the items in Table 18B by the corresponding ones in
Table 18A gives the figures appearing in Table 18C, these figures repre-
senting tin' average annual pay per employee in each of the divisions
considered.
214
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 18C
AN ESTIMATE" OF THE AVERAGE ANNUAL PAY PER EMPLOYEE IN
VARIOUS BRANCHES OF GOVERNMENTAL SERVICE IN THE CON-
TINENTAL UNITED STATES
All
Federal Government
States
Cities and Villages
Cal-
Army,
Post
office
Depart-
en-
Branches
navy,
Miscel-
and
Police
Munic-
Miscel-
Schools
dar
of Gov-
and
laneous
Coun-
and fire
ipal
laneous
Year
ernment
marine
civil
ties
depart-
utilities
civil
corps b
ment
$ 938
ments
1909
$739
$838
$547
$1,040
$1,176
$ 843
$1,058
$517
1910
763
830
565
1,090
958
1,249
845
1,066
535
1911
77S
818
585
1,061
9.S2
1,262
845
1,079
555
1912
798
819
608
1,055
1,018
1,289
855
1,091
578
1913
823
830
644
1,088
1,053
1,263
903
1,103
601
1914
842
SOS
678
1,108
1,083
1,314
951
1,077
619
1915
861
803
696
1,117
1,104
1,291
954
1,120
635
1916
891
912
718
1,113
1,125
1,302
964
1,138
666
1917
940
978
736
1,165
1,157
1,314
9S2
1,141
711
1918
895
787
839
1,320
1,203
1,441
1,014
1,257
798
a For mode of derivation, consult text.
b Includes an allowance for board, lodging, clothing, etc., furnished.
In Table 18D the average pay is reduced to purchasing power at a
constant price level.
S
ALL BRANCHES OF GOVERNMENT
21;
TABLE 18D
AN ESTIMATE OF THE PURCHASING POWER AT PRICES OF 1913 OF THE
PAY OF THE AVERAGE EMPLOYEE IN EACH OF THE LEADING
BRANCHES OF GOVERNMENTAL SERVICE
Index of
prices of
goods
used by
working
classes
Purchasing power of annual earnings of employees of <*
Cal-
All
branches
of gov-
ernment
Federal Government
States
and
Counties
Cities and Villages
en-
dar
year
Army,
navy
and
marine
corps 6
Post
office
Depart-
ment
Miscella-
neous
civil
depart-
ments
Police
and .fire
depart-
ments
Munic-
ipal
utilities
Miscella-
neous
civil
depart-
ments
Sehi..]|,
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
.955
978
.9X1
.994
1.00
1.01
1.03
1.10
1.29
1.58
$774
780
791
803
823
833
836
810
729
567
$877
849
831
824
830
800
780
829
758
l!is
$573
578
595
612
644
671
676
653
."1
531
$1,089
1,115
1,078
1,061
1,088
1,097
1,084
1,012
903
835
$ 9S2
980
99S
1,024
1,053
1,073
1,072
1,023
897
761
$1,231
1,303
1,283
1 ,297
1,263
1,301
1,253
1,184
1,019
912
sss:;
864
859
860
903
942
926
S76
761
642
$1,108
1,090
1,097
1,098
1,103
1,066
1,087
1,035
884
796
$541
547
564
581
601
613
617
605
551
505
a Derived by dividing the respective items in Table 18C by the indices in the second
column of this table.
b Includes an allowance for subsistence.
The figures in Table 18D indicate that from 1909 to 1915, the earnings
of governmental employees were increasing steadily but that after that
date, mainly because of the sharp rise in the price level, nearly every class
suffered a loss in economic prosperity measured in terms of the amount of
commodities that the salaries would buy.
§ 18e. Pensions
In addition to the sums paid out as wages and salaries for present labor,
governments expend large sums as pensions and annuities, payments which
may best be thought of as payments for services rendered in the pasl by
the employees of that day. The largest item in this list is, of course, the
army pension list, and records for this line are complete. It is feasible
also to obtain a general idea of the amounts paid by State and local gov-
ernments for pensions and gratuities. The final results of a compilation of
data on this subject are recorded in Table 18E.
21G
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 18E
APPROXIMATE AMOUNT OF PENSIONS AND GRATUITIES PAID OUT BY
THE VARIOUS BRANCHES OF GOVERNMENT IN THE CONTINENTAL
UNITED STATES
a Estimated from the Financial Statistics of Cities issued by the Census Bureau.
b Estimated from the Financial Statistics of States published by the Census Bureau.
c Statistical Abstract of the United States, 1919, p. 741.
§ 18f. Interest on Public Debts
The principal payments x made by government as a return for the ser-
vices of property consist of interest on the public debt. A considerable
share of this interest is paid to banks and, being accounted for in their
income, is therefore excluded from the net value product of government.
It is impossible to measure with accuracy the total volume of such inter-
est payments; but data are available indicating the approximate amount
of domestic governmental securities held by banks and by applying to
this total an estimated interest rate, one is enabled to approximate the
amount of this kind of interest payments made each year. Table 18F
indicates the procedure followed.
Corporations other than banks receive no inconsiderable share of the
bond interest paid by government, but since bond interest receipts are
excluded from the value product of such corporations it follows that inter-
est payments made to them must be treated just like those made to indi-
viduals. They have therefore been counted as part of the value product
of government.
There is, however, strong ground for contending that most governmental
interest payments, no matter to whom paid, should be excluded from the
1 Some money is expended for rent of leased buildings, but the amount is normally small
and hence has been omitted in this study.
S
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218
THE ESTIMATE BY SOURCES OF PRODUCTION
net income of the people. For reasons discussed in § lm, it has been
decided that accurate accounting requires their retention.
An estimate of the disbursements by the various branches of govern-
ment in the form of interest paid to private parties is presented in Table
18G.
TABLE 18G
AN ESTIMATE OF THE TOTAL AMOUNT OF INTEREST PAID TO INDIVID-
UALS BY THE DIFFERENT BRANCHES OF GOVERNMENT IN THE
CONTINENTAL UNITED STATES
Millions of dollars paid
A
B
C
D
E
Year
Interest paid to banks and individuals by
By all
branches
of govern-
ment to
banks c
By all
branches of
Federal
govern-
ment a
State and
local gov-
ernment b
All branches
of government
A + B
government
to private
individuals
C — D
1909
$ 22
21
22
23
23
23
23
24
111
407
$140
172
184
194
201
219
241
251
259
274
$162
193
206
216
224
242
264
275
370
680
$ 65
72
70
75
73
78
84
85
93
170
$ 96
1910.
121
1911 .
136
1912.
142
1913.
151
1914
1915
1916
164
180
190
1917
1918
277
510
a Statistical Abstract of the United States for 1919, p. 756, — averages for pairs of fiscal
years.
b Data from the Census of Wealth, Debt, and Taxation for 1913, Vol. II, pp. 40-43
and from the Financial Statistics of States, and the Financial Statistics of Cities published
by the Bureau of the Census.
c See Table 18F, Column J.
Table 18G shows clearly the steady increase in interest payments by
governmental units to private recipients and the especially rapid rise in
1917 and 1918 due mainly to the sale of Liberty Bonds by the Federal
Government. Before that date, the Federal debt was practically station-
ary, the increase nearly all coming from State and local governments.
§ 18g. The Net Value Product and Its Division
We are now in a position to measure the total value product of govern-
ment and the percentage thereof going to employees. For reasons previ-
ously stated, government pensions, like pensions paid by corporations,
have been included with the share of the employees. The items have,
however, been separately stated so that anyone who disagrees with this
ALL BRANCHES OF GOVERNMENT
219
point of view can easily make such adjustments as he may believe neces-
sary. In any case, the effect on the percentage will not be very great.
TABLE 18H
THE NET VALUE PRODUCT OF ALL BRANCHES OF GOVERNMENT IN
THE CONTINENTAL UNITED STATES AND THE PERCENTAGE
THEREOE GOING AS PAYMENT FOE THE SERVICES OF PAST AND
PRESENT EMPLOYEES
A
B
C
D
E
F
G
Year
Wages and
salaries a
(Millions)
Pensions
and
gratuities^
(Millions)
Share of
employees,
past and
present
(Millions)
B + C
Interest
payments
to private
individuals r
(Millions)
Net value
product of
government
(Millions)
D +E
Per cent of
value prod-
uct g ling t i
employees
10)1)
F
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
$1,157
1,236
1,300
1,378
1,470
1,571
1,684
1,814
2,530
4,591
$187
185
185
196
208
206
202
203
216
251
$1,343
1,422
1,486
1,574
1,678
1,777
1,886
2,017
2,746
4,842
$ 96
121
136
142
151
164
180
190
277
510
$1,440
1,542
1,622
1,716
1,829
1,941
2,0 Hi
2,207
3.023
5,352
93.3
92 . 2
91.6
91.7
91.7
91.6
91.3
91.4
90.8
90 5
« See Table 18B
b See Table 18E.
c See Table 18G, Column E.
It is clear that past or present employees get most of the net value
product of government, only about one-tenth of the whole going to the
creditors in the form of interest. In 1917 and 1918 there is discernible
a slight diminution in the percentage going to employees, a diminu-
tion which will probably increase in 1919 and 1920 owing to the
increased size of the Federal debt, and the smaller number of Federal
employees.
Having arrived at the net value product of the different branches of
government within the United Stales, it is ;l matter of interest to reduce
the results to terms of purchasing power. This is done in Table 181.
A glance at Table 181 makes it evident that governmental outlays have
more than doubled during the decade, even when all the effects of price
inflation have been eliminated. The very sharp increase in 1918 was
mainly due to the war and may of course soon be partially offset by
reductions.
220
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 181
AN ESTIMATE OF THE PURCHASING POWER AT PRICES OF 1913 OF THE
NET VALUE PRODUCT OF ALL BRANCHES OF GOVERNMENT IN THE
CONTINENTAL UNITED STATES
A
B
C
D
E
F
G
H
Index
Index of
Purchas-
of prices
Purchas-
Total
prices
ing power
of goods
Purchas-
ing power
share
of goods
of share
Interest
consumed
ing power
of net
of past
con-
of em-
paid to
by indi-
of share
value
Year
and pres-
sumed by
ployees d
individ-
vidual
of security
product
( nt em-
manual
at prices
uals c
holders
holders
of gov-
ployees a
and
of 1913
(Millions)
of gov-
(Millions)
ernment
(Millions)
clerical
(Millions)
ernment
E ~ F
(Millions)
workers b
B -*- C
secur-
ities e
D + G
1909. .
$1,343
. 955
$1,407
$ 96
.964
$100
$1,507
1910.. .
1,422
. 978
1,453
121
.983
123
1,576
1911.
1,4S6
.984
1,510
136
.989
138
1,648
1912.
1,574
.994
1,584
142
.998
142
1,726
1913...
1,678
1.000
1,678
151
1.000
151
1,829
1914.. .
1,777
1.01
1,759
164
1.011
162
1,921
1915...
1,886
1 . 03
1,831
180
1 006
179
2,010
1916.. .
2,017
1.10
1,834
190
1 . 084
175
2,009
1917.. .
2,746
1.29
2,129
277
1.234
224
2,353
1918...
4,842
1.58
3,064
510
1.439
354
3,419
a See Table 18H, Column D; includes pensions.
b U. S. Bureau of Labor Statistics index carried back by means of a special study;
see Table 2C.
c See Table ISO, Column E.
d Includes pensions.
e A combined index for working class families and families spending respectively
$5,000 and $25,000 annually for consumption goods, the weights in order being 1, 1 and 2.
§ 18h. The Per Capita Net Value Product
It is worth while to compare next the relative rates of growth of the
net value product of government when reduced to terms of constant price
level, with the increase in the population of the country. This com-
parison appears in Table 18J.
The decade has increased the purchasing power of income derived from
government to about twice as much per person in the United States as was
the case in 1909, but the really striking increase did not come until the
advent of the war, most of it being in 1919. This index represents fairly
well the relative services of government to the people and its burdensome-
ness to the taxpayers in the different years.
,<*
ALL BRANCHES OF GOVERNMENT
221
TABLE 18J
THE PER CAPITA NET VALUE PRODUCT AT PRICES OF 1913 OF ALL
BRANCHES OF GOVERNMENT IN THE CONTINENTAL UNITED
STATES
A
B
C
D
Year
Purchasing power
of net value
product °
(Millions)
Populal ion of the
Continental United
States b
(Thousands)
Per capita purchasing
power
B
C
1909
1910
1911
L912
1913
$1,507
1,576
1,648
1,726
1,829
1,921
2,010
2,009
2,35;;
3,419
90,370
92,229
93,811
95,338
97,278
99,194
100,428
101,722
103,059
104,182
S17
17
18
is
19
1914
1915
1916
1917
19
20
20
23
1918
33
a See Table 181, Column H.
b See Table 2A.
§ 18i. The Share of Government in the National Value Product
One of the most interesting questions to be answered by this study is
whether the activities of government are an increasing or dirniriishing
factor in our national life. This query is partially answered by Table
18K. Of course, the very rapid development of governmental activity
during the war years can scarcely be assumed to have any significant
relationship to the trend under discussion until later developments show
whether the encroachments of government upon the former domain of
private activity are permanent or transitory.
While it is perfectly clear thai there was a sharp increase in the relative
activity of government in 1918, it is somewhat doubtful whether there was
any real growth in the percentage before that date. The probabilities
are, however, that tin trend was slightly upward throughout the decade
but the movement was certainly not striking enough either to satisfy the
proponents of government ownership or greatly to alarm its opponents.
222
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 18K
THE ESTIMATED SHARE OF GOVERNMENT IN THE NET VALUE
PRODUCT OF ALL THE INDUSTRIES OF THE CONTINENTAL UNITED
STATES
A
B
C
D
Year
Net value product
of all industries b
(Millions)
Net value
product of all
branches of
government'^
(Millions)'
Per cent of value
product originating
in government
activity
C B
1909
1910
1911
1912
1913
1914.
$28,775
31,766
31,188
33,554
35,580
33,936
36,109
45,418
53,860
60,366
$1,440
1,542
1,622
1,716
1,829
1,941
2,066
2,207
3,023
5,352
5.00
4.85
5.20
5.12
5.14
5 72
1915
1916
1917
1918
5.72
4.86
5.61
8.87
a See Table 18H, Column F.
b See Vol. I, Table 2.
<*
CHAPTER 10
UNCLASSIFIED INDUSTRIES AM) .MISCELLANEOUS INCOME
§ 19a. The Field Covered
It is an unfortunate fact that there exists a large section of the industrial
field the activities of which are not recorded by the Census Bureau, the
Interstate Commerce Commission, or any other Federal agency. State
and municipal reports and private investigation give an inkling, but
nothing more, concerning the value product in this statistical "no man's
land." Wage data, while scattered, are fortunately quite abundant, and
the income tax throws some light upon the gains of enterprise and property.
These, then, are the chief sources upon which reliance must be placed.
The income derived from this field includes that arising from mercan-
tile operations, both wholesale and retail, from the activities of independ-
ent professional men such as physicians and lawyers, from personal ser-
vice, from the rental of business buildings, and from interest allowance on
the value of consumption goods on hand, besides that from numerous
minor sources. These items of income are grouped and summarized in the
estimates which follow. The figures for the earnings of employees are
believed to be reasonably accurate: the remaining estimates may be widely
in error.
§ 19b. Number of Persons Occupied in Unclassified Industries
The number of entrepreneurs and employees attached to unclassified
industries has been estimated by the simple process of adding up the num-
bers of each class reported for all of the industries thus far recorded and
subtracting the totals thus obtained from the respective total numbers of
entrepreneurs and employees estimated as being attached to all industries.
In the case of the employees, the number thus arrived at for each year 1
has been multiplied by an estimated percentage of employment, and the
resulting products 2 have in turn been multiplied by the average full time
wage computed for the unclassified field.
§ 19c. The Earnings of Employees
This average wage is based upon a study of 1GG average wage records,
some more or less fragmentary, but all of which were estimated or pieced
i See Table 19A, Column F.
2 These products represent the numbers actually working and are entered in Table 19 A.
Column B.
223
224
THE ESTIMATE BY SOURCES OF PRODUCTION
out for the entire decade. These separate records have been weighted
roughly in proportion to the number of employees in the field which they
best typified — the numbers being taken from the Census of Occupations of
1910. Table 19A presents the results of these operations.
TABLE 19A
AN ESTIMATE OF THE NUMBER OF EMPLOYEES IN UNCLASSIFIED
INDUSTRIES AND THEIR AVERAGE COMPENSATION FOR SERVICES
A
B
Number
C
D
E
F
G
Average
H
I
Fraction
Number of
Index of
Purchasing
of
Total
actually
employees
annual earn-
prices of
power of
employees
Average
earnings of
working
attached
ings of those
goods con-
average
Year
actually
full-time
employees
of those
to industry
attached to
sumed by
annual
at work «
annual
(Thousands)
attached
(Thousands)
industry
manual or
earnings
(Thou-
earnings a
B X C
to
B
D
clerical
G
sands)
industry b
E
6,823
F
$ 716
workers c
0.955
H
1909. .
6,290
$ 777
$4,887
0.92
$750
1910. .
6,830
802
5,478
.93
7,376
743
.978
759
1911..
6,820
806
5,497
.89
7,685
715
.984
727
1912. .
7,400
833
6,161
.93
7,980
772
.994
777
1913. .
7,020
858
6,538
.91
8,397
779
1.000
779
1914. .
7,100
885
6,284
.87
8,183
768
1.01
760
1915. .
7,031
904
6,356
.88
8,175
777
1.03
755
1910. .
7,477
942
7,043
.92
8,127
867
1.10
788
1917. .
7,290
1,012
7,384
.9;;
7,600
972
1.29
753
1918. .
6,008
1,087
6,531
.97
6,194
1,054
1.58
667
a For mode of derivation, see text.
6 See § 2d for method of computation.
c U. S. Bureau of Labor Statistics index carried hack, by means of a special study;
see Table 2C.
It is clear that, in the closing years of the decade, wages and salaries
failed to parallel the sharp rise in the price level, the result being that the
economic condition of the employees was worse in 1918 than at any other
time in the period.
§ 19d. The Effect of the War on the Number of Employees
Another interesting feature of the table is the decided fall in the number
of employees occurring in 1918. This fall is in sharp contrast to the rise
occurring in most of the other reporting fields and shows where the drain
in man power for the army produced its ultimate effect. This is, of course,
not at all equivalent to assuming that the army was composed of a larger
proportion of men formerly engaged in this rather than in other fields, for
there was shifting all along the line until the reduction occurred in the lines
of activity least necessary for war purposes.
*
UNCLASSIFIED INDUSTRIES AM) MISCELLANEOUS INCOME 225
§ 19e. The Profits of Entrepreneurs
The estimate of the profits of the entrepreneurs in unclassified indusl riea
rests almost wholly upon the reports of the Federal Bureau of Internal
Revenue for 1916. In their Statistics of Income for that year (pages 126 to
137), are given frequency tables of the incomes of persons in different occu-
pations. Those groups belonging in the unclassified field were segregate I
and summated and the curve derived therefrom was plotted and extended
to cover the incomes falling below the taxable limit. The general assump-
tion was made 1 that the net income of entrepreneurs remained somewhat
above that for employees at the same relative points on the distribution
scale.
An estimate was next made of the fraction of the total income of persons
in these selected occupations which was derived from the gains of business
or profession, this estimate being also based upon Statistics of Income.
The total income as computed was multiplied by this fraction in order to
arrive at the gains of entrepreneurs in unclassified industries.
Since for other years, the distributions of individual incomes were not
reported by occupations, it was necessary to make rough estimates there-
for based upon variables which it was believed might prove representa-
tive; namely bank clearings, profits in other industrial fields, and the net
gains of corporations as shown by the income-tax reports. Owing to the
complexity of the procedure adopted, if seems impracticable to do more
here than to present the final results of the study. The lack of sat isfactory
data necessarily gives rise to the possibility of great error, hence the results
obtained cannot be considered as anything more than very rough approxi-
mations to the truth.
The statistics of the earnings of corporations engaged in business in tin-;
field are, for recent years, more complete than are those of the incomes of
individual entrepreneurs. Although this group cannot be accurately
regated in 1917 and 1918, it seems quite certain that the figures here pre-
sented for the three years beginning with 1916 are accurate enough for
practical purposes. Before the first date mentioned, however, it has been
necessary to make estimates by using as an index of change a combination
of bank clearings and total profits in other recorded lines of industry.
§ 19f. Rents and Royalties
In the Statistics of Income published each year by the Bureau of Internal
Revenue, appears a record of the total rents and royalties received by mem-
bers of each income class. These quantities have been plotted as curves
and the curves have been extended to take in the income classes below the
taxable limit. Since the amount of contract rent received by the poorer
226
THE ESTIMATE BY SOURCES OF PRODUCTION
classes of the population is presumably small, it seems probable that the
error involved in the method used is relatively unimportant. There is
greater danger that a large fraction of rents received are not reported to
the income tax authorities. Should such be the case, the estimates pre-
sented would of course be too low, as no adjustment has been made for
non-reporting.
Contract rents and royalties have already been calculated for a num-
ber of industries. These amounts have been added together and their
sum has been subtracted from the estimated total of the same for the entire
country, the remainder being assumed to represent the net rents and royal-
ties received from unclassified industries.
Before 1916, the income-tax reports furnished no information concern-
ing rents and royalties. For the earlier years, therefore, it was assumed
that the non-reported rents varied in approximately the same manner as
did those in the reporting industries.
The results of these assumptions concerning the aggregate of rents
appear in Table 19B.
TABLE 19B
AN ESTIMATE OF THE TOTAL OF CONTRACT RENTS IN UNCLASSIFIED
FIELDS OF INDUSTRY
A
B
C
D
Year
Total contract
rents in the
United States a
(Millions)
Contract rents
accounted for in
all industries
having records
of rents a
(Millions)
Contract rents
not otherwise
accounted for
(Millions)
B — C
1909
1910
1911
1912
1913
1914
1915
1916
1917
$ 668
705
732
776
817
833
883
1,000
1,150
1,290
$ 550
580
601
637
669
681
720
813
932
1,027
$118
125
131
139
148
152
163
187
219
1918
263
° For derivation, see the text.
§ 19g. The Total Share of Enterprise and Property
Table 19C summarizes the different items entering into the share of
enterprise and property in the unclassified field and reduces the total to
*
UNCLASSIFIED INDUSTRIES AND MISCELLANEOUS INCOME 227
terms of purchasing power. The index used for the last mentioned purpose
is a combination of the indices of prices of goods used by the workers and
by consumers of moderate means. This index is chosen because many of
the small proprietors have no more income than the well-to-do workers;
hence their type of consumption is probably essentially similar to that of
employees.
TABLE 19C
AN ESTIMATE OF THE SHAKE OF THE EXTREI'REXEERS AND OTHER
PROPERTY OWNERS IN THE NET VALUE PRODUCT OF UNCLASSI-
FIED INDUSTRIES
A
B
C
D
E
F
G
Profits accrued plus
Total share
Purchasing
power of
interest."
of entrepre-
share of
Paid out by
Contract
neurs and
Index of
entrepre-
Year
prices of
goods
neurs and
other
Private
royalties '■
property
Corpora-
(Millions)
owners
consumed <•
property
tions 6
entre-
(Millions)
owners
(Millions)
preneurs b
B + C+D
(Millions)
(Millions)
E4-F
1909
$ 848
$2,232
$118
$3,198
.955
S3.348
1910
919
2,360
125
3.404
.977
3,484
1911
862
2,395
131
3,388
.984
3,443
1912
!(6f,
2,582
139
3,687
.998
3,702
1913
1,008
2,652
148
3,808
1.000
3,808
1914
909
2,5s: i
1 52
3,644
1.011
3,604
1915
1,014
2,723
L63
3,899
1.016
3,838
1916
1,569
3,609
1S7
5,364
1.094
4,903
1917
1,834
4,601
219
6,654
1.271
5,235
1918
1,047
4,601
263
5,911
1.514
3,904
a Evidence from the income tax reports indicates that total bond or mortgage in-
terest is only about one-hundredth as groat as profits.
6 For mode of estimation, see text.
c Average of indices representing respectively the consumption of working people
and of families spending $5,000 each annually for consumption goods.
The chief points of importance brought out by Table 19C are: first,
that contract rents form a relatively small part of the total; second, that
private and not corporate entrepreneurs dominate this field; and third,
that 1916 and 1917 were extremely profitable years for the entrepreneurs
here as well as elsewhere.
§ 19h. Other Classes of Miscellaneous Income
There is a very considerable aggregate of income which forms part of
the total for the nation but which cannot legitimately be considered as
228 THE ESTIMATE BY SOURCES OF PRODUCTION
being derived from any of the fields of industry yet discussed. This income
has been treated under four heads:
1. Net rental value of owned homes.
2. Interest on value of miscellaneous direct or consumption goods on
hand. 1
3. Profits from cow-keeping in villages or cities.
4. Profits accruing to urban dwellers from the keeping of poultry and
the raising of gardens.
§ 19i. The Net Rental Value of Owned Homes
The net rental value of owned homes has been calculated by following
the assumption that the value per person amounted to $50 in 1913 2 and
varied therefrom in proportion to the index of rents. Since farm homes
are accounted for under agriculture, it remains only to estimate the
amount for urban homes. The figures in Vol. I, p. 1294 of the Population
Census for 1910 indicate that 4,411,000 of these homes were occupied
by the owners. At 4.492 persons per home, they would house 19,820,000
people. This number presumably has varied about in proportion to the
size of that part of the population not living on farms. This fraction of
the population has therefore been estimated for each year on the basis of
the Census reports. The resulting numbers have been multiplied by the
average amount allowed for rent. The results and some of the processes
appear in Table 19D.
§ 19 j. Interest on the Value of Direct Goods
It is common to think of residences as representing investments upon
which an allowance must be made to represent current income to the
owner, but it is less usual to consider other durable consumption goods in
the same manner. Evidently they are in exactly the same category, the
only differences being that residences represent a larger aggregate of value
in one unit, hence attracting more attention, and that they are a type of
goods very frequently leased and dealt in as commodities, while automo-
biles, pictures, clothing, furniture, etc., are seldom rented and very com-
monly do not change ownership again after leaving the hands of the
dealer. Logically, a net rental for the entire stock of consumption goods
on hand must be estimated and added. Practically no information is
available which makes possible an estimate of this kind. The nearest feasi-
1 Colonel M. C. Rorty (one of our directors) believes that this item should be omitted
from the total. The problem is discussed in § 19j.
2 In 1913, the per capita income of the average inhabitant of the United States was about
$350. The income of home owners was presumably materially larger than the average in-
come — perhaps $500 per capita. Numerous studies seem to indicate that the gross rental
of homes is likely to amount to about 15 per cent, of the family income. If the net rental
equalled two-thirds of the gross rental it would then amount to ^ X i\fo^ $500, or $50.
I
I
UNCLASSIFIED INDUSTRIES AND MISCELLANEOUS INCOME 229
TABLE 19D
THE ESTIMATED NET RENTAL VALUE OF THOSE HOMES IX CITIES
AND VILLAGES OF THE CONTINENTAL UNITED STATES WHICH ARE
OCCUPIED BY THE OWNERS
A
B
C
D
E
F
Year
Number of
urban families
residing in
owned homes
(Thousands)
Population
of
United States
not residing
on farms b
(Thousands)
61,830
63,629
65,211
66,748
68,698
70,654
71,928
73,262
74,639
75,792
Population
Of cities
and villages
residing in
owned homes '
(Thousands)
Net rental
value per
person of
homes owned c
Total net
rental value of
owned homes
(Millions)
DX E
1909. .
1910. .
1911. .
1912 .
1913..
1914..
1915..
1916
1917. .
1918..
4,411a
19,230
19,820
20,2! 10
20,780
21,390
22,001)
22,360
22,800
23,230
23,590
$48.50
50 50
50.50
50.00
50.00
50.00
50.50
51 .00
50.50
52 . 50
$ 933
l.Olil
1,025
1,039
1,069
1,100
1,129
1,163
1 , 1 73
1,238
a Derived from the Census of Population for 1910, Vol. I, p. 1204, by apportioning
the unreported and encumbered homes — the latter on the basis of full ownership.
b Estimated from the Census,
c For mode of derivation, see the text.
ble approach to such a figure is arrived at by applying an assumed interest
rate to the value as reported by the Census of W<alth, Debt, and Taxation
and then proceeding to make estimates for other years based upon the
variations in an index representing a product of the prices of durable eon-
sumption goods and the population of the United States. Such an est iinat e
is made in Table 19E.
§ 19k. Profits from Cow-Keeping
The basis for computing the profits from cows kept in cities and villages
is very slender but this is not a matter of very great moment since the total
is relatively unimportant.
Once in a decade, the Census of Agriculture records the number of milk
cows not on farms. It was found by the United States Public Health
Service through a special study that the average profil obtained from keep-
ing a cow in South Carolina was about $75 per year. This amount has
been varied from year to year according to an index number of the price of
daily products and then, in order to obtain the total entered in Table I'.'l',
230 THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 19E
AN ESTIMATE OF THE INTEREST OX THE INVESTMENT IN
CONSUMPTION GOODS OTHER THAN RESIDENCES
A
B
C
D
E
F
G
H
Index of
Index of total
Interest eon
Year
price of
durable
consump-
tion
goods"
Population
of the U. S.
in
thousands c
value of
consumption
goods
(Thousands)
B X C
consumption
goods,
(Census figures^
(Millions)
Ratio of
E to D
consumption
goods
(Millions)
D X F
investment
in consump-
tion goods
(Millions)
.06 G
1904...
.986
82,467 b
81,310
$ 8,250 d
101.5/
$ 8,250
$ 496
1909 . . .
1.044
90,370
94,350
119. 8»
11,300
678
1910.. .
1.050
92,229
96,840
121.9*
11,800
708
1911. . .
1.056
93,811
99,060
124.8s
12,360
742
1912. . .
1.029
95,338
98,100
12,758 d
130.1/
12,758
765
1913...
.993
97,278
96,600
133 . 8 a
12,920
775
1914...
.987
99,194
97,900
136.2s
13,330
800
1915. . .
.980
100,428
98,420
140. 9s
13,870
832
1916. . .
1.059
101,722
107,720
145. Off
15,620
937
1917. . .
1 . 143
103,059
117,800
147. 6ff
17,390
1,043
1918...
1 362
104,182
141,900
149. 3ff
21,190
1,271
1919. . .
1.642
104,847
172,160
156.0 ff
26,860
1,612
a Weighted as follows: Furniture 4, Clothing 3, Automobiles 3.
b Statistical Abstract of the United States, 1918, p. 776.
c Estimated for the intercensal years by means of a special study; see Table 2A.
d Census of Wealth, Debt, and Taxation, 1913, Vol. I, p. 17.
e Rate arbitrarily assumed to be 6 per cent throughout, since the real object sought
is to measure rents, not interest, and the relationship between rents, interest, and values
is not known for the various years. /Computed by division.
o Interpolated along a smooth curve.
this estimated average profit has been multiplied by the number of cows
kept.
§ 191. Profits from Raising Poultry and Gardens
The estimated profit on poultry and gardens is only a refined guess.
The starting point is an estimate for 1909 of $70,300,000 which is based on
the idea that the average family garden and poultry supply gives a net
gain of .$25.00 per year and that the fractions of families having such
income were as follows for cities of the sizes stated: —
Population of city or village
Fraction of families
Under 10,000
10,000 to 50,000
50,000 to 100,000
100,000 to 250,000
250,000 and over
0.50
.33
.25
.12
.06
All index has been computed, based on the product of the population of
,
UNCLASSIFIED INDUSTRIES AND MISCELLANEOUS INCOME 231
cities and villages of less than 250,000 inhabitants and the average price of
foods and farm products. The estimated value has then been varied from
year to year in proportion to the movements of this index. The resulting
amounts are entered in Table 19F.
TABLE 19F
A SUMMARY OF THE ESTIMATES OF INCOME FROM MISCELLANEOUS
SOURCES
Millions of dollars
Year
Total
Rental value
of owned
urban homes a
Interest oil
value of other
consumption
goods b
Profits
from keep-
ing cows
in cities
and vil-
lages
Protits from
gardening
and poultry
raising
in cities
and villages c
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
$1,740
1,840
1,901
1,946
1,986
2,048
2,112
2,277
2,468
2,876
3,308
$ 933
1,001
1,025
1,039
1,069
1,100
1,129
1,163
1,173
1,238
1,356
$ 678
70s
742
76.-)
775
800
832
937
1,043
1,271
1,612
$ 59
60
61
60
61
62
62
69
90
11 1
L29
S 70
71
73
82
81
86
89
IDS
162
253
211
a See Table 19D, Column F.
b See Table 19E, Column H.
c For mode of derivation, see the text.
§ 19m. The Division of the Net Value Product
A statement of the fraction of all unclassified and miscellaneous income
paid out as wages and salaries is not very significant because of the fact
that no inconsiderable part of the "miscellaneous income" accrues to
persons attached to already recorded industrial fields. For example,
persons engaged in manufacturing, transportation, or mining may receive
income from the rental value of the homes they occupy or from other con-
sumption goods owned or they may obtain profit by raising poultry or
gardens in their spare time. For these reasons, it seems best to present
two columns for the per cent of the income going to the employees in the
form of wages and salaries. The last one has significance only as a balance
item. The fact that it is so much lower than the preceding column helps
to show why the per cent for all indusl ries runs so much lower than does t he
average of the per cents for manufacturing, mining, etc.
232
THE ESTIMATE BY SOURCES OF PRODUCTION
Column F represents the industries in this group and is entirely com-
parable with similar figures for other industrial fields. According to these
figures, employees in unclassified industries receive in the form of salaries
and wages about the same fraction of the net value product that prevails
on the average in the other industrial fields. The percentage has, however,
shown a decline since 1916, a phenomenon which is not characteristic of
most of the other lines studied.
Owing to the heterogeneous nature of the items involved, it seems
useless to attempt to carry further the analysis of the data pertaining to
unclassified industries and miscellaneous income.
TABLE 19G
THE ESTIMATED NET INCOME ARISING FROM UNCLASSIFIED IN-
DUSTRIES AND MISCELLANEOUS SOURCES AND THE FRACTION
THEREOF PAID OUT AS WAGES AND SALARIES
A
B
C
D
E
F
G
Year
Total
income for
these fields
(Millions)
Earnings of
employees
in
unclassified
industries n
(Millions)
Profits and
contract
rents in
unclassified
industries 6
(Millions)
Income
from mis-
cellaneous
sources c
Millions)
Per cent of
paid to em
wages and s
L T nclassified
industries
C
total income
ployees as
salaries from
The total
income
C^ B
C + D
1909 . . .
1910 . . .
1911 .. .
1912 . . .
1913 . . .
1914 ...
1915 . . .
1916 . . .
1917 ...
1918 . . .
S 9,824
10.722
10,7m,
11,796
12,332
11,975
12.367
14,685
16,506
15,318
$4,887
5,478
5,497
6,164
6,538
6,284
6,356
7,043
7,384
6,531
$3,198
3.404
3,388
3,687
3,808
3,644
3,899
5,364
6.651
5.911
$1,740
1,840
1,901
1,946
1,986
2,048
2,112
2,277
2.468
2,876
60.4
61.7
61.9
62.6
63.2
63.3
62.0
56.8
52.6
52 . 5
49.7
51 1
51.0
52 3
53.0
52.5
51.4
ISO
44.7
42.6
a See Table 19A, Column D.
' See Table 19C, Column E.
c See Table 19F, Total.
CHAPTER 20
SUMMARY OF PART I
§ 20a. The Average Income per Ammain
It has long been customary, when comparing different groups of persons,
to use the per capita income of each group as a measure of its relative
economic welfare. This measure is, on the whole, sufficiently accurate
when applied to large groups containing single persons and families of all
sizes. It is, however, nearly valueless if the comparison is between classes
determined by age, sex, marital condition, or social status. In such classi-
fications, the fact that persons differing in sex and age require very differ-
ent incomes in order to live in the same degree of comfort becomes of para-
mount importance. To give validity to comparisons in such instances it
is necessary first to reduce all members of the population to homogeneous
units based upon the relative need for commodities. Such units are termed
ammains. . An ammain is defined as a gross demand for articles of con-
sumption having a total money value equal to that demanded by the average
male in that class at the age when his total requirements for expense of main-
tenance reach a maximum. The number of ammains in each group of per-
sons can be approximated by aid of tables which are available. 1 Having
ascertained the number of ammains it is only necessary to divide the total
income of the group by this number to ascertain the average income per
ammain for the group. There seems to be little doubt that the income per
ammain is the best unit yet devised for use in comparing the relat ive eco-
nomic status of persons and families in different groups of the population.
Inasmuch as we do not know the exact income of the nation and since
the age and sex composition of the population is recorded only once in ten
years, it is impossible to compute the average income per ammain for the
entire country with any high degree of accuracy. Since, however, the age
and sex distribution of the population of a great nation changes very slowly,
it is possible to state the average income per ammain with nearly as high
a degree of accuracy as that attainable in the estimate of the total national
income. It may often be desirable to compare tin 1 income per ammain of
different groups of persons with the average for the entire country. In order
to facilitate comparisons of this type Table 20A is presented. It gives an
estimate for each year of the number of ammains and the average income
per ammain for the entire population of the Continental United States.
•See the Quarterly Publications of the American Statistical Association, Sept.. 1921, p. s."l,
the Journal of Political Economy, July, 1921, or the United States Public Health Reports for
Nov. 26, 11)20.
233
234
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 20A
THE AVERAGE INCOME PER AMMAIN OF THE POPULATION OF THE
CONTINENTAL UNITED STATES
Calendar
year
1909.
1910.
1911.
1912.
1913.
1914.
1915.
1910 .
1917
1918.
Total income in dollars of
The given
year
(Millions)
$28,775
31,700
31,188
33,554
35,580
33,930
30,109
45,418
53,860
00,300
1913 value
(Millions)
$30,101
32,477
31,080
33,730
35,580
33,596
35,335
41,205
41,910
39,112
Number of
ammains in
the entire
population
(Thousands)
02,340
03,027
04,720
05,703
07,104
08,430
09,290
70,175
71,100
71,875
Income per ammain in
dollars of
The given
year
$402
499
482
510
530
490
521
047
757
840
1913 value
.$483
510
490
513
530
491
510
588
589
544
§ 20b. Business Savings
Table 20B summarizes the estimates of business savings presented
separately in the reports for certain industries. In general, business sav-
ings, as recorded, represent increases during the period in the total net
worth of all enterprises in the field. The figures for "Agriculture," how-
ever, represent only the changes from year to year in the value of tangible
agricultural property. Increases in the total value of farm land due to a
rise in the average price per acre are, however, excluded. Changes in the
value of the farmers' bank accounts and investments in properties outside
the agricultural field are not included because the necessary data are lack-
ing. The farmers' personal savings and business savings are indistin-
guishable, hence no effort has been made to make any artificial division of
the savings into these two categories. For the reasons just cited, agricul-
tural savings are not entirely comparable with the business savings of
other fields.
SUMMARY OF PART I 235
§ 20c. Miscellaneous Summary Tables Not Appearing in Volume I
In Table 20H, the amounts saved by reporting non-agricultural business
enterprises are recorded in Column F. Now, in many industries, records
of savings are not available, but it is nevertheless desirable, if possible,
to make a rough estimate of the savings of all business enterprises in the
nation. The estimate here presented is based upon the assumption that
the non-reported and reported industries have each saved the same fraction
of the income available for distribution to entrepreneurs and other prop-
erty owners. In making this calculation, "Government" has not been
considered a business enterprise and "Miscellaneous Income" has not been
considered as business income because such a large share of it accrues to
individuals as private income. After estimating the business savings for
all non-agricultural industries, 1 the increase in the value of farm property
other than land has been added in order that the total may roughly repre-
sent the business savings of the entire United States.
The estimate thus arrived at indicates that the business enterprises of
the nation normally lay aside from 5 to 10 per cent of the national
income before distributing the remainder of their net receipts to the per-
sonal accounts of their owners in the form of dividends (or other profits),
rent, or interest. The amount of this type of saving increases sharply in
years of business prosperity and falls off again greatly in times of depres-
sion. During the decade, business enterprises apparently saved about
30 per cent of the aggregate amount which they might have disbursed to
entrepreneurs and other property owners. Doubtless no inconsiderable
share of the disbursed income is also saved by the recipients, but the
amount so laid aside is purely a matter of conjecture. The volume of busi-
ness savings alone is however so large as to demand the careful considera-
tion of all persons interested in questions of distribution of income.
1 Includes "unclassified" industries.
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242
THE ESTIMATE BY SOURCES OF PRODUCTION
TABLE 20E
AN ESTIMATE OF THE TOTAL AMOUNT OF WAGES AND SALARIES" PAID BY THE
VARIOUS BRANCHES OF INDUSTRY IN THE CONTINENTAL UNITED STATES
Industry
All industries
Agriculture. . .
Mining 6
Factories c . . .
Construction
Other Hand
Trades
Railways d . .
Pullman Co.
Express
Street and
Electric
Railways. .
Electric
Light and
Power. . . .
Telegraphs. .
Telephones. .
Transporta-
tion by. . .
water
Banking
Government e
Unclassified
industries . .
Millions of dollars paid in the year
1909
14,960
717
612
4,366
1,192
295
1,092
s
36
171
40
IS
SI
173
115
1,157
4,887
1910
10,265
716
676
4.790
1,146
327
1,205
9
39
181
47
19
91
182
123
1,236
5,478
1911
16,498
756
698
4,805
1,104
339
1,261
9
42
191
50
22
103
184
137
1,300
5,497
1911
is, 1)92
761
752
5,310
1,218
362
1,350
10
46
201
56
26
112
197
149
1,378
6,164
1913
19,450
786
832
5,890
1,276
391
1,416
14
47
214
59
27
125
204
161
1,470
6,538
1914
18,216
767
718
5.366
932
404
1,310
14
44
224
62
26
128
202
164
1,571
6,284
1915
19,019
786
727
5,892
927
425
1,322
13
45
222
63
26
126
222
183
1,684
6,356
1916
23,175
848
894
8,442
1,066
47S
1,547
14
52
242
71
31
145
274
214
1,814
7,043
1917
27,365
1.059
1,112
10,530
973
603
1,908
15
64
267
86
40
170
334
230
2,530
7,384
1918
32,076
1.251
1.354
12,410
964
780
2.741
20
82
314
97
49
190
421
281
4,591
6.531
a Includes subsistence furnished to employees, but excludes pensions, compensation for injuries, com-
missions, tips, and payments for work done under contract.
b Includes quarries and oil wells.
c The field covered by the principal tables in the Census of Manufactures.
d Includes switching and terminal companies.
e Includes all branches of government — national, state and local.
,
SUMMARY OF PART I
243
TABLE 20F
AN ESTIMATE OF THE TOTAL DISBURSEMENTS TO PAST <>R PRESENT EMPLOYEES
IN THE FORM OF WAGES, a SALARIES,*" PENSIONS, COMPENSATION FOR INJURIES,
AND PAYMENTS FOR WORK DONE UNDER CONTRACT
Industry
Millions
of dollar?
paid in the year
1909
1910
1911
ir,, so:,
1912
1913
1914
1915
1916
1917
27,795
1918
All industries
15,255
16,570
18,417
19,801
18,552
19,355
23,558
32,575
Agriculture. . .
717
7 ir,
756
761
786
707
786
Ms
1,059
1,251
Mining b
643
711
733
790
874
755
704
939
L.169
1.422
Factories c. . . .
4,410
l.s;is
1,852
5,361
5,946
5,410
5,945
8,517
10,621
12,515
Construction
1,192
1,146
1.101
1,218
1,270
932
927
1,066
973
'.Mil
Other Hand
Trades
306
339
351
375
404
418
439
496
628
SI 1
Railways d. . .
1,105
1,219
1,277
1,307
1,434
1,328
1,339
1,500
L.990
2.703
Pullman Co. .
10
11
12
13
17
17
16
17
19
21
Express
43
47
51
54
55
52
52
(il
71
93
Street and
Electric
Railways. . .
171
181
191
201
21 1
224
222
212
267
314
Electric
Light and
Power
40
47
50
56
59
62
63
71
86
97
Telegraphs. . .
18
19
22
26
27
26
26
32
to
49
Telephones. . .
81
92
103
113
126
129
12S
154
173
194
Transporta-
tion hv
Water
173
1S2
184
197
204
202
222
271
334
421
Banking
115
123
137
149
101
164
1 83
214
230
281
Government e
1,343
1,421
1,486
1,574
1,678
1,777
1,886
2,017
2.710
1,842
Unclassified
industries. .
1,887
5,478
5,497
6,104
6.53S
6,284
6,356
7,043
7,384
6,531
a Includes subsistence furnished to employees.
b Includes quarries and oil wells.
c The field covered by the principal tables in the Cmsus of Manufactures.
d Includes switching and terminal companies.
e Includes all branches of government — national, state, and local.
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PART II
THE ESTIMATE BY INCOMES RECEIVED
By
OSWALD W. KNAUTH
ASSISTED BY
ELIZABETH W. PUTNAM
MRS. EUSTACE SELIGMAN"
^
CHAPTER 21
INTRODUCTION
§ 21a. The Problem
The estimate of the National Income on the basis of incomes received
attempts to find and summate the money values of the incomes of all per-
sons who are reported by the Census as "gainfully employed." The the-
ory underlying this estimate is that all of the National Income in every
year must be received by some person. An addition must, however,
be made for the surplus incomes of corporations which are carried
forward after the current distributions to stockholders have been made.
Owing to the form in which our data are available, it has not been pos-
sible to distribute these amounts among individuals, and it is therefore
necessary to add them in a lump sum to the individual incomes in order
to arrive at the total National Income. If the data were perfect and
the methods impeccable in both cases the results of this estimate would
agree with the results of the Estimate by Sources of Production presented
in Part I.
Needless to say, neither the data nor the methods are perfect in either
case. The theory on which the two estimates are based is discussed in
Section iv of Chapter II, Volume I, but it may save misunderstanding to
note again the omission of certain items that contribute to the economic
welfare of the community, and the intention to omit one item that counts
as money income to individuals. It is not feasible to include items of
income on which a money value is not commonly placed. For example,
no allowance is made for the services rendered the community by such
public works as roads and bridges, beyond the income received by those
who work upon them. Nor is any attempt made here to set a money value
upon the services rendered by housewives to their families. On the other
hand, we do include two items which do not enter into exchange, but which
may apparently be measured with reasonable accuracy. These are the
rental values of homes owned by the persons who occupy them, and the
produce of the farms directly consumed by farmers. In addition, we in-
clude some spurious income nrisino- from accretions to the money value of
property unchanged in quality and quantity. Such items as the rise in
the prices of building lots do not increase the volume of serviceable goods
at the disposal of the Nation and therefore such items should not be in-
24!)
250 THE ESTIMATE BY INCOMES RECEIVED
eluded in ;i statement of the National Income. But the individuals who
own these lots may get personal income from the rise in land values, and
income resulting from sales of property at enhanced prices, is supposed to
be included in the income-tax returns on which this estimate is largely
based. During the period covered by the present investigation, however,
it seems probable that the error arising from this source is not serious, for
the high rates of taxation imposed at the time when prices were rising to
their maximum discouraged the sale of property that had appreciated in
value, and encouraged " loss-taking " sales of property that had fallen in
value.
§ 21b. The Method and Data
The method adopted in making the Estimate by Incomes Received was
determined largely by the character of the data that were available. The
largest and most accurate body of material is found in the income-tax
returns. Here are definite figures regarding the number and aggregate
amount of personal incomes above the exemption limits set by law —
$3,000 from 1913 (when the present income tax was first levied) to 1916,
and $2,000 from 1917 onwards. These returns have well-known defects,
but defects which can be corrected in some measure. A second great body
of material is the mass of wages data collected by federal, state and city
governments. Such data make it possible to estimate the aggregate
incomes of the millions of those wage-earners and others gainfully em-
ployed who make no income-tax returns.
The income-tax data have to be supplemented by estimates for income
exempt by law from taxation — especially certain state salaries, interest
on tax-free securities, and the rental value of houses occupied by their
owners. More important and more speculative are the corrections that
must be made for failure to report incomes subject to tax and for
understatement of reported incomes. Similarly in the chapter deal-
ing with incomes less than $2,000 per year, we cannot accept wages
earned as equivalent to income received. Here the chief supplements
include the rental value of owned homes, income from property and
pensions.
The character of these materials, it will be noted, makes it necessary to
divide the Estimate by Incomes Received into two sections, persons re-
ceiving more and persons receiving less than $2,000 per year. This division
at the $2,000 line is probably as satisfactory as any other arbitrary division
that could be selected. A little below this line we approach the minimum
budget on which a family can maintain efficiency, while a little above
$2,000 we enter the range of modest comfort. For an individual without
dependents we have on the lower side sufficiency, on the upper side, ease.
INTRODUCTION 251
Of course, any arbitrary line of division maintained through a period of
such wild fluctuations in the cost of living as occurred during the war is
open to the objection that the economic welfare represented by it was con-
stantly changing. This defect we remedy so far as possible by computing
the average per capita income of income-receivers, and by showing the
fluctuations in the purchasing power of their current receipts.
A third large body of data and, therefore, a third section of this estimate
concerns the incomes of farmers. Relatively few farmers make income-tax
returns, so that we can learn little about their affairs from the Internal
Revenue Bureau's publications. Chief reliance must be placed upon the
annual estimates of the "gross value of wealth produced on farms" made
by the Department of Agriculture. But these estimates confessedly
include a vast amount of duplication which must be corrected as well as
may be by resort to various special studies of farm economics. Farmers
are less accustomed to keep books than perhaps any other large class of
business men; and to keep their books correctly is peculiarly difficult
because the value of the food and fuel they produce for their own consump-
tion must be estimated, as well as the rental value of their owned homes.
What is difficult for the individual farmer to do accurately is impossible
for the outside investigator to do accurately for six and a half millions
of farmers. Hence the estimate of farmers' incomes and especially
the number of farmers having incomes above the $ 2,000 line and con-
sequently also of those below this line is subject to a considerable; margin
of error.
The last section of the estimate is concerned with a type of income about
which there is much discussion — corporate surpluses. There are those who
deny that these surpluses are to be regarded as in any true sense part of
the National Income. For this reason, we keep this item separate and
give totals both for all individual incomes and for individual incomes plus
corporate surpluses. Our investigation of corporate finance inclines us to
believe that some 80-90 per cent of corporate surpluses are genuine income,
invested in the extension of plant and equipment in the same way as is
fresh capital raised by stock or bond issues.
Since the amount of income reported to the Bureau of Internal Revenue
as due to sales of property is a negligible item, we conclude that these
surpluses have not been shown in individual incomes during the prosper-
ous years covered by this report. In years of depression, the surplus
accounts of corporations suffer a great decline, and may turn into de-
ficits. If we did not include this item in our estimates, we should make
the National Income more stable than it actually is.
After the manuscript of Volume 1 was sent to press, certain additional
data have become available which have enabled us to make minor revis-
252 THE ESTIMATE BY INCOMES RECEIVED
ions in the Estimate by Incomes Received. It is our hope to make further
revisions of this sort in our published reports whenever materials and op-
portunity permit. Even the present revised results for 1910-1919 are not
final, but merely the best approximations which we can make from the
data now at hand.
S
CHAPTER 22
TOTAL AMOUNT OF INCOME RECEIVED BY PERSONS HAVING
OVER $2,000 PER YEAR
§ 22a. Introduction
The estimate of the total income of persons receiving over $2,000 per
year is based on income-tax returns, on data regarding tax-exempt income,
and on incomes of farmers having over 82,000 per year. These three pa rl s
of the estimate are discussed in detail in the following sections. Table
22A presents the final results.
TABLE 22A
ESTIMATED TOTAL NUMBER OF PERSON'S AND TOTAL AMOUNT OF
INCOME FROM ALL SOURCES RECEIVED BY ALL PERSONS HAVING
INCOMES OVER $2,000
1910 to 1920
Income in millions of dot
ais
Number of persons
Year
I
Income
tax
data a
(exclud-
ing
farmers)
II
Tax-
exempt
income '<
III
Farmers'
incomes r
over
$2,000
IV
Total
V
Number
of persons
(excluding
farmei
V]
Number
of farm
VII
Total
number of
pers ms
1910.. .
1911.. .
1912.. .
S 8,800 d
8,600 <*
8,800^
8 792
806
818
§ 258
1 82
262
$ 9,850
9,588
9,880
1,300,000
L,300,000
1,300,000
111,000
70. 000
111,000
1,411,000
1,370,000
1,111.000
1913. . .
1914.. .
1915.. .
9,000
8,700
10,000
830
843
858
340
340
516
10,17(1
9,883
11,374
1,300,01 )()
L,300,000
1,800,000
I 13,000
1 11,000
208,000
1,443,000
1,111.000
2,008,000
1916.. .
1917.. .
101S.. .
13,500
1(1,000
16,200
973
1,008
1,279
1,179
3,886
5,784
15,652
20,894
23,263
2.300,000
2,900,000
3,100,000
HS. 01 10
1,313,000
1,861,000
2,748,000
1,213,000
1,961,1
1919.. .
1920. . .
17,500
1,550
1,573
6,298
2,261
25,348
3,600,000
2,008,000
so 1,000
5,608 ,00 1
a See § 22b. c gee Table 24K.
b See § 22c. ''Estimated.
§ 22b. Estimate from Income Tax Data
Two questions must be answered before the income-tax data as reported
by the Bureau of Internal Revenue can be utilized. How much are re-
253
254 THE ESTIMATE BY INCOMES RECEIVED
ported incomes understated and what is the amount of incomes that should
be, but are not reported? For brevity we shall call these two defects of
the data "understatement" and "failure to report." Failure to report is
frequent in the lower income ranges where the exemptions allowed by law
would nearly or entirely cover income received; understatement is preva-
lent in the higher income ranges where most elaborate methods are often
resorted to in order to avoid payment of the tax.
Changes in the law itself and in the methods of collecting the tax make
comparison between different years difficult. In the years 1913 to 1916,
incomes above $3,000 are reported and thereafter above $2,000. * Fur-
ther, the deduction of losses incurred in transactions outside of the particu-
lar business in which the tax payer was engaged was not permitted in the
early years, but in 1917 this ruling was changed so as to permit the writing
off of all losses.
It should be noted that profits made from sales of investments or prop-
erty are included as income under the income-tax law. In Volume I it is
held that such profits are a part of individual, but not of National Income. 2
It may be thought that gains of this sort were enormously increased after
1916 by the rise of prices. If all property had actually been sold at current
quotations the tax returns would include a vast volume of clearly fictitious
income. The fact is, however, that the increased income taxes were an
effective deterrent from making realizing sales, so that only a negligible
portion of this fictitious income was included in the tax returns. And this
portion is probably more than offset by the volume of "loss-taking" sales
of property which had declined in price — sales made purposely to reduce
the amount of taxable income.
Another factor which must be considered in estimating both the amount
of understatement and failure to report is the administration of the income-
tax law. This has naturally improved with experience so that the returns
are far more accurate for the later than for the earlier years. In particular,
an attempt has been made since 1918 to reduce the amount of evasion by
"intensive drives" in the $2,000 to $5,000 range.
On the other hand, since the armistice technical means to reduce the
income reported have been resorted to on a far larger scale than during the
war. In particular, the practice of turning over a portion of income-
bearing securities to members of the family in order to avoid or lessen
taxation is more frequent. This practice may result only in dividing the
same amount of income into smaller units; but it may also lessen total
income because gifts are counted at their market value at the date of the
gift and therefore do not include appreciation of value since their original
i No use is made of the data for incomes between $1,000 and $2,000, as they apply only
to single persons, and arc therefore only a part of all the incomes in these ranges.
-' Sec Volume I, page 45.
TOTAL INCOME PERSONS HAVING OVER $2,000 PER YEAR 255
purchase by the donor. This device makes it possible to sell securities
without reporting appreciated value. This fact is not of much conse-
quence, however, for the appreciation in the value of securities may in
part represent the accumulation of corporate surplus which we include
under a separate head, and in part an increase in the price of unchanged
property, which we do not wish to include. In addition, the practice of
forming investment corporations for the purpose of avoiding or lessening
taxation has increased. By this means, surpluses above the current
needs of the stockholders are retained by the corporation and hence are
not reported as personal income. There is no way of ascertaining with
exactness the extent of this practice. 1
With these general considerations in mind, the data may now be pre-
sented. Careful study, year by year, of the figures appearing in the follow-
ing tables and in the charts in Volume I should enable us to make an esti-
mate allowing for evasion and understatement due to the differences in the
methods of collecting the tax in different years, and to changes in the law
itself. Concerning the failure to make returns and the inaccuracy of
many of the returns made, we have little information bej'ond a surmise
that the omissions are considerable. It is hoped that there will shortly be
available the results of audits which will furnish a better basis for an
estimate.
The following table shows the total number of persons and amount of
income reported by the Bureau of Internal Revenue. Figures are also
given for the probable amount of income and number of persons having
incomes over $2,000 in 1913 to 1916. This estimate 1 was made after com-
parison between the average number of persons and amount of income in
the S2,000 to $3,000 class in 1917, 1918, and 1919 with those having
S3, 000 and over. It was found that about 30 per cent of the total income,
and about 50 per cent of income-tax payers fell within this class. Thes
percentages were accordingly usad in estimating the amount of income
and number of persons having over 82,000 in the earlier years, 1913 to
1916, as shown in columns II and IV of Table 22B. Doubtless, some
degree of error is involved in this estimate because of the rise in prices
and the steeper slope of the curve in the later years than in the earlier;
but after considerable study no better method has been found.
In order to study the probable amount of failure to report and under-
1 Probably, 90 per cent of tho corporations in tin- United States represent merely individuals
or a small group <>f individuals doing business through the medium of a corporation. In
these cases, there is a strong tendency to withhold dividends. Additions to corporate sur-
plus in such companies are certainly as much income as corresponding items of partnerships
or sole traders.
It is to be noted that the war additions to corporate surplus (after taxes) have been wiped
out in large measure by (1) the 1920 to l'.i-'l depression and (2) by investments in planl
facilities that are unrealizable through either operation or sale. — J. E. Sterrett.
256
THE ESTIMATE BY INCOMES RECEIVED
TABLE 22B
THE OFFICIAL INCOME TAX RETURNS ON THE BASIS OF A UNIFORM
EXEMPTION LIMIT OF $2,000
(No correction for failure to report, understatement, or tax-exempt income)
1913 to 1920
a Annual Report of the Secretary of the Treasury, June 30, 1914, p. 628. Bureau of
Internal Revenue, Statis„ics of Income, 1916, pp. 14, 23; 1917, pp. 28, 29; 1918, pp. 36,
37; Preliminary report for 1919, p. 8.
b On the basis of 1917, 1918, and 1919, see text.
' For incomes over 83,000.
d Actual number or amount reported for incomes over $2,000.
< Preliminary figure including incomes over $1,000.
statement of income for each year, the income-tax data were plotted on a
logarithmic scale. These charts are reproduced on pages 120 and 121 of
Volume I. A chart on a logarithmic scale emphasizes small arithmetic
increments or decrements in the lower numbers and minimizes them in
the larger numbers. A slight change, therefore, in the shape of the curve
at the left hand (lower income) end is of great importance, since it in-
volves a large number of incomes. The advantage of charting the data
in this form for analysis is illustrated in Part III of this volume.
It should be noted that the curves for each year show a general similar-
ity in the direction and angle of slope. Reading toward the left from the
right hand side of the chart, the curves for 1913 to 1916 fall off at the
$5,000 point, whereas the curve for 1917 is almost a straight line. In 1918
and 1919 the curves turn sharply upward at this point. These observa-
tions indicate (1) that the comparative number of incomes reported in the
$2,000 to $5,000 ranges in the earlier years was less than in the later years; *
1 In order to discover tax delinquents in 1918, all employers were required to report the
<*
TOTAL INCOME PERSONS HAVING OVER $2,000 PER YEAR 257
and suggest (2) that the reporting of incomes in the $5,000 to, say,
$50,000 ranges was less complete than in the higher ranges.
To show more fully tin 1 situation in the lower income ranges in the years
1917 to 1919, the following table has been made.
TABLE 22C
COMPARISON OF REPORTED XET INCOME, INCOME FROM SALARIES,
AND INCOME FROM BUSINESS OF PERSONS RECEIVING $2,000 TO
$5,000 PER YEAR
1917 to 1919
Year
Number of
Persons
Net income
Income from
salaries
(Thousands
of dollars)
Income from
business
1917a
1918 b
1919 c
1,399,470
2,429,214
2,750,229
$4,180,842
7,162,044
8,320,550
$1,853,648
4,389,992
5,445,578
$1,802,641
1,733,831
1,860,148
a Statistics of Income, 1917, pp. 40, 41.
6 Statistics of Income, 1918, p. 44.
c Statistics of Income, 1919, Preliminary Report, pp. 8, 11.
Income returns of less than $5,000 were checked in the field from 1918
on, 1 while those of over $5,000 were sent to Washington and checked by
the central force. This system resulted in the greatest care being given to
the smaller incomes and to the large ones of say $50,000 or more. The
Washington force has in the past been inadequate to audit all the returns,
and in addition has been so far in arrears that its findings have been made
too late to affect the statistical data, which are of necessity computed from
the returns as they are originally reported. The dip in the curve between
$5,000 and $50,000 in these years may thus reflect understatement of
incomes and be due largely to the technique of the Bureau of Internal
Revenue. The figures for incomes above $50,000 are believed by com-
petent authorities to be technically almost accurate, containing only such
understatements as can be made within the letter of the law. The
amount of such understatement is included in the estimate in § 22c on
Tax-exempt Income.
Further light is apparently thrown on the general problem of under-
statement by a comparison of the average amounts of income reported in
each year.
amounts over $1,000 paid to any individual in wages. The result of this drive was that the
amount of income reported between $2,000 and $5,000 as received from wages or salaries was
greatly increased. No such simple method has been devised for detecting delinquents among
men doing business in a small way on their own account, however, and in L918 the number
of such persons riling income-tax returns actually declined. We cannot, therefore, believe
that failure to report has yet been reduced within narrow limits.
1 Returns for the year 1917.
258
THE ESTIMATE BY INCOMES RECEIVED
TABLE 22D
AVERAGE INCOME OF PERSONS RECEIVING OVER $3,000
1913 to 1919
Year
Number of
persons
(Thousands)
357 a
357 b
336 b
437 b
993 c
1,411 d
1,838 e
Total income
(Millions of
dollars)
$ 3,900 b
4,000 b
4,600 b
6,298 b
9,126 c
10,065 d
13,223 *
Average income
1913.
$10,906
11,188
13,664
14,415
9,187
1914
1915
1916
1917
1918
7,132
1919
7,194
a Annual Report of the Secretary of the Treasury, June 30, 1914, p. 628.
b Statistics of Income, 1916, p. 14.
c Statistics of Income, 1917, p. 28.
d Statistics of Income, 1918, p. 36.
e Statistics of Income, 1919, Preliminary Report, p. 8.
According to this table the average income over $3,000 increased rapidly
from 1913 to 1916, dropped violently in 1917, and declined still further in
1918. These changes are the net resultant of several factors. (1) Incomes
already large doubtless grew rapidly larger with the recovery from the
depression of 1913-14, and the sudden uprush of prices after the middle
of 1915. (2) On the other hand, these large incomes were probably re-
duced in 1917-19 by the encroachments made upon profits by increasing-
costs of doing business. (3) The war-time rise of wages, salaries, profes-
sional fees and of the gains of small business men carried many incomes
for the first time in the lives of their recipients above the $3,000 line, and
of course this rapid increase in the number of incomes in the $3,000-$5,000
intervals tended powerfully to reduce the average of all incomes above
$3,000. (4) After the effect of these three factors has been allowed for
the figures still suggest that a considerable role was played by fuller re-
porting of small incomes. The reduction of the exemption limit from
$3,000 to $2,000 in 1917, the patriotic spirit that made people more willing
to pay taxes during the war and the "intensive drive" of 1918 all contrib-
uted to this result.
In so complex a situation it is impossible to attribute its due effect to
each of the intermingled factors. Yet a rough series of corrections can
be made to give approximations much closer to the whole truth than the
official figures give. The method adopted is first to correct the official
returns for 1918, and then to use these new estimates as a basis for cor-
recting the figures for earlier years.
<*
TOTAL INCOME PERSONS HAVING OVER $2,000 PER YEAR 259
The probable amount of understatement and failure to report income
in 1918 was estimated as follows:
1. The failure to report incomes from business in the $2,000 to $5,000
range was considerable. The doubling of incomes from salaries owing to
the "drive" in 19 IS indicates that an equally successful effort to find
small business incomes would have had large results. For our purposes,
the best guess is to double the amount reported under this head — a cor-
rection which adds $1,298 million to the total.
2. The understatement of income from salaries in 1918 was probably
very much less. This item had been increased very largely over 1917,
and the manner in which the work was conducted indicates that nearly
all salaries were found. However, since this item showed a still further
increase of over a billion dollars in 1919, it is probable that there was still
some understatement in 1918. This amounted to perhaps one-tenth of
the reported total, or $370 billion.
3. The understatement of the incomes between $5,000 and $50,000 is
very difficult to estimate. In these ranges, there were reported in 1917,
415,000 incomes, totalling 84,560 million; in 1918, 465,000 incomes, total-
ling $4,860 million; and in 1919, 640,000 incomes, totalling $6,645 million.
It is known that this class escaped attention in 1918 to a greater degree
than either the larger or smaller incomes, and this point is graphically
illustrated by the "dip" shown in the preceding charts. It is noteworthy
that in 1919 the "dip" was to some extent reduced. An elimination of
the "dip" and a reading of the points on the redrawn curve for 1918
indicates a possible increase of from $1 to $3 billion; the points are so fine
at this stage of a logarithmetic chart that the slightest variation causes an
enormous difference in the readings. A flat increase of $2 billion for the
understatement in these ranges in 1918, then, appears to be as close a
correction as can be made.
A summary of these corrections in tabular form follows: —
TABLE 22E
ESTIMATED AMOUNT OF INCOME SUBJECT TO TAXATION' IX 1918
(Excluding farmers)
(Millions of dollars)
Income reported ovor $2,000 S13,ti'.»J '
Less Farmers' Income 1,123 6
$12,569
Add Estimated Business delinquencies ($2,000 $5,000) 1,298 e
Estimated Salary delinquencies ($2,000-$5,000) 370
Estimated General delinquencies ($5,000-$50,0()0) 2,000 c
Total Estimated Income $16,237
a Statistics of Income, 191S, pp. 36, 37. b Statistics of Income, 1918, p. 11.
c See text.
200
THE ESTIMATE BY INCOMES RECEIVED
When the curve for 1918 is redrawn on the basis of $10.2 billion instead
of $13.7 billion total income, it shows only a small "dip" in place of the
very pronounced one shown in Chart 22B. If a similar computation is
made for earlier years, based on the results for 1918, and if the general
information contained in the preceding charts and tables is utilized, then
the approximation to the income over $2,000 for each of these years is as
follows: —
TABLE 22F
ESTIMATED TOTAL NUMBER OF PERSONS AND AMOUNT OF TAXABLE
INCOME OF PERSONS RECEIVING INCOMES OVER $2,000 PER YEAR
(Excluding farmers)
1913 to 1920
Number of
persons
(Millions)
Total income
(Billions)
Minimum and
maximum estimates
(Billions)
1913
1914
1915
1916
1.3
1.3
1.8
2.3
2.9
3.1
3.6
$ 9.0
S.7
10 .
13.5
16.0
16.2
17.5
$ 7-10
7-10
8-12
12-15
1917
1918
L919
15-19
15-19
17-20
1920
Needless to say, any method of estimating money income that ought to
be, but is not, reported to the taxing authorities yields merely rough ap-
proximations. It cannot be pointed out too often that the exactness of the
figures used is purely technical. However, they are the result of an ex-
haustive scrutiny and analysis of the existing data, and a careful study of
the best means of interpreting them. No final solution of the income dis-
tribution problem can be reached until we have an accurate census of the
incomes of all the people in the country, or at least of a large and well
selected sample.
§ 22c. Tax-exempt Income
In addition to the kind of incomes which are or should be reported by
persons under the income-tax law, there are some forms of income which
are not reported because they are exempt from taxation. Certain items of
this tax-exempt income can be said with some assurance to accrue almost
entirely to those having incomes over $2,000, for example, income from
si ate or local bonds and Federal Farm Loan Bonds. Other types of income,
such as the interest on Liberty Bonds, state and local salaries, and income
,
TOTAL INCOME PERSONS HAVING OVEE 12,000 PER YEAR 261
from homes owned by their occupants, are known to be divided between
those having incomes over and tinder $2,000. Where no statistical infor-
mation was obtainable, we have apportioned such incomes in the manner
which seemed, all things considered, most probable.
The following table is presented to show the amount of income which
accrues to the persons falling under the income-tax law and for which they
are not required to make any return.
TABLE 22G
ESTIMATED TAX-EXEMPT INCOME a
1910 to 1920
(Tax-exempt Agricultural Income Omitted)
(Millions of dollars)
Year
I
Interest
on local
debt
II
[uteres!
on
Libei t y
Bonds
111
Interest
on
Federal
Farm
Loan
Bonds
IV
Interest
on obli-
gations
of p IS-
sessions
of U.S. t>
V
Income
exempt
through
nature
of oc-
cupation c
VI
Rental
value of
homes
owned
VII
Total
1910
1911
1912
1913
1914
1915
1910
1917
1918
1919
L920
$134
148
160
172
L85
200
215
228
236
259
282
$
20
ISO
380
380 d
$
1
1
7
Id
$3
3
3
3
3
3
3
4
4
1
1
$155
155
155
L55
155
1 .V)
I.-.:,
1 55
1 55
2 10
203
$500
.-,1 1! 1
500
51 II i
500
500
6 ii
6 10
Tin
7i I
7 il
S 792
8 16
818
83U
8 13
858
973
1,008
1,279
1,550
1,573
a See the following tables for references.
'• And also U. S. bonds issued prior to 1917.
c State, city and county salaries.
d Estimated.
The items of this table tire taken up in the following divisions.
1. Local Debts.
The next table gives the amount of state, municipal and local debts in
1913.
The security issues subsequent to 1913 are recorded by the Bond Buyer
which has the most complete records available. An estimate of the amount
of refunding may be obtained by comparing the total issues reported by
the Bond Buyer with the actual increase as shown by successive Census
reports. In 1902, the Census of Wealth, Debt and Taxation reported a
262
THE ESTIMATE BY INCOMES RECEIVED
TABLE 22H
TOTAL AMOUNT OF STATE, MUNICIPAL, COUNTY, AND LOCAL BONDS
OUTSTANDING a
1913
State $ 345,942,305
Municipal 2,884,882,726
County 371,528,268
Specified Civil Divisions 100,672,758
School Districts 118,870,601
Total $3,821,896,658
a U. S. Department of Commerce, Bureau of the Census, Wealth, Debt, and Taxation,
1913. Sinking funds excluded.
total of $1,865 million for debts of states, municipalities, and localities as
compared with $3,822 million in 1913. This increase of $1,967 million
compares with total issues of about $3,100 million reported during the
same period in the Bond Buyer. Accordingly, the issues reported annually
by the Bond Buyer have been reduced by one-third to represent the approx-
imate net increase in indebtedness.
The following table shows the new issues of securities for each year, the
estimated increase of indebtedness, and the total estimated interest pay-
ments.
TABLE 221
ESTIMATED TOTAL DEBT AND INTEREST PAYMENTS OF STATES,
MUNICIPALITIES, COUNTIES, AND LOCALITIES
1910 to 1920
(Millions of dollars)
Year
1910.
1911
1912
1913.
1914.
1915.
1916.
1917.
1918.
1919.
1920.
I
II
III
IV
Amount
Estimated
Estimated
Total
issued a
net increase
of debt
total debt
interest at
4.5% c
$324
$216
$2,983
$134
452
301
3,284
148
399
266
3,550
160
408
272
3,822 b
172
446
297
4,119
185
493
329
4,448
200
497
331
4,779
215
445
297
5,076
228
263
175
5,251
236
770
513
5,764
259
745
497
6,261
282
a Bond Buyer, Jan. 3, 1920, p. 34, and Jan. 8, 1921, p. 32.
b Bureau of the Census, Wealth, Debt and Taxation, 1913.
c The average weighted rate of interest of samples of loans issued at various dates
was 4.47 per cent. The increase in interest rates in 1919 affects only a small fraction of
the total debt.
,
TOTAL INCOME PERSONS HAVING OVER $2,000 PER YEAR 263
2. Liberty Bonds.
Liberty Bond issues outstanding at different dates were of ttie following
amounts:
TABLE 22 J
APPROXIMATE VALUE OF LIBERTY BONDS OUTSTANDING
1917 to 1919
(Millions of dollars)
a Report of the Secretary of the Treasury, L917, p. 56.
b Report of the Secretary of the Treasury, 191S, p. 157.
c Report of the Secretary of the Treasury, 1919, p. 214.
d Report of the Secretary of the Treasury, 1920, p. 451.
e 1919 figure carried forward.
Of these issues, the First Liberty Loan and part of the Victory Loan are
entirely tax-exempt. The others are exempt only within rather narrow
limits.
The income from these bonds is divided between banks, corporations and
individuals. The following table shows the estimated amounts held by
banks on the one hand and by corporations and individuals on the other.
In order to estimate roughly the income from Liberty Bonds received
by individuals having incomes over $2,000, estimates of the interest re-
ceived by corporations, and by individuals having incomes under 82.000
must be made. An examination of corporation statements leads to the
conclusion that about $40 millions of such interest was paid to corporations
in 1918 and $90 millions in 1919. Subtracting these amounts from the
figures shown in the last column of Table 22K, we get a total received by
individuals of about $27 millions in 1917, $262 millions in 1918 and $683
millions in 1919. Seventy per cent of these amounts 1 may be considered
1 The original amounts of the bonds issued in the different denominations are as follows: —
$10,000 $3,209,810,000
5,000 1,493.060,000
1,000 9,767,222,000
500 2,095,775,000
100 3,3s«).s()().0()()
50 2,81 1,924,850
{Annual Report of the Secretary of the Treasury, 1920, p. 435.) The amounts owned by
264
THE ESTIMATE BY INCOMES RECEIVED
TABLE 22K
ESTIMATED DIVISION OF THE INCOME FROM LIBERTY BONDS
BETWEEN BANKS, CORPORATIONS AND INDIVIDUALS
1917 to 1919
(Millions of dollars)
Bonds outstanding
Income from bonds
Year
I
Total
amount
outstand-
ing
II
Amount
held by
banks a
III
Amount
held by
corpora-
tions and
individuals
IV
Estimated
total
income
V
Estimated
income of
banks
VI
Estimated
income of
corpora-
tions and
individuals
1917
1918
1919
$ 1,466
9,314
20,726
$ 703
1,374
1,450
$ 763
7,940
19,276
« 51
357
834
$24
55
61
$ 27
302
773
" Reports of Comptroller of the Currency, 1917, v. I, p. 11; 1918, v. I, p. 16; 1919,
v. I, i). 40.
a fair guess at the proportion held by individuals with incomes over $2,000;
which suggests as the probable amount of tax-exempt personal income
from this source, about $20 millions in 1917, $180 millions in 1918, and
$480 millions in 1919. The later issues were more narrowly tax-exempt,
so that a considerable portion of the interest received in 1919 had to be
reported in the income-tax returns. The actual exemption in that year
was then loss than $480 millions by perhaps $100 millions, or say $380
millions. No change of any moment from this amount is warranted for
1920, and the same figure is used for that year.
3. Federal Farm Loans.
The following table gives the amount of Federal Farm Loan Bonds out-
standing in recent years. The Farm Loan Board estimates that practically
the entire issue is in the hands of the public and not in the hands of com-
mercial banks.
hanks and corporations must have been in the neighborhood of four billion dollars — probably
for the most part in large denominations. Few people having incomes of less than $2,000
could lie expected to own bonds of s.500; and some of the persons having incomes of over
s'_>,()(>() would own bonds of $50 or $100. The division of the bonds between persons having
more th:m $2,00(1 and less than sj, (loo would be approximately as follows:
To persons having over $2,000; $16,566 million, being the sum of the denominations of
$500 to $10,000, plus one-tenth of the $50 and $100 ($620 million), a total of $17.3 billion;
le $ 1 billion, the amount held bv banks and corporations, giving a final amount of $13.3
billion. To persons having less than $2,000; nine-tenths of the $50 and $100 bonds, or $5,584
million. This would give 70 per cent of the bond interest credited to individuals to persons
having over $2,000.
S
TOTAL INCOME PERSONS HAVING OVER 82,000 PER YEAR 265
TABLE 22L
FEDERAL FARM LOAN BONDS OUTSTANDING
1917 to 1919 (Thousands of dollars)
1917
1918
1919
Bonds outstanding**
Bonds held by the Treasury b
$2 1 . 147
$21,447
992
$140,122
56,865
$285,500
L36,885
Bonds held l>v the Public. .
$83,257
3,851
$148,615
6,873
Income from Bonds held by the Public c .
"On October 31.
& Unpublished figures furnished by the Assistant Secretary of the Federal Farm
Loan Bureau.
c These loans pay from 4 l /2Per cent to 5 per cent and the interest rate is computed
on the basis of 4 5 /s per cenl .
4. U. S. Bond Issues prior to 1917 and Bonds of V. S. Possessions.
U. S. Bonds issued prior to the year 1017 consisted on June 30, 1919 of
the following:
TABLE 22 M
U. S. BONDS ISSUED PRIOR TO 1917 a
Consols of 1930
Loans of 1925
Panama ( Janal Loan
Panama Canal Loan
Conversion Bonds. . .
Postal Savings Bonds.
Rate of
interest
4
2
3
3
2V 2
Amount
$599,724,050
118,849,
74,901,. ".so
50,000,000
28,894,900
11,349,960
Principal
holder
Banks
Banks
Banks
Public
Banks
Public
° Report of the Secretary of the Treasury, 1919, p. 113.
With slight changes, reported annually by the Secretary of the Treasury,
the interest on these amounts is about 822 million. A large number of
these bonds are held by banks; the best estimates obtainable show that
only the Panama 3 per end Bonds and the Postal Savings Bonds are to
any extent in the hands of the public. 1 The annual income from the bond
issues which are held largely by the public accordingly amounts to $1,784,-
000. To these issues must be added the interest on bonds of the posses-
sions of the United Slates (Hawaii. Philippines and Porto Rico). The
amounts involved are small. In 1910 the total debt was $22 million and
mounted gradually to $41 million in 1020. The interest at the earlier
date, therefore, was approximately 8880,000 and at the later dale,
1 Estimate made by Commission of Public Debt, August 25, 1920.
286
THE ESTIMATE BY INCOMES RECEIVED
$1,040,000. These two amounts add up to about $3 million per year for
the earlier years and $4 million per year for the later years.
5. State, City and County Salaries.
The expenditures for salaries by states, cities and counties are not sub-
ject to the Federal income tax, and such salaries as are above $2,000
should, therefore, be added to the income which is known to accrue to cer-
tain individuals. The data arc mainly taken from the Census publica-
tions, Financial Statistics of States, 1918, Financial Statistics of Cities, 1918,
and County Revenues, Expenditures and Public Properties, 1913. From the
data given in these reports, other expenses, such as payments for upkeep,
interest, and general expenses, have been excluded in Column II of Table
22N, and the final estimate has been a rough paring-down of the remainder.
A number of items included both salaries and upkeep, so that an itemized
division is not practicable and no more elaborate method is warranted
under the circumstances. A check on the salaries paid by states was, how-
ever, possible. The reports of six States were scrutinized with great care,
and an estimate for the entire country was made on the basis of each state.
This estimate varied from $159 to $270 million, the average being $202
million. In view of this, the final estimate of $200 million for state sal-
aries appears reasonable. City and county estimates are reduced in an
approximately similar ratio.
TABLE 22N
ESTIMATED TOTAL SALARIES PAID TO STATE OFFICIALS
1918
State
I
Actual amount
of total
salaries paid
II
Estimated
amount of
total salaries
paid
III
Per cent of
population
.of U.S. re-
siding in State
IV
Estimated
amount of
salaries paid
by all States
on the basis
of one State
California a
Imliana b
Louisiana c
New Yorkd
Virginia e
Wisconsin/
$10,092,581
$7,898,591
5,744,887
2,849,546
3,792,260
5,728,231
2.92
2.76
1.79
9.91
2.135
2.426
$270,499,690
208,148,000
159,192,510
159,477,477
177,623,410
236,118,340
Average of six precedinj
imates
$201,842,236
a California Biennial Report of the State Comptroller, 1917 to 1918.
b Indiana Year Haul;, 1919.
c Louisiana Biennial Report of Auditor, 1918.
d New York Report of Comptroller, 1917, Part 3, p. 11.
e Virginia Ann mil Report of Treasurer, August 3, 1918.
/Wisconsin Report of Treasury, June 30, 1917.
S
TOTAL INCOME PERSONS HAVING OVER $2,000 PER YEAR 267
In order to determine the percentage of state salaries larger than $2,000,
1,500 samples were taken from the U. S. Official Register for 1911, 1917,
and 1919 by choosing the top right hand amount on each page. These
samples indicated that about 8 per cent of government employees receiv-
ing about 20 per cent of the total salaries fell in the class having salaries
of over $2,000, the percentage being about the same for each year. This
percentage is used in Column III of Table 220. Since government sala-
ries did not increase in any marked degree until 1919, when the average
increase was about 30 per cent, the same total of $155 million is kept from
1913 to 1918, and $200 million is estimated for 1919 and 1920.
TABLE 220
ESTIMATED TOTAL SALARIES PAID TO STATE, CITY VXD
COUNTY OFFICIALS
(Thousands of dollars)
I
Total expenses
of general
departments a
II
Estimated
total salaries
III
Estimated
salaries over
•82,000 (20 per
cent of Col. II)
State (1918)
$297,801 b
666,384 c
277,735 d
$200,000
400,000
175,000
$ 40,000
Cities over 2,500 (1913)
Counties (1913)
80,000
35,000
Total
8775,000
$155,000
"Expenses of General Departments include administrative and other expenses for
(a) General Government, (b) Protection to Persons and Property, (c) Conservation
of Health and Sanitation, (d) Highways, (e) Charities, Hospitals and Corrections, (f)
Schools and Libraries, (g) Recreation, (In Miscellaneous.
b Bureau of the Census, Financial Statist if* of States, 1918, Table 10.
c Census of Municipal Pcrcnue-*, E.r/tenditures and Public Properties, 1913, p. 182,
Table 5.
d Bureau of the Census, Wealth, Debt and Taxation, 1913, v. II, Table 5, p. 210.,
6. Rental Value of Homes Owned by their Occupants.
To estimate the value of the rentals of homes owned by persons in the
income class above S2,0()0, it is necessary to fall back on broad generaliza-
tions. No definite body of data exists. The number of persons exclud-
ing farmers falling into this group and their total incomes are shown
in Table 22A.
The Census of 1910 reports about- five and one-quarter million houses
owned by occupiers, excluding farmers. This is about 40 per cent of the
fourteen million families in the country. Since home ownership has in-
creased among the wealthy, especially in recent years, because of the
268 THE ESTIMATE BY INCOMES RECEIVED
income-tax exemption, it is not improbable that one-half of the income-
tax payers own their homes.
There does not appear to be any information in regard to the relation of
income to rent for the higher class incomes. The Bureau of Labor Statis-
tics finds 13.4 per cent to be the proportion of rent to income for working-
class families. 1 These data, which include incomes up to 82,500, show that
the percentage decreases with a rise in the incomes; for incomes above
$2,500 we have no data regarding the relation between rent and income.
Without a complete Census, or at least a typical sample of incomes, rents,
and ownership of homes of the different income classes of the country, any
estimate must be mere conjecture.
The proportion of 13.4 per cent above mentioned, when applied to one-
half the total amount of income, estimated for the class above $2,000,
yields results ranging from one-half billion to three-fourths billion dollars.
In view of the increase in the number of income-tax payers between 1913
and 1919, together with the increase in the amount of income, it is con-
cluded that the total value of rents increased from about one-half to three-
fourths billion dollars. Because of the need of placing a definite amount
in Table 22G, amounts varying from $500 to $700 million are inserted,
but their accuracy is only nominal.
1 Monthly Labor Review, August, 1919, p. 118.
,*
CHAPTER 23
TOTAL AMOUNT OF INCOME RECEIVED BY PERSONS
HAVING UNDER $2,000
§ 23a. Introduction
By far the larger number of persons gainfully employed have incomes
under $2,000; and of these incomes, the major portion conies from personal
earnings received in the form of wages. Profits of small business men and
earnings of professional men, when they are less than 82,000, are not re-
ported to the Bureau of Internal Revenue, and it has been necessary to as-
sume that these average amounts are substantially on the same level with
wages under 82,000. This assumption in regard to the average may not
be far from the truth, even though the distribution of wages is quite differ-
ent from that of profits and professional earnings. The error involved can-
not in any case be very large. A study of typical distributions of these
three types of income would be a valuable 1 piece of work. It is on the
information concerning wages, therefore, that the chief reliance must be
placed in estimating incomes under 82,000.
In order, however, to arrive at the total for this group, estimates must
be added for the income received from other sources. These are income
from pensions, from homes owned by those who occupy them, and from
investments. Once more the condition of the data makes it necessary to
treat agriculture apart from other industries, so that separate estimates
have to be made for the incomes of farm laborers and of farmers. The
amount of each of these items together with the final figure for all incomes
under $2,000 is shown in Table 23A.
§ 23b. Personal Earnings 1
No wages Census has ever been taken in the United States. If there
hail been, this estimate would have been less difficult to make, and the
results would doubtless be more trustworthy. Under the circumstances,
the best means of arriving at the total wages paid is to estimate the
average amount per person from such samples as are obtainable for each
occupational group, and multiply this average by the number of persons
actually working in this group. An estimate 1 could also be made from the
entire number of persons connected with an industry provided the aver-
1 Except those of farm Laborers ami farmers^ which arc taken up in §§ 23c and ~S.i£.
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TOTAL INCOME PERSONS HAVING UNDER 82,000 271
age wages were also estimated on that basis. But most of the average
wages reported are based on the average number of workers actually
employed at some one time. Hence, the first method is the more feasible.
Generally speaking, the average number of persons employed in an
industry is from 3 per cent to 10 per cent less than the number of persons
attached to the industry. 1 About 3 per cent are constantly out of em-
ployment because of sickness and other reasons and a certain additional
per cent are irregularly out of work because of seasonal and cyclical
fluctuations.
The occupational groups are divided in general accord with the scheme
used in the Census of Occupations of 1910. In Table 23D are shown the
numbers of persons actually at work in each year. From these figures
have been subtracted the number of persons receiving incomes of over
82,000 estimated on the basis of the preceding chapter. (Tables 23E and
23F) The next step has been to estimate the average wages in each occu-
pational group (Table 23G), and by multiplication of average wages and
average numbers (Table 23H), to obtain a figure for total wages paid.
In some cases, the different samples from which the average wages pre-
sented in Table 23G were made up, showed considerable variation. How-
ever, in the most important groups, particularly in Manufacturing and
Transportation, the results drawn from different sets of data checked
against each other with a satisfactory degree of accuracy. After the table
had been completed on the basis of independent estimates for each item,
it was again studied to locate such inner discrepancies as might lead to the
detection of errors, either in the relation of wages imputed to different
years or to different occupations. Where discrepancies were found, addi-
tional information was sought. The result is presented as the nearest
practical approximation of the facts we could make from the existing data.
It may be well to warn the reader against the attempt to estimate annual
average earnings from hourly, daily or weekly rates of pay. While it is
easy to multiply daily rates of pay by the number of working days in a
year, this method involves some assumption as to the average number of
days worked. Examples have been found of both annual average earnings
and daily or weekly rates of wages, together with the number of days or
weeks in operation, which show that the results found by multiplying
average rates by days in operation give untrustworthy results. Wage
rates, therefore, have been used only as indices and with the greatest
possible care. This difficulty is most unfortunate because the great
mass of the material to be had is in the form of hourly, daily or weekly
rates of pay.
1 Cf. Chapter 2, § d. Also Honiell Hart, Fluctuations in Unemployment in Cities of the
United States, 1002 to 1917.
272 THE ESTIMATE BY INCOMES RECEIVED
Taken as a whole, the data on which these tables rest are numerous and
fairly reliable. As said above, the average number of persons employed is
based on the 1910 Census of Occupations. As the Census reports the total
number of persons gainfully employed in each occupational group, these
figures have to be adjusted to the average number actually employed.
This adjustment has been made in the case of Manufactures by comparing
the monthly average number at work in 1909, reported in Census of Man-
ufactures, 1909, with the highest number employed, and assuming the
same ratio for 1910. Similar methods of approximating the number actu-
ally at work in 1910 have been applied to each occupation. 1
The average wages found in each occupational group have been ap-
plied to the entire number of persons actually at work in that group. This
plan involves a certain technical error, for some of those in every group
work independently and hence, receive what is generally classified as
"profits" and not "wages." No estimate that is more than a guess as to
the total amount of these "profits" and as to the number who thus work
independently is available. It has been found necessary, therefore, to
assume that the average profits of those having an income under $2,000
is approximately the same as the average wages of employees engaged in
the same industry. An exception is made in the case of "trade," where
the large number of independent workers appears to indicate a rather
higher income than one based strictly on wages. 2
Furthermore, a major difficulty in classification should be pointed out.
There are many cases in which the same person might fall within either
of two groups. Examples are clerks employed by railroads, engineers
connected with a factory or mine, lawyers or doctors holding public ser-
vice positions, horseshoers or field clerks in the army, etc. Classifications
decided upon by the Census Bureau were of necessity more or less arbi-
trary, but careful study has led to the conclusion that they are on the whole
as satisfactory as any other set of arbitrary assignments. The only depar-
tures from the Census classification which we have made are (1) to shift a
certain number of those engaged in manufacturing connected with mining
(reported under manufacturing in the Occupation Statistics of 1910) to
mines, and (2) to change a certain number of persons who on account of
occupation were listed under manufacturing, to the army and navy, for
which a separate group was made. Both changes are of small importance,
but they are desirable because actual figures from other sources for later
years are based on the revised classifications.
1 The method here adopted makes probable a certain amount of understatement of an-
nual income, owing to flic real and regular mobility of labor in shifting from one industry to
another. This is especially the case in seasonal industries. — M. C. Rorty.
- I question the assumption that business and professional earnings under $2,000 are com-
parable to wages. Frequency curves are probably quite different. — M. C. Rorty.
TOTAL INCOME PERSONS HAVING UNDER 82,000 273
There is a considerable chance of error in the numbers attributed to each
occupational group. Each person is placed by the Census in that group
which he considers his regular occupation. But there is of necessity a
large amount of shifting, both from seasonal causes and from variations in
the activity of different industries. Such shiftings, however, will affect the
total wages of all the groups less than the wages assigned to each group.
For the total will only be affected as the average amount of w 7 ages varies
from group to group. This error is probably not of momentous im-
portance, for it will tend to raise the total as often as to lower it.
The main sources of information for each of the leading groups recog-
nized in the estimate are as follows: —
(1) Mining. The estimated number engaged in mining is based on
actual figures for approximately 93 per cent l of all mines in 1911 to 1918 as
reported by the Bureau of Mines. After careful comparison of the numbers
reported in metal mines, coal mines and quarries by the Census of Mines and
Quarries, 1909, by the Occupation Statistics of 1910, and by the Bureau of
Mines, 1911 to 1918, an estimate was made for 1910. These figures repre-
sent the number employed in mines during operation, which is unquestion-
ably somewhat higher than the average number employed during the entire
year. 2 It is believed that when these figures have been combined with
average annual wages from sample states (Pennsjdvania, Kansas, Michigan,
Illinois, West Virginia) based on the data for the whole country given by
the Census of Mines and Quarries, 1909, the resulting total wage is higher
than it should be. A slight reduction has accordingly been made on the
basis of the number of days which mines were closed down. Figures for
the number of days in operation are available for coal mines, and for some
other fields, but fluctuations are so violent and so erratic that the data
cannot be used as samples for all mines. Average wages in certain metal
mining companies, which were made available to the Bureau, were also
consulted for the purpose of checking the general accuracy of the results
obtained.
(2) Manufacturing. The data for the number employed, upon which
the estimates in the manufacturing group are based, were obtained from the
Census of Manufactures (1909, 1914 and 1919) and reports of the statistical
bureaus or labor departments of five states: Massachusetts. New Jersey.
Michigan, New York and Wisconsin. An index was made for these sam-
ple states, checked by means of the Census of Manufactures in 1909, 191 I
and 1919. This index number was used in interpolating the number of
men at work in the non-census years. The same sources and in addition,
the labor reports of Kansas, Ohio and Pennsylvania were consulted with
"See note b, Table 23 D.
2 Several states report the average numbers of men employed in mines during the year,
but these samples arc too small to be of much use.
274 THE ESTIMATE BY INCOMES RECEIVED
regard to average wages. Wages of certain special groups, such as textile,
steel, and shipyard workers, and mechanics and carpenters employed by
railroads, were taken into consideration for the purpose of checking the
general results. It will be seen that from the abundance of material
given in the exact form desired — that of average annual wages and aver-
age number employed — it was possible to construct a fairly adequate
estimate of the trend of aggregate earnings in this field.
(3) Transportation. In chapter 8, in Part I, Mr. King estimates
the average number of persons employed by steam railroads, street and
electric railways, express, telephone and telegraph companies. These fig-
ures are based on data from the Interstate Commerce Commission and the
Census, and comprehend a major part of those employed in transportation.
An index number was made from the totals and applied to the number re-
ported in the Occupation Statistics of 1910 after 6 per cent had been sub-
tracted for unemployment. This per cent is a rough approximation, little
material of adequate character being obtainable for an accurate estimate.
Wages data also are given for the above classes of employees by the Inter-
state Commerce Commission and Census. Average annual wages for
teamsters and drivers in Ohio and Michigan, for railway mail clerks, and
scattered data on rates of pay of employees in water transportation were
studied with a view to covering those occupations not included by the
Interstate Commerce Commission. It will be seen that the data available
are varied and fairly comprehensive, so that the conclusions reached
regarding total wages for transportation should contain a minimum
amount of error.
(4) Trade. Owing to the fact that there are no figures upon which to
base an estimate of the numbers engaged in trade, this section is particu-
larly unsatisfactory. The assumption was made that unemployment in
1910 would cover only the portion of those engaged who were earning
wages (clerks in stores, etc.) and not those deriving their income from
profits (retail dealers, etc.). Three per cent therefore was used to reduce
the number attached to this group to the average number employed.
The assumption was also made that in regard to the number employed,
trade resembled manufactures more closely in its general movement than
any other group, as the clerk in a store is more likely to become a factory
worker than a farm hand, or railroad worker. However, the unprecedented
increase in manufactures owing to the war was probably not paralleled
closely in trade and therefore, a composite figure was used for the years
after 1910. This figure was made by applying the ratio of persons engaged
in trade to the total population in 1910 and to the population of succeeding
years, with corrections for the business cycle and the war.
The weighted average of all wages, with the exception of the army, has
TOTAL INCOME PERSONS HAVING UNDER $2,000 275
been used as the average wage of this group. This figure seems to be
reasonable, in that it is slightly above average earnings in manufacturing
and below average earnings in mines and transportation. Reference to
Table 27C will show that the manufacturing group contains about the same
proportion of women as the commercial group; but the number of independ-
ent workers is less, so that a somewhat lower average income appears
justified. On the other hand, the mining and transportation groups con-
tain only a small percentage of women, so that we may look for a rela-
tively high average wage in these groups.
(5) Public Service. In the public service group, the increase in the
number employed was assumed to be at the same rate as that of the Fire
and Police Departments of six cities (St. Louis, New York, Boston, Charles-
ton, S. C, Washington, D. C, Chicago, and Baltimore). As unemploy-
ment plays little or no part in this group, the offices being largely fixed in
number and kept filled by election or appointment, the number reported
by the Occupation Statistics for 1910 was used for that year without any
reduction. An examination of Federal and state reports shows that there
have been few increases in salaries during the decade in the case of officials,
and as their salaries are for the most part over $2,000, they do not need
to be considered in this section. The trend of annual average salaries of
Fire and Police Department employees was considered to be representa-
tive of the remaining occupations in this group. The actual figures, how-
ever, have been somewhat reduced in order to take into consideration
lower grade employees such as watchmen and laborers. Owing to the fact
that Public Service employees are largely classified under a variety of
heads (Clerical, Professional, etc), the total salaries paid to all Federal,
state, county and city employees are useless for the present purpose. As
separate data for the salaries paid in each occupation are difficult to
segregate, the final figures for this group must necessarily be rough approx-
imations.
(6) Professional Service. The occupations included under professional
service form a long list of heterogeneous professions, teachers being about
one-third of the whole. Ministers, doctors, dentists, engineers, actors,
musicians arc among the more important professions included. The
average numbers so engaged have been estimated with the aid of the num-
ber of teachers as reported by the Bureau of Education, the number of
doctors published in the biennial register of (he American Academy of
Physicians and Surgeons, and the number of ministers given in the Census
of Religious Bodies, 1900 and 1910. The numbers of Federal judges and
attorneys, 1 and of physicians in public health work or resident in prisons
'Letter from the Department of Justice and state Reports of Treasury and Labor De-
partments.
270 THE ESTIMATE BY INCOMES RECEIVED
and reformatories have remained approximately constant. Samples of
salaries exist for several professions, although they cannot be taken as
typical of the whole group without considerable adjustment. Those used
in Table 23G are therefore approximations arrived at from careful study
of teachers' and ministers' salaries as reported by the Federal Govern-
ment and from smaller samples of the salaries of college professors, en-
gineers and professional men in government employ. 1
(7) Personal Service. No data except those provided by the Census
exist from which to estimate the average number employed in Domestic
and Personal Service. The group includes about one million domestic
servants, the other two and a half million being widely scattered among
barbers, laundry workers, watchmen, bartenders, restaurant workers,
hotel-keepers, and other minor occupations. The numbers reported in
the Occupation Statistics of 1910 were reduced by 6 per cent to cover esti-
mated unemployment; a preliminary estimate of the Census Bureau sup-
plied the corresponding number in 1920. The intervening years were
interpolated. In the years 1916, 1917, 1918 and 1919, adjustment was
made for the number who enlisted or were drafted into the army and navy,
and for shifts into manufacturing. This estimate was made on the basis
of the per cent of domestics in Class I of men registered for military ser-
vice to the total number of Class I, 2 given by the Provost Marshal Gen-
eral for 1918 and applied to the average number in the army and navy in
each of the war years. Annual average wages for some of the occupations
of this group are given at odd intervals. Especially useful have been the
data on laundry workers in Massachusetts each year, and in the District
of Columbia for 1909, 1914 and 1919; and the data for restaurant workers
in Michigan are reported from 1909 to 1918. Aside from this, the material
available is in the form of rates of pay in isolated years for individuals or
small groups, which are useful only as a check. While the data are meager
and the method necessarily faulty, the evidence indicates that as a whole
earnings of this group have increased more slowly than any other and that
it is the lowest paid.
(8) Clerical Occupations. Consecutive material for an adequate esti-
mate of the average number engaged in clerical occupations is entirely
lacking. The number as given in the Occupation Statistics of 1910 was
therefore reduced by 6 per cent to account for unemployment in that
year. A preliminary estimate from the Census Bureau supplied the num-
ber in 1920. The intervening years were interpolated, and adjustments
1 This method is likely to give an underestimate. The newer business professions are
likely to be unreported. For illustration — the income of accountants in practice on their
own account or in the employ of larger firms and receiving under $2,000 each would probably
total $10 to $20 million. There has been a rapid increase in the law and all professions closely
associated with business. — J. E. Sterrett.
2 Second report of Provost Marshal General, 1918.
TOTAL INCOME PERSONS HAVING UNDER 82,000 277
made for the war based on the reports of the Provost Marshal General.
The per cent of unemployment is only an approximation, but has some
basis in that it is the same as that used in transportation and manufac-
turing where a large number of clerks are employed. However, the in-
crease in the number of clerks in manufactures (Census of Manufactures)
from 1909 to 1914 was somewhat high owing to a change in the grouping
of manufacturing employees and hence could not be used as a check. The
pay of clerks in railroads 1 and in shipbuilding, 2 although they could cover
only a very small portion of the whole, were found to check with the figures
used.
The group has as its largest division a miscellaneous class of "Other
Clerks," but it also includes bookkeepers, accountants, agents, stenog-
raphers, and messengers. For the latter occupations, we find a consider-
able amount of wages data of a scattered nature, including various govern-
ment investigations, the figures for office clerks in factories in Michigan,
for clerks in railroad transportation in all years, and in manufactures in
1909 and 1914. Other States report isolated average wages for particular
years, which help to check the general accuracy of the results shown. A
large proportion of comparatively skilled workers is included, so that the
average wages should be relatively high in comparison with those in the
other occupational groups.
(9) Army and Navy. The Army and Navy is numerically of small
importance with the exception of the years 1917, 1918 and 1919. For
these years, monthly figures published by the War and Navy Departments,
have been used to determine the average number employed during those
years. The pay has been estimated from reports of the War and Navy
Departments for enlisted men, with about $200 per year added for food,
clothing and shelter.
Nothing has been said as yet of the number of persons engaged in agri-
culture. The number of farm laborers, including wives and children of
farmers working on their home farms, is so uncertain that it is left for
treatment under the separate section on farm laborers.
Since the total number of persons having incomes over $2,000 has been
estimated in the preceding chapter, it is necessary only to subtract the
numbers there shown from the total gainfully employed in order to arrive
at the number having incomes under $2,000. A rough classification of
persons with incomes over $2,000 according to the groups used in this sec-
tion may be made from certain tables shown in the official Statistics of
Income. The tables are entitled Distribution of Incomes by Occupations
1 Interstate Commerce Commission, Statistics of Railroads, 1000 to litis.
2 Census of Manufactures, 190'J and Census of Shipbuilding, 1914, 11)16.
278 THE ESTIMATE BY INCOMES RECEIVED
in 1916 and Income Reported from Business Pursuits by Industries, in 1917
and 1918. x While these tables are not strictly comparable, and consider-
able adjustment has to be made in order to fit them into the classifica-
tion here used, the general results obtained from the two sources are fairly
consistent with each other. Again, it may be pointed out that the total is
probably more accurate than the parts. These estimates are shown in
Table 23E.
Table 23F shows the numbers left after subtracting persons having
incomes over $2,000 in each group from the total average number in that
group. It will be noted that the number of persons having incomes of less
than $2,000 shows decreases in the war years in some groups. These
decreases arise from the fact that many persons in these years rose into
the group having incomes over $2,000. In the summary (Chapter 26)
these changes in the distribution of income will be considered.
The final results have been subjected to a number of tests. The num-
ber gainfully employed has been estimated for each year and checked by
advance information for 1920 from the Census Bureau.
The Provost Marshal General made a similar projection of the gain-
fully employed in 1917, 2 arriving at a total of 28,751,419, excluding farmers
and farm laborers, which checks well with the figure presented for that
year (29,230,000). The number actually employed in 1917 as well as in
1918 and 1919, was larger than was indicated by the projection which the
Provost Marshal used, owing (1) to a shift from agriculture into industry
and the army; (2) the inclusion of college students and normally idle per-
sons in the army ; and (3) the temporary employment, at wages, of house-
wives and other women not usually counted among the gainfully employed.
With regard to wage movements, the weighted average of wages was
computed for each year, and converted into an index number on the base
1913 = 100. This series may be compared with the index number for wages
published by the Bureau of Labor Statistics. In making this comparison,
one should bear in mind what the Bureau of Labor Statistics has said
about its own figures: "The Bureau has hesitated to attempt the prep-
aration of such a wage index because of the incomplete and disconnected
material available for its construction. However, an index number has
been prepared by the Bureau from all sources accessible, and is here pre-
sented." The agreement of the results arrived at in these independent
investigations corroborates their general accuracy. (Table 23B)
The division of the industrial groups according to age and sex is a vital
factor in judging the relations among average wages ascribed to each.
Table 23C has been prepared from the Census of Occupations of 1910
^Statistics of Income: 1916, p. 31; 1917, p. Id; 1918, p. 11.
- Second Report of the Provost Marshal General, December 20, 1918, p. 407.
TOTAL INCOME PERSONS HAVING UNDER $2,000
279
TABLE 23B
COMPARISON OF THE INDEX NUMBER OF WAGES MADE IX THIS STUDY
WITH THAT OF THE BUREAU OF LABOR STATISTICS
1910 lo 1920
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
1910
1911
1912
1913
1914
L915
1916
1917
191S
1919
1920
Weighted av-
erage wage a
(Dollars) . . .
595
607
623
637
643
666
708
807
1003
1 1 I.",
1321
Index number
(1913 = 100)
93
95
98
100
101
105
111
127
157
180
207
Index number
of Bureau
of Labor
Statistics b
(1913 = 100)
93
95
97
100
102
103
111
128
162
184
a Computed by dividing total amount of earnings in Table 2311 by total numbers of
persons, Table 23F, excluding Army and Navy.
b Monthly Labor Review, February, 1921, p. 74; 1919 figure applies to the spring of
1919.
and is presented to aid readers in canvassing the reasonableness of the
results reached in this investigation.
TABLE 23C
PERCENTAGE DIVISIOX ACCORDIXO TO AGE AXD SEX OF THE NUMBER
GAINFULLY EMPLOYED IX EACH INDUSTRIAL GROUP a IX 1910
(Clerical help included)
I
II
Ill
IV
V
( '.roup
Percentage of males
Percentage of females
Total
Over 20
years of age
65.2
86.5
73.7
85.0
71.0
91.3
51.2
28 . s
Under 20
years of age
Over 20
years of age
Under 20
years of age
Agriculture
20.1
13. 4
11.1
10.1
112
l :;
:; 3
3 ."»
8.6
0.1
10.6
3.0
12.0
:; .9
37.9
:.:; . 1
6.1
0.0
4.6
1.9
5 8
5
7.6
lit'.
100.0
Mines
1(11)
Manufacturing
Transportation
Trade
Public Service
100
kid ii
101) I)
100.
Professional Service.. . .
Persona] Service
101)
100
^Occupation Statistics, 1910, Table VI, pp. 302 ff.
With these explanations, the five tables described in the preceding text
are now presented. The sources from which the data were taken are
shown in the appended footnotes.
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TOTAL INCOME PERSONS HAVING UNDER $2,000 289
§ 23c. The Earnings of Farm Laborers
The Census for 1910 places the number of farm laborers at 6,390,000, 1
and estimates that $651,611,287 2 was expended by farmers for labor.
These figures would yield the rather absurd average annual wage of $102
for each farm laborer. Inquiry has developed the fact that among farm
laborers are included those wives and children of fanners who work only
at irregular intervals, and often for only a few days. The ( Jensus uses the
terms "home farm" and "working out" in subdividing farm laborers.
There are reported under the title "home farm," 3,310,000 persons of
whom 2,216,000 are under twenty years of age. Of those' over twenty
years, 563,000 are women, leaving only 531,000 males over twenty years
old in the home-farm group. These laborers appear to be mainly sons
working with their fathers, and their earnings are probably included as
part of the general income of the farm.
There are left therefore, as independent income receivers 3,080,000, of
whom 2,637,000 are laborers "working out," and 443,000 are under spe-
cial classifications. Of the entire group, 274,000 are under sixteen years of
age, and 350,000 are women. Even after the numbers are reduced in this
way, when they are taken in conjunction with the $652 million paid out
by farmers, we still have the low average wage of $212.
The total amount paid by farmers for labor is generally accepted by
qualified judges as approximately correct. It was compiled by asking
each farmer what sum he paid out for labor. The number of farms and
acreage under cultivation remained approximately the same throughout
the decade, so that the assumption is made that the amount of hired help
remained about the same. 3 The only item of change, then, is in the rate of
monthly pay without board, which is taken as typical of the movement of
wages. These reports give the average wages of a large number of report-
ing districts and their accuracy is only approximate.
While the amounts shown in Column III of table 231 are all that were
paid by farmers, yet it is clear thai more than this must have been earned
by those who were classed as agricultural laborers. The group of 3,080,000
who worked out probably earned at least an average of $400 per year.
The best conjecture available is thai about one-quarter million laborers are
hired by the year, some one and one-half million by the month for a period
of three to seven months, and about a million more are employed by the
day. Conditions in different parts of the country vary so greatly that
estimates based on any locality must be accepted with reservations, and
'Bureau of the Census, Occupation Statistics, p. 302 IT. includes agricultural laborers,
other agricultural pursuits and other occupations under forestry and animal husbandry.
2 Abstract of the Census, 1910, p. 372.
3 In 1920, this preliminary Occupation Statistics indicate slightly under three million inde-
pendent income receivers, as against slightly over three million in 1910.
200
THE ESTIMATE BY INCOMES RECEIVED
these numbers are given only as rough approximations. The month and
day laborers ordinarily find some other occupation during the winter to
supplement their wages from the farm.
The total earning capacity of this group in 1010 must have been in the
neighborhood of one to one and a quarter billions, of which only $652 mil-
lion was received in money from farmers. It is not unreasonable, there-
fore, to add $500 million for 1910 to the $652 million in order to arrive at
total earnings. 1 This assumption imputes a lower earning power to farm
laborers than to any other class, which is in accord with what seem to be
the facts. A similar amount, increased in proportion to the general wage
level, has therefore been added to the estimate of farm laborers' income
for each subsequent year. The amount for 1920 has, however, been
increased to allow for the return of 250,000 men from the army to farm
labor, and their rate of pay is added. This increases the proportionate
amounts shown for 1920 by 1/12 (3,080,000-^250,000).
TABLE 231
ESTIMATED EARNINGS OF FARM LABORERS
1910 to 1920
(Millions of dollars)
Year
I
Monthly
wages with-
out board a
II
Relative
pay
III
Total
wages from
farm laboi b
$ 652
682
701
718
708
714
778
958
1,157
1,334 d
1,668
IV
Other
earnings c
V
Total
earnings
of farm
laborers
1910
$27.50
28.77
29.58
30.31
29.88
30.15
32. S3
40.43
48.80
56 . 29
64.95
100.0
104.6
107.6
110.2
108.7
109.6
119.4
147.0
177.5
204.7
236.2
$ 500
511
527
538
543
565
597
683
844
96S
1,110
SI, 152
1911
1912.
1913. . .
1914
1915
1916 . . .
1917
1918
1919
1,193
1,228
1,256
1.251
1,279
1,375
1,641
2,001
2,302
1920 .
2,778 e
a St,:l 1st in, I Abstract, 1920, p. 303.
b $651,61 1,2S7, Abstract of the C< nsus, 1910, p. 372, projected by index in Column II.
• $500 million in 1910 projected by index of wages.
''The recently published Summary of the 1919 Census of Agriculture places the
amount expended by farmers for labor at $ 1,356,403,452.
e For explanation see text.
i Duplication of wages actually earned in other industries, to which farm laborers turn
in winter, is avoided because of the fact that they are not enumerated in those industries.
There is no error in the total; but there is a certain amount of error in the manner in which
the earnings are divided between industries.
<*
TOTAL INCOME PERSONS HAVING UNDER $2,000
291
§ 23d. Pensions
Pensions of the Federal, State, and City governments may be credited
entirely to persons having incomes under $2,000. The Commissioner of
Pensions reports annually the amounts paid for Federal pensions; state
pensions are reported in the Financial Statistics of States; and city pen-
sions are reported in the Financial Statistics of Cities. Both of these vol-
umes are issued by the Census Bureau at irregular periods, so that figures
for intermediate years have been interpolated. Other forms of pensions,
received from corporations and lodges, are incapable of determination;
but they appear to be so small a factor in the total that they may safely
be disregarded.
TABLE 23J
FEDERAL, STATE AND CITY PENSIONS
1910 to 1920
( Millions of dollars)
I
Federal «
II
State
III
City
IV
Total
1910
1911
1912
1913
1914. .
1915.
$159.9
157.3
152.9
174.1
172.4
165.5
159.1
160. S
179.8
2122.2
S 8.4 6
9.76
11.06
12.3 6
13.6 b
14.9 c
16.1 c
17.3 6
18 6
20.2 c
$ 6.8b
7.(1''
8 5 I
9 2 6
9.9 6
10.6 d
11.6 6
12.7 d
13 •")''
I 1 3 6
$175.1
174.6
172 t
195 6
195.9
191.0
1916
1917
1918
1919.
186.8
190. 8
211.9
':. i 7
1920'
a Annual Reports of the Commissioner of Pensions.
b Interpolated.
cU. S. Census, Financial Statistics of States (1915, p. 90; 1916, p. 92; 1918, p. 90;
1919, p. 84).
<*U. S. Census, Financial Statistics of Cities (1911, p. 191; 1912, p. 201; 1915, p. L93;
1917, p. 207; 1918, p. 191).
« Data not available.
§ 23e. The Rental Value of Homes Owned by Their Occupants
The Census of 1910 reports the number of homes, excluding farm homes
(which are taken up in Chapter 24 under farmers' incomes), as 14,131 .'. , !■">.'
Of these, 3,408, S~>1 were owned unencumbered, 1,701,002 were owned on-
cumbered, and 135,404 were not reported in regard to the question of
1 Census of Population, 1910, p. 1294.
292
THE ESTIMATE BY INCOMES RECEIVED
encumbrance. The remaining eight million homes were presumably rented,
and the income accruing from these rentals is included under other head-
ings. Owing to the lack of later information, it has been necessary to as-
sume for purposes of computation, that the number of homes owned in-
creased since 1910 in the same ratio as the general population. The
amount of encumbrance has been placed at one-third the total value, an
estimate arrived at after consultation with a number of real estate experts.
The present estimate is concerned only with homes owned by those
having incomes under $2,000, and it is therefore necessary to subtract
from the total number those homes owned by persons having more than
$2,000 per year. Here we enter the realm of pure conjecture, but it appears
likely that the major portion of all homes were owned by persons with
incomes under $2,000 — say 3 million of the homes owned unencumbered
and one and a half million of the homes owned encumbered. The best
that can be said of an estimate made by such a method is that the error is a
constant one, and that the total is not a large factor in the entire national
income.
The question of deciding on an estimate for average rental is almost
equally hazardous, but here there is some statistical basis for the estimate
made. One method is to ascertain as nearly as we can the proportion of
total income that is spent on house rent, and assume that the owner derives
this proportion of his income from the use of his home. According to the
results of the cost of living survey made by the Bureau of Labor in 1918 to
1919, 13.4 per cent of the total average yearly expenses per family or 12.6
per cent of total average family income, was paid for rent. 1
Other estimates of the proportion of expenditure for shelter to all expen-
ses for consumption goods are as follows : —
TABLE 23K
PERCENTAGE OF INCOME EXPENDED FOR SHELTER <*
Authority
Date
Number of
families
Place
Percentage
U. S. Bureau of Labor Statistics . .
U. S. Bureau of Labor Statistics . .
U. S. Bureau of Labor Statistics . .
U. S. Railroad Wage Commission
Dallas, Texas Wage Commission. .
R. C. Chapin income $1000-$1099
1901
1917
1917
1915
1917
1907
11,156
60S
512
265
50
31
U.S.
New York
Phila., Pa.
U.S.
Dallas, Texas
New York
18.12
12.91
12.04
20.00
14.51
18.01
Average, weighted according to number of families 17.65
a National Industrial Conference Board, Report No. 9, p. 4.
1 Monthly Labor Review, August, 1919, p. 118. This investigation covered 12,096 families
in 92 industrial renters.
,*
TOTAL INCOME PERSONS HAVING UNDER $2,000 293
The average, 17.G5 per cent, shown in table 23K, is the proportion which
the National Industrial Conference Board accepts in its studies of the cost
of living. It will be seen, however, that the system of weighting gives great
prominence to the investigation of 1901 by the Bureau of Labor Statist ics,
and that all but one of the later investigations, though more restricted in
their scope, show a lower percentage of total income spent for rem .
What probably happened was that the proportion of rent to the total
income decreased during the decade; — at least until 1918. For the year
1910, therefore, the composite figure of the National Industrial Conference
Board is perhaps preferable to the lower ratio of rent found in 1918 to 1919
by the Bureau of Labor Statistics. The average family income in 1910
was about S1200, 1 and 17.65 per cent of this gives $211.80. But a further
reduction must be made; not all rent is to be considered as net income to
the recipient. About 40 per cent of the rent goes for various expenses of
upkeep, repair, taxes, etc., leaving perhaps 60 per cent as net return. This
would leave $147.08 — or say, $150.00 as the average amount which home
owners received as income from their homes in 1910, based on this method
of computation.
The average rentals in 91 localities paid by families having an income
between $1200 and $1500 per year is reported in the Monthly Labor
Review as $174 per year. 2 Since these families varied in income and size a
further study was made of families of five having an income of $1300,
and the average amount of rent was found to be $167 per year.
The average rental paid in 1920 in 92 cities by laboring families is given
in the Monthly Labor Review} It is stated that "families who live in
houses or apartments owned by themselves, and families living in houses
or apartments where either heat or light or both are included in the rent,
have been omitted." This is therefore a selected sample from which the
higher ranges of income are excluded. The average rent of $167.79 may
accordingly be considered the low limit, for 1920. This figure should be
compared with an indicated rent of $219 for 1920, which is found by apply-
ing the average of the index numbers of the National Industrial Conference
Board and the Bureau of Labor Statistics (Table 23L) to the basic average
rent of $150 in 1910.
If, then, $150 per year is accepted as an average figure in 1910 for the
income received from homes by their owners, and this is combined with
the conjectured number of homes, the total income in that year was about
$600 million. This should be increased by an index number indicating
changes in rents, and for this purpose the average of the indices computed
i Estimated from total income under $2,000 and number of families.
2 Monthly Labor Rerinv, September, 1019, pages 9 to 30. This survey was made under
the direction of Dr. W. F. Ogburn.
s Monthly Labor Review, September, 1920, pages 84 to 91.
294
THE ESTIMATE BY INCOMES RECEIVED
by the National Industrial Conference Board and the Bureau of Labor
Statistics is used. The final results show a total income from this source
varying from $600 to about .$900 million.
TABLE 23L
RENTAL VALUE OF HOMES OWNED BY OCCUPANTS HAVING INCOMES
UNDER $2,000
1910 to 1920
I
II
III
IV
Year
Index numbers of house rents
Estimated
Bureau of
Labor Sta-
tistics a
National
Industrial
Conference
Board b
Average
rental value
of homes owned
by occupants d
1910
Per cent
100
100
101 . 5
102.3
101
105
114 f
134.9c
Per cent
100
100
100
101.5
105
115
128
158
Per cent
100
100
100.8
101.9
103
110
121
146.5
Million dollars
$600 e
1911
600 e
1912
600 e
1913
600
1014
IKK)
1916
1917
1918
(ill.-,
611
618
660
1919
1920.
726
879
a Monthly Labor Review, October, 1920, p. 65. These studies are based on 18 cities
from 1914 to December, 1917, and thereafter on 31 cities. Prior to 1919, the figures
are given for December, and are interpolated for July.
b Report No. 30, September, 1920. These studies are based on reports from 359
agencies in 158 cities. The figures are for July of each year.
c Figures for June.
d For estimate — $600 million — see text. This amount is projected by Column III.
e Estimated.
§ 23f. Income from Investments
The most obvious method of estimating income from investments is to
find what proportion it normally bears to total income. This may be done
in several ways and the results compared.
The first method is to prolong the curve made from income-tax data to
show the relation between income from investment and income from per-
sonal ('Minings to include the lower ranges. This curve, however, is defect-
ive in two ways: (1) It is necessary to class all "business income" as per-
sonal earnings, on the ground that it is due to effort and only differs from
personal earnings in its contractual nature. (2) This curve tells us what
W
TOTAL INCOME PERSONS HAVING UNDER 82,000 295
arc the probable personal earnings given any sized income, and not the
probable income given any particular earnings. Were the correlation
perfect, this form of statement would make no difference; but unfortu-
nately the correlation is unknown, and the original data are not in such
shape that they can be turned into a different form.
This curve taken at its face value indicates that personal earnings
should be increased as follows, in order to arrive at total incomes of indi-
viduals:
TABLE 23M
RELATION BETWEEN PERSONAL EARNINGS AND TOTAL INCOME
INDICATED BY INCOME-TAX DATA
1918
Average personal earnings Average total income
82,000 $2,215
1,800 1,960
1,600 1,713
1,400 1,480
1,200 1,245
1,000 1,023
800 811
600 603
100 401
200 200
It is clear that this curve cannot be projected more than a short distance,
say to SI, 500, before it loses all semblance of reality. The most, therefore,
that can be said, is that less than 13 per cent (the amount reported by the
Bureau of Internal Revenue in its lowest range, 82, 000-83,000) and proba-
bly not over 10 per cent of the incomes below 82,000 are due to invest-
ments of one kind or another.
Further light is cast on this question by a sample of 12,090 family
incomes well scattered in regard to area which were collected by the Bu-
reau of Labor Statistics in 1919. This summary shows the percentage
relation of total income to total earnings for the entire range of incomes
from "under 8900" to "over 82,500," thus considerably overlapping the
income tax class. These relations are as shown on page 296.
It will be seen that no definite trend is indicated towards a larger per-
centage of income from investments with the rise in incomes. Such <liu;ht
increase, as there is, does not approach the 13 per cent of the $2,000-
83,000 class reported by the Statistics of Income. However, it is stated that
the effort made in collecting these data was to exclude families which
290
THE ESTIMATE BY INCOMES RECEIVED
received any considerable portion of their income from sources other than
the husbands' earnings. It is, therefore, to be expected that the propor-
tion of income from investments will normally be higher than that shown
in this sample, and that 33^ to 4 per cent may therefore safely be regarded
as a minimum figure.
TABLE 23N
PERCENTAGE OF TOTAL INCOME TO TOTAL EARNINGS
(Based on a sample of 12,096 families a)
Income in dollars
Under $900. . .
$900-1,200
1,200-1,500. . .
1,500-1,800. . .
1,800-2,100. . .
2,100-2,500. . .
2,500 and over .
White families
Colored families
103.96
103.37
103.65
103.86
103.84
104 . 93
104.15
104.67
103.82
108.72
105.15
104.98
103.95
100 49
a Monthly Labor Review, December, 1919, pp. 40-41.
The total incomes of 1,602 school teachers in five cities were reported as
$1,645,400 in 1913. ] These incomes were analyzed in regard to their
sources, and it was found that $1,552,040 came from salaries, and $92,820
from investments. The latter is 5.98 per cent of the former.
In arriving at a decision as to the percentages to be used, the limits were
taken as between 4 per cent and 10 per cent. The former is known to be
low. The latter rests on questionable assumptions. In view of the fact
that the modal income is placed at a figure below $1,000 and that there is
probably some relation between income from wages and income from prop-
erty, it is believed that no great error can be involved in adding 6 per cent
to personal earnings in order to arrive at the total income of persons of the
group under $2,000. 2
The results of this computation are shown in the following table:
1 Report of the Committee on Teachers' Salaries and Cost of Living, 1913.
2 Bowley, The Division of the Product of Industry, page 14, estimates the total " earned "
in England below £160 to be £1,046 million and the total "unearned " income below £160
to be £50 million, or about 5 per cent.
<*
TOTAL INCOME PERSONS HAVING UNDER 82,000
297
TABLE 230
AMOUNT RECEIVED FROM INVESTMENTS BY ALL PERSONS HAVING
INCOMES UNDER $2,000
1910 to 1920
(Millions of dollars)
Year
Personal earnings
Estimated income
from investments
1910
$13,711
14,311
14,971
15,458
15,462
15,717
18,294
21.179
27,777
29,882
33,020
$ 823
1911 .
859
1912
1913
S9X
927
1914
1915
928
943
1916. .
1,098
1917
1,271
1918
1919
1,667
1,793
1920
1,981
CHAPTER 24
FARMERS' INCOME
§ 24a. Introduction
The information concerning farmers' income is fragmentary, but suffi-
cient in volume to justify the hope of attaining a fairly accurate estimate.
Before this estimate is presented certain peculiarities of farmers' incomes
and of the data concerning them must be mentioned.
(1) There is no other industry in which non-monetary income makes so
large a proportion of the total as in farming. Besides the rental values of
the farm homes occupied by owners, we must count in the value of the
food and fuel which farmers produce for their own consumption.
(2) Usually the farmer is not only a producer but also a land speculator.
Indeed, it is rather upon the increase in the value of his land than upon the
sale of his produce that the farmer rests whatever hope he cherishes of
growing rich. How large the growth in land values is appears from the
Censuses of 1900 and 1910, which report an increase in the value of farm
lands of $15 billion in addition to an increase of $5 billion in the value of
farm buildings, machinery, and live stock. 1 Fifteen billions for all farms in
ten years means an average annual increase in the value of each farm
amounting to $323. In the decade covered by our estimates the average
increase must have been much larger, because of the great rise in the prices
of farm lands which culminated in 1920. 2 When a farmer realizes a profit
by selling his land at an enhanced price, that profit constitutes income to
him as an individual. But gains of this kind do not constitute income to
the nation as a whole, except in so far as the increased farm values arise
from such improvements as are made by clearing, fencing, draining, irrigat-
ing or fertilizing land. The nation gained no increase of useful goods
from marking up the price of its farm lands in 1919-20 and lost no useful
goods from marking them down again in 1920-21. Hence we make no
effort to estimate the profits and losses which fanners make from fluctu-
ations in land values.
(3) Of course farmers obtain some income from other sources than the
i Needless to say, these official figures have a wide margin of error. In particular, figures
for land values and the value put upon buildings are unsatisfactory, especially in areas of
decreasing farm population. In such districts, the selling values of the farms are often less
than the cost of the buildings alone.
^ These figures have since been reported, and show an increase of land values from
$28,475 million to $54,830 million.
298
FARMERS' INCOME 299
cultivation of their own farms. Their share in the income from tax-
exempt securities has been included under thai heading and musl not be
counted again here. But another item of importance to farmers must be
allowed for — the money they make by doing work for others. How much
these earnings amount to can be calculated only in the roughest maimer.
The few small samples of farmers' incomes which covet- this point indicate
outside earnings varying between $48 and SI 17 per year per farmer. On
this basis the aggregate outside earnings of all farmers run between one-
quarter and three-quarters of a billion annually.
Concerning sources of information, it should be noted that income-tax
returns are of little help in estimating farmers' incomes. In 1916 when the
exemption limit was $3,000, only 14,407 of the six and a half million fanners
filed tax returns. Since that year the tax returns have not been classified
by occupations. In 1917, however, there was reported net income of
$806,163,957 from "agriculture and animal husbandry," divided among
251,838 returns. In 1918 (the latest date for which detailed statistics
have been published), the corresponding figures were $1,122,532,163 and
372,336. ' The reasons why so small a proportion of the farmers figure in
these returns even in a prosperous year are clear. As a class, farmers
belong among the small business men with average incomes not much in
excess of the average earnings of adult male wage-earners. Further, of
these modest incomes a considerable part is in form not subject to taxa-
tion — the rental value of their owned homes, the food and fuel they pro-
duce for themselves. Finally, small business men with incomes near the
exemption limit, especially men who do not keep accurate accounts, prob-
ably evade more extensively than any other class the obligation to make
tax returns.
The basic data upon which all estimates of farmers' incomes must rest
are the Department of Agriculture's annual statements of the gross value
of agricultural produce. These figures for 1910-20 are shown in Table
24A. Their chief defect is that they contain a vast amount of duplica-
tion. Crops fed to live stock are counted twice, first as the value of the
crops themselves, second in the value of the live stock. "Feeders" from
the ranges are counted once when sold by the ranchman and again when
sold as fat stock. The chief problem is to ascertain the amount of this
duplication year by year.
The violent price fluctuations of 1916-20 give rise to special difficulties
in piecing together the fragmentary data which come from different years.
Of the increase; in the gross wealth produced on farms according to Table
24A— an increase from $9 billion in 1910 to $25 billion in 1919— much the
'The 1919 Statistics of Income has since been published. It shows 118,945 businesses
under "Agriculture and related industries," with a total net income of $ 1,211,260,562.
300
THE ESTIMATE BY INCOMES RECEIVED
TABLE 24A
THE NUMBER OF FARMS AND THE GROSS WEALTH PRODUCED
ANNUALLY
1910 to 1920
Year
1910.
1911.
1912.
1913.
1914.
1915.
1910.
1917.
1918.
1919.
1920.
Number of farms a
(Thousands)
6,362
6,371
6,380
6,388
6,396
6,405
6,414
6,423
6,432
6,441
6,450
Gross wealth
produced on farms b
(Millions of dollars)
$ 9,037
8,819
9,343
9,850
9,895
10,774
13,406
19,331
22,479
24,961
19,856
a Figures for 1910 and 1920 are from an advance bulletin of the Bureau of the Census,
entitled Number of Farms by States and Counties, 1920. Other figures are interpolated
along a straight line.
A "farm" for census purposes is all the land which is directly farmed by one person
managing and conducting agricultural operations, either by his own labor alone or
with the assistance of members of his household or hired employees. The term "agri-
cultural operations" is used as a general term referring to the work of growing crops,
producing other agricultural products, and raising animals, fowls, and bees. A "faim"
as thus defined may consist of a single tract of land or of a number of separate and
distinct tracts, and these several tracts may be held under different tenures, as where
one tract is owned by the farmer and another tract is hired by him. Further, when a
landowner has one or more tenants, renters, croppers, or managers, the land operated
by each is considered a "farm." Abstract of the Census, 1910, p. 265, footnote 1.
b Statistical Abstract of the U. S. 1919, p. 183. Duplication of animals and grain fed
to animals is included.
greater part represents merely a change in monetary values. The wholesale-
price index numbers compiled by the Bureau of Labor Statistics show
that the prices of farm products rose from 100 in 1914 to 234 in 1919, or
somewhat faster than the general price level, for which the corresponding
figures are 100 and 212. * But not all of the increase was of this nominal
character. The index numbers of the physical volume of agricultural out-
put, recently made by Professors E. E. Day and W. W. Stewart, agree in
showing that, with the sharp oscillations characteristic of farming, the
volume of goods produced was increasing during the decade.
§ 24b. First Estimate — Based on Total Production and Expenses
Dr. E. A. Goldenweiser 2 has attempted to estimate the proportions by
which the "gross value of wealth produced on farms" reported by the
i Monthli/ Labor Review, February, 1921, pp. 44, 45.
2 American Economic Review, March, 1916.
S
FARMERS' INCOME
301
TABLE 24B
INDICES OF PHYSICAL PRODUCTION FOR AGRICULTURE
Base, Dav, 1909-1913 = 100 «
Stewart, 1911-1913 = 100';
Year
Day
Stewart
Year
Day
Stewart
1909
95
95
1915
113.4
116
1910
99.1
98
1910
100.4
101
1911
94.1
93
1917
108.5
110
1912
111
111
1918
107.1
ins
1913
98.2
96
1919
110.6
112
1914
108.5
108
1920
115.6
° Review of Economic Statistics, Haivard Committee on Economic Research, Septem-
ber, 1920, p. 255.
b Annual Proceedings of the American Economic Association, December, 1920.
Department of Agriculture should be changed in order to arrive at the net
value production of farms. In so doing, he has decreased the total amount
reported by the value of food crops fed to animals and has increased it by
the value of the produce of the farm which is directly consumed by the
farmers' families. In this way, he has arrived at the figure for farmers'
incomes in 1909 shown on page 302.
These figures were based on the returns of the Census of 1910, supple-
mented by the estimates of W. J. Spillman 1 and W. C. Funk. 2 The value
of crops for 1909 is reduced by the amount fed to live stock (com, oats.
barley, hay, and forage, kafir com, emmer, and spelt, totalling $2,786
million) except the amount actually sold (8509 million) and corn consumed
by the family ($40 million).
The values of house rent, and of food and fuel consumed are based on
Mr. Funk's estimate, which was made up by visiting and going over the
monetary affairs of 483 farmers in 10 well scattered localities. In this esti-
mate, Mr. Funk arrived at a total figure of 8421 per family/ 5 but since the
census enumerators are believed to have allowed for a certain portion of
pork and beef, vegetables and fruits consumed by the farm family (esti-
mated at $161), he reduced this original total of 8421 per family to $260.
The expenditures are mostly based on census returns: 8(551 million for
hired labor, $115 million for fertilizers, $300 million for feed, and $840
i Bulletin, July 19, 1913, The Farmers' Income, by W. J. Spillman, Agriculturist, Office of
Farm Management.
2 U. S. Department of Agriculture, Farmers' Bulletin No. (V-in. December, 1914.
3 The Cornell Bureau of Farm Management found the average value of products furnished
by 692 farms in New York State in 1919 to be $449.02. This figure excludes rent, and is
thus fairly comparable at relative prices to the amount used in the text. The deduction
for duplicate census figuring in the Cornell investigation is about l'o per cent, which leads
to the belief that Funk's deduction for duplication is ample.
302
THE ESTIMATE BY INCOMES RECEIVED
TABLE 24C
INCOME AND EXPENDITURES OF THE AVERAGE FARMER <*
1909
Items
Total
Per farm
Income:
Value of crops b
Value of live stock products c . .
$3,250,359,348
1,124,678,632
1,833,151,031
1,653,934,100
$511
177
Value of animals sold and animals slaughtered on
farms .
288
Value of house rent and of food and fuel consumed 1 >y
family and not reported by Census (estimated)
260
Gross earnings of farm and farm family
$7,862,123,111
$1,236
Expenditures: d
Labor, fertilizers, feed, seed (estimated), threshing
(estimated), animals purchased, taxes (estimated),
and miscellaneous
Maintenance charges (buildings, equipment, machin-
ery, etc.)
$2,750,344,281
505,979,322
$ 432
80
Total Expenditures . .
$3,256,323,603
$512
Net earnings of farm and farm family
$4,605,799,508
2,049,148,628
$724
Interest at 5 per cent on value of farm property
(earnings of farm)
322
Earnings of farm family. ...
$2,556,650,880
$402
a The Farmer's Income by E. A. Goldenwciser, American Economic Review, March,
1916, p. 42.
b Exclusive of crops fed to live-stock on home farms.
c Including dairy products (except milk and cream consumed on the farm) poultry,
honey and wax, and wool and mohair.
d Exclusive of value of unpaid family labor.
million for animals purchased. In addition, seed and threshing are esti-
mated at $290 million, taxes and maintenance of buildings and implements,
and miscellaneous expenses at $1,061 million, making a total of $3,256
million or $512 per farm. No elaborate estimate is made of the interest
on mortgages, but a probable amount of $34 per farm is ventured in the
text.
If the proportions which Dr. Goldenweiser found be accepted for the
moment, and applied to the following years, and due allowance be made for
the increase in the total number of farms and changes in prices and costs,
then the approximation to incomes of farm families shown in Table 24D
can be made.
The total value of crops (Column I) is taken from the annual reports of
the Department of Agriculture, and this amount has been reduced to 60
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304 THE ESTIMATE BY INCOMES RECEIVED
per cent of its reported value (Column II), in order to eliminate that
part of the crop which was fed to live stock, and which, therefore, appears
under the heading "Value of Animals" (Column IV).
The value of animal products (Column III) is reported in the Census of
1909, and certain items included have been reported in the Census of 1914
and the advance sheets of 1919. For the intercensal years, the amounts
have been supplied by the Department of Agriculture. 1 These amounts,
however, do not check closely in detail with the Census figures. For exam-
ple, the Department figure for daily products in 1919 showed an increase
of 360 per cent over 1909, while the Census figures indicated an increase
of only about 300 per cent. The Department of Agriculture's figure for
poultry and eggs shows an increase in 1919 over 1909 of 267 per cent,
whereas the advance sheets of the Census indicate an increase of only
about 200 or 210 per cent. Assuming that the Census figures are more
accurate than the estimates of the Department of Agriculture, which are
admittedly rough, it has been concluded from these indications that the
Department's figures are from 12 to 22 per cent too high. They have
accordingly been reduced by 17 per cent.
The amount of correction to be applied for the value of animals is dubi-
ous (Column IV). Some duplication exists in the valuation of animals,
owing to re-sales of live stock. This has been placed rather arbitrarily at
one-fourth the reported value of animals, an amount which is indicated by
unpublished samples available in the Bureau of Farm Economics. Data
on this head were collected for the Census of 1910, but some doubt was
thrown on their accuracy, and they have not been published.
The value of food, fuel, and house rent (Column VI) is based on the orig-
inal amount of $260 per farm taken from Dr. Goldenweiser, and multi-
plied by an index number. 2 This series is made up of the Bureau of
Labor Statistics index number of wholesale prices of farm products and
fuel, 3 weighted in the proportion of 7 to l. 4 The index number is further
adjusted to take into account the increase in the number of farms.
The total cost of production (Column VIII) is taken from Dr. Golden-
weiser 's estimate for 1910 and extended over later years by an index num-
ber constructed as follows: The figures for 1911, 1912, and 1913 are mul-
tiplied by the Bureau of Labor Statistics' index number for wholesale
prices, and by the variations in acreage. For 1914 to 1918, the index num-
bers compiled by the War Industries Board in its History of Prices during
the War were used for the separate items of expense, i. e., feed and forage,
live stock, meats and fats, and fertilizers. These series ceased with 1918,
1 Office Table No. 423, Department of Agriculture.
- No comparative data for rents of farm dwellings are available.
3 Monthly Labor Review, June, 1920, p. 69.
* W. C. Funk, Farmers' Bulletin No. 635, p. 5.
FARMERS' INCOME 305
and the 1919 and 1920 amounts are arrived at by applying the relative
change in wholesale prices of the Bureau of Labor Statistics. An index
number for farm labor was computed from the quotations of the Depart-
ment of Agriculture; Miscellaneous and Maintenance, Expenses, Seed and
Threshing were multiplied by the Bureau of Labor Statistics index number
of wholesale prices, together with the variations in acreage.
The total amount of farm mortgages (Column IX) in 1910 was reported
at SI, 726, 172,851, l and as this is known to be but a partial return, an ap-
proximation of $2 billion has been ventured. Interest is estimated at 6
per cent. For 1919, the total of farm mortgages is estimated at
$3,598,985,000, by James B. Morman, 2 and 84 billion is used as a round
sum. The amounts for the intervening years are interpolated.
The amount of rent paid by tenant farmers (Column X) is found by the
following method: 840.9 billion is taken as the value of all farm property in
1910. 3 Early returns of the Fourteenth Census indicate that the corre-
sponding amount is about 877.9 billion in 1920. The amounts for inter-
censal years have then been interpolated. The proportion of farm land
worked by tenants in 1910 was 273^ per cent, having a total value of
about $11 billion, 4 and this proportion was continued throughout. Finally,
the income of this land which goes to persons outside of agriculture was
estimated on a basis of 5 per cent of the reported value of the lands
worked by tenants as given in the Census.
§ 24c. Second Method — Based on Average Ratio of Expenses to Total
Product
An unpublished study made by Professor G. P. Scoville, of Cornell
University, covering 2,784 farms in eight counties in New York State, for
the years 1908 to 1918, indicates that (a) the value of total crops raised on
farms at the prices for which crops were sold, is roughly equal to (b) the
total income from the sale of crops and live stock, including gains and
losses in live stock inventory, and to (c) the total gross income, including
gain or loss in farm capital and miscellaneous returns. The exact aver-
ages for these three items are respectively 81,744, 81,770, and si.ss<),
giving a grand average of $1,803. The average cash expenses per farm/'
about $930, 6 were somewhat over one-half of the average amount < >f 81 ,s< ).'».
■ Census 1910, Vol. 5, p. 162, Table 6.
2 The Place of Agriculture in Reconstruction, p. 319.
3 Abstract of the Census, 1910, p. 281.
1 Abstract of the Census, 1910, p. 2S5, shows L'-'0, 000,000 acres worked by tenants as against
598,000,000 acres by owners.
5 Does not include unpaid family labor.
6 This relationship of expenses to gross sales is corroborated by the Statistics of Inc
1917, p. 10. These data refer to business incomes, from agriculture and animals, which
"represent only such amounts reported by individuals as were derived from business opera-
tions and do not necessarily indicate the principal occupations of, or the total incomes re-
ported by, the persons making the returns." The number of returns is 251,838, the gross
306 THE ESTIMATE BY INCOMES RECEIVED
or 513^ per cent. If a generalization of farmers' incomes be attempted on
this basis, then the net income is in each case slightly less than one-half of
the Department of Agriculture's figures for gross value of agricultural pro-
duction. The data collected are too scattered to permit of any generaliza-
tion in regard to variations of costs during any particular year of this
period.
That this relation of expenses to gross wealth produced is somewhat
too low for the country at large is indicated by other samples. A study
of 500 farms in Sumter County, Georgia, 1 indicates that the proportion
of farm expenses to farm receipts on a cash basis ranges from 55 to 65 per
cent. In the Indiana area, the expenses constitute from 40 to 50 per cent
of the farm receipts not including the farmer's own labor. 1 A pamphlet
entitled Farm Business in New Hampshire,- shows average" earnings for
303 farms in all parts of the State to be $3,290, and the average expenses to
be $1,968, or 59 per cent. This, however, is not strictly comparable with
Professor Scoville's estimate, since it does not include grain fed to animals
among the expenses.
A fair result will presumably be reached by deducting 55 per cent of
the gross value produced for expenses.
That the rise in costs has been somewhat less in proportion than the rise
in the value of product is indicated by the following table. The first
column is a statement of relative costs from data covering 185 farms in
Wisconsin, Ohio, and Indiana collected by the United States Office of
Farm Management. The second column is a similar statement of relative
costs from data for two counties in Illinois, as ascertained by the Depart-
ment of Farm Organization and Management of the University of Illi-
nois. The third column is the index number of the United States Bureau
of Labor Statistics for prices of farm products in cities. Since the price in
cities is not the vital consideration with the farmer, an unweighted index
number of 31 farm products on the farm is also shown in Column IV.
We may therefore conclude that the results found by taking farm expen-
ses at 55 per cent of the Department of Agriculture's estimate of wealth
produced on farms will not tend to be relatively high for the latter half of
the decade in comparison to the first half. This, however, will not hold
true in all sections of the country, for prices of different classes of product
increased in different ratios. Conditions in different parts of the country
vary so greatly that every generalization must be taken with a grain of
salt.
sales are $1,622,907,759, the business expenses are $816,743,s()2, and the net income is $806,-
163,957. The two are thus approximately equal, bearing out the relationship in so far as
the "total income from the sale of crops and live stock" is concerned.
J Unpublished data of the Bureau of Farm Economics.
2 By A. B. Genung, Farm Management Demonstrator, 1920.
S
FARMERS' INCOME
TABLE 24E
307
RELATIVE INCREASE OF FARM EXPENSES AND PRICKS OF FARM
PRODUCTS
I
II
III
IV
Yeai
Relative cost
of farming in
Wisconsin, Ohio
and Indiana a
Relative cosl
of farming in
two counties
in Illinois 6
Index number
of market
pi ices of
farm producl
Index number
of prices of
fann products
on farm d
1913
1914
100
108
111
118
148
193
100
90
95
100
120
136
142
100
103
105
122
189
220
234
218
100
105
1915
1916
1917
1918
1919
1920
107
128
L95
210
213
216
a Unpublished data of the U. S. Bureau of Farm Management.
t> Figures furnished by University of Illinois, Department of Farm Organization and
Management. The comparability of these cost figures with those collected by the
U. S. Department of Agriculture has been questioned.
c Monthly Labor Review, February, 1921, p. 45, U. S. Bureau of Labor Statistics
index number.
''These data were supplied by Professor G. F. Warren, and converted into index
numbers.
Application of the method suggested yields the following results for each
year:
TABLE 24F
ESTIMATE OF FARMERS' INCOMES
(Based on 45 per cent of the total value of farm production reported by the
Department of Agriculture)
(Millions of Dollars)
Year
Total value of
farm production "
45 per cent of
gross total value
1910
S 9,037
8,S19
9,343
9,850
9,895
10.771
13,406
19,331
22,479
24,961
19,856
S 4.0<»7
3,969
1911
1912
1,204
4,432
1913
1914
4,453
4,819
6,033
8,699
10 lltl
1915
1916
1917
1918
1919. . . .
11 232
1920
8,935
« Statistical Abstract of U. S., 1919, p. is;;.
:;ns
THE ESTIMATE BY INCOMES RECEIVED
§ 24d. Third Estimate — Based on Sample Incomes
A third method of attack is suggested by unpublished data collected by
the Bureau of Farm Economics, covering the distribution of labor income
among 11,000 farms in widely scattered parts of the country. In this
study, the years 1910 to 1915 were considered to represent substantially
uniform conditions, and so were the years 1916 to 1918. Samples from
different years in the first period were averaged together, and so also were
samples from different years in the second period. What are shown,
therefore, are rough averages covering these respective periods. For each
period, the percentages of all farms studied are grouped under the follow-
ing income ranges:
TABLE 24G
LABOR INCOME OF FARMERS a
1910 to 1915
Annual labor
income in dollars
$0-$500 . . .
500-1,000. .
1,000-1,500.
1,500-2,000.
2,000-2,500.
2,500-3,000.
3,000-4,000 . .
4,000-5,000 . .
5,000-10,000.
Over $10,000 .
Negative Income
0-500
500-1,000
1,000-1,500
1,500 and over.
Net Labor Income of All Farmers
Per cent of
total farmers
receiving in-
come named
36.5
17.7
7.4
3.4
15
1.0
1.0
.3
.4
.0
23.9
4.7
1.2
1.0
100.0
Total number
in each income
range (based
on 6,400,000
farmers)
2,336,000
1,132,800
473,600
217,600
96,000
64,000
64,000
19,200
25,600
1,529,600
300,800
76,800
64,000
6,400,000
Total labor
income
(Millions of
dollars)
$ 584
850
592
381
216
176
224
86
192
$3,301
Less
382
226
96
96
$800
$2,501
a This table is based on an unpublished distribution of 11,000 farmers' incomes made
by the U. S. Bureau of Farm Economics. "Labor Income" is denned as the amount
of income remaining after deducting all expenses including a 5 per cent return on the
estimated invested capital.
X
FARMERS' INCOME
309
TABLE 24H
LABOR INCOME OF FARMERS
1916 to 1918
Annual labor income in dollars
$0-$500
500-1,000
1,000-1,500
1,500-2,000
2,000-2,500
2,500-3,000
3,000-4,000
4,000-5,000
5,000-10,000
Over 10,000
Negative Income
0-500
500-1,000
1,000-1,500
1,500 and over. .
Net Labor Income of All Farmers
Per cent of
total fanners
receiving in-
come named
2s li
19.9
10.9
6.1
4.6
2.6
3.1
1.3
1.8
.8
13.9
4.1
1.0
1.3
100.0
Total number
in each income
range (based
on 6,500,000
farmers )
1,859,000
1,293,500
708,500
396,500
299,(101)
169,000
201,500
84,500
117,000
52,000
903,500
266,500
65,000
84,500
6,500,000
Total labor
income
Millions of
dollars)
165
970
ssO
694
(17:-!
165
705
380
877
520
sti, (>:;.")
Less
226
200
81
127
S 634
S6.001
a See Note a, Table 24G.
When the percentages shown in each income group are applied to all the
farmers in the country, the results show an average total income for the
years 1910 to 1915 of $2y 2 billion and for the years 1916 to 1918 of $6
billion.
The rental value of land owned by farmers, which is deducted by the
Bureau of Farm Management before arriving at its figure for labor income,
may be estimated from the following facts: In 1910, the total value of
farms was $40 billion and of this operators owned 72^ per cent , or about
$29 billion. 1 Five per cent of this amount is $1,450 million, which after
deducting $200 million for interest on mortgages, leave- $1,250 million,
which may be added as a rough total to the 1910 to 1915 estimate. The
1 It seems to be generally true that the most valuable farms in the North arc worked by
tenants. This, however, is not true (if farms worked by negro tenants in the South. The
percentage value of farms will not, therefore, coincide exactly with the percentage <>f acreage,
though the amount of error is uncertain on account of the variation of conditions in different
parts of the country.
310
THE ESTIMATE BY INCOMES RECEIVED
1916 to 1918 figure would be somewhat larger; perhaps $2 billion would
not be out of the way. The estimate of the value of farm property for
1920 has not yet been published. 1
The total average annual farm production thus arrived at is therefore
as follows:
Period
1910 to 1915.
1916 to 1918.
Average annual
labor income
Average annual
income from
property
Total income
of farmers
(Billions of dollars)
82' 2
6
8
§ 24e. Final Estimate of Farmers' Incomes
When the three estimates are placed alongside of each other, they are
seen to be fairly comparable in general trend. In order to compare the
results of the first and second methods with those of the third method, the
averages of the corresponding years have been computed. These averages
have been weighted in accordance with the number of cases taken from
each year in arriving at the results shown by the third method. The
figures obtained by the three methods are thus made strictly comparable.
It will be seen that this comparison confirms the general results found by
the first and second methods. All three methods show a marked rise in
monetary incomes between the periods 1910 to 1915 and 1916 to 1918.
The final estimate of farmers' incomes, as shown in Table, 24J, is
based on a combination of the results arrived at by the three methods.
Where there is a considerable discrepancy, the figures found by the first
method are given greater weight. In addition, from $200 to $300 million
has been included to take care of the "outside income" which many
farmers earn. The results are given in terms of billions of dollars, for they
cannot claim to be more than a careful approximation.
§ 24f. Comparison with Other Estimates
Mr. W. R. Ingalls, 2 arrives at $5,200 millions for farmers' incomes in
1916, but he has deducted $2,800 millions for farm laborers, a figure much
larger than that used here. If the estimate for farm labor be added to the
amount found as income of farmers in 1916, our result is about $7,300
millions as against Mr. Ingalls' $8 billions. It is believed his estimate of
expenses other than cost of labor paid is somewhat too low. Mr. W. I.
'It has since been placed at $77.9 billion in an advance bulletin of the Census of 1920.
"-Labor, the Holder of the Nation's Wealth and Income, New York Times Annalist, Septem-
ber 13, 20, and 27, 1920.
S
FARMERS' INCOME
311
TABLE 241
COMPARISON OF TOTAL FARMERS' INC( >MES AS FOUND BY THE THREE
METHODS EMPLOYED
1910 to 1920
(Billions of Dollars)
I
II
III
Year
Fiist
method a
Weighted
average
Second
method &
Weighted
average
Third
method <=
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
$ 3.772
3.517
3.770
4.029
4.020
4.485
5.758
8.811
10.407
10.497
6.931
■
3.93
• 7.69
4.067
3.969
4.204
4.432
4.453
4.849
6.033
8.699
10.116
11.232
8.935
1
4.33
■ 7.72
3.75
8.00
a See Table 24D. Based on an estimate of gross income and expenses of farmers.
b See Table 24F. Based on deduction of expenses (55 per cent of total produce)
from the Department of Agriculture's estimate of gross wealth produced on farms.
cSee Tables 24G and 2411 and text, p. 310. Based on 11,000 samples of the labor
income of farmers plus property income.
TABLE 24J
FINAL ESTIMATE OF THE TOTAL INCOME OF FARMERS
1910 to 1920
(Billions of Dollars)
1910. .
S3 . 95
1911
3 70
1912. . .
4 . 00
1913. ,
4 . 20
191 1.
4.20
1915. ,
. "4.70
1916
5.80
1917. . .
8.80
1918
10.45
1919
... 10 . 85
1920 .
7 20
312
THE ESTIMATE BY INCOMES RECEIVED
King's estimate for 1910 given in the Wealth and Income of the People of
I 'tiikd States 1 was $6,842 millions, and this included the income of farm
laborers. Even when a deduction is made for the latter item, the esti-
mate appears too high, and Mr. King's recent investigations, aided by
more complete evidence, lead him to believe that the amount should be
reduced. Mr. H. A. Wallace 2 has made a similar computation, based on
the "ratio" method. This computation is based on the assumptions that
crops are sold as crops, and not as live stock, and that live stock is taken
into consideration solely as the form in which pasture is marketed. These
assumptions make his results somewhat too low. But his relative increase
in 1917, 1918, and 1919 is somewhat greater than ours, though the general
trend of his figures is the same. He generously states in a letter : "I have
dug into this matter sufficiently so that I think in the main your figures
are accurate." The annual farmers' income, according to his figures, is as
follows:
(Millions of Dollars)
1909
1910
1911
1912
$3,570
3,070
3,140
3,440
1913.
1914.
1915.
1916.
$3,585
3,600
4,000
5,700
1917
1918
1919
1920
$9,210
8,900
9 400
3,900
§ 24g. Farmers Having Incomes Over and Under $2,000
Finally, how many farmers had incomes over and under $2,000, and
what did their total incomes in each of these classes amount to? These
figures must be found, in order that they may be carried back to complete
the estimates of Chapters 22 and 23.
The only basis for drawing the $2,000 line through our totals is a sample
for 1918 of 401 farmers' incomes furnished by Professor G. P. Scoville of
the New York State College of Agriculture. While this is a small sample,
it is the only one that was found which gives actual income. The assump-
tion implicit is not that these farmers' incomes are typical of the entire
country, but that the distribution of income among them is typical. The
average income of these 401 farmers in 1918 was $1,481, whereas the aver-
age income of all farmers in the same year was $1,625. This fact, however,
does not invalidate the hypothesis that the distribution shown by the
sample was typical. Such comparisons as it has been possible to make
with the larger number of 11,000 labor incomes, shown in Tables 24G and
24H, after making an allowance for farm income, tend to justify the use
of this distribution. On this assumption, the probable division of number
i Page 138.
2 Agricultural Prices, pp. 57-61.
1*
FARMERS' INCOME
313
of farmers and amount of farmers' incomes by the 82,000 line for each year
is as follows:
TABLE 24K
NUMBER OF FARMERS HAVING INCOMES OVER AND UNDER S2.000,
AND THE TOTAL AMOUNT OF THESE INCOMES
I
II
III
IV
V
VI
Year
Total
Over $2,000
Under §2,000
Number
of farmers
(Thou-
sands)
Total
income
(Billions)
Number
of farmers
(Thou-
sands)
Amount
of income
(Billions)
Number
of farmers
(Thou-
sands)
Amount
of income
(Billions)
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
6,362
6,371
6,380
6,388
6,396
6,405
6,414
6,423
6,432
6,441
6,450
$ 3.95
3.70
4.00
4.20
4.20
4.70
5.80
8.80
10.45
10.85
7.20
111
79
111
143
144
208
448
1,313
1,861
2,008
804
$ .258
.182
.262
.340
.340
.516
1.179
3.886
5.784
6.298
2.261
6,251
6,292
6,269
6,245
6,252
6.197
5,966
5,110
4,571
4,433
5,646
$3,692
3.518
3.738
3.860
3.860
4.184
4.621
4.914
4.666
4 . 552
4.939
CHAPTER 25
CORPORATE SURPLUS
§ 25a. Definition of Corporate Surplus
Corporations do not generally pay out their entire earnings to their
stockholders. Even after reserves for losses, depreciation, insurance, etc.,
have been made, it is still true that earnings ought to be in general
greater than dividends. The excess of earnings over dividends after
specific reserves have been set aside constitutes corporation surplus.
Such retained earnings are generally put back into the business, though
they may be invested otherwise. 1
§ 25b. The Propriety of Counting Surplus as Part of the National Income
Should these corporation surpluses be included as part of the National
Income? It must be remembered that these surpluses are computed after
the deduction of reserves for depreciation, taxes, bad debts, insurance and
a variety of ascertained losses. To the corporations they are therefore a
book income, and normally are used to ensure regularity in payment of
dividends and for an expansion of their business.
In the accounting practice of corporations, surplus may be used for
scaling down the value of intangible assets, for conversion into stock which
is distributed in the form of dividends, or it may simply be continued as
a surplus account.- Indeed, it might be possible to distribute the entire
earnings of a corporation and finance expansion by means of new stock
issues. But the trend of American business policy is towards the main-
tenance of dividends in years of low profits as well as high. 3 This attempt
at maintenance of dividends demands a conservative policy in years of
high profits and a daring distribution of cash in the lean years. Such a
policy can be maintained, therefore, only when there is in good years a
1 The distinction between dividends and surplus is not necessary in treating private busi-
ness and partnerships, for in the income-tax returns used here the entire earnings are in-
cludi d in the incomes of the individuals owning the business.
2 The Income Tax decision in McCombe v. Eisner (252 U. S. 189), involved the question
whether a stock dividend should be considered income. The basic assumption was that a
corporation was an entity, and therefore the definition of income hinged on the legal separation
of its assets and their ownership by individuals. From an economic point of view, income
must be considered as far as possible to accrue at the time of its receipt by the party earning
it — either corporation or individual. Owing to the form in which most of the data are pre-
sented, income is regarded as accruing only when it is received by the individual, but the
fact thai so much of our business enterprise is in corporate form makes it necessary to recog-
nize corporate surplus as a separate item.
English practice tends towards a larger and more varying distribution of corporate earn-
ings in the form of dividends.
314
CORPORATE SURPLUS 315
considerable margin between earnings and dividends. In many cases
dividends in lean years are paid wholly or partly out of surplus, which
is the first shock-absorber (after reserves) of business adversity. The
fact that dividends and other losses are taken out of surplus in years of
depression means that this surplus was actually earned in years of pros-
perity. An accurate accounting of the National Income year by year
should bring out these real variations in corporate earnings. To take no
cognizance of their rise and fall would create a false impression of the uni-
formity of income over years of depression and years of expansion.
During the years 1920 and 1921, we have seen in many corporations
not only a lack of surplus but even a deficit which wiped out a part, or
more than all, of the surplus accumulated in previous years. This devel-
opment, however, does not mean that the surplus had not been real income
in the years in which it was gathered. On the contrary, the later loss con-
firms the reality of the surplus accumulated in preceding years. Clearly
an accurate statement of the National Income year by year should take
into consideration both the surpluses of prosperous years and the deficits
of periods of depression. It might well happen that the accounting of
"corporate surplus" in any year might yield a net "corporate deficit."
§ 25c. The Genuineness of Reported Surplus Accounts
In some form, then, corporate surplus constitutes an element in the
National Income. Whether it should be considered on an equal footing
with the income actually distributed as dividends to individuals, or
whether it should be shown as contingent income, is another question.
If it were the general practice of corporations to carry adequate * reserves
and if the entire net income were normally distributed as dividends, then
there could be no question that the entire net incomes of corporations
(including what is now generally carried as surplus) should be counted on
the same basis as all other income. If, however, the general reserves of
corporations are normally insufficient, and if surpluses are wholly or mainly
absorbed in meeting unforeseen business losses, then they too should be
treated as reserve, or at least contingent income, subject to later disposal.
They could not be treated as actual income until the business situation
had so developed as to make possible an approximation of the extent of
these losses. 2
This brings up the question whether the surplus accounts of corpora-
tions represent a true increase of assets or merely a reserve account against
■It is assumed that reserves are rarely too lar^c to meet current losses. Any excess of
reserves above current losses manifestly makes the surplus as reported too small by a like
amount.
Broadly, the reserves of corporations are at least as adequate as those of individuals and
partnerships engaged in business. Incidentally, I do not think sufficient weight has been
given to the net losses, or negative income of the latter. J. E. Sterrett.
31G THE ESTIMATE BY INCOMES RECEIVED
unexpected losses. 1 Individual examples of both kinds are common, and
extraordinary changes in the price level further complicate the problem
of bookkeeping values. If it could be shown that physical production did
or did not normally increase with the increase of invested capital through
the growth of the surplus account, the problem whether the surplus account
represented an increase of assets or a reserve which is normally wiped out
by losses could be answered. But the measurement of physical produc-
tion presents the difficulty that very few business enterprises turn out a
single standardized article over a series of years. One must therefore turn
to the money value of the product, remembering however (a) that changes
in money value do not represent changes in physical production during a
period of price change, and (b) that money value is apt to misrepresent
physical product if new assets are put into labor-saving devices. In the
latter case it often happens that while the total product is not increased,
the labor cost is decreased and the profit increased.
If surplus is correctly reported, an increase in surplus should lead to a
corresponding increase in physical production after these two factors have
been allowed for. However, the increase in physical production should
not be in proportion to the increase in surplus but in proportion to the in-
crease in capital plus surplus. In other words, if surplus be bona fide, its
effects upon production, when it is put into the business, should be similar
to the effects of new capital.
The question then is, whether physical productivity tends to vary di-
rectly as the capital plus surplus shown on the books. An attempt has been
made to answer this question. The corporations whose capital plus sur-
plus and physical productivity were examined included all for which com-
parable statistics were obtainable during the whole period chosen for
investigation. The years 1905 to 1914 were chosen for several reasons,
one of the most important of which was that no violent price movements
occurred.
The method used was to break the decade into two five-year periods,
1905 to 1909 and 1910 to 1914, and then compare changes in capital plus
surplus from the average of the first five-year period to the average of the
second five-year period, with corresponding changes in physical produc-
tion from the first period to the second.
1 It is suggested that the real question is not whether surpluses are used as reserves or to
expand the business or for some other purpose, but whether the inventories at the different
dates correspond to actual market values or are merely fictitious figures. There is no known
way of testing this correspondence other than to take a broad view of the actual results of
business operations over a period of years. To attain such a view is the aim of the following
discussion.
With the conclusions drawn here compare the evidence adduced by Dr. David Friday
(Profits, Wages, and Prices, p. 63) from a group of 4,508 corporations which were listed in
Corporate Earnings and Government Revenues, Senate Document No. 259, 65th Congress, 2nd
Session. His compilations show that their invested capital was 182 per cent of their capital
stock.
CORPORATE SURPLUS 317
Physical productivity not being directly measureable, money indices
were used. The disturbing effect of price movements would seem to be
small in this period. Average prices of 1910 to 191 t were about 9 per cenl
above the average of 1905 to 1909. 1
The money indices of physical production used were net earnings, gross
earnings, net profits, total sales.
The corporations and the two variables examined in each case are as
follows : — 2
1. Twenty-five public utilities, (a) capital plus surplus and (b) net
earnings.
2. Twenty-six public utilities, (a) capital plus surplus and (b) gross
earnings.
3. Twenty-four industrial companies, (a) capital plus surplus and (b)
net profits.
4. Fifteen industrial companies, (a) capital plus surplus and (b) total
sales.
5. Thirty-nine industrial companies, (a) capital plus surplus and (b)
net profits.
In each case a straight line was fitted to the widely-scattered points
representing the two variables in the case of each company by the method
of least squares, and the results are shown in the following diagram. If
the volume of business had increased in exactly the same ratio as capital
plus surplus, then on these diagrams the straight lines fitted to the points
would all have an inclination of 45 degrees. To show how nearly the plot-
ted lines correspond to this condition, a dotted 45 degree line has been
inserted in the diagrams.
Though no single example can be considered conclusive, the grouping of
all the lines around the 45 degree line indicates a close relation between the
growth of assets through reinvested surplus and the growth of production.
A further test is suggested by the Census figures for primary horse-
power and capital used in manufacturing. The data are for the years
1904 and 1914. 3 Both figures, especially the 1 amounts for capital, are faulty,
and too great reliance should not be placed on them. Yet they suggest a
close relation between the growth of capital (including surplus) and the
growth of productive power. Moreover, the index of productive power is
in this case not monetary. 4
1 Bulletin of U. S. Bureau of Labor Statistics, No. 181, p. 16.
2 These samples were taken from the reports in Moody's Manual and supplemented by
the corporate records furnished by two large banks. There is some overlapping of samples,
especially between items 1 and 2, anil .'5 and 1
3 The 191!) figures are not yet available, and when they do become available will be af-
fected by price flueutations in such degree as to make them of little value for the present
purpose.
4 The question is raised whether horsepower can be taken as a constant factor for purposes
of this computation during the period covered. If the value product per horsepower remained
constant, then it is a good criterion.
,318
THE ESTIMATE BY INCOMES RECEIVED
80
70
60"
o
O
I
o
O
o
50
40-
30
20
6
■p
VI
o
o
CO
a)
<D
U
o
a 10
S
1
o
CHART 25 A
RELATIVE CHANGES IN PRODUCT
CORRESPONDING TO RELATIVE
CHANGES IN INVESTED CAPITAL
(Different Samples measured
by Different Criteria)
..—THEORETICAL LINE - 45 DEGREES
(l) PUBLIC UTILITIES. Invested Capital and
Grosa Earnings , ly » l.OtixJ
(2) INDUSTRIALS. I nvested Capital and
Bef Profits . Ty = l.Ofax)
(3) PUBLIC UTILITIES. Invested Capital and
Net Earnings , ly s l«05x)
(4) INDUSTRIALS. Invested Capital and
Net Profits , ly = ,?Vx)
(5) INDUSTRIALS. Invested Capital and
Total Sales , (y = .?0x)
10 20 30 40 50 60 70
Percentage Inorease of Capital for 1910-14 over 1905-09.
80
The figures for 1904 were reduced to a basis of 100, and the relative
increases or decreases for 1914 have been plotted. These relations repre-
sent data from 24 industries (including 19,279 establishments) and seem
typical of the whole. The equation of the least square straight line
through the origin is y = .842 x. Here capital values are growing at a
slightly higher rate than the productive powers which they represent.
If the relation were such that horsepower varied directly as capital
plus surplus, the equation would become y=x.
The straight line fitted to the data of the accompanying chart comes
much closer to the theoretical line y = x, if an adjustment is made in capi-
tal plus surplus to offset the rise in prices from 1904 to 1914. x Though such
adjustment for the complete change in prices undoubtedly is too great,
owing to the fact that the rise in investment prices was not as rapid as that
■ Bulletin No. 226, U. S. Bureau of Labor Statistics, p. 28.
S
CORPORATE SURPLUS
319
200
o
u
o
100-
60
-t->
s
V
o
CHART 25 B
RELATIVE CHANGES IN PRIMARY HORSEPOWER
CORRESPONDING TO RELATIVE CHANGES IN
INVESTED CAPITAL.
(24 INDUSTRIES).
THEORETICAL LINE 45 (y s x)
(1) STRAIGHT LINE FITTED TO DATA (y z .842x)
(2) STRAIGHT LINE FITTED TO DATA AFTER ADJUST-
MENT FOR PRICE CHANGES. (y ; . ?62x)
1
100
200
Percentage Increase In Capital plus Surplus for 1914 over 1904.
in the index used — namely, wholesale prices, there is no doubt that
some adjustment is needed. The true relation lies between the two
lines.
While these results may be tentatively accepted for the pre-war
period, the further question is raised as to their validity since 1914.
Are we to include the large surplus accounts of recent years in the
National Income?
Several considerations must be taken into account:
(1) The rise in prices which brought about a lessened physical product
per dollar for the invested surpluses of these later years.
(2) The increased replacement value of fixed capital assets and inven-
tories.
(3) The increased demand for certain products during the war. which
demand fell off after its close.
320 THE ESTIMATE BY INCOMES RECEIVED
(4) The increased income and excess profits taxes.
These considerations affect our attitude toward the bookkeeping meth-
ods employed. The actual amounts of expenses, reserves, surplus, and
dividends shown in the books are subject to wide variation according to
the judgment of accountants and business men. It follows from the pre-
ceding argument that prior to 1914, the reserves set up against specific
uncertainties were normally sufficient to cover the greater part of the un-
foreseen losses which occurred in business, since in a broad sense the sur-
plus financed a roughly proportionate increase in the volume of new busi-
ness transacted.
Did American business men, operating under the stress of all the forces
of uncertainty after 1914, abandon their conservative policy of deducting
reserves adequate to cover current losses and carry as surplus that which
should really be considered a reserve account? The answer to this ques-
tion cannot be found by mathematical treatment. The items are too
complex and interwoven to permit of separation. There were, during 1920,
many striking cases of writing off of surplus accounts owing to the unfore-
seen large depreciation in values; but as already said, that fact does not
invalidate the genuineness of the surpluses during the years when they
were accumulated. On the other hand, there have been a large number of
instances of stock dividends, which converted the surplus account into a
capital account. These conversions suggest that the two accounts are
generically similar and capable of being interchanged.
When the enormous deterrent to the writing up of profits interposed by
high taxes is considered, the burden of proof seems to lie upon those who
would consider the reported surplus as fictitious at the time it is earned.
That there have been certain unfortunate investments is clear, but the
strength which has been shown by many corporations during the recent
depression bears testimony to the general adequacy of reserve accounts.
Moreover, capital values were not generally written up during the war
owing to the higher replacement costs. In old enterprises inflated costs
only affected new investments and inventories. The losses which were
taken in 1921 by many corporations were commonly taken care of in the
balance sheet by reducing surplus. This situation should be shown in the
figures, when they are available, for that year.
Opinions regarding the adequacy of reserves are affected in large meas-
ure by personal environment. The experiences of individuals with those
concerns about which they have special information influence their judg-
ment in making wider generalizations, and individual experiences
vary. After consultations with a number of men, whose positions are
such as to give them a broad view of business policies, the conclusion
has been reached that between 80 and 90 per cent of the reported
CORPORATE SURPLUS 321
surplus constitutes a genuine saving, and hence is a part of the National
Income. 1,2
§ 25d. The Data
The Bureau of Internal Revenue reports the total net earnings of cor-
porations in the volumes entitled Statistics of Income for the years 1916,
1917, and 1918. For the years 1909 to 1913 total earnings are given in the
annual reports of the Commissioner of Internal Revenue. For the years
1914 and 1915 they are not given but may be estimated from the amount
of the tax.
These data, however, are not comparable without adjustments. During
the period 1909 to 1912, corporations paid taxes only on their actual earn-
ings, not including such sums as they received from stock ownership in
other corporations. This practice was changed in the period 1913 to 1917,
when the tax was collected on all the net income of a corporation from
whatever source it might come. In 1918 there was a reversion to the
earlier practice.
This change in practice, however, has made little apparent difference
in the results. The percentage changes from year to year in the earnings
of all corporations have been compared with the percentage changes of the
earnings of the 205 sample corporations quoted elsewhere 3 and with the
251 corporations for which data were collected by Professor Friday. ' In
both these samples, earnings are estimated from year to year on a strictly
comparable basis. There is found to be no constant divergence from the
earnings of all corporations on which to base a correction for the change
in method of computing taxes. In 1913, compared with 1912, the net
earnings of all corporations reported by the Bureau of Internal Revenue
increased 13 per cent, the net earnings of the sample of 205 corporations
increased 9 per cent, and the sample of 251 corporations increased
6 per cent. In 1914 the decreases from 1912 in the three sets of data
were respectively 23 per cent, 18 per cent, and 19 per cent. In 1915
*In my paper in the Annalist (September 20, 1920), I expressed dissent from the hypothesis
that corporate surplus is wholly income and urged that what concerns us in the study of the
division of income is simply what is actually paid in dividends.
Without any doubt corporate surplus is in part utilized for additions to plant, but in part
it disappears, as experience has shown, simply in the maintenance of plant. Since the be-
ginning of the war a large part of the corporate surplus went into the provision of new plant
as a war measure, which plant must be thrown away and written off. During the war we
deluded ourselves with the idea that corporations were accumulating great surpluses that
were going to enable them to maintain their dividends indefinitely, but at the present time
that illusion is being dispelled. W. It. Ingalls.
2 This is doubtless true of ordinary times. The war period is another story. The tendency
throughout was to under rather than to overstate profits. The tax laws saw to that. The
tax laws did not allow reserves for future losses and conservative business judgment did not
anticipate a drop in price levels helow, say, that of 1914. Now, however, we have seen some
commodities crash down below the 1N00 level, — hides, notably. .1. E. Sterrett.
3 See Table 25 A, note d.
* David Friday, Profits, Wages and Prices, p. 17.
322 THE ESTIMATE BY INCOMES RECEIVED
the increases over 1912 were respectively 28 per cent, 52 per cent, and
36 per cent. In 1916 the new influence on bookkeeping methods exerted
by the increase of the corporate tax rate to 2 per cent renders close com-
parisons with earlier years hazardous. As between the 1917 and 1918
data, when the method of computing corporate earnings was changed
again, the Internal Revenue figures for earnings fell about 22 per cent, as
against a fall in the two samples of 24 per cent and 10 per cent.
These comparisons lead one to believe that the inclusion or exclusion of
intercorporate dividends was not a factor of major importance in net earn-
ings. Other forces outweighed it to such an extent that its effect cannot
be ascertained from the available data.
Further, during the period 1909 to 1912, corporations having an income
of less than $5,000 per year were exempted from the tax. The removal of
this exemption in 1913 caused an increase in number of corporations pay-
ing taxes, of about 125,000. From this increase the probable earnings
of such corporations in the earlier years may be roughly approximated.
Another complication is that each year back taxes have been collected
after a field inspection of the books of selected corporations. The assess-
ment of these taxes indicates a considerable degree of under-reporting of
income, even in the years prior to 1916, when the tax rate was only 1 per
cent. Back taxes as high as $3 to $4 million were assessed for each year,
indicating an income of as many hundreds of millions or about 10 per
cent of the reported total. Even these field inspections are reported to
have been far from complete, owing to an inadequate staff.
The final amounts of corporate income estimated for each year are
shown in Column I of Table 25 A. 1 An independent check of the amounts
reported in back taxes in the annual reports of the Commissioner of In-
ternal Revenue 2 approximately verified these totals.
A classification of corporate earnings into financial, commercial, manu-
facturing, mining, public utility and railroad earnings has been given at
various times in the annual reports of the Commissioner of Internal Rev-
enue and in the Statistics of Income, and an effort has been made to com-
plete these classifications. But so many discrepancies have been found
in the amounts reported that a presentation of this material as if it were
comparable would be misleading. The attempt, therefore, to show in
detail the annual variations in the earnings of different classes of corpora-
tions has been given up.
From the reported net income are deducted taxes and deficits; these
are, for the most part, exact amounts. Thereafter, an adjustment is
made for known discrepancies in the reported net earnings, and these
» Statistics of Income for 1916, p. 15; for 1917 and 1918.
2 Commissioner of Internal Revenue, Annual Rcjiort, 1913, p. 505; 1914, p. 624; 1915,
p. 746; L916, p. 661; 1917, p. 773.
CORPORATE SURPLUS 323
amounts are then divided between dividends and surplus. This division
is made in accordance with the results of a study of 205 industrial corpora-
tions, 15 commercial corporations, 62 public utility corporations, the bank-
ing reports of the Comptroller of the Currency, and the railroad reports
of the Interstate Commerce Commission. 1 The division between divi-
dends and surplus as found in each of these samples has been weighted in
accordance with the relative amounts of the net earnings, and a weighted
average for each year has been applied to the estimated total earnings.
The results of these computations are presented in the following table: —
1 See footnotes, Table 25A, for detailed references.
'
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to
w
1-5
<
O
i— i
H
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CORPORATE SURPLUS
325
a Statistics of Income, 1916, p. 15. Originally reported in the Annual Reports of
Commissioner of Internal Revenue, 1911, pp. 70-80, 1912, pp. 74-S5, 1913, pp. 91-102,
1914, pp. 98-109. These figures cover the years 1910, 1911, 1912 and 1913. For 191 1
and 1915, there are no data. The totals are based on the amount of the tax, 1915,
pp. 188, 189, 1916, pp. 204, 205.
The years 1909, 1910, 1911 and 1912 an; obtained from data collected under the
excise tax, section 38 of the Act of August 5, 1909. This Acl permitted the deduction
of income received as dividends from other corporations, and also excluded income of
less than $5,000. The amounts for 1913 to 1917 are obtained from data collected under
the income-tax law of October 3, 1913, and subsequent income-tax laws, and included
all income of corporations, including specifically income received as dividends from
other corporations. The income-tax law for 1918 again permitted the deduction of
income received as dividends from other corporations.
The tax rate was increased in 1916 from 1 per cent to 2 per cent. (Act of September X,
1916.) For the year 1917, the rate was again increased (War Revenue Act of < >ctober 3,
1917) to a normal tax of 4 per cent, plus war excess-profits taxes. For 1917, see Statis-
tics of Income, 1917; for 1918, see Statistics of Income, 1918; for 1919, see Statistics of
Income, 1919.
b For the years 1916 to 1918, losses are reported in Statistics of Income. Prior to
1916 no such figures are given. A deduction for losses in the years prior to 1916 should
therefore be made. A comparison of the deficits reported in 1916 and 1917 with the
amounts of liabilities of enterprises that failed, reported in Dun's Review, suggests that
the liabilities were about 3.4 times the deficits. If this ratio is applied, then the losses
may be estimated as follows:
ESTIMATED DEFICITS OF CORPORATIONS HAVING NO NET INCOME
Year
Number of
commercial
failures
(Dun's)
Amount of
liabilities
(Dun's)
(Millions)
Number of
corporations
reporting no
income, or
actual deficit
Actual
amount of
deficit
(Millions)
Estimated
amount of
deficit
(Millions)
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
12,652
13,441
15,452
16,037
18,280
22,156
16,993
13,885
9,982
6,451
8,881
$202
191
203
273
358
302
196
182
163
113
295
\"ot comparable
128,043
155,240
145,532
134,269
119,347
115,518
$
657
630
690
996
$ 6S7
649
690
928
1,217
1,027
1,000
The total number of corporations reporting and the number reporting taxable income
are as follows:
326
THE ESTIMATE BY INCOMES RECEIVED
Total
corporations
Number of corporations
reporting taxable income
Over $5,000
only
All corporations
Excluding
subsidiaries
1910
1911
1912
1913
270,202
288,352
305,336
316,909
329,445
336,443
341,253
351,426
317,579
320,198
54,040
55,129
61,116
188,886
174,205
190,911
206,984
232,079
1914
1915
1916
1917
1918
1919
1920
202,061
209,634
For the year 1915, it is reported (Statistics of Income, 1916, p. 15) that 30,000 corpora-
tions showing a deficit were included which should have been reported in 1914. This
correction is made in the Table above.
The decrease in 1918 is due to consolidated returns, and for this reason is not included
in computing the ratio between the losses reported for tax purposes and the failures
reported by Dun's Review.
c Raised by $400 million to account for earnings of corporations under $5,000 which
were not repotted.
d The following samples of net earnings of identical corporations were used for the
purposes of comparison:
EARNINGS OF IDENTICAL CORPORATIONS
(Millions of Dollars)
Professor
Earnings of
205 industrial
Friday's sample
national banks
Sample of 62
Year
corporations
of 251
corporations
(Comptroller of
Currency)
public utilities
1910
$ 383
$
$154
$ 84
1911
347
459
157
81
1912
385
513
149
86
1913
420
542
161
86
1914
315
415
149
87
1915
585
699
127
103
1916
1,045
1,402
158
119
1917
1,032
1,774
194
101
1918
777
1,591
212
61
1919
671
240
55
1920
672
282
According to the samples of Industrials, the earnings for 1913 should be from 6 per
cent to 9 per cent higher than in 1912. The earnings for 1914 should be about 25
per cent less than in 1913. There was a large increase in 1915 over 1914 — about 70
per cent to 80 per cent. These figures are not to be taken as entirely typical, for rail-
roads and public utilities vary in different proportions.
e The proportions into which net earnings are divided between dividends and surplus,
according to samples, are as follows:
'*
CORPORATE SURPLUS
327
PROPORTIONS INTO WHICH NET EARNINGS ARE DIVIDED BETWEEN
DIVIDENDS AND SURPLUS IN DIFFERENT INDUSTRIES
(Per cents)
(D = dividends; S = surplus)
Year
Finan-
cial'
Commer-
cial 2
Manufac-
turing and
mining 8
Pub
utiliti
lie
es ■
Pail-
roads 5
Weighted
average 6
D
S
D
S
D S
D
S
D
S
D S
1910
69
73
31
27
55
63
45
37
55 45
63 37
61
68
39
32
62
72
38
28
58.8 41.2
1911
66 6 33.4
1912
81
19
67
33
67 33
73
27
82
Is
71.9 28.1
1913
74
26
67
33
67 33
74
26
73
27
69.5 30.5
1914
81
19
51
49
79 21
76
24
92
8
77.9 22.1
1915
89
11
44
56
45 55
67
33
86
14
56.2 43.8
1916
73
27
34
66
37 63
63
37
42
58
42.7 57.3
1917
65
35
41
59
47 53
75
25
52
Is
50.2 49.8
1918
61
39
49
51
55 45
87
13
65
35
56.9 43.1
1919
56
44
35
65
56 44
81
19
56
41
63.1 36.9
1920
52
48
64 36
74
26
46
54
65.0 35.0)
1 Based on National Banks. Reports of the Comptroller of the Currency.
2 Based on 15 commercial corporations reported in Moody's Manual from 1914 to
1919. Previous to 1914, reports are inadequate, and the manufacturing ratio is used.
3 Based on 200 corporations reported in Moody's Manual and supplied by certain
banking institutions.
4 Based on 62 public utility corporations reported in Moody' '.s Manual.
5 Based on reports of Interstate Commerce Commission and reports in Moody's
Manual covering practically all railroads.
6 In collecting the data on which Column VII is based, care has been taken to include
in surplus only those amounts actually carried as such in the books. In conformity
with this plan, special reserve accounts, reserves against bad debts, losses in inventory
and depreciation have been excluded. This same method was followed in the earlier
investigation of the genuineness of surplus accounts, so that the two computations
have been made on the same basis.
These percentages have been weighted according to the estimated importance of
each class of institutions, and the weighted average for each year is applied to the net
earnings. 1920 is an approximation, since complete data are lacking.
/The New York Journal of Commerce reports the following amounts of dividends
paid by industrial corporations each year. It does not explain how complete they
are or whether they cover identical corporations. They are inserted for purposes of
comparison.
328
THE ESTIMATE BY INCOMES RECEIVED
Year
Dividends
(Millions of
dollars)
Index number
1911
$368
394
445
436
422
546
681
645
576
599
1 00
1912
1.07
1913. . .
1.21
1914
1.18
1915
1.14
1916
1.48
1917
1.85
1918
1.75
1919.
1.56
1920
1.63
These amounts are reported in the first issue of each year, giving three previous years.
The amounts reported for the same year are not always identical and the latest figure
reported has been taken.
a Professor Friday has made a similar computation of surplus (Profits, Wages and
Prices, p. 64) and it is of interest to compare his results with those given in this study:
COMPARISON OF PROFESSOR FRIDAY'S RESULTS WITH THOSE OF THE
BUREAU
(Millions of Dollars)
Year
1910
1911
1912. . . .
1913
1914
1915
1916.
1917
1918
1919. . . .
Total net earnings
Dividends
Surplus
Bureau
Friday
Bureau
Friday
Bureau
Friday
$3,436
3,219
3,819
4,000
$3,360
3,213
3,832
4,340
$2,020
2,144
2,746
2,780
$2,290
2,226
2,498
2,871
$1,416
1,075
1,073
1,220
$1,070
988
1,334
1,468
2,800
4,230
7,937
3,711
5,184
8,594
2,181
2,377
3,389
2,412
2,595
3,784
619
1,853
4,548
1,299
2,590
4,810
7,958
4,513
6,240
8,587
6,300 Est,
6,700 Est.
3,995
2,568
3,937
4,652
4,250 Est.
3,900 Est.
3,963
1,945
2,303
3,936
2,050 Est.
2,800 Est,
The main discrepancies are as follows:
Total net earnings differ, because Professor Friday has taken the published figures
without the emendations made by the Bureau and for which the reasons have been
discussed. This results in wide variations for 1913, although the percentages are quite
close. For 1914, Professor Friday's total is higher than the Bureau's, as is also his esti-
mate of surplus. The proportions are strikingly different, although the proportion
which Professor Friday quotes for industrials (Profits, Wages and Prices, p. 62) is very
close to that found in the sample of the Bureau. In the years 1916 and 1917, for which
better data exist, the two estimates are in close agreement, and for 1918, Professor
Friday made an advance estimate, whereas the Bureau has had the advantage of the
recently published statistics.
§ 25e. Conclusions
If the corporate surpluses for each year are taken at 85 per cent of their
face value, which is about the amount justified by the considerations
S
CORPORA'!'!: SURPLUS
329
previously mentioned, then the final corporate surplus, which is to be
eounted as part of the National Income, will stand as follows:
TABLE 25B
ESTIMATE OF ACTUAL SAVINGS IN THE FORM OF ( '< >RP( >RATE SURPLUS
1910 to 1920
(Millions of dollars)
Year
Corporate surplus"
1 Istimated actual
savings
1910
1911
$1,416
1,075
1,073
1,220
619
1,853
4,548
3,963
1,945
2,303
1,225
$1,204
914
1912
1913 :
1914
912
1,037
1915
1,575
1916
1917
1918
3,st)ii
3,369
1,653
1919
1920
1,958
1,011
« Table 25A.
CHAPTER 26
SUMMARY OF PART II
§ 26a. The Total Income of the United States, 19 10 to 1919
The total income of the United States, as computed in the preceding
sections, may now be summarized on page 331.
§ 26b. The Degree of Error in the Estimate
It is advisable to repeat the caution that these amounts are all esti-
mates constructed from a large amount of data of varying reliability.
Table 26B shows first the range within which the income for each year
probably lies. This range was estimated in the same way that the math-
ematical "probable error" is computed, but it was not possible to do this,
in mathematical terms. It is, therefore, to be regarded simply as a
guessed at " probable error." Next, is shown the greatest error that
could be reasonably expected, on the assumption that each item varied
according to the widest indications from the figures as given, and that
all these variations were in the same direction. Thus is indicated the
outside limits within which the National Income must fall, if all the errors
judged possible by the Bureau have been committed, and committed with
no offsetting of one error by another. Evidently, the chances that this
has actually occurred are extremely small.
330
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332
THE ESTIMATE BY INCOMES RECEIVED
TABLE 26B
THE RANGE WITHIN WHICH THE INCOME OF THE PEOPLE OF THE
UNITED STATES PROBABLY LIES
1910 to 1919
(Billions of dollars)
Year
Final
estimate
Probable range
within which the
actual income
falls
Estimated range
beyond which
actual income
cannot reasonably
lie
1910
31.2
31.1
32.4
33.5
32.7
35.9
45.7
54.1
62.0
66.8
30.0-32.4
29.8-32.4
31.1-33.7
32.2-34.8
31.4-34.0
34.6-37.2
44.3-47.1
52.5-55.6
60.1-63.5
64.2-68.5
25.9-36.5
191 1
25.9-36.3
1912
27.2-37.6
1913
27.9-39.1
1914
26.7-38.7
1915
29.7-42.1
1916. .
40.5-50.9
1917.
46.9-61.2
1918
53.5-70.2
1919
58.6-73.1
1920
§ 26c. Percentage Division of Number of Persons Having over $2,000
and Under $2,000 Income per Year
The percentage of persons having incomes over and under $2,000 and
the percentage of the total income which they received is next shown: —
TABLE 26C
PERCENTAGE OF PERSONS HAVING INCOMES OVER AND UNDER $2,000
AND PERCENTAGE OF THE TOTAL INCOME WHICH THEY RECEIVED
1910 to 1919
Year
Per cent of total persons
having incomes
Per cent of income received by
persons having
Over $2,000
Under $2,000
96%
96
96
96
96
94
93
89
88
86
Over $2,000
Under $2,000
1910
1911
1912
1913
1914
1915
4%
4
4
4
4
6
7
11
12
14
33%
32
31
31
31
33
37
41
39
39
67%
68
69
69
69
67
1916
63
1917.
59
1918
1919
1920
61
61
s
SUMMARY OF PART II 333
It will be seen that while the percentage of persons having incomes over
$2,000 increased from about 4 per cent in 1910 to 1914, to about 14 per
cent in 1919, the percentage of the income which they received increased
only from about 32 per cent to about 40 per cent during this period. The
increase in the number of persons having incomes over §2,000 is doubtless
closely connected with the rise in prices, and does not denote a corre-
sponding improvement in their well-being.
§ 26d. The Percentage of the Total Income Obtained by the Highest
5 Per Cent of Income Receivers
Using this table as a basis, and checking with the work in Part III, it
is possible to make a conjectural estimate of the percentage of the total
income which the highest 5 per cent of income receivers obtained.
The method employed has been to subtract from the number of persons
having incomes over $2,000 such a number as will reduce the remainder
to 5 per cent of the gainfully employed. The average income of those who
are subtracted is then computed in accordance with the distribution of
the entire income as shown in Part III. While no claim to strict accuracy
can be made for the results, the error is probably not sufficient to
alter the trend shown. This percentage is shown including and excluding
farmers because for many purposes farmers make a class apart from the
remainder of the industrial community. Corporate surplus is left out of
this computation for it is not possible to locate the recipients with any
degree of accuracy (see Table 26D).
§ 26e. The Position of the Farmer
The per cent of the National Income which was received by farmers
each year is next shown. The number of farmers was reported in 1910 as
0,361,000 and in 1920 as 0,460,000 — a gain which is so small as to be
practically negligible (see Table 26E).
§ 26f. Income in Each Year in Terms of Constant Purchasing Power
Did the income of the country increase during the decade when meas-
ured in terms of serviceable goods? In order to answer this question satis-
factorily a rather elaborate computation has been found necessary. There
is no satisfactory price index which can be applied indiscriminately to
all products; indeed, the variations of price changes in different classes
of commodities is a st liking feature of the decade. In order to meet this
difficulty, the income of the country was divided into four classes:
1. Expenditures by persons having incomes over $2,000.
2. Expenditures by persons having incomes under $2,000.
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SUMMARY OF PART II
335
TABLE 26E
PER CENT OF THE NATIONAL INCOME RECEIVED BY FARMERS
Year
Total
national income
Farmers' income
Percentage of
national income
(Billions of dollars)
received by farmers
1910
1911
1912
1913
1914
$31.2
31.1
32.4
33.5
32.7
35.9
45.7
54.1
62.0
66.8
$ 3.95
3.70
4.00
4.20
4.20
4.70
5.80
8.80
10.45
10.85
7.20
12.7
11.9
12.3
12.5
12 8
1915
1916
1917
1918
1919
13.1
12.7
16.3
16.9
16 2
1920
3. War expenditures.
4. Construction expenditures.
For each of these divisions, the most plausible index number was found :
1. An index number of costs of living of persons having incomes over
$2,000 was constructed by the Bureau. (Chap. 2, § 2c.)
2. For persons with incomes less than $2,000, the index number of the
cost of living of the Bureau of Labor Statistics, Monthly Labor Renew,
June, 1920, p. 79, was used. The figures used are for June of each year.
The years 1910 to 1912 have been compiled by this Bureau on a basis
comparable to that used by the Bureau of Labor Statistics. (Chap.
2, § 2b.)
3. An index number was constructed from selected items of materials
used in war, as estimated by the War Industries Board. (History of Prices
During the War, 1919.)
4. An index number of construction was obtained from the American
Telephone and Telegraph Company.
These index numbers cannot well be carried back of the year 1913.
Prior to that year, the data are too uncertain to permit of even the crude
methods employed for the later years. However, the general price level
did not alter greatly during the years 1910 to 1913, so that an application
of any legitimate index number of prices and any reasonable subdivision
of the income would not alter the final result to any marked degree.
Taking 1913 as the basic year, computation gives the National Income
for each year in terms of dollars of constant purchasing power as shown in
Table 26G.
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SUMMARY OF PART II
337
TABLE 26G
NATIONAL INCOME AT PRICE LEVEL OF 1913
(Huso Year: L913)
1910 to 1919
Year
Total income
(Billions of dollars).
Weighted index
number <>f prices
Income at price
level of 1913
(Billions of dollars)
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
$31.2
31.1
32.4
33.5
32.7
35.9
45.7
54 . 1
62.0
66.8
98 .
98.0
99.]
100.0
100.6
102.3
113.7
136.1
160.7
177.7
$31.8
31.7
32.7
33.5
32.5
35.1
40.2
39.7
38.6
37.6
§ 26g. The Average Income per Capita in Each Year
The next table shows the average income per capita of the entire popu-
pation and of the gainfully employed. The entire population has been
interpolated according to a method devised by Mr. King, of which the
details are shown in Chapter 2, § 2a.
The number of the "gainfully employed'' is uncertain, owing to the
divergent ways of counting the persons included under agricultural labor.
It seems certain that different standards have been used by the Census
enumerators in determining whether a housewife or member of the family
who helps in the fields intermittently or only for a few days during the har-
vest season should or should not be included. On account of this difficulty
(and it appears to invalidate any close comparison between the totals of
1910 and the estimated totals of 1920), the number of farm laborers has
been kept at a constant figure. In a measure, this comes nearer expressing
the truth than any other arbitrary interpretation, for there is much evi-
dence to indicate that during 1916 to 1919, when farm laborers were
drafted into other industries, their places were taken by members of the
family who are normally not included among the gainfully employed.
This view was taken by Mr. Gray Silver in explaining the large increase
of farmers' income in the years 1917 to 1919. !
The number of gainfully employed which is presented is the number
actually employed in each year, as distinguished from the number attached
' See Vol. I, page 38.
338
THE ESTIMATE BY INCOMES RECEIVED
to the industry. The former number is always smaller than the latter, and
in times of depression is apt to be considerably smaller. It reflects in a
broad way the changes in degree of unemployment. 1
The results are presented in several ways: (1) per capita income for the
whole population, (2) per capita income for the gainfully employed, and
(3) both sets of per capita figures are given first in money of current and
second in money of constant purchasing power. Needless to say, changes
in economic welfare are best approximated by the figures from which the
price fluctuations have been eliminated.
TABLE 26H
PER CAPITA INCOME AND ITS PURCHASING POWER AT THE PRICE
LEVEL OF 1913
Income per capita of the
entire population
Income per capita of the
gainfully employed
Year
Number
of
persons
Income
per
capita
Purchasing
power at
1913
price level
Number
of
persons
Income
per
capita
Purchasing
power at
1913
price level
(Millions)
(Dollars)
(Millions)
(Dollars)
1910 . .
1911 . . .
1912 . . .
1913 . ..
1914 ...
1915 . . .
1916 . . .
1917 . . .
1918 ...
1919 . . .
1920 . . .
92.23
93.81
95.34
97.28
99.19
100.43
101.72
103.06
104 . IS
104.85
$338
332
340
344
330
357
449
525
595
637
$345
338
343
344
328
349
395
385
371
359
33 . 82
34.35
34.81
35.08
34.87
34.91
37.65
38.73
40.92
39.52
$ 923
907
931
955
936
1,028
1,214
1,397
1,515
1,690
$ 940
923
939
955
932
1,005
1,068
1,025
943
951
1 In comparing it to the Census figures our figures for the number of gainfully employed
for 1910 and in 1920, two items should be kept in mind: (1) The Census includes 3,100,000
farm laborers working on home farms, who are not included here. (2) The Census figures
include all those attached to an industry, whereas only those actually at work are included
here. We estimated that about 3 per cent are normally unemployed, that is to say, about
one million persons.
PART III
THE PERSONAL DISTRIBUTION OF INCOME IN THE
UNITED STATES
By
FREDERICK R. MACAULAY
ASSISTED BY
E. GAIL BENJAMIN
<*
CHAPTER 27
THE PROBLEM
What is the frequency distribution of annual income among personal
income recipients in the United States? Before we can give an intelligent
answer to this question, we must formulate it more definitely by indicating
certain connotations which logic or expediency leads us to attach to some
of its terms.
By income it seems desirable to mean actual money income, plus the
estimated money value of the more important of those items of commodity
or service income on which a money value is ordinarily placed. Two of
the most important items which are thus included are the annual rental
values of owned homes and the value of farm produce consumed by farmers'
families.
In line with the ordinary convention, we have excluded from our defini-
tion of income, that income, whether monetary or non-monetary, which a
wife receives from her husband or a child from its parents. 1 Not only is
such exclusion practically expedient but it is also theoretically defensible
and that quite apart from the fact that a money value is not ordinarily
placed on the services of wife or child, wages of housekeepers to the con-
trary notwithstanding.
The frequency distribution resulting from the exclusion of such quasi
incomes will be less heterogeneous and more significant and interpretable
than the distribution which would result from inclusion. For the relation
of the incomes of wives and children to the economic struggle is derived
and secondary, while that of most other incomes is direct and primary.
Now, though the distribution of income among persons is not synonymous
with distribution among the factors of production, the two problems are
very closely related. An individual's income may be thought of as made
up of wages, rent, interest and dividends, profits, and gifts or allowances.
If we omit this last type of income, the problem of factorial distribution
proposes an investigation of how and why the individual received what
remains. Even if gifts and allowances admitted of any such systematic
and reasoned explanation as may be given of rent, wages, etc., the ex-
planation would be of a totally different kind. Hence, for the purposes of
this investigation, it seems undesirable to classify as income, the receipts,
1 That is, while such income has, of course, been counted in the first instance as income
of the husband or parent it has not been re-counted as income of the wife or child.
oil
342 PERSONAL DISTRIBUTION OF INCOME IN U. S.
whether monetary or non-monetary, of those persons receiving merely
allowances or gifts. 1
Similar considerations have led us to think of an income recipient as an
individual rather than a family. Just as it is the husband and not the
wife, the parent and not the child, so it is the individual and not the family
who, as an income receiver, comes into direct economic relationship with
the machinery of distribution.
The chief argument in favor of family rather than individual treatment
of the frequency distribution is based upon the idea that, though income
accrues to the individual and not the family, the family is a more significant
unit of economic need than the individual. But this is a different approach
to the question and has, of course, no intimate relation to the problem of
factorial distribution. Moreover, we must remember that if we are going
to improve appreciably upon the individual, even as a need unit, we can-
not stop with actual biological families with their great variation in size
and constitution, but must introduce the concept of the theoretical family —
father, mother and three children, for example. This last concept is, in
its raw form, quite unusable. The population is not made up of such
theoretical families. We may discuss what a family of five ought to get
to maintain a decent standard of living, but we cannot divide the actual
population into families of five and discuss what these non-existent hy-
pothetical families actually do get. There remains the alternative of ex-
pressing actual families in terms of some need unit such as the "ammain." 2
While this last procedure would probably yield an extremely interesting
distribution based upon need units, it is impractical to attempt any such
solution with the data available. 3
Though a distribution of income among actual biological families would
appear to be somewhat less enlightening and interpretable than a dis-
tribution by individuals or by ammains, it would have its own peculiar
interest and we would have attempted its construction had the data been
adequate for such a purpose. Most of the data bearing on income dis-
tribution are in the individual form; wages distributions, for example, are
1 Of course if the wife or child has "independent" income, that income is no longer of the
nature of a gift or allowance even though it may arise from property originally deeded by
the husband or father. It is now explainable in terms of rent, interest, etc.
If income be defined as above, the term personal income recipient will correspond closely
to the census expression person gainfully employed. Perhaps the most important difference
is that we do not and the Census does include as separate income recipients, farm laborers
working on the home farm.
-' Ammain is a word coined by W. I. King and E. Sydenstricker and defined by them, for
any given class of people, as "a gross demand for articles of consumption having a total
money value equal to that demanded by the average male in that class at the age when his
total requirements for expense of maintenance reach a maximum." Measurement of Relative
Economic Status of Families. Quarterly Publications of the American Statistical Association,
Sept., 1921, p. 852.
1 It is of course quite possible to estimate the average per ammain income, as has been done
!>y Mr. King; the total income of the people can he divided by the estimated number of
ammains in the population. See pages 'l'.V,\ and 234.
THE PROBLEM 343
almost without exception in that form. Now to estimate the frequency
distribution of income among families from data which, in the first place,
are in the individual form and, in the second place, are extremely inade-
quate for estimating even the distribution among individuals, could only
increase the degree of uncertainty in our results.
A few words explaining the reason for introducing the next chapter at
this point are not out of place here. The data upon which an estimate of
even the individual distribution of income in the United States must be
based impress one as being in such shape that it is impossible to arrive at
more than the roughest sort of approximation by any mere direct adding
process. Some more ingenious plan would seem almost necessary. For
example, would it not be possible to formulate a general mathematical
"law" for the distribution of incomes which law might then be used for
"adjusting" the tentative and hypothetical results obtained from piecing
together the existing scanty and inadequate material?
The possibility and desirability of mathematically describing the fre-
quency distribution of income would seem intimately tied up with the case
for mathematically describing error distributions and statistical distribu-
tions in general. The fact that, in our problem, the "law" would be largely
derived from the same data as those which were to be "adjusted" need
not greatly disturb us. The procedure of adjusting observations in the
light of a mathematical expression derived from the same observation- is
not novel. A number of attempts, one of which has become world-famous,
have been made to demonstrate that the distribution of income follows
a definite; mathematical law. However, the next chapter will show why
we fear that no rational and useful mathematical law will soon be formu-
lated.
CHAPTER 28
PARETO'S LAW AND THE GENERAL PROBLEM OF MATHE-
MATICALLY DESCRIBING THE FREQUENCY DISTRIBU-
TION OF INCOME
The problem of formulating a mathematical expression which shall de-
scribe the frequency distribution of income in all places and at all times,
not only closely, but also elegantly, and if possible rationally as opposed
to empirically, has had great attractions for the mathematical economist
and statistician. The most famous of all attempts at the solution of this
fascinating problem are those which have been made by Vilfredo Pareto.
Professor Pareto has been intensely interested in this subject for many
years and the discussion of it runs through nearly all of his published
work. The almost inevitable result is that "Pareto's Law" appears in a
number of slightly different forms and Professor Pareto's feelings con-
cerning the "law" run all the way from treating it as inevitable and im-
mutable to speaking of it as "merely empirical."
In its best known, most famous, and most dogmatic form, Pareto's Law
runs about as follows:
1. In all countries and at all times the distribution of income is such
that the upper (income-tax) ranges of the income frequency distribution
curve may be described as follows: If the logarithms of income sizes be
charted on a horizontal scale and the logarithms of the numbers of persons
having an income of a particular size or over be charted on a vertical
scale, then the resulting observational points will lie approximately along
a straight line. In other words, if
x = income size and
y = number of persons having that income or larger
then log y = log b -f- m log x
ory = bx" 1 . 1
2. In all countries and at all recent times the slope of this straight line
fitted to the cumulative distribution, that is, the constant m in the equa-
tion y = bx" 1 , will bo approximately 1.5. 2
3. The rigidity and universality of the two preceding conclusions strongly
1 If the cumulative distribution (cumulating from the higher towards the lower incomes
as Pareto does) on a double log scale could be exactly described by the equation y = bx m ,
the non-cumulative distribution could be described by the equation Y = — mbx m 1.
2 Strictly, minus 1.5, though Pareto neglects the sign.
344
PARETO'S LAW 345
suggest that the shape of the income frequency distribution curve on a
double log scale is, for all countries and at all times, inevitably the same
not only in the upper (income-tax) range but throughout its entire length.
4. If then the nature of the whole income frequency distribution is
unchanging and unchangeable there is, of course, no possibility of economic
welfare being increased through any change in the proportion of the total
income going to the relatively poor. Economic welfare can be increased
only through increased production. In other words, Panto's Law in this
extreme form constitutes a modern substitute for the Wages Fund Doc-
trine.
This is the most dogmatic form in which the "law" appears. In his
later work Professor Pareto drew further and further away from the con-
fidence of his first position. He had early stated that the straight line did
not seem adequate to describe distributions from all times and places and
had proposed more complicated equations. 1 He has held more strongly
to the significance of the similarity of slopes but he has wavered in his
faith that the lower income portions of the curve (below the income-tax
minimum) were necessarily similar for all countries and all times. He has
given up the suggestion that existing distributions are inevitable though
still speaking of the law as true within certain definite ranges. To translate
from his Manuel (p. 391): "Some persons would deduce from it a general
law as to the only way in which the inequality of incomes can be dimin-
ished. But such a conclusion far transcends anything that can be derived
from the premises. Empirical laws, like those with which we are here
concerned, have little or no value outside the limits for which they were
found experimentally to be true." Indeed Professor Pareto has himself
drawn attention to so many difficulties inherent in the crude dogmatic
form of the law that this chapter must not be taken as primarily a criticism
of his work but rather as a note on the general problem of mathematically
describing the frequency distribution of incomes.
Almost as soon as he had formulated his law Professor Pareto recognized
the impossibility of extrapolating the straight line formula into the lower
income ranges (outside of the income-tax data which he had been using).
The straight line formula involves the absurdity of an infinite number of
individuals having approximately zero incomes. Professor Pareto felt
that this zero mode with an infinite ordinate was absurd. He believed
that the curve must have a definite mode at an income size well above
zero 2 and with a finite number of income recipients in the modal group.
1 The inadequacy of these more complicated equations is discussed later. See pp. .'lis, 363
and 3(54.
2 This is, of course, not absolutely necessary. It depends upon our definitions of income
and income recipient. If we include the negligible money receipts of young children living
at home we might possibly have a mode close to zero. There are few children who do not
really earn a few pennies each year. Compare Chart 31A page 41(3.
346 PERSONAL DISTRIBUTION OF INCOME IN U. S.
Having come to the conclusion that the income frequency distribution
curve must inevitably have a definite mode well above zero income and
tail off in both directions from that mode, Professor Pareto was led to
think of the possibilities of the simplest of all frequency curves, the normal
curve of error. However, after examination and consideration, he felt
strongly that the normal curve of error could not possibly be used. He
became convinced that the normal curve was not the law of the data for
the good and sufficient reason that the part of the data curve given by
income-tax returns is of a radically different shape from any part of a
normal curve. 1
Professor Pareto finds a further argument against using the normal curve
in the irrationality of such a curve outside the range of the data.
The mode of the complete frequency curve for income distribution is at
least as low as the minimum taxable income. Income-tax data prove this.
However, a normal curve is symmetrical. Hence, if a normal curve could
describe the upper ranges of the income curve as given by income-tax data
then in the lower ranges it would cut the y axis and pass into the second
quadrant, in other words show a large number of negative incomes.
Now, aside from the fact that this whole argument is unnecessary if
the data themselves cannot be described even approximately by a normal
curve, Professor Pareto's discussion reveals a curious change in his middle
term. If he had said that a symmetrical curve on a natural scale with a
mode at least as low as the income-tax minimum would show unbelievably
large negative incomes we could follow him but when he states that not
only can there be no zero incomes but that there can be no incomes below
"the minimum of existence" we realize that he has unconsciously changed
the meaning of his middle term. Having examined a mass of income-tax
data, all of which were concerned with net money income and from these
data having formulated a law, he now apparently without realizing it,
changes the meaning of the word income from net money income to money
value of commodities consumed, and assumes that those who receive a money
income less than a certain minimum must inevitably die of starvation.
1 Though Pareto seems to have thoroughly understood this fact, his discussion is not al-
together satisfactory. He states that the data for the higher incomes show a larger number
of such incomes than the normal curve would indicate. This is hardly adequate. To have
stated that the upper and lower ranges showed too many incomes as compared with tin middle
range would have been better. An easy way to realize clearly the impossibility of describing
income-tax data by a normal curve is to plot a portion of the non-cumulative data on a natural
x log y basis. When so charted the data present a concave shaped curve. However, if the
data were describable by any part of a normal curve of error, they would show a convex ap-
pearance, or in the limiting case a straight line, as the equation of the normal curve of error
— x-
' //.r = >.i„e " <r " ) becomes, on a natural x log y scale, log e y x = log e y — ^.ora second degree
parabola whose axis is perpendicular to the x axis of coordinates.
The reader must note that the limiting straight line case mentioned above is on a natural
x log y scale and not (as the Pareto straight line) on a log x log y scale. (Note concluded
page 347.)
PARETO'S LAW
347
Children receive in general negligible money incomes. Many other persons
in ilie community are in the same position. A business man may "lose
money" in a given year, in other words he may have a negative money
income. There seems no essential absurdity in assuming that a large
number of persons receive money incomes much less than necessary to
(Note 1 page 346 concluded.)
Chart 28A showine; curves fitted to observations on the heights of men illustrates the ap-
pearance of the normal curve on a natural scale and on a natural ./■ log .'/ scale. That chart
also illustrates another fact of importance in this discussion, namely, that fitting to a different
function of the variable giv< s a different fit.
!
-150
-120
-90
-60
-30
-/5
10
r
DISTRIBUTION OF HEIGHTS OF 1078 MEN.
B/OMETR/Kf? VOL II Pf/5 (FATHERS)
1-Normal Curve Fitted to Natural Scale
Data by Method of Mom ents, also
Loss of Same.
2-5econd Degree Parabola Fitteo to
Natural x Loa Y Data by Method of
Least Squares, also Antilogs of5ame.
CHART 28A
A/ATC/?/)L
S3 5 1 59S 60S f'S 62S 63S 64 S 6S5 6SS 67 'S 68 S 69S 70.S 71.5 72.5 735 745
HEIGHT IN IHCHES
-/50
585 535 60S 6'S €2 5 635 645 655 665 67.5 685 695
HEIGHT IH IHCHES
348 PERSONAL DISTRIBUTION OF INCOME IN U. S.
support existence. When in 1915 Australia took a census of the incomes
of all persons "possessed of property, or in receipt of income," over 14
per cent of the returns showed incomes "deficit and nil." x
Professor Pareto's realization of the impossibility of describing income
distributions by means of normal curves led him to the curious conclusion
that such distributions were somehow unique and could not be explained
upon any "chance" hypothesis. "The shape of the curve which is fur-
nished us by statistics, does not correspond at all to the curve of errors,
that is to say 2 to the form which the curve would have if the acquisition
and conservation of wealth depended only on chance." 3 Moreover, while
Professor Pareto's further suggestion of possible heterogeneity in the data
corresponds we believe to the facts, his reason for making such a sug-
gestion, namely that the data cannot be adequately described by a
normal curve, is irrelevant. 4 "Chance" data distributions are no longer
thought of as necessarily in any way similar to the normal curve. Even
error distributions commonly depart widely from the normal curve.
The best known system of mathematical frequency curves, that of
Karl Pearson, is intended to describe homogeneous material and is
based upon a probability foundation, yet the normal curve is only
one of the many and diverse forms yielded by his fundamental
d log y x + a
equation — = .°
dx b + b\X -f- b 2 x 2
While Pareto's Law in its straight line form was at least an interesting
suggestion, his efforts to amend the law have not been fruitful. His at-
tempts to substitute logJV = log e A — a log e (x + a) or even log^ =
log e A — a log e (z + a) — fix for the simpler log N = log A — a logz
have not materially advanced the subject. 6 The more complicated curves
have the same fundamental drawbacks as the simpler one. Among other
peculiarities they involve the same absurdity of an infinite number of
persons in the modal interval and none below the mode. Along with the
doubling of the number of constants, there comes of course the possibility
of improving the fit within the range of the data. Such improvement is,
however, purely artificial and empirical and without special significance,
as can be easily appreciated by noticing the mathematical characteristics
of the equation.
A number of other statisticians have at various times fitted different
types of frequency curves to distributions of income, wages, rents, wealth,
1 Compare Table 29A.
2 My italics.
3 Manuel, p. 385. See also Cours, pp. 416 and 417.
« Vid. Cours, pp. 416 and 417.
5 Professor A. \V. Flux in a review of Pareto's Cours aV Economie Politique (Economic Journal,
March, 1897) drew attention to the inadequacy of Pareto's conception of what were and what
were not "chance" data.
e Cf. Cours, vol. II, p. 305, note.
PARETO'S LAW 349
or allied data. 1 However, no one has advanced such claims for a "law"
of income 2 distribution as were at one time made by Professor Pareto.
When considering the possibility of helpfully describing the distribution
of income by any simple mathematical expression, one inevitably begins
by examining "Pareto's Law." It is so outstanding. Let us therefore
examine Pareto's Law.
1. Do income distributions, when plotted on a double log scale,
approximate straight lines closely enough to give such approxi-
mation much significance?
Before attempting to answer this question it is of course necessary to
decide how we shall obtain the straight line with which comparisons are
to be made.
Professor Pareto fitted straight lines directly by the method of least
squares to the cumulative distribution plotted on a double log scale. The
disadvantage of this procedure is that, though one may obtain the straight
line which best fits the cumulative distribution, such a straight line may be
anything but an admirable fit to the non-cumulative figures. For example,
if a straight line be fitted by the method of least squares to Prussian re-
turns for 1886 (as given by Professor Pareto) the total number of income
recipients within the range of the data is, according to the fitted straight
line, only 5,399,000 while the actual number of returns was 5,557,000,
notwithstanding the fact that Prussia, 1886, is a sample which runs much
more nearly straight than is usual. How bad the discrepancy may be
where the data do not even approximate a straight line is seen in Professor
Pareto's Oldenburg material. There the least-squares straight line fitted
to the cumulative distribution on a double log scale gives 91,222 persons
having incomes over 300 marks per annum while the data give only 54,309.
■Among others, Karl Pearson, F. Y. Edgeworth, Henry L. Moore, A. L. Bowlcy, Lucien
Mareh, J. C. Kapteyn, C. Bresciani, C. Gini, F. Savorgnan.
- Professor H. L. Moore, in his Laws of Wages, is concerned primarily with wages not
income.
Professor J. C. Kapteyn has presented a pretty but somewhat hypothetical argument sug-
gesting that the skewness in the income frequency curve should be such that plotting on a
log x basis would eliminate it.
"In several cases we feel at once that the effect of the causes of deviation cannot be inde-
pendent of the dimension of the quantities observed. In such cases we may conclude at once
that the frequency curve will be a skew one. To take a single example:
"Suppose 10(10 men to begin trading, each with the same capital; in order to see how their
wealth will be distributed after the lapse of 10 years, consider first what will be their condition
at some earlier epoch, say at the end of the fifth year.
"We may admit that a certain trader A will then only possess a capital of £100, while
another may possess £100,000.
"Now if a certain cause of gain or loss comes to operate, what will happen?
"For instance: Let the price of an article in which both A and H have invested their capital,
rise or fall. Then it will be evident that if the sain or loss of A be L'lO. that of 15 will not be
£10, but £10,000; that is to say, the effect of this cause will not he independent of the capital.
but proportional to it."
J. C. Kapteyn, Skew Frequency Curves in Biology and Statistics, p. 13.
350 PERSONAL DISTRIBUTION OF INCOME IN U. S.
The reason for this peculiarity of the fit to the cumulative distribution
becomes clear when we remember that the least-squares straight line may
easily deviate widely from the first datum point while a straight line giving
the same number of income recipients as the data must necessarily pass
through the first datum point. 1
A straight line fitted in such a manner that the total number of per-
sons and total amount of income correspond to the data for these items
gives what seems a much more intelligible fit. Charts 28B to 28G show
cumulative United States frequency distributions from the income-tax
returns for the years 1914 to 1919 on a double log scale (Professor Pareto's
suggestion). Two straight lines are fitted to each distribution— one a
solid least-squares line fitted to the cumulative data points and the
other a dotted line so fitted that the total number of persons and total
amount of income correspond to the data figures. While the least-squares
line may appear much the better fit to these cumulative data, a mere
glance at Tables 28B to 28G will reveal the fact that such a line is, to
say the least, a less interpretable fit to the non-cumulative distribution. -
It is, of course, evident that neither line is in any year a sufficiently good
fit to the actual non-cumulative distribution to have much significance.
No mathematics is necessary to demonstrate this. 3
1 e. g. in the case of Prussia, 1886, the first datum point is x = "over300M" and y = 54,30!?
persons.
- Professor Warren M. Persons discussed the fit of the least-squares straight line to Professor
Pareto's Prussian data for 1892 and 1902 in the Quarterly Journal of Economics, May, 1909,
and demonstrated the badness of fit of that line to those data.
3 The income returned for the years 1914 and 1915 was estimated from the number of re-
turns. Income is not given in the reports for those years.
In fitting straight lines to the data of Tables 28B to 28G the lowest income interval (in
which married persons making a joint return are exempt) has always been omitted. To have
included in our calculations these lowest intervals would have increased still further the bad-
ness of the fit in the other intervals.
S
PARETO'S LAW
351
CHART 28 B
UNITED STATES INCOME TAX RETURNS
1914
CUMULATIVE FREQUENCY DISTRIBUTION
AND
- 1,000,000
FITTED (Least Squares) STRAIGHT LINE
Scales Logarithmic.
- 100,000
^
^V
- 10,000
^K
z
|
>~.
- 1,000 °
a
w
ca
2
>j"-..
100
^O n *'
-10
2
il
3 4 5
-l-X-i.—
INCOME IN THOUSANDS OF DOLLARS
10 20 30 40 50 100 200 300 400 500 1,000 2,000 3.000
1 1 1 iii, | I
352 PERSONAL DISTRIBUTION OF INCOME IN U. S.
- 100,000
CHART 28C
1,000,000
10,000 2
o
as
1.000 g
S
se
100
10
UNITED 5TATE5 IMCOME TAX RETURNS
1915
CUMULATIVE FREQUENCY DISTRIBUTION
AMD
FITTED Ueast Squares) STRAIGHT LINE
Scales Logarithmic
INCOME IN THOUSANDS OF DOLLARS
2 3 4 5 10 20 30 40 50 100 200 300 400500 1,000 2.00U
' I ' I I | | | ' i.ii
,*
PARETO'S LAW
353
(HART 2ND
UNITED STATES INCOME TAX RETURNS
1916
CUMULATIVE FREQUENCY DISTRIBUTION
AND
-1,000,000
FITTED (Least Squares) STRAIGHT LINE
Scales Logarithmic
-100,000
^
'•Nu
- 10,000 g
a.
§
o
^kN,
OS
■ 1,000 w
B3
z
^^S.^*
-100
>/■-..
-10
INCOME IN THOUSANDS OF DOLLARS
2 3 4 5
10
20
30
40 50 11)0 200 300 400 500 1,000 2000 30004O005O00
354 PERSONAL DISTRIBUTION OF INCOME IN U. S.
• 1,000,000
- 100,000
10,000
1,000
-100
-10
CHART 28 E
UNITED 5TATE5 INCOME TAX RETURNS
1917
CUMULATIVE FREQUENCY DISTRIBUTION
AND
FITTED (Least Squares) STRAIGHT LINE
Scales Logarithmic
INCOME IN THOUSANDS OF DOLLARS
3 4 5 10 20 30 40 50 100 200 300 400 500 1,000 2,000 3,000 4,000
' ' ' ' ' ' ' ' ' ,ii, i ■ i i .
S
PARETO'S LAW
355
CHART 28F
- 1,000,000
- 100,000
- 10,000
<n
z
a
9
g
as
■ 1.000 O
as
u
05
-100
■10
UNITED STATES INCOME TAX RETURNS
ISIS
CUMULATIVE FREQUENCY DISTRIBUTION
AND
FITTED (Least Squares) STRAIGHT LINE
Scales Lcjgarilhmic
3 4 5
■ ■
10
INCOME IN THOUSANDS OF DOLLARS
20 30 40 50 100 200 300 400 500
-x.
-* — ■-
M
1,000
-t.
2.00(1 3,000
l I
356 PERSONAL DISTRIBUTION OF INCOME IN LI. S.
CHART 28 G
UNITED STATES INCOME TAX RETURNS
1919
CUMULATIVE FREQUENCY DISTRIBUTION
AND
- 1.000,000 ^.
FITTED (Least Squares) STRAIGHT LINE
Scales Logarithmic.
- 100,000
- 10,000g
\v
OS
<*v
o
as
-1,000 «
03
s
9
z
N^s
-100
>s>»
-10
o^/v ^%
2 3 4 5
10
INCOME IN THOUSANDS OF DOLLARS
20 30 40 50 100 200 300 400500 1,000 2,000 3,000
PARETO'S LAW
357
TABLE 28B
(XITED STATES INCOME-TAX RETURNS, 1914
A
B
C
Income class
U. S. in-
come-tax
returns
Least-squares
straight line
Straight line
giving
correct total
returns and
income
Per
cent
A is
of B
Per
cent
\ is
of C
$ 3,000-$ 4,000
(82,754)
4,000- 5,000
66,525
101,241
84,683
65 . 7
78.6
5,000- 10,000
127,448
160,545
115,347
70.4
110.5
10,000- 15,000
34,141
38,630
32,716
ss.4
104.4
15,000- 20,000
15,790
15,853
14,102
99.6
112.0
20,000- 25,000
8,672
8,230
7,589
105 . 4
114.3
25,000- 30,000
5,483
4,879
4,631
112.4
118.4
30,000- 40,000
6,008
5,380
5,267
111.7
114.1
40,000- 50,000
3,185
2,793
2,835
114.0
112.3
50,000- 100,000
5,161
4,430
4,756
11(1.5
108.5
100,000- 150,000
1,189
1,065.5
1,241
lilt)
95.8
150,000- 200,000
406
437.3
535
92 . S
75 . 9
200,000- 250,000
233
227.1
288 . 1
102.6
80.9
250,000- 300,000
130
134.6
175.5
96.6
74.1
300,000- 400,000
147
14S.46
199.9
99.0
73.5
400,000- 500,000
69
77.06
107.6
89.5
64.1
500,000-1,000,000
114
122.20
180.4
93.3
63 . 2
1,000,000 and over
60
62.78
107.5
95.6
55.8
Total (over $4,000)
274,761
344,256.00
274,761.0
358
PERSONAL DISTRIBUTION OF INCOME IN U. S.
TABLE 28C
UNITED STATES INCOME-TAX RETURNS, 1915
A
B
C
Income class
U. S. in-
come-tax
Least-
squares
Straight line
giving
correct total
Per
cent
A is
of B
Per
cent.
A is
of C
returns
straight line
returns and
income
$ 3,000-
$ 4,000
(69,045)
4,000-
.5,000
58,949
92,064
68,540
64.0
86.0
5,000-
10,000
120,402
154,507
119,634
77.9
100.6
10,000-
15,000
34,102
40,358
33,013
84.5
103.3
15,000-
20,000
16,475
17,406
14,724
94.7
111.9
20,000-
25,000
9,707
9,372
8,121
103.6
119.5
25,000-
30,000
6,196
5,716
5,050
108.4
122.7
30,000-
40,000
7,005
6,508
5,875
107.6
119.2
40,000-
50,000
4,100
: 1,503
3,241
117.0
126.5
50,000-
100,000
6,847
5,880
5,65:;
116.4
121.1
100,000-
150,000
1,793
1,536
1,560
116.7
114.9
150,000-
200,000
724
662.5
695.4
109.3
104.1
200,000-
250,000
386
356.6
383.8
10S.2
100.6
250,000-
300,000
216
217.5
23S . 6
99.3
90.5
300,000-
400,000
254
217.7
277 . 6
102.5
91.5
400,000-
500,000
122
133.3
153.2
91.5
79.6
500,000-
1,000,000
209
223. S
267.1
93.4
7S.2
1,000,000;
uid over
120
133.6
177.3
89.8
67.7
Total (over $4,000)
267,607
338,825.0
267,607.0
y
PARETO'S LAW
359
TABLE 28D
UNITED STATES INCOME-TAX RETURNS, 1916
A
B
c
U. S. in-
come-tax
returns
- raighl line
P«
Pi 1
Income class
Least-squares
straight lirx-
giving correct
total returns
at
A is
cent
A i.
and income
of B
of C
1 3,000-$ 4,000
(85,122
1,000 5,000
72,027
139,096
86,588
51.8
83 2
5,000 o.ooo
52,020
84,759
54,221
01 1
1
6,000 7,000
170
5:1.5.;:;
36,899
1 5
os 8
7,0! in 8,000
26, ! U
39,846
20,510
66 1
99.7
8,000- 0,000
19,9.7.1
2 '.202
19,801
68.1
100.8
9,000- 10,000
15,051
22.529
15,445
69.5
101.3
10,000- 15,000
45,309
60,668
12,879
71 7
105 7
15,000- 20,000
22.01S
26,120
19,311
86 6
117.1
20,000 25.000
12,05:;
11,011
10,726
92.2
120 s
25,000 30,000
s.055
8,558
0,705
01 1
120.1
30,000- 40,000
10,068
9,731
7,854
103 5
128 2
40,000- 50,000
5,611
5,202
1,362
107.2
128 6
50,000- 00,000
3,621
3,189
2,730
113 . 5
132.6
60,000 70,000
2.5 is
2.120
1,857
110 s
107 2
70,000 80,000
1,787
1,499
1,334.8
ll.l 2
133 o
80,000 90,000
1,422
1,102
ooo s
12:) o
1 12 7
90,000- 100,000
1,074
847
777 5
126 s
138.1
100,000- 150,000
2,900
2,282.1
2,158. 1
127 1
101 1
150,000- 200.000
1,284
982
972.1
130.7
132.1
200,000- 250,000
726
52S . 2
500.9
137 I
134.5
250,000- 300,000
127
321.9
337.6
1.12
126.5
300,000- 400,000
169
6.1
395.3
L23.1
lis
400,000- 500,000
215
196 s
219 o
124.5
111.6
500,000-1,000,000
376
329.6
:;s7 i
111 1
07 1
1,000,000 1.500.000
97
35 83
108.7
113.0
89 2
1.500,000-2,000,000
12
36.96
IS VS
110 6
85 o
2,000,000 3,000,000
.11
31 os
11 10
loo 3
76.9
3,000,000-4,000,000
14
13.77
19 91
0)1 7
70.3
4,000,000 5.0011.000
9
7 10
11.05
121 6
si 1
5.(100,000 and over
10
19.76
32 s7
50
30 1
Total (over $4,000
344,279
510,374.00
344,279.00
360
PERSONAL DISTRIBUTION OF INCOME IN U. S.
TABLE 28E
UNITE
-D STATES 1
A
NCOME-TAX
: RETURNS, :
n
L917
TT S
13
Straight line
Per
Per
Income class
income-tax
returns
Least-squares
straight line
giving correct
total returns
cent
A is
cent
A is
and income
of B
of C
S 1,000-$ 2,000
(1,640,758)
2,000- 2,500
480,486
618,069
517,512
77.7
92.8
2,500- 3,000
358,221
367,835
284,620
97.4
125.9
3,000- 4,000
374,958
407,366
376,117
92.0
99.7
4,000- 5,000
185,805
212,569
184,854
87.4
100.5
5,000- 6,000
105,988
126,507
111,097
83.8
95.4
6,000- 7,000
64,010
82,746
73,355
77.4
87.3
7,000- 8,000
44,363
57,357
51,285
77.3
86.5
8,000- 9,000
31,769
41,556
37,362
76.4
85.0
9,000- 10,000
24,536
31,551
28,551
77.8
85.9
10,000- 11,000
19,221
24,097
21,900
79.8
87.8
11,000- 12,000
15,035
19,412
17,747
77.5
84.7
12,000- 13,000
12,328
15,707
14,440
78.5
85.4
13,000- 14,000
10,427
12,751
11,761
81.8
88.7
14,000- 15,000
8,789
10,709
9,909
82.1
88.7
15,000- 20,000
29,896
34,161
31,891
87.5
93.7
20,000- 25,000
16,806
17,825
16,876
94.3
99.6
25,000- 30,000
10,571
10,609
10,159
99.6
104.1
30,000- 40,000
12,733
11,749
11,385
108.4
111.8
40,000- 50,000
7,087
6,130
6,021
115.6
117.7
50,000- 60,000
4,541
3,649
3,622
124.4
125.4
60,000- 70,000
2,954
2,387
2,391
123.8
123.5
70,000- 80,000
2,222
1,653.5
1,672
134.4
132.9
80,000- 90,000
1,539
1,198.5
1,217.9
128.4
126.4
90,000- 100,000
1,183
910.0
930.8
130.0
127.1
100,000- 150,000
3,302
2,384.4
2,469.5
138.5
133.7
150,000- 200,000
1,302
985.2
1,039.6
132.2
125.2
200,000- 250,000
703
514.1
550.5
136.7
127.7
250,000- 300,000
342
305.9
330.8
111.8
103.4
300,000- 400,000
380
338.9
371.2
112.1
102.4
400,000- 500,000
179
176.8
196.3
101.2
91.2
500,000- 750,000
225
199.96
225 . 56
112.5
99.8
750,000-1,000,000
90
82.61
94.97
108.9
94.8
1,000,000-1,500,000
67
68.77
80.51
97.4
83.2
1,500,000-2,000,000
33
28.42
33.90
116.1
97.3
2,000,000-3,000,000
24
23.65
28.71
101.5
83.6
3,000,000-4,000,000
5
9.77
12.10
51.2
41.3
4,000,000-5,000,000
8
5.10
6.40
156.9
125.0
5,000,000 and over
4
12.42
16.25
32.2
24.6
Total (over $2,000)
1,832,132
2,123,640.00
1,832,132.00
s
PARETO'S LAW
361
TABLE 28F
UNITED STATES INCOME-TAX RETURNS, 1918
A
B
C
U.S.
income-tax
returns
Straight line
Per
Per
Income class
Least-squares
straight line
giving correct
total returns
cent
A is
cent
A is
and income
of B
of C
$ 1,000-8 2,000
(1,516,938)
2,000- 3,000
1,496,878
1,375,372
1,470,366
108.8
101.8
3,000- 4,000
610.095
537,892
566,044
113.4
107.8
4,000- 5,000
322,241
269,674
280.477
lit :,
114.9
5,000- 6,000
126,554
155,513
160,300
81 4
78.9
6,000- 7,000
79,152
99,102
101,389
79.9
78.1
7,000- 8,000
51,381
07,ls 1
0S.25S
76.5
75 3
8,000- 9,000
35,117
17,740
48,266
73.6
72.8
9,000- 10,000
27,152
35,628
35,795
70.2
75.9
10,000- 11,000
20,414
26,793
26,832
70.2
76.1
11,000- 12,000
16,371
21,283
21,231
76.9
77.1
12,000- 13,000
13,202
16,999
16,873
77.7
78.2
13,000- 14,000
10,882
13,638
13,515
79. s
80.5
14,000- 15,000
9,123
11,328
11,105
80 5
81.7
15,000- 20,000
30,227
35,214
34,4s0
85 8
87.7
20,000- 25,000
16,350
17,05 1
17,097
92.6
95.6
25,000- 30,000
10,206
10,181
9,762
100.2
101 5
30,000- 40,000
11,887
10,886
10,330
109.2
115
40,000- 50,000
6,449
5,458
5,121
lis 2
125 9
50,000- 60,000
3,720
3,147
2,928
US. 2
127.0
00,000- 70,000
2,441
2,000
1,852
121.7
131 s
70,000- 80,000
1,691
1,359.5
1,246
124.4
135.7
80,000- 90,000
1,210
000.2
SSI. 4
125.2
137.3
90,000- 100,000
934
721.0
053.7
12.1.5
142 .9
100,000- 150,000
2,358
1.S22 3
1,036.3
129.4
141 1
150,000- 200,000
866
712.7
629.8
121.5
137 5
200,000- 250,000
401
357 3
312.1
112.2
128 5
250,000 300, 000
217
200 .
17S.3
119.9
138. 5
300,000- 400,000
260
220.3
188.7
118.0
137.8
400,000- 500,000
122
110.5
93 . :^
110.4
130.4
500,000- 750,000
132
119.28
99.70
110.7
132 4
750,000-1,000,000
40
46.66
38.30
98.6
119.9
1,000,000-1,500,000
33
36.88
29 ss
S9.5
110.4
1,500,000-2,000,000
16
14.42
11.50
111.0
139.1
2,000,000-3,000,1 too
11
11.40
8.96
96.5
122.8
3,000,000-4,000,000
4
4.46
3.44
89 7
110 :\
4,000,000-5,000,000
9
2.24
1.71
89.3
117.0
5,000,000 and over
1
4.86
3.60
20 6
27 s
Total (over $2,000)
2,908,176
2,769,408.00
2,908,176.00
3G2
PERSONAL DISTRIBUTION OF INCOME IN U. S.
TABLE 28G
UNITED STATES INCOME-TAX RETURNS, 1919
A
B
C
U. S.
income-tax
returns
Straight line
Per
Per
Income class
Least-squares
straight line
giving correct
total returns
cent
A is
cent
A is
and income
of B
of C
$ 1,000-$ 2,000
(1,924,872)
2,000-
3,000
1,569,741
1,984,285
1,673,688
79.1
93.8
3,000-
4,000
742,334
764,739
660,950
97.1
112.3
4,000-
5,000
438,154
379,330
333,645
115.5
131.3
5,000-
6,000
167,005
216,921
193,470
77.0
86.3
6,000-
7,000
109,674
137.278
123,953
79.9
88.5
7,000-
8,000
73,719
92,511
84,273
79.7
87.5
8,000-
9,000
50,486
65,403
60,066
77.2
84.1
9,000-
10,000
37,967
48,583
44,980
78 1
84.4
10,000-
11,000
28,499
36,386
33,887
78.3
84.1
11,000-
12,000
22,841
28,796
27,027
79.3
84.5
12,000-
13,000
18,423
22,921
21,600
80.4
85.3
13,000-
14,000
15,248
18,329
17,395
83.2
87.7
14,000-
15,000
12,841
15,181
14,459
84.6
88.8
15,000-
20,000
42,028
46,868
45,162
89.7
93.1
20,000-
25,000
22,605
23,249
22,797
97.2
99.2
25,000-
30,000
13,769
13,294
13,228
103.6
104.1
30,000-
40,000
15,410
14,084
14,219
109.4
108.4
40,000-
50,000
8,298
6,986
7,178
118.8
115.6
50,000-
60,000
5,213
3,994
4,162
130.5
125.3
60,000-
70,000
3,196
2,528
2,665
126 4
119.9
70,000-
80,000
2,237
1,704
1,813
131.3
123.4
80,000-
90,000
1,561
1,205
1,292
129.5
120.8
90,000-
100,000
1,113
894
968.3
124 . 5
114.9
100,000-
150,000
2,983
2,240
2,461.5
133.2
121.2
150,000-
200,000
1,092
863.2
971.6
126.5
112.4
200,000-
250,000
522
428.1
490.4
121.9
106.4
250,000-
300,000
250
245.0
284.4
102.0
87.9
300,000-
100,000
285
259 . 2
306.0
110.0
93.1
400,000-
500,000
140
128.6
154.4
108.9
90.7
500,000-
750,000
129
137.32
168 . 2
93 . 9
76.7
750,000-
1,000,000
60
52.89
66.4
113.4
90.4
1,000,000-
1,500.000
34
41 . 25
52.95
82.4
64.2
1,500,000-
2,000,000
13
15.89
20 . 90
81.8
02 . 2
2,000,000-
5,000,000
7
12.40
16.68
56.5
42.0
3,000,000 and over
11
12.15
17.27
90.5
63.7
Total (over $2,000)
3,407,888
3,929,905.00
3,407,888.00
s
PARETO'S LAW
363
Why do the least-squares straight lines appear graphically such good
fits to the cumulative distributions (for at least the later years) when a
merely arithmetic analysis shows even this fit to the cumulative data to
be so illusory? Because the percentage range in the number of persons is so
extremely wide. The deviations of the cumulative data on a double log
scale from the least-squares straight line are minute when compared with
the percentage changes in the data from the smallest to the largest incomes.
But this is not helpful. The fact that there are 100,000 times as many
persons having incomes over $2,000 per annum as there are persons
having incomes over 85,000,000 per annum, does not make a theoretical
reading for a particular income interval of twenty or thirty per cent over
or under the data reading an unimportant deviation. Charting data on
a double log scale may thus become a fertile source of error unless ac-
companied by careful interpretation. 1 This fact has long been recognized
by engineers and others who have had much experience with similar prob-
lems in curve fitting.
Another matter of some importance must be noted here. The devia-
tions of the data from the straight lines mighl be much less than they are
and yet constitute extremely bad fits. The data points (even on a non-
cumulative basis) do not flutter erratically from side to side of the fitted lines;
they run smoothly, passing through the fitted line at small angles in the way
that one curve cuts <nt<>th< r. Now, in curve fitting, such a condition always
strongly suggests that the particular mathematical curve used is not in
any sense the "law" of the data.
2. Are the slopes of the straight lines fitted to income data
from different times and places similar in any significant degree?
1 Tho dangers of fitting curves with such a combination as a cumulative distribution and
a double log scale, withoul further analysis, is well illustrated by the results Professor Pareto
obtained tor Oldenburg. To the Oldenburg data he fitted the rather complicated equation
log N = log A — a log I x + a) — 8x and obtained the following results. (The value Pareto
gives for ,1 namely .0000631, does not check with his calculated figures given below. |3 =
.001)0271 is evidently what he intended.)
X
Logarithms of X
marks (over)
Observed
Calculated
A
300
600
900
1,500
3,000
6,000
9,000
15,300
30,000
5 1 .309
24,043
16,660
9,631
3,502
994
No
1 10
25
1 73 1'. >
4.3810
4.2217
3 9837
:; 54 13
2 9974
2.6484
2. 1461
L.3979
1. 7349
4.4368
4 . 231 1 1
3 9409
3 5008
2.9997
2.6671
2. 1838
1.3364
— .0558
—.0086
+ .0428
+ .0435
— .0023
-.0187
H377
+ .0615
(From Coins d'Economie Politique, vol. II, p. 307.)
The above table may give the reader a vague idea that the tit is rather g 1. However,
from the above table the following table may he directly derived:
(Note concluded page 364.)
364
PERSONAL DISTRIBUTION OF INCOME IN U. S.
If income distributions charted on a double log scale not only cannot
be approximately represented by straight lines, but also differ radically
(Note 1 page 363 concluded.)
Number of persons
Income in marks
Actual
Computed
of computed
300- 600
600- 900
900- 1,500
1,500- 3,000
3,000- 6,000
6,000- 9,000
9,000-15,300
15,300-30,000
Over 30,000
30,266
7,383
7,029
6,129
2,508
549
305
115
25
26,969
10,342
8,270
5,560
2,169
534
312
131
22
112.2
71.4
85.0
110.2
115.6
102.8
97.8
87.8
113.6
Total
54,309
54,309
100.0
The fit no longer impresses one as quite so good. See Chart 28H below.
■/OO,
•70000
■1000
I
I
1
■too
3
i
CHART 28 H
OLDENBURG
INCOME TAX RETURNS
1890
CUMULATIVE FREQUENCY DISTRIBUTION
WITH TWO FITTED CURVES
(t) log y= 9.0077- I.63ZI log z (least squares straight line)
ft) log y =3.72204 -1. 465 log (x+220) - . 0000274 x
(Pareto's Seconal approx/rr?a//on.)
Scales Logarithmic
6
i
/rtCOME /// HUTiDFEDS OF MARKS
9 75 30 60 90
30
-J-
60
_l
PARETO'S LAW
365
in shape, it is of course not of great importance whether the straight lines
fitted to such data from different times and places have or have not ap-
proximately constant slopes. For example, a comparison of Chart 28C
showing the cumulative distribution of United States income-tax returns
for 1915 on a double log scale and Chart 28 F showing similar data for
1918, makes it plain that, even were the slopes of the fitted straight lines
for the two years identical, the data curves would still be so different as
to make the similarity of slope of the fitted lines of almost no significance. 1
In considering slopes, let us examine further both the data and the
fitted lines for these two years 1915 and 1918. Tables 281 and 28J give
some numerical illustrations of the differences between the distributions
for the two years. Table 281 gives the number of returns in each income
interval each year and the percentages that the 1918 figures are of the
1915 figures.
TABLE 281
COMPARISON OF UNITED STATES INCOME-TAX RETURNS FOB
1915 AND 1918
Income class
Number of returns
Ratio of 1918
1915
1918
to 1915
$ 4,000 a-$ 5,000
58,949
120,402
34,102
16,475
9,707
6,196
7,005
1,100
6,847
1,793
724
3X6
216
25 1
122
209
120
322,241
319,356
69,992
30,227
16,350
10,206
11,887
6,4 19
9,996
2,358
S66
401
247
260
122
ITS
67
5.4664
5,000- 10,000
2.6524
10,000- 15,000
15,000- 20,000
2.0524
1.8347
20,000- 25,000
1.6844
25,000- 30,000
1.6472
30,000- 40,000
1.6969
40,000- 50,000
1 . 5729
50,000- 100,000
1.45! 19
100,000- 150,000
1.3151
150,000- 200,000
1 . 1961
200,000- 250,000
1 . 0389
250,000- 300,000
1 1435
300 000- 400 OIK)
1 0236
400,000- 500,000
1 0000
500,000-1,000,000
8517
1,000,000 and over
.5583
a The $3, 000-84, 000 class is not included, as in 1915 married persons in that class were
exempted while in 1918 they were not.
The change as we pass from the $4,000-$5,000 interval, where the 1918
figures are nearly five-and-a-half times the 1915 figures, to the intervals
above $500,000, where the 1918 figures are actually less than the 1915
figures, illustrates the great and fundamental difference between the slopes
of the two distributions. However, such a comparison of unadjusted
1 Compare also the deviations from the fitted lines as given in Tables 28< ' and 28F.
366
PERSONAL DISTRIBUTION OF INCOME IN U. S.
money intervals, while it throws into relief the differences in slope of the
two distributions, is by no means as enlightening for purposes of exhibiting
their other essential dissimilarities as a comparison of the two sets of data
after they have been adjusted for changes in average (per capita) income
and changes in population. Table 28 J gives some comparisons between the
data for the two years and between the fitted lines for the two years on
such an adjusted basis. Two intervals, one in the relatively low income
range and the other in the high income range, are used to illustrate the
essentially different character of the distributions for the two years.
TABLE 28J
COMPARISONS OF UNITED STATES INCOME-TAX RETURNS FOR THE YEARS 1915 AND
1918 ADJUSTED FOR CHANGES IN AVERAGE (PER CAPITA) INCOME AND CHANGES
IN POPULATION
ACTUAL INCOME-TAX DATA
Income intervals
Number of returns
(1) (2)
Fraction of population
(3) (4)
Ratio of
Column (4)
to Column (3)
1915
1918
1915
191S
Between 12 and 13
times average income
21,190
31,197
.00021099
.00029!)!."".
1.4193
Between 1,200 and 1,300
times average income
43.85
20 37
. 0000004366
OOOOOOl'.t:,:.
.4478
Over 12 times average
income
248,600
271,452
.002 17536
.00260561
1 0526
Amount in dollars
Per cent of total income
Over 12 times average
income
1915
$4,283,010,735
1918
$5,312,832,516
1915
11.9%
191S
8.7%
. 7311
LEAST-SQUARES STRAIGHT LINES
Income intervals
Number of returns
(1) (2)
Fraction of population
(3) (4)
Ratio of
Column (4)
to Column (3)
1915
1918
1915
1918
Between 12 and 13
times average income
32,886
41,730
.00032745
.00040056
1 . 2233
Between 1,200 and 1,300
times average income
47.63
17.10
.0000004743
.0000001641
.3460
STRAIGHT LINES FITTED TO GIVE THE SAME TOTAL NUMBER OF RETURNS AND THE
SAME TOTAL INCOME AS THE INCOME-TAX DATA
Income intervals
Number of returns
(1) (2)
Fraction of population
(3) (4)
Ratio of
Column (4)
to Column (3)
1915
litis
42,460
1915
191S
Between 12 and 13
times average income
24,510
. 00024405
. 00040756
1 . 6700
Between 1,200 and 1.300
times average income
54.73
14.15
. 0000005450
.0000001358
.2492
<*
PARKTO'S LAW
367
NOTES TO TABLE 28J
"Average Income" Intervals
1915
1918 ■"
S 358
1,296
4.654
129,600
■165, 400
586
12 times average income
13 " " "
: i 132
7.618
1 200 " " "
703 200
l 300 "
761. MID
Equations of Fitted Straight Lines on a Cumulative Double Log B
hues
Lines giving correct total
number of returns and
total income
1914
y
y
y
y
y
y
= 11.153322 — 1.559256 \
= 10 643299 1 -119579 \
= 10.839435 — 1 424638 \
= 11 . 111! .116 - 1 53 6 x
= 12.033697— 1 .693823 x
= 12.320963— 1.734802x
y = 111 557242 — 1 420936 x
1915
v = 10 202382 — 1 32
1916
v = in 212702 - 1 .298088 \
v = 11.170980— 1 186817 \
v = 12 202452— 1 .738497 s
y = 12 . 036155 — 1 . 6672 5 3 i
1917
1919
Tabic 28J needs little discussion. In the section treating actual income-
tax data we notice that while the adjusted number of returns in the lower
income interval ' increased 41.93 per cent from 1915 to 1918, the adjusted
number of returns in the upper income interval 2 decreased 55.22 per cent.
Moreover, while the adjusted total number of returns above 1 the " 12-times-
average-income" point increased 5.20 per cent, the adjusted amount of
income reported in these returns decreased 26.89 per cent.
Such figures suggest a rather radical change in the distribution of in-
come during this short three-year period. Similar conclusions may be
drawn from the figures for 1 he two pairs of fitted lines, though we must
of' course remember that these lines describe only very inadequately the
actual data. The lines so fitted as to give each year the same total number
of returns and total amount of income as the data for that year yield
sensational results. While the adjusted number of returns in the lower
income-interval increased 67 per cent, the adjusted number of returns
in the upper income-interval decreased 75. OS per cent.
Finally, it has been suggested that changes in the characteristics of the
tax-income-distribution in the United States from L915 to 1918 may be
accounted for as the results of the increase in the surtax rates with 1917.
We do not believe any large part of these changes can be so accounted
for. Notwithstanding the fact that the country entered the European
war during the interval, the difference between the 1915 distribution and
the 1918 distribution in the United States, extreme as it is. cannot be said
to be unreasonably or unbelievably great. Even the changes in the slope
of the least-squares line are not phenomenal. Pareto's Prussian figures
contain fluctuations in slope from — 1.G0 to -1.89 while the slope of the
least-squares straight line fitted to his Basle data is only — 1.25. The
1 Between 12 and L3 times the average income (per capita) each year.
- Between 1,200 and 1,300 times the average income (per capita) each year.
368 PERSONAL DISTRIBUTION OF INCOME IN U. S.
slopes of the least-squares straight lines fitted to the American data are
—1.42 for 1915 and —1.69 for 1918.
3. If the upper income ranges (or "tails") of income distributions
were, when charted on a double log scale, closely similar in shape,
would that fact justify the assumption that the lower income ranges
were likewise closely similar?
Before attempting to answer the above question, let us summarize the
case we have just made against believing the "tails" significantly similar.
We can then discuss how much importance such similarity would have
did it exist.
We have found upon examination that the approximation to straight
lines of the tails of income distributions plotted on double log scales is
specious; that the slopes of the fitted straight lines differ sufficiently to
produce extreme variations in the relative number of income recipients
in the upper as compared with the lower income ranges of the tails;
that the upper and lower income ranges of the actual data for different
times or places tell a similar story of extreme variation; and that the
irregularities in shape of the tails of the actual data, entirely aside
from any question of approximating or not approximating straight lines
of constant slope, vary greatly from year to year and from country to
country, ranging all the way from the irregularities of such distributions
as the Oldenburg data, through the American data for 1914, 1915 and 1916
to such an entirely different set of irregularities as those seen in the Amer-
ican data for 1918 1 .
At this stage of the discussion the reader may ask whether a general
appearance of approximating straight lines on a double log scale, poor as the
actual fit may be found to be under analysis, has not some meaning, some
significance. The answer to this question must be that, if we were not deal-
ing with a frequency distribution but with a correlation table showing a
relationship between two variables, an approximation of the regression lines
to linearity when charted on a double log scale might easily be the clue
to a first approximation to a rational law; but that, on the other hand, ap-
proximate linearity in the tail of a frequency distribution charted on a double
log scale signifies relatively little because it is such a common charac-
teristic of frequency distributions of many and varied types.
The straight line on a double log scale or, in other words, the equation
y = bx m , when used to express a relationship between two variables, is, to
quote a well-known text on engineering mathematics, "one of the most
useful classes of curves in engineering." 2 In deciding what type of equa-
tion to use in fitting curves by the method of least squares to data con-
1 Compare Charts 28H, 28B, 28C, 28D and 28F.
2 P. Steinmetz, Engineering Mathematics, p. 216.
PARETO'S LAW 369
cerning two variables the texts usually mention y = bx m as "a quite com-
mon case." 1 A recent author writes, "simple curves which approximate
a large number of empirical data are the parabolic and hyperbolic curves.
The equation of such a curve is y = ax b [y = bx m ], parabolic for b positive
and hyperbolic for b negative." 2 A widely used text on elementary
mathematics speaks of the equation y = bx m as one of "the three funda-
mental functions" in practical mathematics. 3 The market for "logarith-
mic paper" shows what a large; number of two-variable relationships may
be approximated by this equation. Moreover this equation is often a
close first approximation to a rational law. Witness "Boyle's Law." In-
deed, sufficient use has not been made of this curve in economic discus-
sions of two-variable problems.
The primary reason why approximation to linearity on a double log
scale has no such significance in the case of the tail of a frequency distribu-
tion as it often has in the case of a two-variable problem is because of
the veiy fact that we are considering the tail of the distribution, in other
words, a mere fraction of the data. While frequency distributions which
can be described throughout their length by a curve of the type y = bx m are
extremely rare, a large percentage of all frequency distributions have tails
approximating straight lines on a double log scale. 4 It is astonishing how
many homogeneous frequency distributions of all kinds may be described
with a fair degree of adequacy by means of hyperbolas 5 fitted to the data
on a double log scale. Along with this characteristic goes, of course, the
possibility of fitting to the tails of such distributions straight lines approxi-
mately parallel to the asymptotes of the fitted hyperbola. However we
have by no means adequately described an hyperbola when we have
stated the fact that one of its asymptotes is (of course) a straight line and
that its slope is such and such. Had we even similar information con-
cerning the other asymptote also, we should know little about the hyper-
bola or the frequency distribution which it would describe on a double
log scale. The hyperbola might coincide with its asymptotes and hence
have an angle at the mode or it might have a very much rounded "top."
Such a variation in the shape of the top of the hyperbola G would generally
correspond to a very great variation in the scatter or "inequality" of the
distribution as well as many other characteristics.
1 D. P. Bartlett, Method of Last S,/mirt s, p. 33.
2 J. Lipka, Graphical and Mechanical Computation, p. 128.
3 C. S. Sliehter, Elementary Mathematical Analysis, preface.
4 A very large percentage of the remainder have tails approximating straight lines on a
natural x log y basis.
6 N. B. Not a straight line on tin (Inutile log scale, which is a so-called hyperbola on the
natural scale, but a true conic section hyperbola on tin doutilt In,] sent, .
Charts 28K and 28L (Earnings per Hour of 318,946 Male Employees in 1919) illustrate
how excellent a fit may often be obtained by means of an hyperbola even though lifted only
by selected points. A comparison of the least-squares parabola and the selected-points
hyperbola on Chart 28K illustrates also the straight-tail effect.
6 Compare Karl Pearson's concept of "kurtosis."
370
PERSONAL DISTRIBUTION OF INCOME IN U. S.
S
PAKITOS LAW
371
Rough similarity in the tails of two distributions on a double log scale
by no means proves even rough similarity in the remainder of the dis-
tributions. Charts 28M, 28N, 280 and 28P illustrate both cumulatively
100,000
u
10.000J
1.000 ©
as
100
CHART 2S M
CUMULATIVE FREOUEnCY DISTRIBUTION
or
RATES OF WAGES PER HOUR
FOR
7?.23l MALE EMPLOYEES
in rn E_
SLAUGHTERING & MEATPACKING INDUSTRY
IM THE U.S. IM 1917.
sovKt *w» ' i/iaonsunanasaiiTi/tai
Scales Logarithmic
10
WAGES IN CENTS PER HOUR
IS 20 25 30 40 50 60
1 .ii .ii
.372
PERSONAL DISTRIBUTION OF INCOME IN U. S.
CHART 28 N
FREQUENCY DISTRIBUTION
OF
RATES OF WAGES PER HOUR
FOR
7^,2^l MALE EMPLOYEES
in THE
SLAUGHTERING &MEAT-PACKI11G INDUSTRY
IN THE U.S. IN 1917.
soukc 8/£M0arine&smisrici. ffuuem&t
Scales Logarithmic
-10,000
a
/ X
s
/ \f.
a.
/ v\
-1,00(
s
w
Ed
J
b.
O
«
-100
oa
s
-10
•
-]
WAGES IN CENTS PER HOUR
10
15 20 25 30 40 50 60
I 1 1 11 ^^L^_
and non-cumulatively on a double log scale two wages distributions whose
extreme tails appear roughly to approximate straight lines of about equal
slope. 1 Charts 28M and 28N are from data concerning wages per hour
of 72,291 male employees in the slaughtering and meat-packing industry
in 1917; 2 Charts 280 and 28P are from data concerning wages per hour
of 180,096 male employees in 32 manufacturing industries in the United
States in 1900. 3 A mere glance at the two non-cumulative distributions
will bring home the fact that while they show considerable similarity in
the upper income range tails, they are quite dissimilar in the remainder
'The illustration shows only "rough similarity" in the extreme tails. However, there
seems no good reason for believing that even great similarity in the tails proves similarity
in the rest of the distribution. It certainly cannot do so in the case of essentially hetero-
geneous distributions, such as income distributions.
2 Bureau of Labor Statistics, Bulletin No. 252.
3 Twelfth Census of the United States (1900), Special Report on Employees and Wages,
Davis R. Dewey.
,
PARETO'S LAW
373
CHART 280
CUMULATIVE rRWUEHCY DISTRIBUTION
OF
RATES OF WAGES PER HOUR
FOR
IS0.096 MALE EMPLOYEES
-100,000
32 MANUFACTURING INDUSTRIES
IN THE US IN 1900
scutes Dittry ii"cr/au3
Scales logarithmic
-10,000
pa
»
Eh
O
-1,000
OS
W
pa
s
3
2
-100
WAGES
IN
CENTS
PER HOUR
10
15
20
25
30
40 50
60 70 80 90 100
of the curves. Moreover, in spite of this similarity of tails, the slaughtering
and meat-packing distribution has a coefficient of variation of 30.5 while
the manufacturing distribution has a coefficient of 47.7. In other words,
the relative scatter or "inequality of distribution" is more than one-and-a-
half times as great in the manufacturing data as it is in the slaughtering
and meat-packing data. Furthermore, no discussion and explanation of
greater essential heterogeneity in the one distribution than in the other
will offset the fact that the tails are similar but the distributions are dif-
ferent. There seems indeed to be almost no correlation between the slope
of the upper-range tail and the degree of scatter in wages distributions.
Some distributions showing extremely great scatter have very steep tails,
some have not. 1 The frequency curve for the distribution of income in
Australia in 1915 is radically different from either the curve for the United
States in 1910 constructed by Mr. \Y. I. King or the curve for the United
States in 1918 constructed by the National Bureau of Economic Research.
1 The tails of wage distributions have in general much greater slopes than those of the
upper (i. e., income-tax) range of income distributions. This is an outstanding difference
between the two distributions. Pareto's conclusions with respect to the convex appearance
of the curve for wages are consistent with curves showing number of dollars per income-tax
interval traceable to wages but not with actual wage distributions showing number of
recipients per wage interval. Distributions based upon income from effort and distributions
based upon income from such sources (mostly profits and income from property) as yield the
higher incomes seem to have tails the one as roughly straight as the other, indeed many
wage distributions have tails more closely approximating straight lines than do income-tax
data.
374
PERSONAL DISTRIBUTION OF INCOME IN U. S.
CHART 28 P
FREQUENCY DISTRIBUTION
OF
RATES OF WAGES PER HOUR
FOR
180,096 MALE EMPLOYEES
IN
V 32 MANUFACTURING INDUSTRIES
\^ IN THE U. S. IN 1900
\<!q source Dcyt£r wctnsus
\X> 5cal&5 Loganlhmic
A^
-10,009
-1,000
W
w
s
-100 g
<
o
O
NUMBER
-1
10
WAGES IN CENTS PER HOUR
15 20 25 30 40 50 60 70 80 90 100
Yet all three curves have tails on a double log scale quite as similar as is
common with income-tax returns. 1
From this discussion we may draw the corollary that it is futile to at-
tempt to measure changes in the inequality of distribution of income
throughout its range by any function of the mere tail of the income fre-
quency distribution. It seems unnecessary therefore to discuss Pareto's
suggestions on this subject.
4. Is it probable that the distribution of income is similar enough
from year to year in the same country to make the formulation
of any useful general "law" possible?
1 As will be seen in Chapter 29, there seems reason for believing that the extreme difference
between the distribution of incomes obtained by the Australian Census and the estimate
made by the National Bureau of Economic Research is due largely to difference in definition
of income, and income recipient. However, this does not alter the fact that we have here
again two distributions with tails as similar as is usual with income-tax distributions and
lower ranges about as different as it is possible to imagine.
W
PARETO'S LAW 375
Before answering this question we must decide what we should mean
by the word similar. If income distributions for two years in the same
country were such that each distribution included the same individ-
uals and each individual's income was twice as large in the second year
as it had been in the first year, it would seem reasonable to speak of the
distributions as strictly similar. If in a third year (because of a doubling
of population due to some hypothetical immigration) the number of per-
sons receiving each specified income size was exactly twice what it was
in the second year, it would .^t ill seem reasonable to -peak of the distribu-
tions as strictly similar. Tested by any statistical criterion of dispersion
which takes account of relative size (such as the coefficient of variation),
the dispersion is precisely the same in each of the three years. Moreover
the three distributions mentioned above x must necessarily have identically
the same shape on a double log scale, and furthermore any two distribu-
tions which have identically the same shape on a double log scale '-' must
necessarily have the same relative dispersion as measured by such indices
as the coefficient of variation, interquartile range divided by median, etc.
Approximation to identity of shape on a double log scale seems then a
useful concept of "similarity." It is the concept implicit in Pareto's work. 3
Now we have already found considerable evidence that income dis-
tributions are not, to a significant degree, similar in shape on a double log
scale. The income-tax tails of income distributions for different times and
places neither approximate straight lines of constant slope nor approxi-
mate one another; they are of distinctly different shapes. Moreover, such
tails do not show in respect of their numbers of income recipients and
'Or, any distributions whose equations may be reduced to one another by substituting
k\X for x and />•_>// for y.
2 The curve may be thought of as consisting of two parts, which before reduction to log-
arithms, would be (1) the positive income section and (2) the negative income section with
positive signs.
•While approximate identity of shape on a natural scale a natural x and log .</ scale, or
any other similar criterion would constitute a "law," no such approximate identity of shape
on such scales has yet been discovered and it seems difficult to advance any very cogent
a priori reasons for expecting it.
In this connection we must remember thai had we the exact figures for the entire frequency
curves of the distribution of income in the United States from year to year, if moreover we
could imagine definitions of income and iiimm, ncipient which would be philosophically
satisfactory and statistically usable — and if further we managed year by year to describe
our data curves adequately by generalized mathematical frequency curves of more or less
complicated variety we should not necessarily have arrived at any particularly valuable re-
sults. Any series of data may be described to any specified degree of approximation by a
power series of the type y = A -f- Bx -\- Cx- -f- Dx* + but such lit is purely em-
pirical and absolutely meaningless except as an illustration of MacLaurin's theorem in the
differential calculus. We might be able to describe each year's data rather well by one of
Karl Pearson's generalized frequency curves, but if the essential characteristic-, of the curve —
skewness, kurtosis, etc., changed radically from year to year, description of the data by such
a curve might well give no clue whatever as to any "law." Not only might the years be dif-
ferent but the fits might be empirical. Profes or Edgeworth has well said that "a close fit
of a curve to given statistics is not, per se and apart from a priori reasons, a proof that the
curve in question is the form proper to the matter in hand. The curve may be adapted to the
phenomena merely as the empirically justified system of cycles and epicycles to the planetary
movements, not like the ellipse, in favor of which there is the Newtonian demonstration, as
well as the Keplerian observations." Journal of the Royal Statistical Society, vol. 59, p. 533.
37G PERSONAL DISTRIBUTION OF INCOME IN U. S.
total amounts of income any uniformity of relation to the total number
of income recipients and total amount of income in the country, even
after adjustments have been made for variations in population and average
income. 1 Considerations such as these, reenforce the conclusion which
we arrived at from an examination of wage distributions, namely, that
there is little necessary relation between the shape of the tail and the shape
of the body of a frequency distribution, and have led us to suspect that,
even if the tails of income distributions were practically identical in shape,
it would be extremely dangerous to conclude therefore that the lower
income ranges of the curves were in any way similar.
A most important matter remains to be discussed. What right have
we to assume that the heterogeneity necessarily inherent in all income
distribution data is not such as inevitably to preclude not only uniformity
of shape of the frequency curve from year to year and country to country
but also the very possibility of rational mathematical description of any
kind unless based upon parts rather than the whole? What evidence have
we as to the extent and nature of heterogeneity in income distribution
data?
In the first place we must remember that lower range incomes are pre-
dominantly from wages and salaries, while upper range incomes are pre-
dominantly from rent, interest, dividends and profits. 2 While 74.67 per
cent of the total income reported in the United States in the $1,000-12,000
income interval in 1918 was traceable to ivages and salaries, only 33.10
per cent of the income in the $10,000-$20,000 interval was from those
sources, and only 15.92 per cent of the income in the $100,000-1150,000
interval and 3.27 per cent of the income in the over-$500,000 intervals.
On the other hand, while only 1.93 per cent of the total income reported
in the $l,000-$2,000 interval in 1918 was traceable to dividends, 23.73
per cent was so traceable in the $10,000-120,000 interval, 43.18 per cent
in the $100,000-$150,000 interval, and 59.44 per cent in the over-$500,000
intervals. 3 The difference in constitution of the income at the upper and
1 Estimated per cent of total income received by highest 5% of income receivers in United
States:
1913 33
1914 32
1915 32
1916 34
1917 29
L918 20
1919 24
National Bureau of Economic Research, Income in the United States, vol. 1, p. 116.
2 Compare Professor A. L. Bowley's paper on "The British Super-Tax and the Distribution
of Income," Quarterly Journal of Economies, February, 1914.
3 Statistics of Income 1918, pp. 10 and 44.
While the reporting of dividends was almost certainly less complete in the lower than in
the upper income classes, the difference could not be sufficient to invalidate the general con-
clusion. Lower range incomes are predominantly wage and salary incomes; upper range in-
comes are not.
PARETO'S LAW 377
lower ends of the distribution is sufficient to justify the statement that
most of the individuals going to make up the lower income range of the
frequency curve are wage earners, while the individuals going to make up
the upper income range are capitalists and entrepreneurs. 1 What do we
know about the shapes of these component distributions? Is the funda-
mental difference in their relative positions on the income scale their only
dissimilarity?
In any particular year the upper income tail of the frequency distribu-
tion of income among capitalists and entrepreneurs seems not greatly dif-
ferent from the extreme upper income tail of the frequency distribution
of income among all classes. This is what we might expect. Not only is
the percentage of the total income in the extreme upper income ranges
reported as coming from wages and salaries small but much of this so-
called wages and salaries income must be merely technical. For example,
it is often highly "convenient" to pay "salary" rather than dividends.
Furthermore, in so far as the tail of the curve of distribution of income
among capitalists and entrepreneurs is not identical with the tail of the
general curve, it will show a smaller rather than a larger slope, because the
percentage of the number of persons in each income interval who are
capitalists and entrepreneurs increases as we pass from lower to higher
incomes. 2 Now the slopes of the straight lines fitted to the extreme tails
of non-cumulative income distributions on a double log scale fluctuate
within a range of about 2.4 to 3.0.
The upper range tails of wages distributions tell an entirely different
story. Aside from surface irregularities often quite evidently traceable to
concentration on certain round numbers, the majority of wages distribu-
tions have tails which, on a double log scale, are roughly linear. 3 How-
ever the slopes of straight lines fitted to these tails are much greater than
the slopes of corresponding straight lines fitted to income distribution
tails. 4 While the slopes of income distribution tails range from about 2.4
1 Many individuals in the middle income ranges must necessarily bo difficult to classify.
This does not mean that the concept nf heterogeneity is inapplicable. There are countries
in which the population is a mixture of Spanish. American Indian, and Negro blood. Now
such a population must, for many statistical purposes, he considered extremely heterogeneous
even thougb the percentage of the population which is of any pure blood bo quite negligible.
2 In 1917, the only year in which returns are classified according to "principal source of
income" (wages and salaries, income from business, income from investment) the difference
in slope, in the income range $100,000 to $2,000,000, between the distribution for all returns
and the distribution for those returns which did not report wages and salaries as their prin-
cipal source of income was less than .05. The slope in this range of the line fitted t<> all re-
turns was about -.til; the business and investment line was about 2.59 and the wages line
about 3.21. In 1916, the only year in which returns are classified according to occupations,
the distribution of income among capitalists shows a slope of only 2.08 while public S<
employees (.civil) show a slope of 2.70 and skilled and unskilled laborers a slope of l'.71.
'Attention has already been drawn to the fact that this is a characteristic of many fre-
quency distributions of various kinds.
4 A further difference between the upper range income distribution among capitalists and
entrepreneurs and the upper range of the distribution among all persons seems to be, from
the l'.llfi occupation distributions, that the distribution among all persons shows less of a roll,
i. e., is straighter.
378 PERSONAL DISTRIBUTION OF INCOME IN U. S.
to 3.0, the slopes of wages distributions tails commonly range between
4.0 and 6.0. They seldom run below about 4.5; they sometimes run as
high as 10.0 and 11.0.
A distribution of wages per hour for 26,183 male employees in iron and
steel mills in the United States in 1900 1 shows a tail with a slope of about
3.35. However, the total of which this is a part, the distribution of wages
per hour among 180,096 male employees in 32 manufacturing industries
in 1900, shows a tail-slope of about 4.8. The estimated distribution of
weekly earnings of 5,470,321 wage earners in the United States in 1905 2
shows a tail-slope of about 5.0. The distribution of earnings per hour
among 318,946 male employees in 29 different industries in the United
States in 1919 3 shows a tail-slope of about 5.86. The distribution of
wages per month among 1,939,399 railroad employees in the United States
in 1917 q shows a tail-slope of about 6.25. The distribution of wages per
hour among 43,343 male employees in the foundries and metal working
industry of the United States in 1900 5 shows a tail-slope of about 7.8.
The distribution of earnings in a week among 9,633 male employees in the
woodworking industry — agricultural implements — in the United States in
1900 6 shows a tail-slope of over 11.0. At the other extreme was the case
of the wages-per-hour distribution among 26,183 male employees in Amer-
ican iron and steel mills in 1900 with a slope of 3.35. Both 11.0 and 3.35
are exceptional, but the available data make it clear that wages distribu-
tions of either earnings or rates have tail-slopes which are always much
greater than the maximum tail-slope of income distributions.
The illustrations in the preceding paragraph are illustrations of the tail-
slopes of wages distributions among wage earners. However all the evi-
dence points to frequency distributions of income among wage earners
having tail-slopes only very slightly less steep than the tail-slopes of wages
distributions. We have almost no usable data concerning the relation
between individual wage distributions and income distributions for the
same individuals, but we have a few samples showing the relation between
family earnings distributions and family income distributions. 7 More-
over, we can without great risk base certain extremely general conclusions
i Twelfth Census of the United States (1900), Special Report on Employees and Wages,
Davis R. Dewey.
2 1905 Census of Manufacturers, Part IV, p. 647.
3 Monthly Labor Review, Sept., 1919.
4 Report of the Railroad Wage Commission to the Director General of Railroads, 1919, p. 96.
s Twelfth Census of the United States (1900), Special Report on Employees and Wages,
Davis R. Dewey.
e Twelfth Census of the United States (1900), Special Report on Employees and Wages,
Davis R. Dewey.
7 The reader must not confuse the percentage of the income not derived from wages going
to wage-earners in any particular income class with the percentage of the income not derived
from wages going to all income recipients in any particular income class. Some of these last
recipients are not wage earners at all, they receive no wages. Information concerning the
second of these relations but not the first is given in the income tax reports.
PARETO'S LAW 379
concerning individual wage-earners' income distributions on these family
data. The upper tails of the family-wage distributions are the tails of the
wage distributions for the individuals who are the heads of the families.
This is apparent from an analysis of the samples. Now income from rents
and investments belongs almost totally to heads of families. Such income
is however so small in amount that it cannot alter appreciably the slope
of the tail. 1 While income from other sources than rents and investments
(lodgers, garden and poultry, gifts and miscellaneous) may not be so con-
fidently placed to the credit of the head of the family, this item changes
its percentage relation to the total income so slowly as to be negligible in
its effect upon the tail-slope of the distribution. 2 Notwithstanding the
danger of reasoning too assuredly about individuals from these picked
family distributions, we seem justified in believing that the tail-slopes of
income distributions among individual wage earners are not very different
from the tail-slopes of wage distributions among the same individuals. 3
The upper tail-slopes of income distributions among typical wage earners
1 For example, in the report on the incomes of 12,096 white families published in the Monthly
Labor Review for December, 1919, we find the income from rents and investments less than
one ner cent of the total family income for each of the income intervals.
Percentage income from
Income group rents and investments
is of total income
Under S900 .079
$ 900-81,200 .176
1,200- 1,500 .410
1,500- 1,800 .551
1,800- 2,100 .606
2,100- 2,500 99.s
2,500 and over . 778
2 As a somewhat extreme example the Bureau of Labor investigation mentioned in the
preceding note shows the following relations between total family earniqgs and total family
income (including income from rents and investments, lodgers, garden and poultry, gifts and
miscellaneous).
Income group Percentage that total
^ earnings are of total income
Under $900 96.2
$ 900-81,200 96.5
1,200- 1,500 96.3
1,500 1,800 96.0
1,800 2.100 96. 3
2,100 2.. '.00 95.1
2,500 and over '.Hi. 2
3 Further corroboratory evidence, of some slight importance, that the tail-slopes of wage
distributions among wage earners are not very different from the tail-slopes of income dis-
tributions among wage earners is yielded by the fact that the tail-slopes of income distribu-
tions among families (which are virtually identical with the tail-slopes of both income and
wage distributions among the heads of these families) have roughly the same range as the
tail-slopes of wage distributions among individuals. The British investigation into the in-
comes of 7,616 workingmen's families in the United States in 1909 shows a tail-slo] f about
3.5. (Report of the British Board of Trade on Cost of Living in American Towns, loll. [Cd.
5609], p. XLIV.) The Bureau of Labor's investigation into the income of 12.000 white fam-
ilies in 1919 shows a tail-slope of about l.o. .Mr. Arthur T. Emery's extremely careful in-
vestigation into the incomes of 2,000 Chicago households in 1918 shows a tail-slope of
about 1.1. At the other extreme we find that the Bureau of Labor's investigation into the
income of 11,156 families in 1903 ( Kiijhii < ///// Annual Report of the Commissioner of I.nhur,
1903, p. 558) shows a tail-slope of about 10.0, and that Mr. R. ('. Chapin's investigation into
the income of 301 workingmen's families in New York City (Standard of Lit , . 1 >ntj Work-
ingmen's Families in New York ('it;/, p. 44) also shows a slope of about 10.0. The tails of
these last two cases are very irregular so that the slope itself is not determinable with much
precision.
380 PERSONAL DISTRIBUTION OF INCOME IN U. S.
may then be assumed to have much greater slopes than the upper tail-
slopes of income distributions among capitalists and entrepreneurs. It
does not seem possible to make any very definite statement concerning
the body and lower tail of the capitalist and entrepreneurial distribution —
even in so far as that term is a significant one. 1 All the evidence suggests
that the. mode of what we have termed the capitalist-entrepreneurial dis-
tribution is consistently higher than the wage-earners' mode. 2 Its lower
income tail undoubtedly reaches out into the negative income range, which
the tail of the wage-earners' distribution may, both a -priori and from evi-
dence, be assumed not to do. It seems a not irrational conclusion then to
speak of the capitalist-entrepreneurial distribution as having a lesser tail-
slope than the wage- earners' distribution on the lower income side as well
as on the upper income side, 3 and as a corollary almost certainly a much
greater dispersion both actual and relative than the wage-earners' dis-
tribution.
Though the above generalizations concerning differences between the
wage-earners' income distribution and the capitalist-entrepreneurial in-
come distribution seem sound, they tell but a fraction of the story. Aside
from the difficulty of classifying all income recipients in one or the other
of these two classes, we are faced with the further fact that investigation
suggests that our two component distributions are themselves exceedingly
heterogeneous. 4 We have already noted that wage distributions for dif-
ferent occupations and times are extremely dissimilar in shape and we
suspect that the same applies to capitalist-entrepreneurial distributions.
For example, what little data we possess suggest that the distribution of
income among farmers has little in common with other entrepreneurial
distributions.
Moreover, the component distributions, into which it would seem nec-
essary to break up the complete income distribution before any rational
description would be possible, not only have different shapes and different
positions on the income scale (i. e., different modes, arithmetic averages,
etc.), but the relative position with respect to one another on the income scale
of these different component distributions changes from year to year. 5
1 In the total income curve there is a broad twilight zone where individuals are often both
wage or salary earners and capitalists or even entrepreneurs.
- In the 1016 occupation distributions the only occupations showing more returns for the
$4,00(1 $5,000 interval than the $3,000 $4,000 (that is the only occupations showing any
suggestion of a mode) are of a capitalistic or entrepreneurial description — bankers; stock-
brokers; insurance brokers; other brokers; hotel proprietors and restaurateurs; manufacturers;
merchants; storekeepers; jobbers; commission merchants, etc.; mine owners and mine op-
erators; saloon keepers; sportsmen and turfmen.
:l ( )f course the very word slope is an ambiguous term to use concerning the tail of a curve
which enters the second quadrant.
i Evidence suggesting definite heterogeneity in the "wage and salary" figures of the income-
tax returns is presented in Chapter .'50.
5 This fact is one of the simpler pieces of evidence against the existence of a "law." Of
course, even though the income distribution were made up of heterogeneous material, if the
PARETO'S LAW
:;si
Table 28Q l is interest ins as showing the changes in the relative positions
of the arithmetic averages of different wage distributions in 1909, 1913
and 1918.
TABLE 28Q
CHANGES IX THK RELATIVE POSITIONS OF THE AVERAGE ANNUAL
EARNINGS OF EMPLOYEES ENCACKD IN VARIOUS INDUSTRIES
Industry
All Industries
Agriculture
Production of Minerals
Manufacturing:
Factories
Hand Trades
All Transportation
Railway, Express, Pullman, Switching ami
Terminal ( los
Street Railway, Electric Light and Power,
Telegraph and Telephone Cos
Transportation by Water
Banking
( iovernment
Unclassified Induct ries
L909
100.0
48.2
95.7
91
111
101
104.0
99
L23
123
118
114
1913
100.0
15 !
104.4
97 5
L03 5
L05 1
108 '_'
93.8
114.1
128.6
113.8
107.7
191S
100.0
54.7
119.0
103 ■".
110.8
119.3
129 :;
' si 1
147.5
135.5
83.0
97.8
The data are so inadequate that the construction of a similar table for
capitalist-entrepreneurial distributions is not feasible. However, there are
comparatively good figures for total income of farmers and total number
of farmers year by year. 2 The average incomes of farmers, year by year,
were the following percentages of the estimated average incomes of all
persons gainfully employed in the country.
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
Percentages
75.19
69.13
72.41
74.88
76.33
80.45
82.85
104.51
109.68
103.95
63.88
This is a wide range.
Exactly what effects have such internal movements of the component
distributions upon the total income frequency distribution curve? This
is a difficult question to answer as we have not sufficient data to break
component parts remained constant in shape and in their relative positions with respect to one
another on the income scale, these relations would of themselves constitute a "law."
1 Based upon Incomt in tht United States, Vol. I, pp. 102 and 103.
2 See Income in the United States, Vol. I, p. 112.
382
PERSONAL DISTRIBUTION OF INCOME IN U. S.
down the total, composite, curve into its component parts with any de-
gree of confidence. 1 However, the movements of wages in recent years
would appear to give us a clue to the sort of phenomena we might expect
to find if we had complete and adequate data.
The slopes of the upper income tails of wages distributions are great,
4 to 5 or more. 2 Now the wage curve moved up strongly from 1917 to
1918 if we may judge by averages. The average wage of all wage earners
in the United States 3 increased 15.6 per cent 4 from 1917 to 1918. During
the same period the average income of farmers increased 19.1 per cent 5
and the average income of persons other than wage earners and farmers
remained nearly constant. Total amounts of income by sources in millions
of dollars were:
1917
1918
Percentage 1918
was of 1917
•
Total Wages a
Total Planners' Income
All other Income
$27,795
8,800
17,265
$32,575
10,500
17,291
117.20
119.32
100 15
Total Income
$53,860
$60,366
112.08
a Includes pensions, etc., and includes soldiers, sailors, and marines.
Stockholders in corporations saw income from that source actually decline
from 1917 to 1918. 6 What happened to American income-tax returns
during this time?
1 The processes by which the income distribution curve published in Income in the United
States, Vol. I, pp. 132-135 was arrived at were such that to use that material here would
practically amount to circular reasoning. The conclusions arrived at here were used in build-
ing up that curve.
- The slope of the tail of the wage and salary curve in the 1917 income tax returns is only
about 3.21 (compare, note 2, p. 377). However we must remember that the individuals there
classified are largely of an entirely different type of "wage-earner" from those in the lower
groups. In this upper group occur the salaried entrepreneurs, professional men, etc., and
those whose "salaries" are really profits or dividends. The evidence points to a rather dis-
tinct and significant heterogeneity along this division in the wage and salary distribution.
See Chapter 30.
3 Excluding soldiers, sailors, and marines, and professional classes but including officials
and "salaried entrepreneurs."
« From $945 per annum in 1917 to SI, 092 per annum in 191S.
5 From §1,370 per annum in 1917 to $1,632 per annum in 1918.
« CORPORATION DIVIDENDS, SURPLUS AND EARNINGS
(In millions of dollars)
Dividends
Surplus
Net earnings
1917
1918
3,995
2,568
3,963
1,945
7,958
4,513
See page 324.
.
PARETO'S LAW
383
TOTAL AMOUNT OF NET INCOME RETl'liNED BY SOURCES (RETURNS
REPORTING OVER $2,000 PER ANNUM NET INCOME;*
(Millions of doll.
Income class
Over $2,000 . .
2,000- 4,000.
4,000- 5,000.
5,000-10,000 .
Over 10,000.
Wages and salaries
1917
$3,648
1,553
301
661
1,133
1918
$6,493
3,687
703
849
1,254
All other sources b
1917
$7,543
1,7'. I'.)
528
1,167
1.049
l'.ils
>7.198
2,036
736
1,296
3,130
a Wages income from returns reporting between SI, 000 and $2,000 per annum is not avail-
able for 1917.
b "Other sources" are total net income minus wages and salaries, i. e., total general deduc-
tions have been assumed as deductible from other sources (gross). All things considered,
this seems proper here though it may easily be criticised. In connection with changes in the
relation between net and gross income from 1917 to 1918 see Chapter 30, pp. 401 and 402.
While reported income from all other sources than wages and salaries
declined 4.6 per cent, 1 reported income from wages and salaries increased
78.0 per cent. 2 Moreover, the great increases in wages and salaries were
in the lowest intervals. The wage curve with its steep tail-slope was
moving over into the income tax ranges. 3 The effect upon the total curve
is veiy pronounced, as may be seen from Table 28R.
TABLE 28R
AxMERICAN INCOME TAX RETURNS IN 1917 AND 1918
Total Number of Returns
(In thousands)
$2,000-$4,000
4,000- 5,000
5,000-10,000
Over 10,000.
1917
1,214
186
271
162
101S
2,107
:V22
319
160
Percentage L918
was of 1917
17:; 56
17.; 12
117.71
98 77
On a double log scale we see the curve changing its shape radically. While
the 1917 curve is comparatively smooth and regular, the 1918 curve
develops a distinct "bulge" in the lower ranges. 4
The preceding discussion has been concerned with equal dollar-income
1 Had "other sources" been taken gross instead of net, that item would have shown an
increase of 5.3 per cent instead of a decrease of 4.6 per cent.
2 The actual spread is still greater than the figures show. Income from professions, which
in 1917 was classed under wages, in l'.ils and 1919 was classed under business.
3 This seem.- to be a fact though it is not the whole story. The "intensive drive" of 1019
may easily account for some of the increase. See Chapter 30 for a discussion of the probable
extent of this influence.
4 See Income in the United States, Vol. I, Charts 28 and 30.
384
PERSONAL DISTRIBUTION OF INCOME IN U. S.
intervals. However, $2,000 income in 1918 was relatively less than $2,000
income in 1917. The average (per capita) income of the country was
$523 in 1917 and $586 in 1918. 1 The adjustment is theoretically crude,
but $2,241 2 in 1918 might be considered as in one sense equivalent to
$2,000 in 1917. The results of comparisons of the two years upon this
basis are given in Table 28S. 3
TABLE 28S
INCOME RETURNED— BY SOURCES
(Millions of dollars)
1917
Income class
Wages and
salaries
Total net
income
Total net
income
minus
wages and
salaries
Total gross
income
Total gross
income
minus
wages and
salaries
$2,000-$4,000
4,000- 5,000
5,000-10,000. . ..
Over 10,000
$1,553
301
661
1,133
$3,352
829
1,828
5,182
$1,799
528
1,167
4,049
$3,713
895
1,951
5,518
$2,161
594
1,290
4,384
1918
$2,241-$4,482. ...
$3,236
$5,359
$2,123
$5,766
$2,530
4,482- 5,602. . . .
498
1,111
613
1,247
749
5,602-11,205
773
1,960
1,187
2,315
1,542
Over 11,205
1,153
4,129
2,976
4,842
3,689
£93
(Multiplied by — , that is reduced to "1917 dollars")
586
$2,241-34,482
$2,888
$4,783
$1,895
$5,146
$2,258
4.482- 5,602
445
992
547
1,113
668
5,602-11,205. ...
690
1,749
1,059
2,066
1,376
Over 11,205. .
1,029
3,685
2,656
4,321
3,292
(Percentages of Total Income of Country)
1917
$2,000-$4,000
2.88
6.22
3 . 34
6.89
4.01
4,000- 5,000
.56
1.54
.98
1.66
1.10
5,000-10,000. . .
1.23
3 . 39
2.16
3.62
2.39
Over 10,00
2.10
9.61
7.51
10.24
8.14
1918
$2,241-14,482
5.30
8.78
3.48
9.45
4.15
4,482- 5,602
.82
1.82
1.00
2.05
1.23
5,602-11,205. . . .
1.27
3.21
1.94
3. SO
2.53
Over 11,205...
1.89
6.77
4.88
7.94
6.05
1 Income in tin United States, Vol. I, p. 70.
2 $2,000 X |||-
3 The figures for the amounts of income in the irregular 1918 income intervals of that table
($2,241-$4,482, etc.) were calculated by straight line interpolation on a double log scale ap-
plied to the even thousand dollar intervals of the income-tax returns. Though the total
income curve does not approximate linearity it may be assumed linear within the small
range of one income tax interval without serious error.
S
PARETO'S LAW
385
(Table 28S concluded.)
NUMBER OF RETURNS
(Thousands)
Income class
1917
Income class
L918
Percentage L918
was of 1917
$2,000-$4,000
4,000- 5,000
5.000-10,000
Over 10,000
1,214
186
271
162
$2,241-84,482
4,482- 5,602
5,602-11,205
Over 11,205
1,758
220
260
136
144.81
118.28
95.94
83 95
It is from this table once again apparent that the wage distribution moved
independently up on the income scale and that the effecl of this movement
was confined to the lowest income intervals. Charts 28T, 28U, 28V, 28W,
28X, 28Y, 28Z, and 28AA which show the number of dollars income per
dollar-income interval, by sources, are enlightening as illustrating in still
CHART 28T
US INCOME TAX RETURNS
1916
NUMBER OF DOUARS !H EACH INCOME
INTERVAL BY SOURCES
-1
INCOME IN THOUSANDS OF DOLLARS
10 20 30 40 SO 100 200
I I ■ l i i I i
300
400 500
i i
1.000
2,000
386
PERSONAL DISTRIBUTION OF INCOME IN U. S.
CHART 28 U
U. 5. INCOME TAX RETURNS
1916
NUMBER OF DOLLARS IN EACH
INCOME INTERVAL BY SOURCES.
Scales Logarithmic.
4. INCOME OTHER THAN WAGES
4c ^~-^
OR BUSINESS
5o^^ ^^"^"""^
5 RENTS
6. INTEREST
6. ^^^
"S./V- 7 DIVIDENDS.
- -... ^^PTv,
^ ^*Jfe v
-10,000 ^
o
O
o
•ME INTERVAL
^8s>\ V
\ ^K \\
as
3
o
^V^ s
-100 °
x. % v
'"^>»4
^s. ^ v ^
>»7
Bn
^v V N^
g
v.^
«*
d
~*X
o
\ V°5
a
-10
INCOME IN THOrSANDS OF DOLLARS
^-^^•6
3 4 5 10
20 30 40 50 100 200 300 400 500
1,000 2,000
PARETO'S LAW
387
CHART 2sY
-100.000
-10,000
Ed
• 1,000 S
S
z
M
as
j
o
a
BJ
U
0-
|
J
-100
U.S. INCOME TAX RETURNS
1317
NUMBER OF DOLLARS IN EACH
INCOME INTERVAL BY SOURCES
Scales Logarithmic
1 TOTAL INCOME.
8 WAGES.
3 BUSINESS.
4 OTHER INCOME.
4 5
I I
INCOME IN THOUSANDS OF DOLLARS
10 20 30 40 50 100 200
111 I '
300 400 500
1.000
2,00c
388
PERSONAL DISTRIBUTION OF INCOME IN U. S.
CHART 28 W
U 5 INCOME TAX RETURNS
1917
NUMBER OF D0LLAR5 IN EACH
INCOME INTERVAL BY SOURCES
4o (
Scales Logarithmic
5 \
*\^^ 4 INCOME OTHER THAU WAGES OR BUSINESS
^N>^ 5 RENT5
^^^ 6 INTEREST
/*
^ --a... "o-^^ 7- DIVIDENDS
X-.: *^**«
-10,000
©
5
VIE INTERVAL
s
z
M
\. v ^ \\
<
X. s «. '-^S^
J
\^ *« "•vS>s.
J
^S. v >- «X
- 10U o
>, x s. , sS4
Q
\ V " D 7
M
\ «^
U
*>^ v ^
cu
\ v.
3
X. »N n
«e
\ N
>v * 6
-io §
\
-1
*S
INCOME IN THOUSANDS OF DOLLARS
3 4
5 10 20 30 40 50 100 200 300 400 500 1,000 2,000
,
PARETO'S LAW
389
CHART 28 X
1 tr"""^
-1,000,000
V N \
U S INCOME TAX RETURNS
1918
"^K
NUMBER OF DOLLARS IN EACH
3
INCOME INTERVAL BY SOURCES
Scales Logarithmic
1 TOTAL income:
-100,000
^&*~ ^*\.
2 WAGES
3 BUSINESS
>»3T^>^
■n^ a other income;
^Sj-^-*^
- 10,000
i
>
-l.OOOg
%>o<x
z
voSv
Cd
> N * — X
s
8
z
X v - X\
: 100 M
\ N n>^
5
o
5
\ v?x
H
-io g
"N \
3
\
o
\
a
\
-1
V !
\
\
\
\
\
V
\
\
INCOME IN THOl'SANDS OF DOLLARS
2 3 4 5
10 20 30
40 50 100 200 300 400 500 1.000 Z.WU XOUO'^
390
PERSONAL DISTRIBUTION OF INCOME IN U. S.
,
PA KIOTO'S LAW
391
-i.000.O0O
iou.ooo
CHART 2SZ
[0,000
Id
1.000 §
o
a
10u e-
U 5 INCOME. TAX RETURNS
1313
NUMBER OF DOLLARS IN EACK
INCOME INTERVAL BY SOURCES
Scales Logarithmic.
1. TOTAL INCOME
2 WAGES
3 BUSINESS
A OTHER INCOME.
t
i
1
3 4 S
i i i
INCOME IN THOUSANDS OF DOLLARS
10 20 30 40 50 1UU
1 i i i i i
200 300 400 500
1.000
_
V -z
2.000 3.000
1
392
PERSONAL DISTRIBUTION OF INCOME IN U. S.
CHART 28AA
-10,000
-1.000 «
-100
■10
U S INCOME TAX RETURNS
1313
NUMBER OF DOLLARS IN EACH
INCOME INTERVAL BY SOURCES
5cales Logarithmic
A INCOME OTHER THAN WA6E5
OR BUSINESS
5 RENTS.
6 INTEREST.
7 DIVIDENDS.
4 5
INCOME IN THOUSANDS OF DOLLARS
10 20 30 40 50 100 200
I, ii I I
300 400 500
IOOO
2000
3000
— — —
<*
PARETO'S LAW 393
greater detail the changes in the constitution of the returns from year to
year.
Such material and the appearance of the "bulge" on the income-tax
curve in the lowest income ranges 1 in the years 1918 and 191 ( .) when wages
and salaries wore high and average (per capita) incomes also high - strongly
suggest that the income curve, in so far as it shows any similarity from
year to year, changes its general appearance and turns up (on a double
log scale) as it approaches those ranges where wages and salaries are of
predominant influence. 3 The great slopes of wage distributions are on
this hypothesis not inconsistent with the smaller slope of the general
income curve in its higher (income-tax) ranges. 4
Conclusions:
(1) Pareto's Law is quite inadequate as a mathematical generalization,
for the following reasons:
(a) The tails of the distributions on a double log scale are not,
in a significant degree, linear;
(b) They could be much more nearly linear than they are without
that condition being especially significant, as so many dis-
tributions of various kinds have tails roughly approaching
linearity;
(c) The straight lines fitted to the tails do not show even approxi-
mately constant slopes from year to year or between coun try
and country;
(d) The tails are not only not straight lines of constant slope but
are not of the same shape from year to year or between
country and country.
(2) It seems unlikely that any useful mathematical law describing the
entire distribution can ever be formulated, because:
(a) Changes in the shape of the income curve from year to year
seem traceable in considerable measure to the evident hetero-
geneity of the data;
(b) Because of such heterogeneity it seems useless to attempt to
1 See Chapter 30 for further discussion of this " bulge" in connection with an examination
of how far it may he the result of irregularity in reporting.
2 Average (per capita) incomes being high means that a definite money income (such as
$2,000) takes us relatively further down the income curve than it" average incomes were low.
3 It is difficult to say just where the " bulge" might have appeared in the 1917 distribution
if as great efforts had been made to obtain correct returns in that year as were made under
the "intensive drive" for 1918 returns. The wages line on the 1017 number of dollars income
per dollar-income interval chart (Chart 28V) shows signs of turning up somewhere between
$4,000 and So, 000 and the business line somewhere in the $5,000 S10.000 interval. However
neither movement is larjie nor can their positions be accurately determined on account of the
size of the reporting intervals. See also Chapter .'50, p. 412.
4 The "bulge" on the income from wages and salaries curve itself, as seen in the income-
tax returns for 1918 and 1919 (see Charts 2sX and28Z), seems the result of heterogeneity in
these wage and salary data themselves. This hypothesis is considered in Chapter 30.
394 PERSONAL DISTRIBUTION OF INCOME IN U. S.
describe the whole distribution by any mathematical curve
designed to describe homogeneous distributions (as any simple
mathematical expression must almost necessarily be designed
to do) ;
(c) Furthermore, the existing data are not adequate to break up
the income curve into its constituent elements;
(d) If the data were complete and adequate we might still remain
in our present position of knowing next to nothing of the
nature of any "laws" describing the elements. 1
(3) Pareto's conclusion that economic welfare can be increased only
through increased production is based upon erroneous premises.
The income curve is not constant in shape. The internal movements
of its elements strongly suggest the possibility of important changes
in distribution. The radically different mortality curves for Roman
Egypt and modern England, 2 and the decrease in infant mortality
in the last fifty years illustrate well what may happen to heteroge-
neous distributions.
The next four chapters review the data from which any income frequency
distribution for the United States must be constructed.
1 Though all the evidence points to hope of further progress lying in the analysis of the
parts rather than in any direct attack upon the unbroken heterogeneous whole.
* See Biometrika, Vol. I, pp. 261-264.
S
CHAPTER 29
OFFICIAL INCOME CENSUSES
There has never been a complete income census of the American people.
The Federal income-tax data cannot take the place of such a census. Re-
specting the distribution of income among persons having incomes of less
than $1,000 Federal income-tax data give us no information whatsoever.
Furthermore, on account of the exemption of married persons, compara-
tively little use can be made of the $1,000 to 82,000 interval. The number
of persons reporting incomes over $2,000 in our best year, 1918, was only
7.3 per cent of the estimated total number of income-recipients in the
country. Moreover, not only because of direct evasion and illegal non-
reporting, but also because of "legal evasion" and the large amount of
tax-exempt income which need not be reported at all, these income-tax
data cannot give an approximately correct picture of even that part of
the frequency curve which lies above $2,000. The adjustments of the
income-tax data necessary to obtain such a picture are extremely large,
as we shall presently see.
Only one country in the world has ever taken an official income census
which made any pretense of completeness. Under the War Census An
the Commonwealth of Australia took an official income census of incomes
received during the year ended June 30, 1915, by everyone, man, woman,
or child, who was "possessed of property, or in receipt of income." x The
results of that census are summarized by G. H. Knibbs, the Commonwealth
Statistician, in The Private Wealth of Australia and its Growth. A Re-
part of the War Census of 1915. (See Table 29A and Charts 29A, 29B
and 29C.)
Now while it would naturally be impossible to construct a complete
frequency distribution for American incomes from Australian data, 2 we
might perhaps hope to discover some characteristics of income-distribution
1 While the first clause of the Australian "Wealth and Income Card" stated merely that
it was "to be filled in by all persons aged 18 or upwards possessed of property, or holding
property on trust, or in receipt of income," etc. (p. 9), "a special instruction was issued that
in the ease of all persons under the age of 18, possessed of property, or in receipt of income.
a return must be furnished by the parent or guardian in respect of such property or income."
(p. 10.) The income from such trust funds was not all, but only "in the main." allocated to
individual beneficiaries, (p. 22.)
G. H. Knibbs, The Private Wealth of Australia and its Growth. A R fthe War Casus
of 1915.
2 Aside from the questionableness of such a procedure, the large size of the low income
intervals in the Australian distribution and the lack of information concerning the amount
of negative income make that distribution a difficult one to work with. A classification by
such largo intervals tells very little.
395
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r^
™i
L
CHART 29 A
NON-CUMULATIVE FREQUENCY DISTRIBUTION
SCALES NATURAL
■Males and Females
Males
■Females
L
SCALE
100.000
PER50N5
I
ido 260 3oT) _ ~~m~ 500
INCOME IN POUNDS STERLING
600
700
■ ! -..- ■>
"1
- 1,000,000
a
a
a
H
CHART 29 B
NON-CUMULATIVE FREQUENCY DISTRIBUTION
SCALES LOGARITHMIC
100,000 ^
I
10,000
- 1,000
-100
Cu
CO
Z
o
CO
Ed
W
Cm
b
O
DS
W
ca
s
2
1
I
I
I ,
I
50
"1,000,000'
100
INCOME IN POUNDS STERLING
200 300 500 1,000 2,000 3,000 5,000
CHART 29C
CUMULATIVE FREQUENCY DISTRIBUTION
SCffLES LOGflR/THM/C
INCOME IN POUNDS STERLING
200 30,0 59O 1,0,00 2,000 3,0,00 , '',000
398 PERSONAL DISTRIBUTION OF INCOME IN U. S.
curves in general from this, the only actual census ever taken. A knowl-
edge of such general characteristics might then, quite imaginably, be a
little helpful in the problem of describing the American or any other
income distribution.
However, when we come to examine the Australian figures, we find that
they have certain pronounced peculiarities which would be extremely diffi-
cult to read into the American material. For example, the Australian dis-
tribution shows a flatness and lack of pronounced mode totally unlike the
results we have built up from an analysis of American data. In the Aus-
tralian distribution there are nearly the same number of persons having
incomes between and £50, £50 and £100, and £100 and £150. 1
What are the causes of this rather startling peculiarity of the Australian
frequency curve? 2 In the first place let us suggest a possibly minor but
by no means necessarily negligible factor. We know little about the good-
ness of the Australian reporting in this census. Income is, from its nature,
a difficult subject to investigate. When the material is collected by means
of schedules to be filled in by the informants, as was the case in the Aus-
tralian census, the returns may easily be full of errors. The average in-
dividual is surprisingly ignorant concerning the amount of his total income.
The further fact that the census was taken in order to estimate possi-
bilities of future taxation may well have been a powerful incentive towards
great irregularities all along the line, but especially in the lower income
groups. Persons whose income brought them distinctly into the upper
groups (over £156) were, at the time of the income census, about to make
returns under oath for income-tax purposes and would hardly care to
show a radical discrepancy between the two returns. On the other hand,
many persons, whose true incomes were around £156 and the modal income,
might easily have "underestimated" with the idea of evading if possible
future taxation based upon a lowering of the exemption limit. The result
of such practices would tend to show up graphically in a flattening of the
curve in the vicinity of the mode of the distribution and a raising of the
numbers in the lowest groups. 3
However, poor reporting is probably only a secondary element ac-
counting for the peculiarities of the Australian curve. It is most of all the
> See Table 29 A and Chart 29 A.
'-' Notwithstanding the fact that distributions for different times and for different countries
probably vary greatly (see Chapter I'M, tin- difference between the Australian curve and
the Bureau's American estimate seems too radical to explain upon this basis.
3 It is difficult to determine the extent of actual non-reporting. The number of males
filling out income cards was 2,527,831. All males "possessed of property, or in receipt of
income" are supposed to be included in this number. It amounted, however, to only 54.60
per cent of the total male population. Males "possessed of property, or in receipt of income"
necessarily constitute a larger percentage of the total male population than do male "bread-
winners," yet in the Australian census of 1911 male breadwinners constituted 69.4 per cent
of the total male population, and male breadwinners 20 years of age or older 58.9 per cent.
Even if we assume that the number of income returns for males under 18 was negligible we
still are faced with a discrepancy difficult to account for.
OFFICIAL INCOME CENSUSES 399
concentration of female returns in the lowest income groups which gives
the flat and modeless appearance to the total curve. The Australian fre-
quency distribution among males only, is much more like our estimated
American distribution 1 than is the Australian distribution among males
and females together. Now the concentration of female returns in the
lower income intervals would seem to be the result of a large number of
returns made by women and female children receiving petty incomes from
property who would be classified, in the Australian Census of Population,
as "dependents" and not as "breadwinners." 2
Of the total female population in 1915, 33.46 per cent made out income
cards and 23.18 per cent reported positive incomes (10.28 per cent re-
ported zero or negative incomes). But according to the Australian census
of 1911, only 18.6 per cent of the total female population were classified
as "breadwinners." Thus the women reporting positive incomes in L915
constituted a much larger percentage of the total female population than
did female "breadwinners" in 1911 of the total female population in thai
year. The discrepancy seems too great to be accounted for by the in-
crease in the number of women "breadwinners" caused by the war. More
than half of the 23.18 per cent of the female population reporting positive
incomes in 1915 reported incomes under £50 per annum. Moreover, the
average income of this group was only £22 per annum — under the arith-
metic average of the interval. This strongly suggests petty incomes from
property, and part time occupations such as keeping boarders, lodgers,
chickens, etc., rather than any great increase in the number of female
"breadwinners." The fact that over 30 per cent of the returns made by
females reported zero or negative incomes is further evidence that the
large number of extremely small incomes reported was largely the result
of the schedule calling for income returns from all persons "possessed of
property."
Negative incomes arise in general from business or speculative losses.
Bad as may be the condition of any laboring class, its members are seldom
faced with negative incomes. It is unlikely that many of the 2 I'd. 176
females reporting "deficit and nil" were wage-earners. They were in
general the owners of small investments which showed losses, such as
town lots upon which taxes had been paid. 3
1 See Income in the United Stair* , Vol. I, pp. 12S, 129, L32 135.
2 All persons are classified as " breadwinners" or as "dependents" by the Australian cei
Male "breadwinners" in Australia constituted in 1911, according to the census of that year,
69.4 per cent of the total male population, female "breadwinners" 18.6 per cent of the total
female population, and total "breadwinners" 15.0 per cent of the total population. These
figures compare with American census figures for 1910 showing males "gainfully employed"
to constitute 63.6 per cenl of total males, females "gainfully employed" 18.1 per cen( o\
total females, and total "gainfully employed" 41.5 per cent of the total population.
'It is worth noting that in the Australian schedule "rah- and taxes paid" could be de-
ducted before making an income return. This consideration may be of -"me importance in
explaining the very large number of small, zero, and negative in
400 PERSONAL DISTRIBUTION OF INCOME IN U. S.
While the frequency curve for Australian males is much more like the
American distribution than the curve representing both male and female
Australian income recipients, even it shows a much greater concentration
in the lowest income intervals than does the American distribution. This
can probably be accounted for to some extent by a large number of income
returns for young male "dependents" "possessed of property."
The essential difference in appearance between the American income-
distribution curve which we presented in Volume I and the Australian
curve of 1915 is, then, probably traceable to (1) Australian underreporting
and (2) Australian inclusion of a large number of "dependents" who re-
ceived petty incomes from property and who were in no important sense
"breadwinners" or "gainfully employed."
What shall we say about the desirability or undesirability of including
in an income frequency distribution dependents receiving petty incomes
from property? While it is true that their incomes, positive or negative,
are in a way as real as any other incomes, we must remember that probably
almost all individuals over six years of age not only receive but earn some
money income during each year. Shall we then include the entire popu-
lation over six years old in our distribution? As we approach this theo-
retical limit it is seen that the concept becomes less and less practically or
even theoretically interesting. Both practically and theoretically we are
interested in the incomes of persons who, though they be minors, have
"economically come of age" and have entered into certain definite rela-
tions to the machinery of factorial distribution. They are "breadwinners"
or "persons gainfully employed," and the concept back of such expres-
sions, though like many economic concepts somewhat of a compromise,
seems a good compromise for our purposes.
Denning income recipient as we have, we cannot use the Australian
material as an aid to the graduation or adjustment of the American income-
distribution curve in its lower ranges. In the upper income ranges, the
Australian distribution offers, as we shall see, an interesting illustration
of the same double swing (letter S) appearance of the curve seen in some
of the more recent American data. 1
1 When charted on a double log scale.
<*
CHAPTER 30
AMERICAN INCOME TAX RETURNS
At the beginning of the preceding chapter attention was drawn to some
reasons why income-tax returns cannot take the place of an adequate
income census. Nevertheless tax returns are in many respects t he most
important single source of information we have for estimating tin? fre-
quency distribution of incomes. Were there neither tax returns nor in-
come censuses for any country, it is difficult to see how we could make
even an interesting guess as to the distribution of income in the upper
ranges.
American income-tax data go back to 1913. We have now at our dis-
posal returns for the seven years, 1913 to 1919, inclusive. 1 However, the
amount of information given in the official reports for the earlier years
1913, 1914 and 1915 is not great. Little is shown beyond the number
of returns classified by large income intervals and the same returns classi-
fied by districts. The 1916 tax report is the most voluminous and in one
respect the most adequate report which has yet appeared. 2 It contains
a set of tables which we are sorry to miss in the later reports, showing
the frequency distribution of incomes by separate occupations. Other
features of this report which have been retained in later years are tables
showing both number of returns and amount of net income for each income
class for the country as a whole, and the same by States; tables showing
the sources of the income returned in each income interval, that is the
amount from wages, business, property; distribution tables arranged by
sex and conjugal condition; amounts of tax collected from each income
class, etc.
Changes in the Federal Income Tax Law during the period have not
been such as greatly to affect any conclusions which we have drawn from
the data. From the standpoint of this investigation, probably the mosl
important changes in the law relate to general deductions, professions, and
minimum taxable income.
In the 1916 returns all deductions were classified as general deductions.
1 The Annual Reports of the Com?rn'ssit>in r of Fnttrnal ' are the sources for American
income-tax data for the years L913 to r.tl.j. Since 1915 the data have appeared annually
as a separate Treasury Department publication entitled Statistics of I
2 A peculiarity of the 1916 data is that the returns are tabulated as family rather tlian in-
dividual returns. "The net incomes reported on separate returns made by husband and wife
in 1916 are combined and included as one return in the figures for the several classes." Statis-
tics of 1 ncoim. 1 "J 17, p. 22.
401
402 PERSONAL DISTRIBUTION OF INCOME IN U. S.
In the 1917 returns the types of deductions classified as general deductions
were greatly reduced; not even contributions were included. In 1918 the
category was enlarged; contributions, for example, were again placed in
the general deductions class. Now these changes affect greatly the rela-
tions between net and total income from year to year. Reported net income
was in 19 10 only 75.43 per cent of reported total income, in 1917 it was
92.67 per cent, in 1918 89.74 per cent, and in 1919 88.51 per cent. As
it is the total and not the net income which in the Statistics of Income, is
divided up according to source, such fluctuations as the above interfere
with comparisons of different years.
While income from professions was tabulated separately in 1916, in 1917
it was included in wages and salaries, and in 1918 and 1919 in business.
In the 1913 to 1916 returns exemptions were $3,000 per annum for an
unmarried person, or a married person not living with his wife (or her
husband), and $4,000 per annum aggregate exemption for married persons
living together. 1 In the 1917 and later returns these minima were reduced
to $1,000 and $2,000 respectively. However, the increase in usefulness for
our purposes of the 1917 and later returns was even greater than the
lowered minima would suggest. Not only was the minimum taxable
income lowered from $3,000 to $1,000, but this reduction occurred in the
face of a rapidly rising general level of incomes. With the rise in incomes,
$3,000 in 1918 or 1919 was relatively a much smaller income than $3,000
in 1913. In other words, we might logically expect $3,000 to be relatively
further down the income distribution curve in 1918 than in 1916 or
1917.
The accuracy of the reporting is, of course, a matter of great importance
for this investigation. Now, while it does not seem possible to measure
directly from the data changes in accuracy of reporting during the period,
the rapid expansion of the income-tax organization and its increasing
attention to the investigation and checking of returns establish the pre-
sumption of greater statistical value in the reports for the later years.
Offsetting this to an unknown degree is the apparently increasing amount
of "legal evasion" in the higher income classes. The reporting for the
years 1913, 1914, 1915 and 1916 appears to have been peculiarly bad in
the lower income ranges. The distinct improvement in 1917 (compare
the 1917 returns with those for earlier years in Tables 28B, 28C, 28D, 28E,
and Charts 27 and 28 of Volume I) seems associated with the patriotic
enthusiasm engendered by the war. Upon our entry into the war, not
only did the Bureau of Internal Revenue make an increased effort to ob-
1 As the returns for 1913 were for income received for the ten months March 1 to December
31, 1913, the actual minima used for reporting purposes were $2,500 and $3,333.33 (i. e., \%
of $3,000 and $4,000 respectively).
AMERICAN INCOME TAX RETURNS 403
tain correct returns but individuals, under the spur of patriotism, seem to
have made less effort to evade. 1
The remainder of this chapter is concerned largely with a discussioD
of possible irregularities in the distribution of non-reporting and under-
statement in the later years. While the total amount of non-reporting
and understatement was almost certainly greater in the returns for 1917
than in those for 1918 and 1919, are we sure that the non-reporting and
understatement of these later years are not possibly more irregularly dis-
tributed along the frequency curve than was the case in 1917? Is it
possible that the improvement in the accuracy of the published returns
for 1918, as compared with those for 1917, was so much greater in the
income intervals under $5,000 that the resulting change in the shape of
the frequency curve may amount to something almost akin to an "over-
adjustment"?
Income returns by individuals are made on two types of blanks, a blank
to be filled in by persons reporting incomes under S5,000 and another
blank to be filled in by persons reporting incomes over that figure. Now,
while the returns of incomes under 85,000 and made on "under 85,000"
blanks are examined, investigated and audited in the field soon after
their receipt, the investigation and audit of the returns for incomes over
85,000 are handled in Washington. If an individual has an actual income
of $8,000 but reports $4,000 (on an "under 85,000" blank), as soon as a
Field Collector discovers this discrepancy, he passes the matter over to
the Revenue Agent in charge of the District for Field Investigation. The
return, accompanied by the Agent's report, is forwarded to Washington
for final audit. Thus the Field Collectors audit only returns thai are a
made on "under $5,000" blanks and (b) believed, after investigation, to be
for incomes which are actually under $5,000.
While the Field Audit of returns of these incomes is well under way
before the preparation of the statistical tables in the Statistics of Incorm
and hence appears in that tabulation to an unknown extent, the Washing-
ton audit of incomes over $5,000 has hardly begun and hence the amended
figures for these higher incomes do not appear in the Statistics of Incorm .
It is impossible to say exactly how much of the "bulge" - which appears
in the $1,000 to 85,000 interval on the double log charts of the 1918 and
1919 tax income distributions is caused by a difference in the accuracy
of the published figures for returns of incomes under and over $5,000.
However, the Treasury Department states that "the Statistics of Inc
1 It must not, of course, be assumed that the increase in the number of returns in 1917 is
traceable solely to increased goodness of reporting.
2 Described in Chapter 28. At many points in the following discussion the reader should
refer back to the presentation of the case for heterogeneity in the income-tax data contained
in Chapter 28.
404 PERSONAL DISTRIBUTION OF INCOME IN U. S.
are compiled almost entirely from unaudited returns whether they be for
'under $5,000' or 'over $5,000."' It seems probable therefore that the
sudden change in slope of the 1918 curve (on a double log scale) at about
$5,000 can be explained only partially by a change in accuracy of the
published returns at that point.
Moreover, a considerable amount of evidence, some of which has already
been presented in Chapter 28, suggests that the "bulge" on the income
curves for the later years corresponds to a reality on the actual income
curves. While it may be somewhat over-accented in the published figures
for 1918 and 1919, and while the figures for 1917 might have shown more
of such a "bulge" * had the reporting been better, we must not assume
that the published figures for either 1917 or 1918 give a radically incorrect
picture of the facts merely because the income curves for the two years
are so different. The dogma of the similarity of the income curve from
year to year has little evidence to support it.
It is by no means certain that even the apparently definite and sharp
angles on the curves in this $4,000 to $6,000 region give an unreal picture.
While it is true that we find the same angles on the wages and salaries
curve, that curve itself seems heterogeneous. An income distribution
curve composed of wage and salary earners (in the ordinary sense of the
terms) may well cut an income distribution curve composed of "salaried
entrepreneurs," and business and financial experts somewhere in the lower
income ranges. The angle on the composite curve may give a decidedly
accurate picture of the facts. 2
Let us see what light the data throw on some of these problems.
Table 30A showing the number of returns for the lower income intervals
in 1917, 1918, and 1919 and the percentage movements from year to year
illustrates the great increase in the number of returns in the under-$5,000
intervals between 1917 and the later years.
Chart No. 28 of Volume I, on which are drawn the frequency distributions
for each year from 1916 to 1919 on a double log scale, shows the difference
in the appearance of the income curves for the three years. Examining
that chart we notice that the 1918 data-points, which in the upper income
ranges run nearly as smoothly as the 1917 points, in the $4,000 to $5,000
interval move abruptly upwards and from there on into the lowest income
ranges are well above the 1917 points, showing on the chart an irregular,
plateau-like effect in these lowest income ranges. No such "plateau"
is apparent on the 1917 line. The year 1919 presents in that chart a
1 While the 1917 curve runs much more smoothly in the $3,000 to $6,000 range than either
the 1918 or 1919 curves, it is not without the hint of a bulge beginning at about $4,500. See
p. 412.
2 In constructing the complete income distribution curve for 1918, published in Volume I,
the influence of changes in the accuracy of reporting around $5,000 income was probably
overestimated.
AMERICAN INCOME TAX RETURNS
m
TABLE 30A
Number of returns
Percentage increases
Income intervals
1917
1918
1919
1918
over
1917
1919
over
1918
1919
over
1917
$2,000-$3,000
3,000- 4,000
4,000- 5,000
838,707
374,958
185,805
1,496,878
610,095
322,241
1,569,741
742,334
438,154
78.47
62.71
73.43
4.87
21.68
35.97
87.16
97.98
135.81
5,000- 6,000
6,000- 7,000
7,000- 8,000
8,000- 9,000
9,000-10,000
105,988
64,010
44,363
31,769
24,536
126,554
79,152
51,381
35,117
27,152
167,005
109,674
73,719
50,486
37,967
19.40
23.66
15.82
10.54
10.66
31.96
38.56
43.48
43.77
39. 83
57.57
71.34
66.17
58.92
54.74
similar appearance to 1918 though the absence of small intervals in the
range immediately above $5,000 disguises the characteristics of the curve
materially. 1
The change in the contour of the lower range of the tax income frequency
curve from 1917 to 1918 and 1919, is, as we have mentioned, associated
with a large increase in the relative amount of income from wages and
salaries in the lower intervals. Tables 30B and 30C are interesting in
this connection. 2
The 1916 figures in Table 30B are introduced simply because they
are computable. 3 However, too much weight must not be attached to
them. The 191G returns are undoubtedly extremely inadequate. The
high percentages that year from $3,000 income (the 1916 minimum) up
to about $10,000 may possibly be the result of the ease with which salary
returns (as opposed to wage, business, or other returns) are obtainable.
The $4,000 to $5,000 interval is the lowest comparable interval for the
four years. 4 In that interval the numbers of returns by years were:
1916- 72,027
1917-185,805
1918-322,241
1919-438,154
1 When chart 28 was drawn for Volume I, only "preliminary" large interval data were
available. Final small interval data show a "bulge" very similar to that seen in the 1918 line.
2 The 1917 official wages figures include income from professions. The 1018 and 191!) wages
figures do not. This makes the increase in the percentages in 1918 still more striking. In-
come from professions was tabulated separately in 1916, l>ut was included in the voagi s figures
for that year in order that 1916 and 1917 might be comparable.
3 No data are available front which corresponding figures for 1913, 1914 or 1915 might
be calculated.
* The $3,000-84,000 interval did not in 191G, include married persons making a joint return.
406
PERSONAL DISTRIBUTION OF INCOME IN U. S.
TABLE 30B
PER CENT THAT INCOME FROM WAGES AND SALARIES IN EACH NET
INCOME CLASS WAS OF TOTAL NET INCOME IN THAT CLASS
Income class
1916
1917
1918
1919
$ 1,000-$ 2,000
2,000- 3,000
3,000- 4,000 .
2,000- 4,000
4,000- 5,000
76.98
66.86
46.32
36.30
79.45
69.75
55.21
(64 . 42)
48.85
83.49
74.53
61.86
(69.45)
52.48
5,000- 10,000
10,000- 20,000
20,000- 40,000
40,000- 60,000
60,000- 80,000
80,000- 100,000
100,000- 150,000
150,000- 200,000
200,000- 250,000
250,000- 300,000
300,000- 500,000
500,000-1,000,000
1,000,000-1,500,000
1,500,000-2,000,000
2,000,000 and over
53.31
36.38
24 . 60
17.23
16.20
13.37
13.34
9.39
9.14
7.87
6.59
5.21
4.84
3.23
.51
36.16
32.94
26.82
22.74
19.67
18.51
15.75
12.65
12.30
9.36
10.17
6.39
2 . 83
3.76
2.39
39.59
38.60
33.16
27.88
25.36
22 . 16
18.44
16.16
13.07
12.57
11.27
5.42
7.54
2.21
.85
43.24
38.11
33.38
27.57
24.01
22 . 70
18.75
15.42
13.62
11.92
10.18
6.80
1.60
10.00
4.02
The amounts of income from wages and salaries and from other net income
in the $4,000-15,000 interval were year by year in millions of dollars:
1916
1917
1918
1919
Wages and salaries a .
216
107
301
528
703
736
1,029
< >ther net income
931
a Income from professions is included in the 1916 and 1917 wages and salaries figures.
The percentage changes in these items from one year to the next were:
1917 1918 1919
1916
Wages and salaries 139 . 3
Other Net Income 493.0
1917
233.7
139.4
1918
146.4
126.6
It is plain that the great increase in the $4,000-15,000 interval 1 in 1917
was in income from other sources than wages and salaries.
Table 30C shows the wage and salary figures compared with total income
instead of net income as in Table 30B. It was, of course, necessary to re-
tain the net income intervals as the data are not classified in total income
1 As may be seen from Tables 30B and 30C, the increase from 1916 to 1917 in income from
other sources than wages and salaries was greater than the increase in income from wages
and salaries not only in the $4,000-$5,000 interval but also in the $5,000-$ 1U.U00 interval.
AMERICAN INCOME TAX RETURNS
407
intervals. Though the relations between years are different in this table
from what they are in the net income table, 1 the distribution of the per-
centages in each individual year shows much the same characteristics in
both tables.
TABLE 30C
PER CENT THAT INCOME FROM WAGES AND SALARIES IX EACH NET
INCOME CLASS WAS OF TOTAL INCOME IN THAT (LASS
Income class
(Net)
1910
1917
1918
1919
$ 1,000- $2,000
74.67
77.25
2,000- 3,000
65.42
lilt. 14
3,000- 4,000
47.74
51.14
56.71
2,000- 4,000
1 1 82
(60.15)
64 12)
4,000- 5,000
45.96
33.60
44. s2
17 12
5,000- 10,000
3G.38
33.87
33.55
36.60
10,000- 20,000
25.76
30. so
33 . 10
32 70
20,000- 40,000
18.81
25 . 20
28.76
28 36
40,000- 60,000
13.75
21.23
2:5.79
23 39
60,000- 80,000
12.76
IS. 56
21.51
20.33
80,000- 100,000
10 71
17.61
19.00
lit 25
100,000- 150,000
11.06
15.05
15.92
1 5 40
150,000- 200,000
7.68
12.01
13.10
12 11
200,000- 250,000
7.83
11.75
1 1 22
11 . 26
250,000- 300,000
6.64
8.71
10.73
9 SO
300,000- 500,000
5.50
9.59
9.62
8.19
500,000-1,000,000
4.35
5.88
4.37
5.38
1,000,000-1,500,000
4.12
2.62
6.29
1 . : ; 1
1,500,000-2,000,000
2.82
3 5 1
1.81
s 51
2,000,000 and over
.47
2 . 18
.63
.32
The percentages in Tables 30B and 30C show each year a sudden increase
(as we approach the lower income intervals) somewhere in the 84,000 t<>
$5,000 or the $5,000 to $10,000 interval. At exactly what point each year
do these sudden increases seem to occur? Charts 30D, 30E and 30F pre-
sent the material in a slightly different form. They illustrate the relation-
ship between the average income from wages and salaries in each net
income interval and the average total income in the same net income in-
terval for the years 1017, 1918 and 1019 on a double log scale. The 1918
and 1919 charts immediately suggest the improbability of being able to
describe the data by a single simple mathematical expression. To the
1918 data-points have been applied two distinct mathematical curves,
which fit the data remarkably well and intersect at about $6,700 total
income. The curve fitted to the upper income ranges is a parabola, while
that fitted to the lower income ranges is an hyperbola, one of whose asymp-
totes is the 45° line which divides the chart into a "possible" and an "im-
1 Some reasons for the changes in relation of net to total income from year to year are
mentioned on pages 401 and 102.
408
PERSONAL DISTRIBUTION OF INCOME IN U. S
CHART 30 D
US IMC0ME TAX RETURNS /
1917 /
3
<
a
o
AVERAGE INCOME /
FROM /
WA6ES AND SALARIES /
AMD /
AVERA6E TOTAL INCOME /
IN /
EACH NET INCOME INTERVAL /
Q
O
Scales Logarithmic /
-100 g
z
<
CO
P
-50 §
-40 H
s ° ^^"^
o
-30 23
5
-20 j
<
CO
o
WAGES AND
-5 S
o
-4 £
O
-2 Z /
° /
4
TOTAL INCOME IN THOUSANDS OF DOLLARS
i
3 4 5 10 20 30 40 50 100 200 800 400 500
1.000
2,000 3,0001000
X
AMERICAN INCOME TAX RETURNS
409
410
PERSONAL DISTRIBUTION OF INCOME IN U. S.
CHART 30F
<
-J
j
o
Q
U.
100C
CO
a
z
<
50 g
40 =
US INCOME TAX RETURNS
1919
AVERAGE INCOME
FROM
WAGES AND SALARIES
AVERAGE TOTAL INCOME
IN
EACH NET IMCOME INTERVAL
Scales Logarithmic
TOTAL INCOME IN THOUSANDS OF DOLLARS
10 20 30 40 50 100 200 300 400 500
' , , i , , ,
1,000
2,000 3,000 4,000
i
AMERICAN INCOME TAX RETURNS
411
possible" area. The equations of the two (1918) curves on a double log
scale are (I) y + 3.92945 — 2.744 x 4- .22 x - = (parabola)
(II) y - — 3.981909 y-- .867240 xy 4- 3.981909 x — .132754 z 2
— .060262 = (hyperbola)
As it is difficult to estimate accurately by eye the goodness of fit of a curve
to data when charted on a log scale, Table 30E is introduced:
TABLE 30E
WAGES AND INCOME IN THE 1918 INCOME TAN RETURNS
Net income
intervals (1918)
S 1,000-8
2,000-
3,000-
4,000-
5,000-
6,000-
7,000-
8,000-
9,000-
10.000-
1 1 .000-
12,000-
13,000-
14,000-
15.000-
20,000-
25,000-
30,000-
40.000-
50,000-
( ;o ooo-
7(1.000-
80,000-
90,000-
100.1)01)
150.000-
200,000-
250,000-
300.000-
400,000-
.-,1)0,01)0
7 :,o.ooo-l
1.000.000-1
I..", 00. 000-2
•j. ooii ooo 3
3,000,000-4
2,000.
3.000.
4.000.
5,000.
6,000.
7.000.
8,000.
0,000
10,000.
11.000.
12,000 .
13.000.
14,000.
15,000.
20,000.
25,000.
:;o.000.
lo.OOO.
50,000.
60,000.
70.000.
S0.000
90,000.
100.000.
150,000
200.000.
2.-0.000
300.000
400,000 .
500,000 .
7 r.o.OOO.
.000.000
..-,00,000.
,000,000 .
000,000.
000,000
Average
total income
8 1,566
2,583
3,710
4,866
6,388
7,620
8,952
10,148
11,214
12.207
13,707
14,263
15,922
16.77s
20,167
25,859
31.704
39,644
52,319
64,327
74. sis
90.437
98,379
111,515
139.. -,20
2 11, 0.V.i
259,487
317,578
109,756
.',14,882
765,! K)5
1.013. sir,
1,426,182
2.0s 1.71.-,
3.203.07.;
1.515.732
Average income from
wages and salaries
Data
8 1,169
1.600
l.so7
2,181
2,192
2.537
2,963
3,341
3,747
4,171
4,555
4,806
5.520
5,801
6,375
7,891
9,196
10,711
12.039
14.963
10.570
is. 701
19,273
20,447
22 212
27J58
29,107
34,076
44,393
38,967
27,582
01.183
89,710
37,118
51 '. 17s
11,013
Mathematical
curves
8 1.17s
1.052
1,955
2,117
2,216
2,555
3,012
3,407
3,760
4,07s
4,542
4,709
5,204
5, 155
6,400
7,860
9,211
10,872
13. 102
15.000
16,539
IS. 150
10.351
20,682
23,163
27,829
30 1s
32.220
3,1.7s.;
36.sl7
39,765
41.220
12,199
12.100
10.720
38,753
Percentages
that data are of
mathematical
curves
99 2
102 3
97.0
103.0
98 9
99.
OS
98.
99.
102
100.
102.
.3
.4
1
.7
3
.3
1
106.2
106.3
99.6
1
s
.5
100.
gg
98
95.8
99.3
100.2
101.7
99.6
95.9
99 7
96.8
105 7
127 6
105.8
69. 1
148.4
212.6
ss
123 2
28 1
The data of table 30E move 1 rather erratically in the intervals above
8300,000 per annum income. This is natural in view of the small number
412
PERSONAL DISTRIBUTION OF INCOME IN U. S.
of cases in these upper intervals. There were only 627 returns reporting
net incomes of over $300,000 per annum; this is less than one seventieth
of one per cent, of the total number of returns. In the 28 intervals under
$300,000 per annum 14 of the percentages show the data within one and
one half per cent, of the mathematical values.
These mathematical curves have not been introduced as being in any
sense the "law" of the data but merely to emphasize how smoothly the
data curves run and yet how unmistakable a sensation they give us of two
parts, one above about $6,700 total income and one below that figure. 1
It would, of course, be quite impossible to get any sort of approximation
to the lower range data by producing the parabola fitted to the upper
income ranges. How impossible may be seen from Table 30EE.
TABLE 30EE
WAGES AND INCOME IN THE 1918 INCOME TAX RETURNS
Average
total
income
Average income from wages
and salaries
Percentages that
data are of
intervals (1918)
Data
Hyper-
bola
Para-
bola
Hyper-
bola
Para-
bola
$4,000-$5,000
3,000- 4,000
2,000- 3,000
1,000- 2,000
$4,866
3,710
2,583
1,566
$2,181
1,897
1,690
1,169
$2,117
1,955
1,652
1,178
$1,574
1,152
745
391
103.0
97.0
102.3
99.2
138.6
164.7
226.8
299.0
The 1919 data show the same two-curve appearance as the 1918 data.
This may be clearly seen from chart 30F. 2 The intersection of the two
curves would be at about $7,100 instead of $6,700 as on the 1918 chart.
Is there any sign of such a change from one curve to another on the 1917
data? There seems to be. Chart 30D shows the 1917 data with a parabola
fitted to the observations above the first interval. This curve and Table
30D give us a strong impression that the first interval cannot be described
by any simple curve which describes the remainder of the data. The same
two-curve characteristics as the 1918 and 1919 data are strongly suggested.
The equation of the 1917 parabola on a double log scale is y + 1.8417 —
1.8346 x + .124 x 2 = 0. The poorness of the fit to the first interval and
the comparative goodness of the fit to the remainder of the data as high as
$250,000 per annum may be seen from Table 30D. If the data were
numerous enough to permit us fitting two curves they would probably
intersect at about $4,500.
1 An alteration in the size of the intervals in which the data are quoted by the Income Tax
Bureau would of course change the data curve to some extent. However, taking the intervals
as they conic and fitting the curves to them we get the unmistakable impression of great regu-
larity. It seemed scarcely worth while to fit the curves to areas rather than points.
2 The story told by Chart 30F is so plain it seemed hardly necessary to fit another set of
curves.
AMERICAN INCOME TAN RETURNS
413
TABLE 30D
WAGES AND
INCOME IN
THE 1917 INCOME TAX RETURNS
Average
total income
Average income from
wages and salaries
Percent a«es
that data are of
intervals (1917)
Mathematical
mathematical
Data
curve
curve
$ 2,000-$ 4,000 . . .
$ 3,059
$1,280
$1,101
116.3
4,000- 5,000...
4,818
1,619
1,688
95.9
5,000- 10,000...
7,210
2,442
2,422
100.8
10,000- 20,000 .
14,61':;
4,517
1 374
103.3
20,000- 40,000 .
29,236
7.368
7,411
99.4
40,000- 60.000 . . .
51,940
11,024
11,03s
99.9
60.000- 80,000...
72,811
13,516
13,699
98.7
80,000- 100,000 . . .
93,742
16,510
15,992
103.2
100,000- 150,000. . .
126,'. 179
19,108
19,081
100.1
150,000- 200,000 . . .
181,156
21,758
23,147
94.0
200.000- 250,000 . . .
23:;. ssi)
27,501
26,388
104.2
250,000- 300,000 . . .
293,905
25,587
29,478
86.8
300,000- 500.000 . . .
398,.", 17
38,204
33,877
112.8
500,000-1,000,000. . .
740,769
43,558
43,632
99.8
1,000,000-1,500,000. . .
1.294,619
33,973
52,845
64.3
1,500,000-2,000,000. ..
1,812,388
64,201
58,358
110.0
2,000,000 and over. . . .
4,551,718
99,132
71,945
13.7.8
Both the regularity of the data curves and the positions of the inter-
sections of the mathematical curves 1 might suggest that heterogeneity
of the wages and salaries data was the primary cause of the irregularity
in the total income curve. The position of the points of intersection of the
mathematical curves might seem inconsistent with a sudden change in
accuracy of reporting at exactly $5,000.
However this argument does not appear so conclusive when we examine
the actual amount of wages in each income interval. The constitution of
the reported income each year may be seen rather plainly in ('harts 28T,
28U, 28V, 28W, 28X, 28Y, 28Z, and 28AA. 2 These chart - show the number
of dollars per dollar income interval reported in each income interval by
sources for the years 1910 to 1919. 3 They not only illustrate the facl that
the constitution of the income curve changes radically as we move from
small to large incomes but also picture the salient characteristics of these
changes; each source curve, being charted on a double log scale, may be
> Particularly the 1919 intersection which is above the s~>, ooo to so, not) m I income interval.
« See pages 3S5 to 392.
3 The five lines representing wages, business, rents, interest, and dividends were found to
interweave to such an extent when drawn on one chart that two charts were drawn for each
year, one representing wages and business and the other incomes from property.
Wages includes "salaries, wages and commissions" and in L916 and L917 "professions and
vocations."
Business includes "business." "partnerships, personal service corporations, estates, and
trusts," and " profits from sales of real estate, stocks, bonds, etc.," and in 1918 and L919
"professions."
Hints includes royalties. _
I nit n si includes unclassified investment income.
414 PERSONAL DISTRIBUTION OF INCOME IN U. S.
seen at a glance in its entirety. We see from Charts 28X and 28Z that,
though the ratio of the income from wages and salaries to total income
may, when charted, show an angle above $5,000, the entire "bulge" on
the wages and salaries curve itself occurs in the under-$5,000 intervals
both in 1918 and 1919. Moreover, while "wages and salaries" is the larg-
est item in these lowest income intervals, and hence is the controlling factor
in determining the peculiar shape of the total curve in this region, it is not
the only item showing irregularities and "bulges." Some of these move-
ments are extremely difficult to explain. Why should a "bulge" appear
on the lower income ranges of the "rent" curve in 1918 and by 1919 be-
come pronounced? * The appearance of a bulge on the wage curves in
1918 and 1919 seems quite explicable on the basis of heterogeneity within
the wage and salary data themselves but one feels a shade less confidence
in any explanation of why that curve moved in this peculiar manner if the
explanation does not seem also clearly applicable to the rents curve which
moved in an apparently similar manner.
1 A mere increase in rents will not, of course, account for this unevenness in their distribu-
tion.
CHAPTER 31
INCOME DISTRIBUTIONS FROM OTHER SOURCES THAN
INCOME TAX RETURNS
Concerning the frequency distribution of incomes over $3,000 or $4,000
per annum we have almost no information aside from the income tax
returns. Existing wage distributions and non-tax income distributions
almost never reach higher than $2,500 or 83,000 per annum.
Even in the lower income ranges (under say 82,500 or 83,000) most of
the existing non-tax income distributions are of little use in our problem.
In the first place there are less than half a dozen distributions of this sort
which are not such small samples as to prevent us feeling much confidence
in their representative nature. 1 An even more serious defect of every such
distribution known to us, with one exception'- is that the purpose for which
the data have been collected almost inevitably makes them extremely
ill-adapted to our use. For example, one of the largest recent sample- is
prefaced by almost a page of introduction explaining what types of re-
cipients were purposely excluded. 3 This is rather typical. To base upon
such distributions any wide generalizations with respect to the income
curve for the country as a whole or even for the localities from which such
data were collected would be unwarranted.
Furthermore, almost without exception these studies in income distri-
bution are on & family basis. While it is sometimes possible to make a
1 For example, Chapin's well-known investigation into the distribution of incomes includes
only 391 workingmen's families, and the best distribution of farmers' incomes includes only
401 farmers from a single state.
2 Arthur T. Emery's distribution of income among I960 Chicago households.
3 "In studying the sources of income and the important i each source with relation to
the total inc me of a family the following limitations to the type of family schedules should
be kept in mind. No families were scheduled in which there wire children who lived as
boarders, that is, paid a certain sum per week or per month for board and spent the remainder
of their earnings or salary as they saw lit. X<> families were scheduled which kept any hoard-
ers. The number oi lodgers to be kepi by a family was limited to three at any one time. No
families wen- scheduled in which the total earnings of the family did not equal 75 per cent, or
more of the total income. It will be seen thai these limitations excluded a large number >>f
families and this materially affects the percentage of families having earnings from children
and income from lodgers, and also results in showing a larger percentage of the total income
as coming from the earnings <>f the husband than would lie the ease if the type of families
named had not been excluded from tic study. It also reduces the actual amount per family
earned by children and received from boarders or lodgers that would lie shown in case a cross
section of a community including all the types mentioned were used. The object in making
the exclusions named was to secure families dependent for support, as largely as possible,
upon tin' earnings of the husband. < >f course, it was impracticable to secure a sufficient
number of families in which the only source of income was the earnings <>f the husband, but
in following the course named the percentage of families having an income from other sources
has been very lamely reduced." "Cosl of Living in the United States — Family Incomes,"
Monthly Labor Bi view, Dec., 1919, p. 30.
415
416
PERSONAL DISTRIBUTION OF INCOME IN U. S.
rough estimate of the individual incomes from the family data, such es-
timates are not what are needed for our purposes. They can show nothing
but the distribution of income among the individuals constituting these
families and these families are almost inevitably so chosen as to make the
individuals composing them not representative of income recipients at
large. Analysis of the distribution of earnings among the individual mem-
bers of such families discloses an heterogeneity so extreme as to result in a
pronouncedly duomodal distribution curve. The fathers' incomes have one
mode while the children's incomes have another. Chart 31A showing a
natural scale frequency distribution of earnings among 2811 individuals
in 2170 families in 1918 1 exhibits this duomodal appearance in a striking
manner. The "families" had been so chosen as to exclude both young
400
3
<
300 9
>
a
I
110(1
III!)
200
FREQUENCY DISTRIBUTION
OF
ANNUAL EARNIN6S OF 2eil INDIVIDUALS
IN
2170 FAMILIES IN THE U.S. IN 19)8.
Jounce: Burepu of i ftaoR Statistics
&cnu:s WaTURfrt.
CUAIIT31A
400
600
800
-a—
1,000
ANNUAL EARNINGS
1,200 1,400
1,000
1,800
I
2.000
2,2ft
-zm
married couples having no children and unmarried but independent wage
earners. Investigations planned to bring out the economic character-
istics of such "typical families," while they may be extremely valuable
for the purposes for which they were undertaken, are necessarily of but
little use in the construction of a frequency distribution of all individual
incomes in the community. Moreover, even if we were attempting to
construct a family and not an individual distribution these data would not
generally be particularly helpful for, in addition to the exclusions just
mentioned, further narrow and rigid restrictions are usually, and for the
purposes in view quite properly, imposed upon the definition of the " typical
family."
1 This is a sample from the 12,090 white families referred to in note 3, page 415 The
detailed figures of this sample were tabulated for us by the Bureau of Labor Statistics.
They cover 15 cities chosen as representative of the whole list. Each one of the 15 cities
shows the duomodal appearance referred to in the text.
DATA FROM OTHER SOURCES THAN TAX RETURNS 417
As incidentally remarked above, there is one non-tax income frequency
distribution to which many of the above criticisms do not apply. It is
the distribution of income among 19G0 Chicago "households" in 1918 from
an investigation made by Mr. Arthur T. Emery for the Chicago Daily
News. 1 Instead of attempting to describe a "typical family" Mr. Emery
attempted to discover the "household" income of each person whose name
came at the top of a page in the Chicago city directory. Mr. Emery en-
countered many difficulties in attempting to follow out this scheme and
has himself pointed out sources of error. 2 Notwithstanding the inevitable
difficulties, Mr. Emery seems to have made a real effort to obtain a scien-
tific sample. While his distribution shows unmistakable irregularities,
it is in many respects for our purposes the most interesting and suggestive
recent non-tax income distribution available.
Finally, it seems impossible to obtain from these distributions any but
extremely general conclusions concerning the relation between income
from effort and income from property. The data have almost always 3
been so chosen as to eliminate any families obtaining an appreciable frac-
tion of their income from property. While they may give us some clues
as to the shape of the upper range tail of the wage-earners' income distri-
bution curve 4 they can tell us little about even the upper tail of the general
income curve and almost nothing about the lower income tail of either the
wage-earners' or the general income curve.
1 While the Bureau is not at liberty to publish this material we were permitted to make
what use we could of it in constructing our income curve for the country.
2 In a letter to the Bureau he writes, "There was, however, one important source of error
in this method — the poorer and middle class residents were willing to talk, and with the care-
fully trained approach of the investigator, the upper class was also won over, but we found
in the wealthy districts that the butler and 'not at home' caused a lar<re amount of travel
on the part of the investigator," and often a final failure to obtain any report.
3 These remarks do not apply to the distribution of income among the 401 fanners or Mr.
Emery's distribution. However, the Bureau has no figures, in the case of Mr. Emery's dis-
tribution, for income from property.
4 Compare pages 37S, 37'J, 360.
CHAPTER 32
WAGE DISTRIBUTIONS
There is in all an immense amount of American wage data. On the other
hand, as an investigator gets into his subject, he begins to realize that the
material is more remarkable for its fragmentary nature than for its amount
— great as that may be. For no recent year can he obtain wage distribu-
tions for more than about 8 per cent, of those gainfully employed. Of
course, if these 8 per cent, were scattered over the different types of em-
ployment and localities in any truly random fashion, and if their wages
were uniformly reported, much might be done with the material. As
things are, however, whole occupations as important as agricultural labor
and trade are almost unrepresented. Moreover, as we are interested in
the amount of wages actually received during the year, it is rather dis-
couraging to find that this is the one type of distribution which practically
never occurs. Distributions of amounts actually earned in a month are
almost as rare. There are a few distributions of amounts actually earned
in a week or fortnight, but the great majority of wage distributions are
distributions of wage rates — figures by the hour being the commonest — or
of hypothetical earnings, generally known as full-time earnings per week.
Now it is in general impossible to construct a wage distribution for earn-
ings from a distribution of rates. Earnings depend, of course, not only on
rates but also on hours worked. However, we seldom know anything about
the distribution of hours worked and almost never do we know anything
about the relation between rates and hours worked. Chart 32A illustrates
how violent may be the difference in shape of the earnings and rates curves
for the same individuals. 1 The earnings distribution in this particular
case shows not only a much greater scatter than the rates distribution but
is of an entirely different shape, as may be seen from Chart 32B where the
data are drawn on a double log scale. Chart 32C shows the distribution
of hours worked in a week for the same individuals. Now, though the
slaughtering and meat packing industry may be an extreme example,
what evidence we have suggests that distributions of rates and of earnings
are rarely in close agreement. Moreover the relation of the one distribu-
tion to the other changes as we pass from industry to industry. 2
1 43,063 Male Employees in the Slaughtering and Meat Packing Industry in 1917. Bureau
of Labor Statistics, Bulletin 252. For purposes of comparison the two distributions are so
placed that the frequency curves show the same arithmetic means and areas.
2 Resulting largely, of course, from the varying types of distributions of hours-worked-in-
418
WAGE DISTRIBUTIONS
410
CHART 32 A
FREQUENCY DISTRIBUTIONS OF RATES OF
WAGES PER HOUR AND EARNINGS PER WEEK
FOR A3, 063 MALE EMPLOYEES in THE
SLAUGHTERING AND MEAT PACKING INDUSTRY
IN THE US IN 1917.
Soukce Burt£Ru of ineoR SrmisTics Bcn.L£n/y zsz
%
4e.
%
V"L
%
%
CHART 32 B
FREQUENCY DISTRIBUTIONS OF RATES OF WAGES PER HOUR
AMD EARNINGS PER WEEK FOR 43,063 MALE EMPLOYEES
IN THE SLAUGHTERING AND MEAT PACKING INDUSTRY IN
THE U.S. IN ISI7.
SCU/?C£ BUftEftU Of LABOR &TftTISTICS BULLETIN 2SZ
■5CflJ.CS LOGRKITH/MC.
420
PERSONAL DISTRIBUTION OF INCOME IN U. S.
- 5,000
4,000
1,000
J
CHART32C
3,000 <
s
o
as
3
03
s
2.000 z
FREQUENCY DISTRIBUTION
OF
HOURS WORKED IN A WEEK
FOR
43,063 MALE EMPLOYEES
IN THE
SLAUGHTERING AND MEAT PACKING INDUSTRY
INTHE
U. S. IN 1317.
Source Bukcw of L tiBOf? St/vt/stics
8<JLLETIH,2SZ
20
30
HOURS WORKED IN THE WEEK
50 60
70
-J—
80
_1_
The same difficulty as we find in any attempt to estimate the distribu-
tion of earnings per week from the distribution of rates per hour seems
inherent in any attempt to estimate the distribution of earnings in a year
from the distribution of earnings in a week. The unknown distribution of
weeks worked in the year must seriously affect our results. 1
Estimating the frequency distribution of wages earned in a year for an
industry from the frequency distribution of wages earned in another year
in the same industry, if we had such data, would involve us in a similar
difficulty. Even though we knew the total number of individuals gainfully
employed and their total wage bill each year and also the frequency dis-
tribution of earnings for one of the years, estimating the frequency dis-
tribution for the other year would be hazardous. While some rates dis-
tributions for the same industry in the same locality show symptoms of
not changing in shape very radically from year to year, 2 this does not seem
the-week (month or year) in different industries. Illustrations of lack of uniformity in the
relation between rates and earnings of the same persons for the same period but in different
industries were worked up from Professor Davis R. Dewey's Special Report on Employees
and Wages for the 12th Census.
1 We have no distributions of amounts earned in a week and in a year for the same industry,
with which to illustrate this point directly.
2 For example, the distribution curve for wages per week among Massachusetts factory
workers shows a moderate degree of similarity of shape from year to year.
Professor H. L. Moore (Political Science Quarterly, vol. XXII, pp. 61-73) discussed the
fluctuation from 1890 to 1900 in the variability of wage rates in a total made up of thirty
WAGE DISTRIBUTIONS
421
a sufficient reason for assuming the same of earnings distributions. The
shape of the distribution representing hours or days worked in the year
may be expected to change greatly from year to year with alternations of
prosperity and depression. 1
What little evidence we possess suggests that wage distributions 2 for
individuals of the same sex in the same industry at the same date, but in
different localities, though generally more dissimilar in shape than distri-
butions for the same industry in the same place but at different dates,
are less unlike one another than distributions for different industries though
in the same place and at the same time. The variation in shape of such
distributions for different industries is often extreme. 3
selected manufacturing industries. These distributions (for 1890 and 1000) illustrate both
the similarity and the difference in rates distributions between the two years.
1 For example, what little information we have points to the "scatter" of the days-worked-
in-a-year distribution being much greater in a year of depression than in a year of prosperity.
The extreme variations in shape of the income distributions for the same 1240 individuals
in the years 1014 to 1919 as seen in the Statistics of Income, 1919, page 30, are interesting in
this connection.
- Whether earnings or rates.
'Examples of this are numerous. Charts 32D and 32E show the distribution of wanes
per week among Massachusetts males working in (a) the boot and shoe industry and (b) the
paper and wood pulp industry. For purposes of comparison the two distributions are so
placed on the natural scale chart that the frequency curves show the same arithmetic means
and areas. The double log chart is based directly upon the natural scale chart. It was
necessary to break up the "over $35" interval before calculating the arithmetic means.
122
PERSONAL DISTRIBUTION OF INCOME IN U. S.
CHART 32 E
FREQUENCY DISTRIBUTION OF RATES OF WAGES PER WEEK
FOR MALES IN THE BOOT AND SHOE INDUSTRY AND FOR MALES
IN THE PAPER AND WOOD PULP INDUSTRY IN MASSACHUSETTS
IN isie.
Source.. Massachusetts Strvst/cs or Mmufactoke-s J9J8.
Sc/1i.ES J-OGff/?/THM/C
In conclusion, the order of importance of the variables as affecting the
shape of the distribution curve seems to be — industry, place, time.
We have but little basis for estimating total income from earnings. In
the preceding chapter on Income Distributions from other Sources than
Income Tax Returns attention was drawn to the difficulty of arriving at
any reliable statement of relationship between earnings and income from
such distributions because of the way in which the data were selected. It
is even less possible to discover the nature of any such relationship from the
income-tax material. Though there is no such apparent " selection" in
the income-tax data as hi the case of non-tax income distributions, the
material is not arranged to answer our particular question.
The non-statistical reader examining Charts 30D, 30E and 30F, on which
are plotted average total income and average income from wages in each
income interval, might think that it would be quite simple to estimate the
probable average total income of persons having any specified wage. How-
even- there is a profound statistical fallacy involved in the use of this ma-
terial for any such purpose. As given in the official tables, income is the
independent variable, wages the dependent. This condition cannot be
reversed without retabulation of the original returns. The statistical
student recognizes the problem as one involving the impossibility of de-
riving one regression line from the other when neither the nature of the
WAGE DISTRIBUTIONS 423
equation representing the regression line 1 nor the degree of relationship
(correlation in the broad, non-linear sense) is known. Even if we knew
that the average net income of those persons reporting in 1918 in the 85,000
to $6,000 net income class was $5,474 and the average wage obtained by
these persons was $2,192, we would be quite unwarranted in concluding
that the average income of persons n reiving $2,192 per annum wages was
$5,474. If no wage earner received income from any oilier source than
wages we still would have a condition where the average income in the
income class would be greater than the average wage. Total wages would
be necessarily less than total income, because in the income class are in-
cluded not only wage earners but capitalists and entrepreneurs. But both
total wages and total income are divided by the same number to get an
average — namely total number of persons in that income class.
This suggests a technical criticism of the material contained in the
Statistics of Income. All data concerning the relation between two vari-
ables are always there published in such a manner as to give information
concerning only one of the regression lines and no information whatever
concerning the "scatter." If such data were published in the form of " cor-
relation tables" the increase in usefulness for statistical analysis would
be very great. Such "correlation tables" keep closer to the original data
than the usual type of statistical tables. Freer use of them is much to be
desired, particularly in cases where it is difficult to anticipate all the prob-
lems for whose solutions investigators will go to the tabulated materials.
1 The difficulty of the problem is, if possible, increased in this particular case because of
the fact that the regression is radically nun-linear.
CHAPTER 33
THE CONSTRUCTION OF A FREQUENCY CURVE FOR ALL
INCOME RECIPIENTS
The direct and only adequate method of discovering what is the fre-
quency distribution of income in the United States would be to define
very carefully the terms income and income recipient and then have a care-
fully planned census taken by expert enumerators upon the basis of these
definitions. The returns brought in by the enumerators should moreover
be sworn to by the persons making them and heavy penalties attached to
the making of false or inaccurate returns. A less satisfactory method but
one which would probably give excellent results would be to have a large
number of truly random samples taken by such a census. The results of
either procedure could then be adjusted in the light of other statistical
information concerning the National Income and also in the light of theo-
retical conclusions derived from the data themselves.
Constructing an income frequency distribution for all income recipients
in the United States from the existing data, a few of whose peculiarities
have been noted in the preceding chapters, necessarily involves an ex-
tremely large amount of pure guessing. It is only because of the practical
value of even the roughest kind of an estimate that any statistician would
think of attacking the problem. The method followed in the actual con-
struction of the income frequency distribution has been outlined in vol-
ume I. 1 This method contains one assumption after another that is open
to question. Moreover we feel in many cases quite unable to estimate
the probable errors involved in these assumptions. Their only excuse is
their necessity. What is the amount of under-reporting for income tax
and how is it distributed? What is the effect upon the returns of "legal
evasion?" To what extent is the "bulge" on the income-tax returns in the
region under about $5,000 in 1918 the result of the "intensive drive?"
What is the relation between wages and total income by wage intervals?
What is the relation between wage rates and earnings in any particular
industry? Etc., etc. These are all questions which must be answered over
and over again and yet they are questions the answers to which must be,
in many instances, almost pure guesses. And, to repeat, the margin of
possible error is often large.
In view of the sparsity and inadequacy of the data, our first approach
to the problem was an attempt to discover, if possible, some general mathe-
matical law for the distribution of income. Were we to get any very defin-
1 Income in the United States, Vol. I, pp. 122-139.
424
FREQUENCY CURVE FOR INCOME RECIPIENTS 425
ite and reliable clues as to the mathematical nature of the frequency dis-
tribution of income from small sample income distributions and from wages
distributions, etc., such clues might of course be invaluable in checking
the results obtained from piecing together existing wage distributions,
income distributions, and other scattered information. We would be in
the position of the astronomer who is able to "adjust" the results of his
observations in the light of some known mathematical law. It soon be-
came clear, however, that it is quite impossible to discover any essential
peculiarities of the income frequency distribution. The available material
is not only insufficient for purposes of such generalizations, but moreover
the distribution from year to year is so dissimilar, that any generalization
of this nature is too vague to be of any practical value.
The method finally used for the construction of the income curve has
therefore, we are sorry to say, practically all the weaknesses of the data
from which it has been constructed. The occupations of the country
were tabulated and to each occupation was assigned those wage and income
distributions which seemed applicable with the least strain. We had then
a series of income and wage distributions which nominally covered nearly
all the income recipients in the United States, though for some occupations
the inadequacy of the wage and income samples was little short of absurd.
The wage distributions were converted into income distributions on the
assumption that the smaller the wage the larger is its percentage of total
income. Beyond this simple assumption the particular functional relation-
ships used for many industries were almost pure guess work. Moreover,
not only was there the danger of error in moving from wage distribution
to income distribution and the danger of error resulting from estimating
a wage distribution for a particular industry in a particular locality from
a similar though not identical industry in a different locality, but also there
was the danger of error resulting from estimating a wage distribution for
one year from a wage distribution for another.
The final results are probably not quite so bad as they might have been
had we not had a number of collateral estimates with which roughly to
check up and otherwise adjust the first results of our estimates. For ex-
ample, such independent information as Mr. King's estimate of the total
income of the country and Mr. Knauth's estimate of the total amount of
income from dividends were pieces of information with which the results
of the frequency curve calculations were made to agree.
Some hypothetical reasoning is inevitable in such a statistical study as
the present one. The investigator must not lose heart. Sir Thomas
Browne in his rolling periods sagely remarks that "what song the Syrens
sang, or what name Achilles assumed when he hid himself among women,
though puzzling questions, are not beyond all conjecture!''
INDEX
"Actually at work," 178, 272
differs from "attached to industry,"
:;:; :;i
Actual savings, in corporate surplus, 329
Agricultural implements, 52-54
Agricultural laborers
age and sex percentages, 279
income of, 270
wages of, 55-59
winter earnings in other industries, 290
Agricultural products, total
gross value of, 299-301
net value of, 55
Agriculture, 40-64
relative importance, 02
American Contractor, 103
American Merchant Marine
see transportation by water
American Telephone and Telegraph Com-
pany, 179-190, 335
Ammain
average income per, 233-234, 342
defined, 233
number of, 234
Animal products
aggregate value, 49, 60, 303-30!
variations in value, 48
Animals on farms
see live stock on farms
Animals slaughtered, 42
value of, 302-303
Animals sold
value of, 302-303
Army, Navy, and Marines, 212-215, 277
average annual income over $2,000, 283
average annual income under $2, 000,
284
number employed in, 2S0
"Attached to the industry"
meaning of term, 34, 17s
numbers, 39, 272
Australian war census of incomes, 348,
395-400
Automobile Chamber of Commerce, Na-
tional, 52
Automobile repairing
see hand trades
Automobiles on farms, 52-54
Banking, 202-209
entrepreneurs normally occupied in, 33
volume of business, average, 209
see also deposits, bank
Barrett, Alfred M., 150-152
Bartlett, D. P., 369
Bell Telephone Companies, 179-190
Birth rates, 14-16
Blacksmithing
see hand trades
Bond Buyer, 261
Bondholders
see security holders
Bond interest
see security holders, share of, interest on
investments
Bonds, conversion, 265
Bonds, Liberty, L2, 219
Bonds, Postal Savings, 265
Bonds, U. S., 265
Book income
defined, 3
used in first estimates, 10
Bowley, A. b, 349, 376
Bresciani, C, 349
Bricklayers, L07
Building construction, value of
see construction work, value of
Building contracts, ll):; 105
Building laborers, 107
wages of, index of, 107
Building materials, prices of, 107-111
Building permits, 103 105
Building shortage estimated. Ill 1 15
Building trades
see construction industrj
Bureau of Farm Economic-, 306, 308
427
428
INDEX
Bureau of Labor Statistics
data used in price index, 17-24, 43, 113
index of residence rents, 91
Union Scale of Wages and Hours of
Labor, 147, 198
Bureau of Mines, U. S.
data from, 65-77
Business savings
see savings, business
Cabinet making
see hand trades
Car days
Pullman, in relation to employees, 138-
139
street, 155
Car miles
Pullman, 140
street railway, 155-156
Carpenters, 107
Census of
Agriculture, 33, 230
Central Electric Light and Power Sta-
tions, 157
Electrical Industries, 33
Electric Railways, 149
Incomes, 395-400
Manufactures, 33, 83, 109, 273-274
Mines and Quarries, 73, 74, 273
Occupations, 32-33, 210, 271, 273
Religious Bodies, 275
Telephones, 59, 180, 183
Transportation by Water, 196, 198-200
Wealth, Debt and Taxation, 211-217,
219, 230
Changes in income tax law
see income tax law, changes in
Chapin, R. C, 292, 379, 415
City and village government, 210-217
Civil service, 210-217
Clerical occupations
average annual incomes under $2,000,
285, 288
average wages, 277
number engaged in, 276, 277, 283, 284
age and sex percentages, 280
Clock repairing
see hand trades
Coal industry
see mines, quarries and oil wells
Commercial failures, 325
Commissioner of Education, U. S.
annual reports of, 212
Commissions to Express employees, 143-
144
Common carriers
see Pullman cars, steam railways, street
railways, transportation, transporta-
tion by water
Comptroller of the Currency
annual reports, data from, 202-209
Consols of 1930, U. S., 265
Construction costs, index of, 69, 335-336
electric light and power, 164
manufacturing, 96
street railways, 154
Construction industry, 103-115
indices of profits, wages, material
prices, 108
Construction work, value of in U. S.,
104-106, 109-111, 114-115
Consumption goods
comparison of price indices, 31
index of prices of,
for well-to-do, 24-30
for workers, 17-24
interest on value of, 229-232
value of, in agriculture, 302-304
Contract work in manufacturing, 86, 89
Corporate earnings
all corporations, 324
having net incomes, 324
compared for decade, 326
electric light and power, 159-160
manufacturing, 85
proportion to dividend and surplus, 327
railways, 127
transportation by water, 192-194
Corporate savings
see business savings
Corporate securities, total, held by banks,
203
Corporate surplus
see surplus, corporate, also savings,
business
Corporations, number of
reporting no income or deficit, 325
reporting taxable income, 326
Cost of living
see cost of consumption goods, also
price indices, etc.
County governments, 213-216
INDEX
42'J
Cow-keeping, 230-232
Cows on farms, 43-44
Crops
fed and not fed to live stock, 50-51
value of, 54-55, 60, 301-305
Curves, fitting
abuse of power series in, 375
to cumulative data dangerous, 363
to different functions of the variable,
effect of, 347
Dairy products, 42-44
Day, Edmund E., 75-77, 300
Death rates, 14-17
Debts, public, interest on, 216, 219
Deficits, corporate, 324
amount of, 325
Deposits, bank, average volume of,
209
compared with population, 207-208
share of net value product, 206-207
Depreciation
manufacturing, 84-86
railways, 119
Dewey, Davis R., 372, 378, 420
Direct goods
see consumption goods
Disbursements
by Government to employees, 214
net, how ascertained, 3
net vs. gross, 3
Disbursements, net, to entrepreneurs and
other property owners
construction, 108
electric light and power, 163
express, 141-143
government, 217, 219
manufacturing, 92-94, 96
mining, etc., 66-70
Pullman transportation, 136
railways, 125, 127
street railways, 148, 151-152, 155
telegraphs, 168-169, 171-174
telephones, 181-183
transportation, 116
transportation by water, 195, 196
Disbursements, total, to entrepreneurs,
238-239
Discounts, bank, 203
Distribution of income
see frequency distributions
Dividends
banking, 202-205
corporate, 324, 328
total, 382
electric light and power, 164-165
manufacturing, 95-96
mining, etc., 67-69
net vs. gross
banking, 202
express, 142
Pullman transportation, 134
telegraphs, 170-172
Pullman transportation, 133-135
share of, in earnings, 327
street railways, 151-154
telegraphs, 168-173
telephones, 179-182
total, 328
transportation by water, 193-194
Dodge, F. \\\, Company, 103-105
Domestic animals, 42
Dressmaking, custom
see hand trades
Drury, H. B., Murine and Dock Labor, 197
Dan's Renew, 325
Dyeing and Cleaning
see hand trades
Earnings
average annual
how computed, 33-35
of persons receiving under §2,000, 285
vs. rates of pay, 271
vs. wage rates, 12
average "full time," 34-3S
of farm laborers, 2S9-290
see also employees, share of
Earnings, corporate
see corporate earnings
Earnings, gross
of transportation by water concerns,
estimated, 193
of farms and farm families, 302
Earnings, net of
all corporations, 324, 327, 328
having net incomes, 32 I
farmers, 302
manufacturing corporations, 93, 96
proportion of dividend and surplus. 327
Earnings, personal, 269
and total income, 382-392, 4U6-414
430
INDEX
Earnings, personal, (cont.)
how estimated, 271-279
income from, 270
of individuals in a family, 416
see wages, frequency distributions,
heterogeneity of income data
Edgeworth, F. Y., 349, 375
Edison Company, The New York, data
used for price index, 20
Efficiency of employees
see physical products
Eggs and poultry, 45-46
Electric light and power companies,
private, 157-167
Electric railways
see street and electric railways
Emery : Arthur T., 379, 415, 417
Employed persons, gainfully, in TJ. S.
see persons gainfully employed
also employees, and occupational dis-
tribution
Employees, average annual earnings of
agriculture, 57-58
banking, 206
construction, 114
electric light and power, 166
express companies, 147
government, 214-215
manufactures, 91
mines, etc., 74-76
Pullman car transportation, 137-138
steam railways, 131
street and electric railways, 152-153
telegraph companies, 169
telephone companies, 185-186
transportation, 118
transportation by water, 196-197, 199-
200
unclassified industries, 224
see also employees, share of
Employees
"actually at work" differs from "at-
tached to industry," 33-34
"attached to industry," meaning of
term, 33-34
numbers, 38
damages paid to, by railways, 125-
126
occupational distribution of, 32-39, 280
output per capita, see physical product,
125-126
Employees, number of
agriculture, 57
banking, 205-206
construction, 114
electric light and power, 166
express companies, 146-147
government, 210-212
hand trades, 102
manufactures, 90-91
mines, quarries and oil wells, 73-74
percentage by ages, sexes, industries,
279
Pullman cars, 138-139
steam railways, 128-131
street railways, 153
telegraphs, 175, 177
telephones, 184-186
transportation, 118
transportation by water, 196-198
unclassified, 224
Employees, share of
agriculture, 55-56, 289-290
all industries, 243
banking, 205-207
construction, 105-109, 113
electric light and power, 158, 161, 165-
166, 242
estimated, 161
express companies, 144-147
Government (all branches), 212-217,
220
hand trades, 100, 102
manufactures, 87-90, 98
mining, etc., 70-75
Pullman cars, 136-138
railways, 125, 127, 128, 131
street railways, 151, 153-154
telegraphs, 169, 175
telephones, 183-186
transportation, 117
transportation by water, 195-200
unclassified industries, 223-224, 232
Entrepreneurs
how defined, 32
industrial distribution of, 33
Entrepreneurs and other property owners
disbursements to
see disbursements
purchasing power of share of, in
agriculture, 59-61, 63
banking, 205
INDEX
431
Entrepreneurs, etc. (cont.)
purchasing power of share of, in (cont.)
construction, 111-112
electric light and power, 164
express, 143
manufacturing, 97
mining, etc, 70
Pullman cars, 135
railways, 132
street railways, 153-154
telegraphs, 174
telephone-, [V2
transportation, 116
transportation by water, 194-
195
unclassified industries, 227
Entrepreneurs share in the net value
product of
agriculture, 59
all industries, 240-211
banking, 204 205
construction, 107-112
electric light and power, 165
express, 142-143
manufacturing, 91 98
mining, etc., 65-70
saved as surplus, 68
Pullman transportation, 134
railways, 123, 127
street railways, 150-151
saved as surplus, 152
telegraphs, 17:; 171
telephones, 179 ISO
transportation, 116
transportation by water, 193-195
unclassified indust ties, 227) 22X
Errors in computations, minor, 7
Errors of estimates, 7-10, 2:50, 251, 255,
273
probable error, '.'>'■'>() .;.;_'
Estimates of income
from industrial products, I
how made, 3
made from corporation reports, 4
plan of presenting, 10
Excess profits tax, 320
Excise taxes, corporate, 324
Expenses of farmers
relative increase, 307
total, 302 303
Express companies, 111 117
Factory production
see manufacturing industry
Failures, commercial, 325
"Failure to report" incomes, 254-260
Farm emploj
see agricultural laborers
Farm labori
see agricultural laborers
Farmers
distributed by income, 308-309
expenditures of, 302-307
families, :>,:>,!
not "gainfully employed," 32, 289
income of, 2'.)N :;i:;
percentages, 333-335
receiving over $2,000, 253, 313
receiving under $2,000, 270, 313
total, 307, 311-312
income tax, 299
"labor income" of, 308-310
number of, income over 82,000, 253
return- to, 02-64
tenant, 305
Farm property
rental value of, 309 310
value of, ol 7.7,, 2'. 18-299
Farm loans, federal
interesl on, 261
outstanding, total, 264 265
Farm products
set agricultural products
Farms, number of, 300
Federal Bureaus
set bureaus
Federal Government, 210 222
federal Reserve Hoard
study of employees' income apportion-
ment, 25
federal securities held by banks, 218
Pert ilizer, 7)2, 54
Finance
proportion of dividends and surplus, .127
Financial Statistics of Cities, 21-"., 217), 217,
219, 291
Financial Statistics of States, 211. 212. 219,
291
hue depart nuiit
see police ami fire departments
Flux, A. W., 348
Food and kindred products, 80 82
see also agriculture
432
INDEX
Freight carried by railways, 128-130
Frequency curves
describing distribution of income by, 343
normal curve of error
fitted to heights of men, 347
not applicable to income distribu-
tions, 346-348
rejected by Pareto, 346
Pearson's system of, 348, 375
y = bx m , 368-369, see Pareto's Law
see hyperbola
Frequency distributions
of heights of men, 347
of income, 339-425
among families, 341
among individuals, 341, 416
among wage-earners, tail-slope of,
379-380
by sources, 385-392
equations of straight lines fitted to,
367
factorial, 341
heterogeneity of data, 376-393
in U. S., 350-362, 365-368, 382-392,
400, 404^14, 424^25
tax returns 1914, 351, 357; 1915,
352, 358; 1916, 353, 359; 1917,
354, 360; 1918, 355, 361; 1919,
356, 362; 1915 and 1918 com-
pared, 365-367; $5,000-line, 403-
404
in Oldenburg, 363-364
mathematically describing, 343
meaning of similarity in, 375
not describable by normal curve,
346-348
per ammain, 341
of wages, 369-374, 378, 416-423
and incomes, 380-392, 405-414
peculiarities of, 418-423
per hour, 370-374
rates and earnings in same industry,
419
rates in different industries, 421-422
similar tail-slopes of dissimilar, 371-
374
tail-slopes of various, 378
tail-slope not an index of scatter, 373
see hyperbola, Pareto's Law
Friday, David, 316, 321, 326, 328
Funk, W. C, 301
Gainfully employed persons in U. S.
age and sex of, 279
see also persons gainfully employed,
employees, and occupational dis-
tribution
Gardens, 50-51
Gini, C., 349
Goldenweiser, E. A., 300, 302, 303,
304
Government in U. S.
data concerning all branches of, 210-222
income from
principles determining, 4-5
number of employees of, 212
Government service to business
impossible to measure, 5
Government services,
direct; indirect, 5
Grist mills, custom
see hand trades
Gross earnings
see earnings, gross
Gross income
see earnings, gross
also income, gross
Gross value of products in
agriculture, 299-301
manufacturing, 78-84
Gross wealth
see wealth, gross
Hand trades, 99-102
Harness and saddles, 52-54
Hart, Hornell N.
Fluctuation in Unemployment in Cities
of the United States, 36
Heterogeneity of income data, 376-393
see frequency distributions
Hod carriers, 107
Homes owned, 291, 294
income from 270
rental value of, 228-229
tax exempt, 261, 267-268
Honey, value of, 49
Horses, value of, 48, 53
House rents
index of, 294
value of, 302
Housewives
value of services excluded, 249
Hoyt, Homer, 104
INDEX
433
Hyperbola
fitted to earnings per hour, 370-371
logarithmic frequency curves describ-
ableby, 3G9
Immigration
annual statistics of, 14-16
Income
amount subject to taxation, 259-260
book, 3
defined, 3, 341
failure to report, 254-260
from Government, how computed, 5-6
how estimated, 3, 250-252
interest on loans not deducted, 12
miscellaneous, 223-232
monetary vs. non-monetary, 341
non-monetary, 298
per ammain, 233-234, 342
psychic, defined, 3
reported for tax, 253
spurious, due to changing prices, 249-
250
total bank vs. bank loans, 209
understatement of, 254-260
Income average
annual, per capita, 337
from wages and salaries, 408-414
per ammain, 233-23 1
persons receiving over $2,000, 258
persons receiving under $2,000, 285-288
Income, corporate
total reported, 324
Income, farmers, 298-313
based on average ratio of expenses to
total product, 305-308
based on sample incomes, 308-310
based on total production and ex-
penses, 300-305
final estimates, 310-313
over $2,000, 313
percentage of total average incomes, 381
total, 382
under $2,000, 313
Income, gross
electric light and power, 158
express companies, 143
farmers, 303, 307, 311-323
manufacturing, 85
of persons receiving over $2,000, 253,
Income, gross (cont.)
of persons receiving under $2,000, 270
related to personal earnings, 295-296,
382
street railways, 149-150
transportation by water, 192-193
Income, National
distribution of expenditures, 336
percentage of, received by persons
comprising the highest five per cent,
333-:;:; 1
farmers, 333, 335
receiving over 82,000, 332-333
receiving under $2,000, 332-333
purchasing power of, 333, 335, 337
range of, 330, 332
total, 331
Income, net
all corporations, 324
all farmers, 303, 307
industrial, 4
personal by sources, 3S2-392
salaries vs. business, 257
surplus included in percentage going for
shelter, 292
Income, personal
defined, 341-343
from pensions, 270
negative, 347-348
returns by sources, 3S2-392
Income, personal distribution of, 339-425
see frequency distributions, heteroge-
neity of income data, Pareto's Law
Income, personal, over 82,000, 25:; 26S
331
average, 258
from business, 257
from salaries, 257
price index for, 330
total, 331
Income, personal, under $2,000, 269-
297
from investments, 201 297
occupations and industries, 271-286
personal earnings, 269-290
related to total income, 295
price index for, 336
total, 270-331
Income receivers, classes of, 25:;
defined, 342
frequency curve for, 424-125
434
INDEX
Income tax
corporate, 324
data used to estimate income, 253-257,
295
law, administration of, 254
changes in, affecting comparison,
254-320
Income, tax exempt from, 260-268
Federal farm loans, 261, 264-265
Government bonds, 261, 265
Liberty bonds, 261, 263-264
obligations of possessions of U. S., 261
rental of owned houses, 261, 267-268
state and local debts, 261-262
through nature of occupation, 261, 266-
267
Income tax returns
accuracy of reporting, 402-414, 424-425
and frequency distribution, 351-362,
365-368 "
comparison for years 1915 and 1918,
365-369
farmers, 299
for different classes, 383-392
importance in estimating income dis-
tribution, 401-414
number of, 385
on uniform exemption limit, 256
technique of, 401-403
Index of gross output in manufacturing,
80-83
Index of prices
business savings, 11
construction, 334, 336
consumption goods
used by well-to-do, 24-31, 333, 334,336
used by workers, 17-24, 31, 333, 334,
336
farm products on farm, 307
farm products at market, 307
house rents, 294
placed on 1913 basis, 11
war expenditures, 334, 336
Index of wages, 279
Industrial Conference Board, National,
293
indices of prices, 20-23
Industrial distribution
of gainfully employed persons, 31-39
of persons receiving under $2,000, 271-
286
Influenza
effect on population, 16-17
Information
additional, available, 10
Ingalls, W. R., 68, 310, 321
Insurance, cost to farmers, 53-54
Inter-business payments, elimination of, 4
Interest
fraction of total income received from,
386-392
on investments in
agriculture, 52-54, 302
electric light and power, 162-164
express companies, 141-142
manufactures, 85, 93, 96-97
mining, etc., 66-67
railways, 123
street railways, 150, 151-154
telegraphs, 170-172
telephones, 1S0-182
transportation by water, 193-195
unclassified industries, 229-231
on local debt, 261-262
paid by Government, 216-219
payments on consumption loans
not deducted from income, 12
tax exempt, 261
Investments, income from, 270
of persons receiving less than $2,000,
294-297
Iron and Steel, 80
Jewelry
see hand trades
Kansas Bureau of Mines, 71
Kapteyn, J. C., 349
Kilowatt hours produced by electric light
and power companies, 167
Knibbs, G. H., 395
"Labor income" of farmers
average.
310
defined, 30S
estimated, 309
Laidler, H. W., 74
Laundries
accuracy of data on, 99
see also hand trades
Leather and its products, 81
Liabilities of failures, total, 325
INDEX
435
Liberty loans
see loans, Liberty
Lincoln, Professor Edmond E., 158
Lipka, J., 369
Liquors and beverages, 81
Live stock on farms, 47^9
value of, 302
Loans, bank
average volume of, 209
compared with population, 207-209
made to farmers, 53-54
purchasing power of, 208-209
Loans, consumption
interest payments on, 12
Loans, Federal farm
see farm loans, Federal
Loans, Liberty
effect on Government interest pay-
ments, 219
income computed from, 12
interest on, 261, 264
value of, 263
Loans of 1925, U. S., 265
Loans, Panama Canal, 265
Local debt
interest on, 261, 262
Lock repairing
hand trades
Lumber, 80
Mackay telegraph companies, the, 168-
178
Manufacturing Industry, 78-98
approximate total business savings in,
236-237
gross value of output vs. net value
product, 78-84
importance of industry, 78
number engaged in, 273-274, 280, 283,
284
age and sex percentages, 279
average annual incomes under $2,000,
285, 288
proportion of dividend and surplus, 327
-"iirces of information, 78- s -!
statistics of
Massachusetts, 36-37, 80-82, 87-88
Pennsylvania, 71, 87-88, 106
March, Lucien, 349
Marines
sec Army, Navy and Marines
Massachusetts
Statistics of Manufactures, 36-37, SO 82
87-88
Meat supply of U. S., 42
Merchant Marine, American
see transportation by water
Metals other than iron, s _'
see also mines, quarries, and oil wells
Michigan Department of Labor, 71
Milk supply, 13-44
Millinery
see hand trades
Mines, quarries, and oil wells, 65-77
Mining
entrepreneurs normally occupied in, 33
number engaged in, 273, 280, 283, 284
age and sex percentages, 27 ( .»
average annual incomes under $2,000,
285, 288
sources of information, 65
Moore, Henry L., 349, 420
Morman, James B., 305
Mortgages on farms, 305
Municipal utilities, 211-218
National income
.sec income, ual ional
Navy
see Army, Navy and Marines
Need unit of income, 342
Net earnings
see earnings, net
Net value product
see value product, net
New York Journal of Commerce, 327
X. V. State < 'ivil Service < Jommission, 212
Non-monetary income, 298
( >cean cables
see telegraphs
( Occupational distribution of
employees, 32-39
entrepreneurs, 33
persons receiving under 82,000, J7I 286
Oil wells
see mines, quarries and oil wells
Output
see physical product
Painters, 107
Panama Canal loan-, I S ,
see loans, Panama Canal
436
INDEX
Paper and printing, 81
Pareto, Vilfredo, 344
non-mathematical conception of chance,
348
rejects negative incomes, 346
rejects normal curve, 346
Pareto's Law, 344-394
any general income "law" questionable,
374-392
conclusions concerning, 393-394
described, 344-345
impossibility of extrapolating, 345
lower income ranges and, 368-374
modern substitute for Wages Fund
Doctrine, 345
non-rectilinear forms of, 348
straight line hypothesis, 349-363
uniformity of slope thesis, 363-368
zero mode with infinite ordinate, 345
see frequency distributions, heteroge-
neity of income data, hyperbola,
income, personal distribution of
Passenger traffic on railways, 128-130
Paving materials, 82
Pearson, Karl, 348, 349, 369
Pennsylvania Department of Internal
Affairs, 71,106
statistics of manufactures, 87, 88
Pensions, amount of
express companies, 144
Government, 216-217, 220, 291
manufactures, 90
persons with incomes under $2,000, 291
railways, 126
telephones, 184
Pensions, income from, 270
Personal service
average annual incomes under ,$2,000,
285
total earnings under $2,000, 288
average wages of, 279
number engaged in, 276, 280, 283, 284
age and sex percentages, 279
Persons gainfully employed in U. S.
families of farmers excluded, 32
industrial distribution of, 32-39
numbers of, how computed, 32
see also employees
Persons, number of
having incomes
over $3,000, 258
Persons, number of (cont.)
having incomes (cont.)
over $2,000, 253, 260, 331
by occupations, 283
under $2,000, 270, 331
reporting incomes, 256
Persons, percentage of
having incomes over $2,000, 332-333
having incomes under $2,000, 332-333
Persons, Warren M., 350
Per capita
see population of U. S.
Physical products
agriculture, output per person, 56-61
indices of, 301
banking, loans per person, 207-209
construction per capita of population
115
electric light and power kilowatt houra^
167
Government, share of, 53, 222-223
measured in money, 317-320
mines, quarries, oil wells, per employee,
75-77
Pullman car-days, 139-140
railways, passenger miles, 128-130
relation to corporate surplus, 316-320
street railways, revenue car miles, 155-
156
telephones, average, per employee, 186-
188
tonnage of American Merchant Marine,
198," 201
transportation by water tonnage, 196
Plasterers, 107
Plumbers and gasfitters, 107
Police and fire departments, 211-218
Population, U. S.
average per capita income, 337
distributed by residence, 229
effect of influenza on, 16-17
method of estimating, 14-16
Population, U. S. ompared with
agricultural ouput, 61
banking facilities, 208-209
construction, 115
electric power service, growth of, 167
mineral output, 75-77
Pullman service, growth of, 139-140
railway service, growth of, 130-131
street railways, growth of, 156
INDEX
437
Population, U. S., compared with (cont.)
telephone service, growth of, 189-190
tonnage of American Merchant Marine,
201
Postal service, U. S., 211-218
Poultry
and eggs, 45-46
raisin-. 230 231
Power companies, private
see electric light and power companies,
private
Price indices
for business savings, 12
of consumption goods
used by well-to-do, 21-31
used by workers, 17-24
placed on 1913 basis, 11
see also index of prii
Price variations, how eliminated, 10-12
Printing, paper and, SI
Produce
see agricultural products
Professional services
number engaged in, 275, 280, 283-284
age and sex percentages, 27',)
average annual incomes under $2,000,
285, 288
Profits
see dividends
also entrepreneurs, share of
Profits, undivided
see surplus
also savings, business
Property owners
see entrepreneurs and properly owners
Psychic income, defined, 3
Public servii
number engaged in, 27."., 280, 2s:j-284
age and sex percentages, 279
average annual incomes under $2,000,
285, 288
Public utilities
proportion of dividends and surplus,
327
Pullman car transportation, 133-1 10
Pullman porters, tips paid to, 135-136
Purchasing power
comparison of price indices
for different classes, 31
for workers, 22-23
how computed, 10-12
Purchasing power (cont.)
index number for
well-to-do, 2s 29
workers, 17-21
interest on savings deposit
net value product of
all industries, 245
Government, 221 -222
of hank loan- and deposits, 208 209
of income, :;:;;;, :;;;.",. ;;.;7
Purchasing power of business savings
banking, 205
by industries, 237
electric light and power, ltll
manufacturing, 07
mining etc., 69
Pullman transportation, L35
railways, 132
street railways, 153-154
telegraphs, 173-174
telephones, 1\2
transportation by water, 195
Purchasing power of employees' share
agriculture, 58
banking, 206
construction, 1 1 I
electric light and power, L66
express, 144
Government service, 215, 220
hand trades, 102
manufacturing, 91
mining, etc., 70
Pullman transportation, 137-138
railways, 131
street railway s, L53
telegraphs, L78
telephones, L86
transpoit.ii ion, 1 18
transportation by water, 200
unclassified industries, 224
Purchasing power of property's share
agriculture, 59
banking, 205 206
by industries, 239, 241
construction, 1 12
electric light and power, 164
express, 1 13
government, 220
manufacturing, 97
mining, etc., 70
national income, 337
438
INDEX
Purchasing power, etc. (cont.)
Pullman transportation, 135
railways, 132
street railways, 153-154
telegraphs, 174
telephones, 183
transportation, 116
transportation by water, 195
unclassified industries, 227
Quarries
see mines, quarries, and oil wells
Railways, steam, and switching and ter-
minal companies, 119-132
additions to physical property of, 122
lied Cross, contributions by banks, 202,
207
Rediscounts, bank, 203
Relief for employees
see pensions
Rent, 292-293
fraction of total income received from,
386-392
Rental value of farms, 309-310
Rental value of owned homes, 228, 229,
291-294
tax exempt, 261, 267-268
Rents, contract, in U. S., 225-227
Rents, index number for, 294
Rents and royalties from
express companies, 141-142
manufacturing, 85, 86, 91, 92, 97
mines, etc., 66, 70, 75
street railways, 150-152, 154
telegraphs, 169, 172, 173
telephones, 180-182
unclassified industries, 225-229, 231-232
Reserves, corporate, 314-316, 320, 321
see also surplus, corporate
Rorty, M. C, 28, 112, 182, 206, 228, 272
Royalties
see rents and royalties
Salaries
see employees, share of, also wages and
salaries
Salaries, government, state, city and
county officials, 266-267
Savings, actual in corporate surplus,
329
Savings, business
all industries, 246
by industries, 234-237
included in income, 3
index of values for
banking, 204
electric light and power, 103-165
express, 143
manufacturing, 95-93
mining, etc., 69
Pullman transportation, 134-135
railways, 122-124, 127, 132
street railways, 150-152, 154
telegraphs, 173, 174, 176, 179
telephones, 180-182
transportation by water, 194, 195
transportation, 115
Savorgnan, F., 349
Saw mills, custom
see hand trades
School districts, 211-218
Scoville, G. P., 305-306
Sears, Roebuck & Co.
data used in price index, 18-19
Securities, corporate, total
held by banks, 203
Security holders, share of
banks, 203-204, 206-207
electric light and power company, 163-
164
express companies, 141-142
Government securities, 218-219
manufacturing, 90-97
Pullman transportation, 134-137
railways, 123, 127, 132
street railways, 148-149
telegraph companies, 170
what it includes, 4
Security holders, disbursements to
from telegraph companies, 168
see also entrepreneurs and other prop-
erty owners
Seed used by farmers, 50-51
Sewing machine repairing
see hand trades
Shelter
per cent of income paid for, 292-2'J'J
Shipbuilding
excluded from construction, 103
Shoe repairing
see hand trades
INDEX
439
Silver, Gray, 337
Similarity of distribution
what constitutes, 375
Sinking funds, railway, 122
Slichter, C. S., 369
Slope of logarithmic income curves, 371-
392
South Carolina
statistics of manufactures, 87, 88
Spillman, YV. J., 301
Standardization of purchasing power
how obtained, 10
in terms of 1913 prices, 10
accuracy checked, 10
State and county government, 210-21.")
Steam fitters, 107
Steam railways
see railways
Steel, iron and, 88
Sterrett, J. E., 255, 276, 315, 321
Stewart, W. W., 300
Stock dividends, 320
Stockholders
average income of, 26
see also security holders, entrepreneurs
Stone cutters, 107
Stone masons, 107
Street and electric railways, 148-156
Structural iron workers, 107
Summary of Part I, 233-246
Summary of Part II, :«0-339
Surplus, banking, 202-204
Surplus, corporate, 314-329
banking, 202-204
definition of, 314
general accuracy substantiated, 6, 84-86
genuineness of, 315-320
included in net income, 3, 314
proportion of, in earnings, 327
reports by corporations accepted, li
total estimated, 324, 328, 329, 331,
382
see also savings, business
Switching companies, 119
see also railways
Sydenstricker, E., 342
Tailoring, custom
see hand trades
Tax-exempt income
see income, tax exempt
Taxes
relation to national income, •">
charged against industry, 5, 6
see also income tax, etc.
Taxidermy
see hand trades
Tax, income
see income tax
Teachers, income of, 296
Telegraphs, 168 i7s
Telephone-, 17!) I '.Ml
messages and message miles, 190
revenue: business vs. residence, 189
Terminal companies, 1 19
set also railways
Textiles, 80
Tips to Pullman employees, 135-136
Tobacco manufactures, 82
Tonnage, American merchant marine,
198, 201
Topics covered, 10
Trade
number engaged in. 274, 275, 280, 283,
284
age and sex percentages, 279
average annual income under $2,000,
285, 2S8
Transportation, 1 16-1 18
see also steam railways; switching and
terminal companies; street and elec-
tric railways; private electric lighl
and power companies; transportation
by wat ei-
Transportation by water, 191-201
mode of estimating gross earnings, L92
L93
Typewriter repairing
.sec hand trades
Unclassified industries, 223 232
Uncollectible revenues, in
express companies, ill 1 1">
railways, 126
telephone-. ls;l
Understatement of income-. 254 260
increase since armistice, 254 '-'■">•">
Undivided profits
sec surplus, business -ivm
Unemployment, 271
estimated for I S 36 3
in Massachusetts factories, 36-38
440
INDEX
United States Bureau of Mines
data from, (55-77
United States Bureau of Labor Statis-
tics
see Bureau of Labor Statistics
United States, government of, all branches
of,
data concerning, 210-222
U. S. Realty Company, 105-108,
112
Utilities, public
see public utilities
Value product, net (cont.)
entrepreneurs and property, share of,
see entrepreneurs, share of
security holders share in
see security holders
Value product, total
see value product, gross
Vegetables, 50-51
Victory loans, 264
see loans, liberty
Village government
sec city and village government
Value added by manufacture, 82
Value, gross
see gross value
Value product, gross
in agriculture, 303, 306-307
in construction, 109-112
in manufactures, 83
Value product, net
agriculture, 40, 54-55, 59, 62, 303
all industries, 244, 245
banking, 202, 206-207
construction, 113
electric light and power, 158-159, 164,
165
express, 144-145
government (all branches)
components of, 210
distribution of, 217-219
per capita, 220-221
purchasing power of, 221
share, in national, 221-222
street railways, 154
telegraphs, 173-176
telephones, 180-184
transportation, 116-117
transportation by water, 194, 199
unclassified industries, 231-232
Value product, net
employees' share in
see employees' share of
Wage rates
vs. average annual earnings, 12, 34-38
see frequency distributions
Wage distributions, 418-423
Wages and salaries
in all industries, 242
relation to total income, 37(5, 392, 400-
414
see employees, share, also employees,
average annual earnings
Wages, index of, 279
Wallace, H. A., 312
War, affecting labor supply in unclassified
industries, 224
War expenditures
price index of, 336
War Industries Board, 304, 325
Warren, G. F., 307
Watch repairing
see hand trades
Wealth, gross
agriculture, 300
Western Union Telegraph Company, 168-
178
West Virginia Bureau of Mines, 71
Wireless telegraphs
see telegraphs
Wiremen, inside, 107
Wire mileage, telephone, 187-188
Wool and mohair, 46-47, 49
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