HD 6983 B7 UC-NRLF III llllllllllllllllin mi ii linn B W 57b A7b University of Pennsylvania ■■:■•■ .: US' shift If 1$ IP :!t:;j;;:.i liiiiiiiii!.. t:i:i:r.i:t:i t ! ! iti!< Rising Costs of Living BY 0. FRED BOUCKE A THESIS PRESENTED TO THE FACULTY OF THE GRADUATE, SCHOOL IN- PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY Cl|» fljnlljgurtr JJr GEORGE BANTA PUBLISHING COMPANY MENASHA, WISCONSIN 1916 •».! tjt* *: University of Pennsylvania Rising Costs of Living BY 0. FRED BOUCKE A THESIS PRESENTED TO THE FACULTY OF THE GRADUATE SCHOOL IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY ?Eh» Colkgiirts ^rw GEORGE BANTA PUBLISHING COMPANY MENASHA, WISCONSIN 1916 *%1 ^ CONTENTS List of Tables and Figures v Introduction 1 Part I — Production Chapter I, Changes in Supply 5 Chapter II, Changes in Costs 19 Part II — Distribution Chapter I, Changes in Price 33 Chapter II, Changes in Income 45 Appendix, Method for Calculating Factorial Incomes 75 Conclusion 82 Bibliography 86 3G12oj LIST OF TABLES AND FIGURES A. Tables page No. of Table 7 I. Agricultural Production in 1889 and 1909 2 Agricultural Production in 1899 and 1909 3. Production and Exports and Imports of Agricultural Staples between 1889 ^ and 1913 " "" 4. Production (by Quantity) in Agriculture, Forestry and Mining with special Reference to Fixed and Circulating Capital, m 1889 and 1909 M 5. Groups of Producers and Non-Producers in 1890 and 1910 20 6. Costs of Production in Agriculture, in 1889 and 1909 29 7 Costs of Production in Agriculture, in 1899 and 1909 30 8. Relative Wholesale Prices by Principal Groups of Commodities, from 1890 ^ to 1912 ■;■" ;■" 9. Production (by Value) in Agriculture, Fonstiy, and Mining with special Reference to Fixed and Circulating Capital, in 1889 and 1909 & 10. Indices of Wages per Hour in Principal Fields of Production, from 1890 ^ to 1912 " II. Indices of Wages per Hour in Specified Industries, 1890 to 1912 48 12. Gross and Net Returns in Agriculture, 1899 and 1909 * 13. The Redistribution of Incomes between 1890 and 1910 14. Family-Budgets in 1891 and 1901 15. Relative Standing of Occupational Classes, 1890 and 1910 B. Figures t Option of Thirty-Seven Commodities and Service, 1890 to 1914... ) J 15 2 Growth of Twenty-Four Occupational Classes, 1890 to 1910 ) * 3. Fixed and Circulating Capital-Goods in National Production, in 1889 and ^ 1909 »"*» 4. The Factorial Distribution of Incomes, in 1890 and 1910 IS 65 INTRODUCTION The topic of rising costs of living is not discussed as widely today as some years ago. Apparently people have lost interest in the phenomenon which was watched most attentively between 1907 1 and 1912 and during that time provoked a wealth of comment, both by economists and on the part of the general public. One may assume either that we have grown accustomed to high costs or else that with the rise of new problems the old have grown stale. But whatever the reason it is made clear by a perusal of this literature that from beginning to end two viewpoints predominated. These were, first that an explanation of high costs of living involves a study of price- levels, and secondly that rising prices as such constitute an evil. The quantity-theory of money 2 may be identified with the first group of writings. It proceeds to show that the amounts of money in circula- tion and price-levels are closely related, indeed that a rise or fall in the one necessitates a proportionate rise or fall in the other. Furthermore, it makes gold the decisive factor among the various sorts of money cir- culating, and considers the ratio between gold stocks and bank-deposits subject to check fairly rigid. Thus gold becomes a causal force which normally determines price-levels and expresses through its changes chang- ing costs of living. 3 This, briefly, is the theory in its most recent and commonly accepted form. It puts the question of prices in the centre of discussion identi- fying, furthermore, such movements with the problem of costs of living itself. But manifestly there is a weakness in the monetary interpreta- tion which no particular version of it can escape. In a word : One may grant the truth of the equation of exchange, 4 or even the chain of causa- tion from gold to average prices, and still deem the matter of costs un- touched. For the real problem has to do, not with a price-level, but with particular prices, not with money but with values of goods in terms of effort and other goods, in short, not with static terminals of time but with periods of change, with dynamics. 1 The number of magazine articles listed in Readers Guide to Periodical Literature, under the caption "High Costs of Living" was for: 1904 to 1907, about forty; 1908 to 1912, about two hundred; 1913-14, about'fifty. — See also Annals of the American Academy of Political and Social Science, Sept. 1911, for citations by Mr. Roger W. Babson. 2 Fisher, Irving, The Purchasing Power of Money, and Why the Dollar is Shrinking. 3 Fisher, I., The Purchasing Power of Money, edit . 19 1 1 , p a 1 S ir 1 59 . 4 MV+M'V' = PT, where M is circulating money, the "V's" velocity of circula- tion or rate of turn-over, P the price-level, and T the volume of trade. 2 RISING COSTS OF LIVING If all prices were merely doubled none would complain probably, however short-sighted human nature. What nettles the popular mind is the uneven rise of different sets of prices. The common-sense man asks: "why does my income buy less?" not, "why does a dollar buy less?" For him it is a matter of ratios between income and outgo. The difficulty lies in proving whether society as a whole has more or less to consume than formerly, or whether some are getting more both qualitatively and quantitatively, while others receive less. Costs of living may be said to have risen generally when the former is the case, especially if labor pro- duces a decreasing amount, or locally when the second happens. But which ever view we take, plainly the quantity theory of money falls down on an important point. It implies that costs of living would not change substantially without such a dispersion of prices as gold- movements occasion. It ignores particular prices for the sake of following a broad price-level. It lifts the concept of price out of its socio- economic environment and is unable to adapt itself to a society whose supplies and values change independently of money. 5 If the monetary interpretation is adequate a stabilization of prices is not only feasible but inevitable, once stocks of gold have been made constant. Either we do not concede this, or the quantity-advocate fails to cover the problem of rising costs by establishing a law of price-levels. In both cases a further search for a key to our problem becomes worth while. The second viewpoint held so consistently in popular treatments con- nects also with price, but in a quite different sense. The aim now is, not to fuse all goods and services into a universal index, but to contrast prices with wages and to pronounce times bad when prices rise, and good when they fall while wages are going up. Not money- but labor-prices are kept in mind. Hence cheapness is lauded and dearness decried. Roughly this corresponds to a theory of prices and distribution launched by the classics, but endorsed by many thinkers since then. So it will not be amiss to illustrate it from the works of Adam Smith who is its first sponsor, in order to contrast it thereafter with a doctrine of more recent origin. To Adam Smith 6 the hall-mark of progress was cheapness and plenty. He showed that history was nothing if not a continual improvement of productive methods and an expansion of social income. But in the wake of it should come lower labor-costs and a higher wage procured through 5 Fisher, I., Purchasing Power of Money, edit. 1911, p. 316. 6 Adam Smith, A n Inquiry into the Nature and Causes of the Wealth of Nations, Book I, chapters 5-11; Book II, chapter 1; Book III, chapter 1. INTRODUCTION 6 the bounties of nature in conjunction with man's ingenuity. In other words, proprietors of the soil and wage-earners had one common interest, while in conflict with them was the policy of the manufacturer and trader whose profits encroached on wages. Competition would level all incomes ultimately, but meanwhile prosperity consisted in a cheapening of food and commodities used by labor. Falling prices invariably accompany a growth of national opulence, as embodied in a larger population and a pleasing abundance of wheat and meat. Competition was the driving force in this direction. If we apply this test to the period here under review, namely, the years 1890 to 1915, the result is disconcerting, to say the least. Much effort has been devoted to demonstrating that wages relative to other sources of income have not increased lately, but on the contrary fallen. On the other hand it is a commonplace to dwell on the remarkable growth of wealth and production, or to enumerate signs of material progress in our mode of living. It needs only a moment's reflection on the indubi- table facts of present economic life to discard the definition of welfare and human progress proffered by Adam Smith. We must turn, therefore, to another school of thought in order to get the perspective that alone will make rising costs of living intelligible. The modern dynamic view of society 7 does not emphasize competition but monopoly, not land but human industry, not savings but betterment of person and capital-goods, not conflict between income-classes con- ceived as so many non-communicating compartments, but harmonious interests among social groups, not falling prices but rising prices in one respect, or a shifting of high and low prices in another. The dynamic economist stresses differentials of personality and places them alongside of natural monopolies as the foundation of a surplus which goes to enterprise, but gradually to everybody. Invention gives extra profits. Personal superiorities lead to the same result. They render prices inde- pendent of costs of production, and through special means of control effect a concentration of wealth. But with a concentration of the tech- nical means of production appears an enlarged aggregate income. All share in it at last because no other outlet for its consumption exists. Profits thus are a blessing because they facilitate further improvements. Besides, the consumer limits monopoly-powers by his own powers of sub- 7 See especially Patten, S. N., The Theory of Prosperity, 1902; "The Reconstruction of Economic Theory," 1911, in Annals of the American Academy of Political and Social Science, Supplement, Nov. 1912 "The Conflict Theory of Distribution," in Yale Re- view, 1908. 4 RISING COSTS OF LIVING stituting one article for another when prices advise it, and because wants ever outstrip productivity. This being so, wants and productivity are mutually interacting. By the one the efficiency of the marginal worker is raised; by the other a new want is stimulated. Through improvement of the Self and of capital-goods values go up. What is more, the shares of labor and capital are increasingly blended. Instead of separate funds for three or four factors of production we get many overlapping social budgets. The gains of the monopolist are socialized into common benefits. The marginal wage is upheld by the supramarginal. Lastly, prices maintain themselves in a double sense. They rise with progress because wants are satisfied by better products, and themselves are put on a higher plane. The units of value which, balanced against each other, mean prices are thus enlarged. At the same time prices cannot fall, chiefly because monopoly is a permanent fixture in a dyn- amic society. One kind will supersede another. Land and entre- preneur rents continually arise and disappear in this field or that, ac- cording to changes in technique and ideals. But generically they must endure. Hence prices and costs will tend to go apart rather than to coincide. There can be no sinking of the general price-level, but only a rise of prices in units of goods, or a shifting of high and low prices measured by coin. The essential thing, then, is changes in costs of production and wants. These bring qualitative and quantitative changes in supply for individuals or society at large. But with them incomes will be redistributed at all times, though most so in transitions. Costs of living thus become a sign of social progress rather than of retrogression. They do, in the broadest sense, mean a boon, however trying the processes of adjustment to some. In the spirit of this philosophy the following pages attempt to treat four main topics, namely (1) the changes of supply in goods and services during the last quarter century; (2) cost-aspects of supply, with the under- standing, however, that costs do not explain all prices; (3) price-move- ments by groups of goods, wholesale and retail; and (4) the redistribution of incomes from services and property. A distinction between total supplies and particular incomes is necessary, for while the one measures productivity, the other reflects valuations. Together they will help us to understand the problem as Americans have felt it, to get at the fundamental causes, and to correlate incidentally economic fact and theory. PART I. PRODUCTION Chapter I — Changes in Supply I. Production of Materials. The word "supply" may refer to two different things according to what we desire to explain. There is supply in the sense of natural resources from which all goods spring, and there is the supply of these goods themselves. It is obvious that the two are intimately related and that every country depends upon one for the other. For the world at large no alternative exists. Yet we cannot determine the exact nature of economic goods produced at any one time until we examine them as such, for out of raw materials many varieties of articles may be fashioned. The stuff nature gives us is fixed in quantity and kind. We cannot turn iron into marble, or timber into water-power. But the form and uses of each are at our option. Out of iron all sorts of commodities are producible, and with grain or cotton a long array of physically necessary, ornamental, or socially injurious goods may be turned out. What is more, the final products may satisfy different in- come-groups, or, again, become purely a service rendered by government on behalf of the nation at large. Hence, what concerns us most at the outset is not the supply of natural bounties, but rather that of the material services drawn from them and marking the scope and character of our economic enjoyments. Now, in this respect a remarkable change took place since 1890. Prior to that date America produced a superabundance of agricultural stuffs, but nothing else nearly so much. For instance, between 1870 and 1890 the population grew 62%, the number of bread-earners in agri- culture 55%, the acreage of faim-lands in general about the same, but that of improved farms 94%, and the stock of farm animals even more. 1 All prices fell previous to 1895, but farm products especially so. The average man's food supply probably never had been so great. Labor in farm and forest gave the richest returns, and national wealth in- creased in proportion. But gradually there came a change. The surplus of energy and goods found an outlet in industry. For- eign trade furnished the technical means of machinofacture quickly, besides stimulating a flow of capital from Europe to the New World. Thus national development was secured on a grander scale than ever, but with some novel effects. 1 Abstract of Census of 1910, pp. 281, 282. See also Census 1910, vol. 4, p. 41, and Statistical Abstract, 1911, pp. 732-33. RISING COSTS OF LIVING During the period 1890 to 1910 our population increased 47%, its wealth at least 150%, imports over 100%, exports 140%, while still more impressive gains were registered in industrial output, bank- clearings, railroading, etc. 2 Expressed in dollars and cents, then, the social divi- dend rose to figures never heard of before. But the crucial fact is, first, that measured by weight and volume production grew also, and secondly that not all classes of goods gained equally. Indeed, it is not enough merely to know that the total output of stuffs was doubled within a score of yeais. 3 More significant is the relative movement of goods, tan- gible and intangible, the ascendancy of some and the decline of others, in brief a change of ratios between the principal groups of goods. Mo- mentous in consequences was the comparative decline of agriculture, the gain of industry and mining, and a yet more startling extension of personal services. To satisfy ourselves on this point by a few figures: Between the triennials 1889-1891 and 1910-1912 the output, in weight, of lead increased 192%, of pig-iron 230%, of zinc 316%, copper 334%, phosphate rock 446%, coal (both kinds) 300%, petroleum 400%, cement 900%, and aluminum several thousand percents. 4 For earlier years the percentage gain had been slightly greater, but the absolute gain not anywhere near as great. However, this industrial advance is most striking when compared to a growth of population of 47%, of 75% in the number of gainfully occupied in manufactures, 5 of 140% in the value of aggregate products, 6 and of 200% in invested capital. 7 If we follow statistics on occupations as classified by the federal Census Office we find that manufactures and mechanical pursuits in 1890 account for 24.4% of all "gainfully occupied," i.e., those sup- porting themselves chiefly from money earnings, and for 28.3% in 1910. 8 For transportation, trade, the professions, and personal and domestic services the precentages are respectively 36.4 and 38.7; or, stating them with regard to the entire population, 13.5% and 16. 1%. 9 The number of agriculturally employed fell in proportion. 2 Statistical Abstract, 1913. 3 See Table 4, p. 12. 4 Statistical Abstract, 1913, pp. 663-65. 6 Abstract of Census of 1910, p. 439. 6 Census of 1910, vol. 5, pp. 32-33. 7 Ibidem. 8 Census for 1910, vol. 4, p. 41. * Ibidem. For a criticism on classifications see Am. Econ. Rev., March 1915. For a reply to criticisms ibidem, Sept. 1915. PRODUCTION Any output for a given period may, however, be pronounced suf- ficient or insufficient by several standards. It depends on what we have in mind. Thus to say that agricultural production was doubled is one thing; to compare it with developments in other fields a second; and to relate it to population a third. One must decide which criterion is to be adopted. For present purposes evidently nothing is so important as a per capita supply. It is what the average man would get at two different dates that concerns us, provided distributive principles remained constant. Hence movements in population must never be lost sight of. The output of different kinds and groups of goods is best measured by reducing all unit-measures to a common standard such as the pound. Granted that the same goods have very different practical values accord- ing to the uses made of them, and that they vary infinitely in make-up and qualities, such a quantitative comparison is here indispensable. Nor will the results be far from correct so long as the same rates of conversion are applied uniformly to all years. This is done in Table 1. TABLE 1 PRODUCTION IN AGRICULTURE FOR 1890 AND 1910 Triennial Averages Producec I in Mil- Pounds Produced in Percentage Product Unit lions per Billions of pounds Increase 1890 1910 Unit 1890 1910 Cereals Bushel 3017 4920 50 150.8 246 62.8% Tobacco Pound 475 1000 1 0.5 1 110% Potatoes Bushel 231 333 60 13.8 20 44.2% Hay and For- age Ton 66.8 97 A 2000 133.6 195 45 .8% Cotton Bale 7.2 12.8 500 3.6 6.4 78% Cotton seed... Ton 3.8 5.5 2000 7.6 11 44.8% Butter and Cheese Pound Gallon Pound Bushel Pound 1460 5200 295 13 568 1940 5800 307 20.6 1752 1 8 1 50 1.5 41.6 0.3 0.6 0.6 1.9 46.4 0.3 1 1.8 32 .7% Milk 11.5% Wool 4% Flaxseed 55% Sugar 208% 354.5 530.8 50% Milk Cows Heads 15.6 21.4 37% Other Cattle... Heads 35.9 45.5 26 .4% Hogs and Sheep Heads 94.5 111.5 18% References: Statistical Abstract for 1913, and Census of 1910, Vol. 5. 8 RISING COSTS OF LIVING All standard measures such as the bushel or gallon or ton have been converted into pounds of sixteen ounces, the amounts representing tri- ennial averages for the large majority of goods. Individual items have further been added up to make a grand total so that for the period 1889 to 1909 the increase could be given in percentages. The table shows that the aggregate supply kept pace with population. But this increase of the total covers up some details of peculiar signi- ficance. Thus the greatest gain was made by crops that either do not figure prominently among our domestic products, or else do not count as foods. Rice is an example of the first kind, and tobacco of the second. Sugar, it is true, ranks high both as food and in the list of home products, but nonetheless one-half of what we consume comes from abroad. Another point is the relative decline of some cereals which might or do form a mainstay of the family table. The production of wheat, for instance, grew only 39%, and that of rye only 20%. For oats and corn the gains are respectively 86% and 79%, but much of it went to the fat- tening of live stock which could not be supported by natural grazing as in former days. Cultivation encroached more and more on free pas- tures, so that meat-animals and notably also dairy cows had to be stall- fed. At the same time the supply of meat did not increase proportionate to population. We have hence a shrinkage of foods, even though none for agri- culture as a whole. This is true of the two decades since 1890, but it applies more strongly to the last census decade 1899 to 1909. Table 2 shows that during those years the population grew 21%, but total output TABLE 2 AGRICULTURAL PRODUCTION 1899-1909 Product Unit Product Millions 1899 ion In of Unit 1909 Pounds per Unit Production in Pounds (Billions) 1899 1909 Cereals Bushel Bushel Ton Pound Pound Bushel Bushel Quart 4439 515 91 5635 152 316 212.4 463 4513 643 109.3 6380 127 448 214.7 427 50 45 2000 1 1 60 50 1.5 222 23 182.2 5.6 0.15 19 10.6 0.7 226 Other Grains and Seeds Sugar, Hay and Cot- ton Seed 29 218.6 Cotton, Tobacco 6.4 Minor Crops 0.27 Potatoes 26.9 Fruit 10.7 Berries 0.64 Total 463 .2 518 .5 PRODUCTION 9 only 11%. The number of milch cows increased probably about 20%, and that of other live stock less. Correspondingly dairy products are falling off, while the supply of meats is curtailed. Cereals, fruits, and berries show up poorly. Forage crops (silage, hay) and cotton hold their own. Sugar and potatoes even gain relatively, but such are exceptions. We may conclude, therefore, that the supply of meats, dairy products, and important cereals went down steadily, the decline being most marked after 1900. This it is the safer to say since the years 1899 and 1909 were both fairly normal. But for that matter it follows from other facts. The shrinkage came inevitably since acre-yields rose but very little, 10 because the acreage of improved lands gained less than five per cent, the number of farm-workers remaining approximately stationary, 11 and because of changes in the area covered by the main crops. In 1899 the cereals covered 65.3% of the acreage under cultivation; in 1909 only 61.5%. Wheat shows the greatest loss, then corn. Oats, cotton, vegetables, and fodders gained. 12 Truck-gardening became most popular in the East, within the pale of big cities and perfected transportation systems. The national domain was more sparingly parcelled out to seekers of homesteads at the very moment when demand for them reached its height. 13 Foreign trade was bound to reflect this pressure. For one thing old ratios of imports and exports of foods, raw-stuffs, and manufactures were upset. For another, exports comprised decreasingly cereals and animal products. In 1900 our food-output was valued at 81,900,000,000 of which 28.7% was exported. But in 1910 it had dwindled to 10.8%. 14 In 1890 foods exported in excess of food-imports still amounted to §96,000,000; by 1911 to less than $32,000,000 in spite of a strong rise of prices. 15 Or to put the situation another way: Since 1890 the value of food-imports grew three times as fast as exports. The opulence of the American people is exemplified in these facts. For primary necessities and machinofactures we were able to buy huge quantities of cocoa, sugar, coffee, tea, alcoholic beverages, delicatessen, and so on. Our productive powers exceed the European so much that luxuries form a greater part of our imports than elsewhere, even discounting differences of home pro- duction. But on the other hand the positive decline of food-exports 10 Census for 1910, vol. 5. 11 Ibidem, pp. 534-35, and 570. Abstract of Census for 1910, p. 265. 12 Census for 1910, vol. 5, p. 533. 13 Statistical Abstract for 1913, p. 19. 14 Ibidem, Tables 234 and 236. Statistical Abstract for 1911, pp. 702-52. 16 Ibidem. 10 RISING COSTS OF LIVING shown in Table 3 portended nothing good. The export of oats fell from five million bushels in 1890 to one and a half millions in 1911 ; that of rye from six millions to nothing; that of wheat from 165,000,000 bushels to not quite a hundred million. 16 Exports of butter dropped to one-fourth of former years. Cheese and flaxseed not only vanished in the export list but appear among imports. Barley and eggs alone form a growing percentage. Meats reckoned in dollars and cents increase somewhat, but in view of price movements apparently rather than genuinely. Further- more, imports of wool, hides, and hay went up at a rapid rate. For all that, these changes in our foreign trade could not restore the old balance of supplies. The final and summary effect of readjustments of demand and supply is shown in Table 4 which contains the principal products of agriculture, mining, forestry, and machinofacture in 1890 and 1910. Again, as on a former occasion, the items have been reduced to pounds in order to obtain a comparative viewpoint. This is the more serviceable since with the exception of natural gas, building stones (natu- ral), fish and very trifling items all quantities are calculated by the fed- eral census. 17 We are thus in a position to take inventory, as it were, of the national stock, of its main elements and of the trend of production during the period of rising prices. Long ago Ruskin in his quaint economic essay dwelt on the importance of knowing "what quantity of each article composing the store [of nations] exists in proportion to the real need for it by the population." 18 We cannot easily fix the actual needs of people, particularly since the primary needs have ceased to fill our bill of consumption. A surplus economy does not bother about such minima; it turns more on the secondary wants, on the comforts and luxu- ries. But nonetheless the materials of a rising level of living must in- terest us, for they lie at the very core of costs of living. Now, the facts are these: in 1889 foods comprised 32% of the national output; in 1909 17.3%. Hay and tobacco contributed respectively 17.7% and 11.6%, the rest being products not for either internal con- sumption of man or the feeding of live stock. Among foodstuffs, meats, wheat, rye, and dairy products preeminently are on the decline. Forage and orchard crops fell off slightly, wool and hides much more, while the 18 Statistical Abstract for 1913. 17 Ibidem. 18 Ruskin, M unera Pidveris, p. 39. See also Hobson, Work and Wealth, p. 32: "A pecuniary statement of the National Dividend which contains no information as to the nature of the goods and services comprising it may be repudiated out of hand as useless — ." £2^ p < re a re TJ rri n w t? 1 o w k ti td << n * re o in P X H- a> a- o era ■ era -re rt^ ££§b !T rt> ui re 8 £>0*< i-rj ui O *i 5» TO re re pj re re re p p P O-P-O- [fl ui 1/1 ^dtOWt-JO^^HWCdWCd OCPoP OC) C>CCCCi O- £L 3 3 P- P- *i^ O S"< p %*> ct- O n re P O g 3 a- TfW w 2 c s= re re re o Ul Ul Ul Ul 1890 o 90-92 1890 Cfi ui 3" O 3 5" p. re. Ul Ul 91-95 1890-91 1890-91 uiOiO^ \0 O to 00 to to to to 4^ On OjnOh- -otAoao^^o 4^ to On 00 o i(0 58 a > w o no OO tO NO 1913 1910 1911-12 11-13 1911-12 N C/J W h- *- ►£* tO WUlO On On On H-» Ol H- k tO ^ Oj Ul CO Oj Cv k" Oj h; g> CO gO; OoOtOv-'NOOtOH-OoOnNOONO; g OnOo M-JO^l-OOO^CMslWOft On 4* ji. 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I (It g =^!3 n p A ui ai "S _^ W 10 *> Ul >i] 25 Nri 37 o 00 vO T G w C W « 58 > 3 tn so Ul taj - sS 1 - §9 o I o o » 58 » W X JO o a o o 2: PI X I g o o w H > > > ° o M M r/i tn > W r< w M H Si -a w g H Z w Ul > f w 00 00 o Z 1—1 a z n vO ^ h- > > o o cj r 1 H C W cyo H > H 03 12 RISING COSTS OF LIVING supply of lumber, corn, oats, potatoes, sugar, rice, and cotton increased faster than population. Yet in 1889 cereals, meat and milk constitute 29% of the total, in 1909 only 15%. The selection of single instead of a series of years weakens the force of our argument. This cannot be gainsaid. If, for instance, triennial averages are taken the standing of agriculture improves, as foods would then form respectively 28.9% and 18.3% of the aggregate sums. 19 Also, the latter themselves would show a gain of 150% as compared to the smaller gain indicated on Table 4. On the other hand, since the figures for minerals, too, would have to be raised the percentages are really affected less than appears at first sight. Thus we can hardly be in doubt as to the general fact: Agriculture took decidedly second rank to industry, for between 1889 and 1909 the latter increased 228%. Coal, iron, and petroleum come first, and lumber second at a considerable distance. As to the product of fisheries we know that it gained scarcely 20%, in spite of higher prices paid especially after 1900. Fish, like other foods, form a shrinking part of our national income. 20 Suppose we try now, in the last place, to divide products into "fixed" and "circulating" capital so as to be able to contrast quantitative changes later on with changes in value. John Stuart Mill among other writers has called our attention to the need of a continuous round of pro- duction and consumption measurable by the year. He tells us that "the greater part in value of the wealth now existing in England has been produced by human hands within the last twelve months. A very small proportion indeed of that large aggregate was in existence ten years ago." 21 Hence the necessity of continuous, recurrent effort, and hence — by way of practical application — the paramount importance of right principles of taxation. 22 Whether on Mill's static premises a constant ratio of surplus to total production was implied need not here detain us. But it is instructive that what he said about values in general applies also to our physical quan- tities since 1890. This is brought out by Table 4. If namely in confor- mity with modern usage we call such goods circulating as admit of a 18 Statistical Abstract for 1913. 10 Bureau of Census, "Fisheries of the U. S.," 1911, p. 10. 21 Mill, Principles of Political Economy, Book I, ch. 5, section 6. 12 Ibidem, section 8. TABLE 4 Production of Main Groups of Circulating and Fixed Capital, 1889 and 1909 (Physical Quantities. All Measures Reduced to Pounds at Indicated Rates) A . Circulating Capital Article Cereals Meats Milk Butter and Cheese. Sugar Molasses Rice (Clean) Hops Poultry Eggs Potatoes Orchard Products... Peas, Beans Hay and Forage. Wool Cotton Cottonseed Flaxseed Hemp Tobacco Salt Petroleum Coal Standard Measure Bushel Pound Gallon Pound Pound Gallon Pound Pound Head Dozen Bushel Bushel Bushel Ton Pound Bale Ton Bushel Ton Pound Barrel Barrel Ton Reckon'd at Pounds 50 1 8 1 1 12 1 1 3.6 1.5 60 50 40 2,000 1 500 2,000 40 2,000 1 280 300 2,240 Total Circulating Goods (roughly) All Foods Hay, Salt, Cottonseed, Tobacco Millions of Pounds 1889 1909 176 ,450 12 ,000 41 ,600 1,460 301 300 129 39 1,000 1,230 15 ,660 0,940 0,360 133 ,600 0,191 3,550 3,600 0,410 0,023 0,488 2,240 10 ,500 282 ,240 688 ,000 252 ,000 140 ,000 222 ,500 14 ,700 46 ,400 1,950 1,681 500 507 41 1,760 2,400 26 ,880 1,075 0,740 194 ,900 0,255 5,325 10 ,600 0,780 0,075 1,056 8,428 54 ,960 1 ,034 ,880 1 ,632 ,000 320 ,000 215 ,000 B. Fixed Capital Lumber Pig Iron Lead and Zinc Copper, Aluminum, Nickel. Silver and Gold Lime Cement M-Feet 3,000 Ton 2,240 Ton 2,000 Pound 1 Ounce 1-16 Barrel 150 Barrel 380 70 ,000 17 ,000 0,484 0,232 0,003 10,275 2,660 120 ,000 57 ,800 1,186 1,130 0,004 7,000 25 ,346 Total Fixed Capital Percentage of Circulating Goods on Total Production: Percentage of Foodstuffs on Total Percentage of Goods indirectly for Food, on Total Note: Omitted Goods: Natural gas; building stone; fish; and 101 ,000 212 ,000 87 .1% 88 .4% 32 % 17 .3% 17 .7% 11.6% inor items. 14 RISING COSTS OF LIVING single or transient use only, such as foods, fodder, tobacco, plant-fibers, wool, coal and petroleum, then the remainder, representing fixed capital, constitute but one-tenth of the grand total both in 1890 and 1910. 23 In other words, while the various constituents of each class of capital have changed their relative positions the surplus has not; certainly not in a perceptible degree. Goods, we may infer, are replaced at a more or less constant rate, whether they satisfy primary or secondary needs, whether foods are in the ascendant or commodities, production-goods or direct utilities. It may be highly significant for certain groups of people that coal and cotton displace cereals or wool, and that stuff is discarded rather than worn out, but the net result is always a displacement, not an accre- tion of goods. The more dynamic the age the greater the velocity of circulation. This seems to be the upshot of the matter. Any number of data might further be cited to illustrate this point, but a few will suffice since they may be considered symptomatic of the general trend. Thus we know that the per head consumption of meat declined, 24 that of corn, wheat, sugar, tea and malt liquors increasing but moder- ately, while that of coal, iron, silk, rubber, musical instruments, lighting fixtures, paper, sporting goods, "soft drinks," and (presumably) linoleum and oilcloth went up enormously. 25 Figure 1 is designed to show the relative gain of each, quantities being selected wherever feasible with due regard for exports and imports. Where values are compared price- rises will reduce differences slightly. It appears that the change in demands is particulary marked since 1900. For instance, the value-output of confectionary increased 140%, 23 Definitions of Fixed and Circulating Capital have changed several times in the history of economic thought. Smith understood "Fixed" to mean capital em- ployed in the improvement of land, the purchase of useful machines, etc., so as to yield a profit "without changing masters." {Wealth of Nations, Book 2, chap. 1). Ricardo and Mill meant by it goods admitting of multiple, repeated uses and employed for further (price) production. The idea of fixed capital as goods capable of bearing re- peated uses, without consideration of exchange or production, dates from the rise of psychological thought. 24 Report of Bureau of Animal Industry, Dep't of Agriculture, for the years 1905 and 1911, respectively, p. 283, and p. 260. 26 These and subsequent data have been taken from Statisical Abstracts for the years, 1911, 1912, and 1913. IfiOCose it» Con- 6um.pticm o£ 37 Sneil\ie0 »■» r- -s nD 00 ol <- o en 00 t-^ o «J OQ CO CO tf Q o NO ro O vS ^ 3 *» » «> K i C7) Q JO * I Auctc fi * Q a-' e4 0) R 4 o «n >o f* I- o s0 CO o d «• CD cn CO N^ o «0 oo Oft CO tf s O w> ^ ^) 00 r K «> PRODUCTION 15 of canned fish 177%, of canned vegetables 220%, flavoring extracts 240%, men's furnishings 192%, women's clothing 466%, oilcloths 323%, cash-registers and calculating machines 410%, plumbers' supplies 264%, dentists' supplies 191%, typewriters 447%, refrigerators 140%, fancy- paper boxes 194%, printing and publishing 125%, patent medicines 156%, druggist preparations 557%, perfumery and cosmetics 200%, silverware 135%, artificial ice 760%, fur goods 200%, jewelry 86%, choco- lates 136%, corsets 130%, photographic apparatus 189%, and of auto- mobiles and trucks some 5,000%. 26 We must repeat: Price-rises account for the least of this expansion. Changes in foreign trade to be sure make some deductions necessary; and the unequal accuracy of statistics, of course, tends to exaggerate the development. But with all requisite al- lowances the general fact of unprecedented qualitative changes in demand still remains. This is the cardinal fact, not the exactness of our calcu- lations. It speaks volumes that during the score of years under review the per capita consumption of manufactures increased from $133 to $221, while that of agricultural produce shows virtually no advance. 27 II. Services. The non-material services were multiplied even faster than those embedded in industrial commodities. Railroads, e.g., in- creased their ton-mileage by 150% between 1890 and 1910, 28 traction com- panies their traffic since 1902 by 100%. 29 Telephone companies tripled their turn-over, and central light and power stations nearly quad- rupled it. 30 Not less telling is the extension of personal services, for by their prog- ress the course of material productivity may be gauged, just as in turn they promote it and help to raise the general level of living. One may say, the greater in a community the body of workers providing place- utilities or catering directly to personal wants, the higher the type of economic civilization we are dealing with, the wider the margin for non- necessities, and the ampler the income of that society as a whole. The progress of science during this era is indicated by the growing number of vocations, that is by increased specialization. This spirit of research lies back of the fact that since 1880 the number of archi- tects and designers increased 920%, of engineers and electricians 2,370%, of chemists and metallurgists 700%, of operatives in rubber fac- " Ibidem. 27 Census of 1910, vol. 5, p. 35. 28 Statistical Abstract for 1911, p. 288. 28 Market World and Chronicle, issue of April 10, 1915. 80 Ibidem. 16 RISING COSTS OF LIVING tories 620%, and of plumbers and gas-fitters 740%. 31 Directly or indi- rectly inventions fostered by scientific inquiry have necessitated this growing host of industrial servants. But like increases in the field of trade and transportation reflect, on the one hand, the bearing of large-scale production on the exchange-mechan- ism, and on the other, the multiplication of wants in the wake of tech- nical improvements. In a sense, wants grow faster than productivity! Thus, while the population (since 1880) increased 80%, the number of gainfully occupied actors and showmen increased 840%, that of boarding and lodging-house keepers 770%, of janitors 1,500%, of brokerage agents 1,010%, of typists and stenographers 150%, of messenger and office boys 735%, of shippers and packers 920%, sales-men and -women 2,550%, street railway employees 1,180%, of soda-water bottlers 740%. 82 And so on. Occupational data since 1890 have been put on a sound comparative basis; so they are even more to the point. The tabulation, as given in Figure 2, shows that the greatest gains were made by bookkeepers, sales-men and -women, restaurant keepers, janitors, hairdressers, clerks, commercial travelers, employees of traction and telephone companies, stenographers and typists, watchmen, shippers and packers, laundry operatives, and plumbers; the least by printers, physicians, teachers, ped- lers, lawyers, and clergymen. The latter three groups did not increase as fast as population. Barbers, journalists, dentists, and music teachers hold a middle position in the race for popularity. We may conclude, then, that demands were most urgent for commercial equipment and training, for rapid transit and a better intelligence service in the big cities, for protection against accidents or crime, for sanitation in one guise or another, and for the elimination of irksome home duties. Government budgets throw additional light on the new direction of demands. Compared to what was once thought a proper delimitation of government activites present views are radical indeed. From individ- ualism we have veered to paternalism of a sort whose leading character- istic is the care of person rather than of profits. Science and bitter experiences have taught us the fundamental importance of public health, of security, right modes of living, and careful husbandry of natural re- sources. Hence expenditures grew at an astonishing rate, wholly apart from appropriations for army or navy. If for 1890 we estimate the na- 31 Census of 1910, vol. 4, pp. 54-56. 32 Ibidem. ffi I 4 1 c 1 u * 3 1 k- > X -< f d s i 3 v Cl- V W f d v d I** j* J d 8 i « d 2 -4 c 4 d 01 "3 3 ■U it E 3 3 (2 2 c U V C d 4 3 § It «!; d £ 5* aJf v ft a 61JKE 2/ Group o* Gain- ^ullu Occu-piedL KelcAivt -lo ropu.- lod.Wl&90-l910 u a- 1 3 o >» S '3 O nO 01 o cV N <"> *■ + * !? 00 <0 *i w 1*5 <^ O) N *0 o> 00 c^ — <9 W 00 c\l ^ W> 0) = « To o 00 O 00 >0 (S (I) to (4 CO ^; *! to v31 .8% Other Enterprises Capital and Land 14.2% Average Wage per Adult Earner Annually $41 59 $645 C. Factorial Shares in Percentages of Actual National Gross Income. Labor (with Fee Earners) . Enterprise Land and Capital 1910 54 % 31 .8% 14 .2% The leading facts of redistribution thus appear in Table 13. It will be seen that between 1890 and 1910, while the population increased 47%, the number of gainfully occupied as defined by the Bureau of the Census increased 63%, the number of money-earners about 60%, national wealth 160% to 170%, and national income from 150% to 160%. We repeat, these like all preceding or subsequent figures must be accepted with cau- tion, for the chances of error through many causes are great, but they indicate the trend of development and the nature of distributive changes. The number of wage-earners grew 120%, that of fee-earners 94%, of farmers 13%, and of other enterprisers 115%. Since farmers, however, make up a much larger element than these "other enterprisers" the av- erage increase for all was, as stated, 60%. As to incomes, labor received 59% of the total in 1890, and 54% in 1910. Enterprise raised its quota in "Ft GintE T". 5«« Tubl« 13 "Pactovial J istiri. bunion ok "twtoirvt in Ond ^VumeYicol SfYcnpth of Whop Earners cm el En+eY^i sets Xvftwn -Vo a Scute Clonal Gross, Inconn, 1S90, #1Z. 500, 000,000 ~Hv.\'\ otioI G*o«.&Xr\c<»m«, 1 9 1 0, #>31, 400,000,000 ■ . 5^ ■« + b> f I -0 V **>l £ (0 li o r* I-' <0 It I •r- tf (A P w. 8" 5 S- -v * v J £ V Ofl "Wag* ana fee Eotiuvj 66.8% Enie-tbr iters 33.1% V^ 00 no v P ~Wa.de anc\ Vce Earners, 7Z.S~^ Enttt or ! se T5, 2*7 ^" DISTRIBUTION 65 proportion, while rentals remained stationary. Income bounded ahead of population not only in terms of money, but quantitatively as well, for the price-level rose much less than national income. Labor loses in two respects, namely first by getting a smaller percentage of the social income, and secondly by forming a larger part of the earners. On the other hand it gained in having more to consume in actual variety and volume of goods, and in participating more generally in the proceeds of enter- prise. Barring the lowest wage-classes they doubtless shared increas- ingly in profits through stocks or bonds. But this does not detract from the significance of the fact that profits did gain on wages, that particularly corporations claim a larger and larger part of the social in- come, and that the number of enterprisers recognizable as such de- creased relatively. Rent proper received a somewhat larger, but interest a somewhat smaller, part of the grand total; hence by blending the two under the caption "rentals" we make their share virtually constant. Indeed, the cardinal point brought out by all the data for redistribution is not the rising importance of land and capital-funds, but the ascendancy of business rents, i. e., the preponderating influence to-day of monopoly. This is the lesson of Figure 4. 76 Crude labor in particular fared badly because supplies of it often ex- ceeded demand, or because for lack of organization men could not enforce their rights, or because coming from a lower material civilization in 76 For a computation of factorial shares closely approximating our own see King, Wealth and Income of People of the United States, pp. 156-160. The percentages of each share for 1890 and 1910 are as follows: Wages Interest Rent Profits Total Income 1890 53.5% 14.4% 7.6% 24.6% $12,082,000,000 1910 46.9% 16.8% 8.8% 27.5% $30,529,000,000 Rent here does not include the "hire of buildings or improvements," and inter- est is defined as price for use of capital-goods i.e., goods, used in the further production of wealth, hence excludes rent on homes. Since Prof. King's modus operandi is differ- ent from that here resorted to the substantial agreement of results is the more noteworthy. For best data on income distribution in 1890 see Spahr, Ch. The Present Distribution of Wealth in the United States, where the national income is estimated at $10,800,000,000. Professor Scott Nearing (Income) shows figures for wage and property- incomes not far out from those of Prof. King and those here advanced. For occupational incomes see particularly the repeatedly quoted study by Prof. Streightoff, Distribution of Incomes in the United States, 1912 (vol. 52, No. 2 of Studies in His- tory, Economics and Public Law, Columbia University). TVctoVial J)istircbutio-n o£ Income, in i890\ 19/0 ^TumcYica\ Strength of Wft.o«r Earners coicl En-tcY^^ri sets 3**ci\*m to * Scale "Xattonal OTos&Xncome, 1S90, #1£,SOQ, OoqCOO -v *Wag< ana F«?r»sers 33.2. DISTRIBUTION 65 proportion, while rentals remained stationary. Income bounded ahead of population not only in terms of money, but quantitatively as well, for the price-level rose much less than national income. Labor loses in two respects, namely first by getting a smaller percentage of the social income, and secondly by forming a larger part of the earners. On the other hand it gained in having more to consume in actual variety and volume of goods, and in participating more generally in the proceeds of enter- prise. Barring the lowest wage-classes they doubtless shared increas- ingly in profits through stocks or bonds. But this does not detract from the significance of the fact that profits did gain on wages, that particularly corporations claim a larger and larger part of the social in- come, and that the number of enterprisers recognizable as such de- creased relatively. Rent proper received a somewhat larger, but interest a somewhat smaller, part of the grand total; hence by blending the two under the caption "rentals" we make their share virtually constant. Indeed, the cardinal point brought out by all the data for redistribution is not the rising importance of land and capital-funds, but the ascendancy of business rents, i. e., the preponderating influence to-day of monopoly. This is the lesson of Figure 4. 76 Crude labor in particular fared badly because supplies of it often ex- ceeded demand, or because for lack of organization men could not enforce their rights, or because coming from a lower material civilization in 76 For a computation of factorial shares closely approximating our own see King, Wealth and Income of People of the United States, pp. 156-160. The percentages of each share for 1890 and 1910 are as follows: Wages Interest Rent Profits Total Income 1890 53.5% 14.4% 7.6% 24.6% $12,082,000,000 1910 46.9% 16.8% 8.8% 27.5% $30,529,000,000 Rent here does not include the "hire of buildings or improvements," and inter- est is denned as price for use of capital-goods i.e., goods, used in the further production of wealth, hence excludes rent on homes. Since Prof. King's modus operandi is differ- ent from that here resorted to the substantial agreement of results is the more noteworthy. For best data on income distribution in 1890 see Spahr, Ch. The Present Distribution of Wealth in the United States, where the national income is estimated at 810,800,000,000. Professor Scott Nearing (Income) shows figures for wage and property-incomes not far out from those of Prof. King and those here advanced. For occupational incomes see particularly the repeatedly quoted study by Prof. Streightoff, Distribution of Incomes in the United States, 1912 (vol. 52, No. 2 of Studies in His- tory, Economics and Public Law, Columbia University). 66 RISING COSTS OF LIVING Europe they were satisfied to work for less than the native. At any rate, it must be remembered that 75% of the aliens arriving at our shores since 1900 had no special vocation, that not all of them could have been surplus-producer in any sense of the word, and that they were put necessarily to marginal uses with low wages. The entry of women workers in large numbers only aggravated the situation. 77 As mem- bers of a family they frequently needed less than self-supporters or heads of families, thus contenting themselves with lower pay regardless of what they produced. 78 Wherever labor organized, as in the building- trades, railroading, and mechanical branches of industry they certainly gained a super- wage. But these constitute a minority and, perhaps, the more efficient ranks whose claim to a superior share would be satis- fied anyhow. 79 VI. Family Budgets. What the masses of producers and therefore of the population in the United States received we must judge more parti- cularly from family-budgets such as have recently been tabulated on pri- vate and public initiative. It is in these budgets of the average working man that we can find the range and trend of consumption at different times. A comparison of prices, wholesale and retail will give us a gen- eral idea, but an analysis of typical household expenses furnishes the de- tails that make a story complete. For budgets are ratios of income and outgo. To the man of the street who thinks in plain terms it is the ratio between money received and money spent. At different moments he will find one changing or the other, or both. Looked at more closely, however, this ratio is one between labor spent and product returned. The question is either, how much and how long have I worked to get these goods? or, what opportunities was I allowed to labor so as to procure income? Combining the two aspects of the problem we arrive at the query: How much and what kinds of goods did I receive this year to consume or save, and how much and what kinds some other year? 77 Census of 1910, vol. 4, pp. 54-56. 78 See Eighteenth Report of Commissioner of Labor, 1904, p. 362, and Streightoff , Distribution of Incomes, p. 93. 79 There is no agreement of opinions on the relation between unionism and super- wages, and there hardly can be in view of the lack of reliable data. For a brief, but clear consideration see Clark, Walter E., The Cost of Living, pp. 38-44. Also: Quar- terly Publications of American Statistical Association, June 1910, pp. 154-64, where Prof. Haney of the University of Texas gives an unbiased comparison of wages for both organized and non-organized workers. — On the other hand, the depressing effect of immigration on wages is generally acknowledged. See, e.g., Prof. Taussig's article in Quarterly Journal of Economics, 1906, pp. 520-21. DISTRIBUTION 67 In the end costs of living mean such levels of living for different groups of people, a change being welcomed or resented according to its nature and the aspirations or reasoning of the consumer. The bulk of prices, most authorities agree, have risen more than av- erage wages. True, the index for two hundred and fifty-five commodi- ties at wholesale rose only about 20% between 1890 and 1910, 80 while wages per hour rose from 32% to 37%. 81 It might consequently seem that laborers had advanced themselves financially. Offhand one feels all the more inclined to believe this since many articles like sugar, coffee, tea, wheat flour and bread, rye flour and corn starch among foods, as well as certain fabrics of cotton and silk, glassware, tobacco, boots and shoes, refined petroleum, soap, kitchen utensils, and mechanics' tools have become relatively cheaper. 82 However, some noteworthy details disillusion us quickly. For society as a whole the level of living has undoubtedly risen, and there is probably no family that has not in one way or another benefited by the revolution of the last two decades. Yet for a considerable part of the population the displacement of goods has meant increased finan- cial pressure. Viewed rightly average labor-income does not balance prices as nicely as one would wish. In the first place, namely, the very commodities which the average family consumes in largest quantities, such as meats, dairy products, eggs, fats, fish, fuel, woolens, furniture, and certain services rose even at wholesale more than wages. 83 In the second place most retail prices advanced more than those at wholesale, 84 and in the third place retail food-prices went up long before wages, and far higher. 85 Even in combining, as Professor King has done, all officially listed wholesale prices with an index for fifteen main foods at retail we find the general index rising fully as much as the average indus- trial wage-rate per hour. 86 If all articles of consumption were indexed at retail and weekly or annual earnings substituted for hour-rates, wages would show a relative decline of, say, 8% to 10%. This is the trend for the period 1890 to 1910 or 1913. If, in addition, we examine the decade 1900 to 1910 or 1913 the fall of wages would be 80 See Bulletin 114 of Bureau of Labor Statistics. 81 American Economics Review, Dec. 1914, article by Dr. Rubinow on Recent Trend of Wages. 82 Bulletin 114, Bureau of Labor Statistics. ^Ibidem. 84 Ibidem, and Bulletin 136 of Bureau of Labor Statistics. 85 Ibidem. 8e King, Wealth and Income, p. 190. 68 RISING COSTS OF LIVING still more perceptible. For previous to 1900 wages fell less than the price of necessities, but afterwards the tendency was the other way. Manu- factures of wide use, comforts, and luxuries rose but little, but fuel and lighting, many articles of personal wear, staple-foods except sugar, bread, and coffee, also building-stuffs and some furnishings rose greatly. 87 Thus the purchasing power of a dollar reckoned at wholesale prices for all goods except foods would, if expressed by one hundred for the decade 1890-99, stand at 99 in 1900, and at 96.3 in 1910. 88 Measured by retail-prices only it would of course fall more, especially if we compared it, not with the course of all wages, but with that of crude-labor wages alone. Any impartial and comprehensive test of wages in terms of re- tail price will force the conclusion that relatively the masses of employees, that is at least one-third of the producing population, either failed to get their share of national wealth, or benefited much less than a general examination of supply-changes would suggest. 89 The explanation of this lies in the excessive rise of prices for the most important sorts of goods such as food, shelter, and fuel; that is most important either because life depends upon them, or because the loss of them is felt as a hardship from force of habit and social considerations. Both things are involved in the phrase "standard of living." Indeed, to quote one writer, such a standard is " merely a level of living so fixed in habit that any falling short is felt as a privation." 90 Some goods are essential to life in the biological sense. We must have so much bread and meat or equivalents, and so much protection from the ills of weather. This is a minimum demanded by every man. But beyond this he wants things, first, to raise a family and maintain his own economic efficiency, secondly to provide for his own needs or those depending on him in old age, when he will no longer be able to work. Whatever else he may wish for sheer enjoyment or to improve himself and family, the right to live and to keep up his productive powers stand first. It embraces wants prescribed by law of nature, to be satisfied be- fore all others in theory, if not always in practice. The additional wants marking a given level of living are not, however, thereby proclaimed 87 Bulletin 114 of Bureau of Labor Statistics. 88 King, Wealth and Income, p. 199. "Ibidem., p. 181. See especially also an excellent summary of evidence in the American Economics Review, April 1916 by Prof. H. P. Fairchild in his The Standard of Living, Up or Down? 90 Davenport, Economics of Enterprise, p. 3. Compare also with Seager, Henry R. Principles of Economics, 1913, p. 80. DISTRIBUTION 69 superfluous or repressible at will. Man after all is the slave of habits and of imitation. He is moved by the sayings of his associates or the com- parisons of everyday experience. 91 If certain things are allotted to him now, and then suddenly withheld he will chafe under the depri- vation. Or, again, if commodities gratifying primary wants of hunger and cold rise in price the poor will suffer more than the rich whose alternatives are many. Put in the formula of the German statistician Engel: People spend relatively the more on means of subsistence the smaller their income, and the less the greater their income. In the for- mer case luxuries are a bagatelle, in the latter they form a broad margin indicative of a high standard of living. To be sure, not all of the laws formulated by Engel hold good every- where, however well-founded his main contention. There are national temperaments and environmental forces as well as instinctive valuations of goods. A comparison of the expenses for like groups of goods by dif- ferent nationalities in the same country, and belonging to the same in- come-class, convinces one of that easily enough. 92 Each age has its peculiar ideals and customs, each race its own predilections and codes of conduct. But nonetheless American workingmen's budgets illustrate admirably the prime importance of certain kinds of foods or clothing and shelter, and the relative smaller advantage to be gained by laborers from a cheapening of manufactures or services. All such investigations tend to prove what a study of production in general has shown us already: Namely that Civilization has not yet been able to provide a rich abun- dance of essentials even while multiplying wants, and that therefore in the process of exchange and pricing the essentials must so appreciate as to form a growing part of costs among groups that do not increase their earnings in proportion to national progress. 91 For an early stress of the distributive bearing of inelastic wants see Jennings, Rich, in his National Elements of Political Economy. On the importance of social value based on primary instincts and imitation see Anderson, B. M. Social Value; chapters 13 and 14 where the sociological theory of value receives adequate treatment in refutation of the monetary, exchange-idea of value. Most economists have made use of the socio-ethical interpretation of value in one connection or another. For a particu- larly suggestive version see, however, Watkins, G. P., Welfare as an Economic Quantity, 1915, where "transputed utility" is recognized as distinct from direct and complemen- tary utility in price- and social-problems. 82 See, e.g. Report of British Board of Trade on Costs of Living in American Cities, reprinted in Sen. Doc. 62. C. I. ses., vol. 4, pp. 81-90; or Eighteenth Report of Com- missioner of Labor, pp. 626-29. 70 RISING COSTS OF LIVING TABLE 14 WORKINGMEN'S BUDGETS IN 1891 AND 1901, SHOWING PERCENTAGES SPENT FOR VARIOUS ITEMS PER YEAR Income Food Rent Clothing Light & Fuel Misc. 1891 $400-500 1901 45.1% 46 .9% 15 .3% 18 .6% 14 .4% 11.4% 6.6% 6.7% 18 .6% 16 .5% 1891 $600-700 1901 41 .2% 43.5% 15 .5% 18 .5% 15 .9% 12 .9% 5.9% 5.8% 21 .5% 19 .4% 1891 $700-800 1901 38 .9% 41 .4% 15 .6% 18.1% 16 .3% 13 .5% 5 .3% 5.3% 23 .9% 21 .6% 1891 $800-900 1901 38.1% 41 .4% 16.1% 17.1% 15 .1% 13 .6% 5.3% 5.0% 25 .4% 23 .0% 1891 $1000-1100 1901 34.7% 38 .8% 15.1% 17 .5% 17.5% 15 .1% 4.5% 4.9% 28 .2% 23 .7% 1891 $1100-1200 1901 30 .7% 12 .2% 16.5% 3.9% 36.7% Note: The percentages of 1891 represent an average for 2562 families; those of 1901 for 11,156 families. Bureau of Labor: Seventh Annual Report, 1891; P. 864. Eighteenth Report, 1903; P. 101. Table 14 brings out some leading characteristics in American bud- gets between 1890 and 1900, 93 but one must consult the details in order to fully comprehend their significance. Thus in 1900 the average family with an income of $750 to $800 spent of its total food-bill 8.94% for breadstuffs, 34% for meats and fish, 5.14% for eggs, over 16% for dairy products, nearly 15% for vegetables and fruit, and about 3% for lard. Of the remainder — some eighteen per cent — tea, coffee, sugar and molas- ses constituted one-half. 94 Again, in a much smaller community of work- ers in 1908, where the average family had $600 to S700 per annum, 29.4% of food-expenses went for meats and fish, 21.6% for milk, 21% for cereals, 13.8% for vegetables and fruit, 8% for sugar, and 6.5% for alcoholic beverages. 95 That is to say, by far the largest element in food consisted 93 Eighteenth Rep. Commissioner of Labor, p. 101, and Seventh Report, p. 684. 94 Eighteenth Rep., pp. 82-83, and pp. 622-25. 95 Chapin, R. C. The Standard of Living in New York City, p. 140. For further interesting details see, e.g. American Economics Review, June 1915, giving tables of ex- DISTRIBUTION 71 of the very goods whose supply dwindled most since 1900 and whose prices rose highest. As a rule rents form from 12% to 18% of family-expenses. 96 Now two- thirds of all homes are rented; less than one-third is owned free of encumbrances; 97 hence a rise in rent relative to commodities becomes at once a momentous event. Besides, frequently much more than one- seventh or sixth of the annual income is paid out for shelter. Thus ac- cording to a recent inquiry 98 only ten per cent of the foreign-born element in American eastern cities own homes; the other 90% pay $156 rent out of an average annual earning of $452, that is 34%. Considering that we have among us thirteen millions of foreigners 99 this percentage tells its own story. One is, in short, disposed to modify Engel's law of consumption with respect to American conditions during the last quarter century along these lines: (1) The average wage-earner spent from 75% to 80% of his income on food, rent, clothing, light and heat. (2) One-half of the out- lay for food goes into the purchase of meats, fish, dairy products, and eggs. (3) Since over two-thirds of all adult money-earners have less than $700 a year to spend the abnormal rise of foods and rent forced a change of diet or at least some restrictions for which an extension of indulgences in other goods could not entirely compensate. The inelasticity of some wants meant nothing else. As long as the masses look to what might be called materialistic gratifications a rapid urbanization of industry and life will affect low incomes adversely. Much of the feeling of rising costs of living since 1900 was bound up in this circumstance. 100 At the same time we should see also the cheerful side of the situa- tion. For in the first place wages are tending to adjust themselves more and more to the change in production and profits. Even the least skilled laborers will fare better hereafter. In the second place the average family is not as large today as a generation ago. There are less mouths to feed per wage-earner, and particularly so among the middle classes. The penses of working women in the state of Washington, compiled by Industrial Welfare Commission, 1914. Also: Mrs. L. B. Moore's Wage-earners' Budgets, p. 96. 96 See references given under notes 92-95. 97 Census of 1910, vol. I, p. 1295. 98 Sew. Doc. 61. C. 2. ses., vol. 66, pp. 104, 123 and 141. 99 Ibidem. 100 The general principle of costs of living underlying this fact is remembered in Marshall's Principles of Economics, 2 ed., p. 510. But see also Cairnes, J. E. Some Leading Principles of Political Economy, ed. of 1900, p. 276. 72 RISING COSTS OF LIVING average family had five members in 1890 and 4.6 in 1910. 101 Not only that, but the number of children under fifteen years had decreased rela- tive to population. 102 This is an advantage from a certain individual standpoint, and also socially if the death rate declines in proportion or still faster. In the third place the average wage-earning family has more than one bread-earner. In 1900, e.g., a survey of twenty-five thousand such families showed an average of 1.82 earners. 103 Twenty-two per cent had children at work, and almost as many per hundred kept boarders or roomers to help meet expenses. 104 Child labor is ordinarily an injury to society and may be highly reprehensible for special reasons. But we have plenty of evidence to prove that children are gradually stepping out of the labor market, while grown-up girls and women are taking their places. 105 The emancipation of -woman thus has aided the finances of a broad middle class earning between $1,000 and $2,000. In the fourth place, wage-earners are probably more actively inter- ested in business profits through stock and bond holdings than ever be- fore. 106 This helps to equalize incomes in a wholesome way. But in the fifth place, taxes — a forced contribution to public revenues for social ends — are being paid increasingly by the well-to-do rather than by the poor, in spite of tariffs and excises which burden chiefly the masses. Taxes and fees account for a larger portion of national income than is ordinarily realized. In 1912, for instance, the receipts of federal and local governments amounted to $2,500,000,000, a sum equal to seven per cent of the total income from which it is taken. 107 Less than 3% 101 Census of 1910, vol. I. 102 Ibid. 103 Eighteenth Annual Report of Commissioner of Labor, p. 362. 1M Ibid. 105 Census of 1910, vol. 4, p. 69, and Census of 1890, Part II, Introduction, p. 121. See also Quarterly Journal of Economics, Feb. 1915, pp. 123-25. im No reliable data are at hand (see, e.g., Streightoff, Distribution of Incomes, pp. 35-40), but the Journal of Commerce in issue of Dec. 26, 1912 estimated the number of stock-holders of corporate securities at two millions. Cited by Van Antwerp, The Stock-Exchange from Within, p. 15. — Occasionally the reports of a railroad corporation, like those of the "Pennsylvania," give an insight into growing participation by small earners. But the best circumstantial evidence is, of course, the rise of salaries, bank- accounts, profit-sharing schemes, large-scale production, stock-sales in times of panic, etc. 107 Census Bureau, National and State Revenues and Expenditures, 1903 and 1913, published in 1914, and Financial Statistics of Cities over 30,000 Population, published in 1913. — The figures here given are the somewhat higher ones of Prof. King in his Wealth and Income — , pp. 138-143. DISTRIBUTION 73 of this huge sum consisted of state and municipal receipts for public services rendered, about 12% of revenues from the federal postal ser- vice, the rest of taxes mainly. 108 The customs receipts were $1.25 per capita of population in 1890, and double that in 1912. 109 Per family of five this would represent respectively six and twelve dollars, or but a very small fraction of the average budget. Meanwhile the excise rate on cigarettes doubled, and between 1904 and 1914 that on tobacco — both of which were essentially paid by the producer. 110 In addition we have now a corporation and a general income tax. As to local taxation. Between 1903 and 1913 receipts from property- taxes grew 93% per capita, those from business taxes 74%, from liquor taxes 115%, from inheritance taxes 256%. m Thus state revenue receipts exclusive of loans nearly doubled while the population increased 20% and national wealth 70%. 112 Cities over 30,000 population each raised their total revenue receipts from $20.12 per head to $28.80, their ad valorem tax receipts 85% per head, and the rate per hundred of as- sessed real estate values 10%. 113 That is, special assessments and busi- ness-taxes rose most, while practically no new levies were made on small incomes. They went scot-free. And now to another viewpoint still. One of the striking gains of these years of rising productivity and rising costs of living is the shortening of the working-day already referred to and the elimination of irksome toil in the home. Instead of twelve or more hours per day most laborers now work but eight or nine hours. In less time he produces more, and gets more in variety and quality of goods or services. Safeguards and hygiene have become common watch- words. Life about the factory or store has been rendered more agree- able, less prison-like or demoralizing. With monopolies and profits on an unprecedented scale has come a larger amount of wordly goods, lei- sure and care of the Self. Invention and specialization have freed us largely from drudgery and stagnation of the mind. The universal trend is toward a dissemination of useful and balanced knowledge, toward a prolongation of the period of learning and growth in the average child, and an intensification of the psychic life in general. 108 Ibid. 109 Statistical Abstract for 1913. 110 Reports of Commissioner of Internal Revenue, 1904 and 1914. 111 Bureau of Census, National and State Revenues and Expenditures, 1903 and 1913, Bulletin 114, pp. 14-16. 112 Ibid. 113 Bureau of Census, Financial Statistics of Cities over 30,000 Population, p. 77. 74 RISING COSTS OF LIVING Household economy is being monetized, that is labors once performed at home are given to the outsider who, though charging for his services, is more proficient. By an extension of the principle of labors the family thus becomes possessed of more time for recreation, education, social amenities, congenial fields of employment, or care of children. Sympto- matic of this new spirit is an increase in the factory output of baked goods since 1890 of 200%, of 426% for women's clothing, of 433% for millinery goods; 114 or, again, a doubling of the number of steam laundry employees or restaurant keepers. 115 In a word, it looks as though the jack-of-all- trades were to disappear not only in industry but likewise from the home — whether for better or worse. Cooking, preserving, sewing, cleaning, washing, dress making and repairs innumerable are being turned over to vocations. The family is the gainer if it utilizes rightly its additional leisure hours; or if it does not, it must still reckon such leisure as part of an income for the sake of which other things are fore- gone, perchance food or furniture or theatre tickets or pleasure trips. This is the differential viewpoint of any group. It rests on the fact that all income has an outgo, that nothing comes for the asking, and that everything has two sides, a pleasing and a harshly exacting. But the signs are not disheartening except to the pessimistic. Fam- ily disintegration does not mean a collapse of the unit we call the family, but only a rearrangement of our duties and rights. The number of marriages per thousand of population has grown, not decreased. 116 Stan- dards have risen, not fallen. Self-improvement is on the upward bent, not only for the opulent, but also for the less richly endowed. It speaks well for the future that public schools enroll more children per thousand of population than ever, that expenses for schools have quad- rupled in two decades, 117 that college attendance has grown 300%, 118 and that, while the number of women students at colleges has increased 500%, 119 the number of women teachers has grown only 100%. 120 For precisely in such figures may we read the hope of greater productivity hereafter, indeed the guarantee that industrial progress and the enlarge- ment of social income are permanent features. 114 Census of 1910, vol. 8, pp. 381, and 399-400. 115 Census of 1910, vol. 4, Occupations. 116 Census of 1910, vol. I, p. 514. 117 Statistical Abstract for 1913, p. 104. 118 Statistical Abstract for 1911, p. 752. 119 Ibid., p. 752. "° Ibid., p. 727. APPENDIX TO CHAPTER II, PART II Method for Calculating the Factorial Incomes The facts presented in Table 13 were arrived at as shown below, but it must be understood that only the principal steps can be here indicated. To attempt more is out of question in a pamphlet of this sort. Partly for the same reason incomes from abroad or outgos to abroad have been ignored, though the sums involved are anyhow trifling compared to the total national income. Incomes for 1910 A. Wages 1. Calculate the number of "gainfully occupied" people as given in the Census of Occupations for 1890 and 1910, dividing them into three groups, viz., laborers, enterprisers (see Table 13a, p. 78 f.), and fee earners. The latter represent certain professional classes paid for their services not in salaries, but in fees. Table 13a does not enumerate them. 2. From the aggregate of laborers deduct all children (under sixteen years) working on farms and a certain number of adults on farms, who presumably do not earn money (see Table 5, p. 20). Divide the re- mainder into four classes, namely, children, females, male wage-earners, and (300,000) officials, who earn much more than the average laborer. 3. To find the average earnings per year (1910) of these groups we rely in the main on wage statistics supplied by Professor Streightoff in his "Distribution of Incomes in the United States" (see Bibliography) and by Dr. Rubinow in the December issue of the American Economics Review, 1914 (see Bibliography). Professor Streightoff (p. 139) fur- nishes us a basis for the year 1904, at which time 65% of all male adults earned annually less than $626-, 27% from $626-, to $1,044, and 8% in ex- cess of $1,044. Let us put therefore the earnings of each class at respectively $572, $900, and $1,250, that is for the year 1904. Dr. Rubi- now gives us a basis for 1910, in that he places the rise of wages (industrial for both sexes, but which may here be applied to males in all fields of work) between 1904 and 1910 at 14%. Let us make it 15%, and apply this rate uniformly to all three classes of male laborers. 4. From various data we may estimate annual earnings of women in 1910 at $520, and those of children at $210. 5. Multiply the number of earners in each class of male workers, and of females and of children by the average earnings of each individual in each group, and deduct from the total 10% in allowance for unemploy- ment (as suggested by certain data). 76 RISING COSTS OF LIVING 6. Similarly obtain total earnings of the three hundred thousand of- ficials, taking an average of $2,500, and of the fee earners, taking an average of $1,300 (as suggested, again, by certain data). For figures see Table 13b, p. 81. B. Profits 1. Divide all enterprisers, as found in Table 13a, into farmers, and other enterprisers, excluding from the latter only 400,000 manufacturers whose incomes may be assumed to appear essentially in the net returns of corporations. 2. Numerous data already referred to point to an average net income per farmer of $500. For other enterprisers assume earnings of $1,100 (as suggested by certain facts). 3. Take two-thirds of corporate net earnings as actual dividends (see Commissioner of Internal Revenue Reports). 4. Multiply earnings of farmers and other enterprisers by number of each group, and add corporate dividends. For figures see Table 13b. C. Rentals (Rent and Interest) 1. Farm real estate was worth $35,000,000,000 in 1910. Of this 34%, if we turn the percentage on acreage into a percentage on value by as- sumption of uniform values, was mortgaged up to 27.3% of its value (by partial test). Take a six per cent interest rate. — Of the total 32.2% was not operated by the owner, that is rented on various terms; but put the rate at 4% of values involved. 2. Corporations carried a funded debt of nearly $32,000,000,000 on which we may assume the average interest charge (as indicated by sundry facts) to have been about 4.5%. 3. Savings in the country amounted to $6,000,000,000. Take an average interest rate of 3%. 4. The total public debt amounted to four billions, of which one bil- lion yielded, say, 2.5%, and three billions, say, 5%. 5. The value of non-income yielding property (consumption goods and tax exempt property, money, etc., as per table of national wealth furnished by Census Bureau, 1915) was $35,500,000,000. The national wealth was, as per Census, $187,000,000,000 in 1912; say, $175,000,- 000,000 in 1910. Hence, deducting all items of wealth so far charged with rentals or yielding no income, we have $65,000,000,000 left. Of this some $11,000,000,000 may be assumed to consist of corporate property bonded as under (2) ; hence ignore them. This leaves $54,000,000,000. DISTRIBUTION 77 Of this $21,500,000,000 represents the value of city homes, if we assume that the value of all city real estate bears the same percentage to total real estate that is recorded for 1900, and if we assume that one-half of city real estate consists of residence values. This item will be considered presently. We have thus left $32,500,000,000 in the shape of live stock and farm implements, factories, etc., etc. Say, one-fourth of their value is fully mortgaged at 6%. 6. There remains to be computed rent for use of homes not owned, and interest charges on homes mortgaged. The procedure is this: a. Figure such rents in percentage of annual earnings of laborers and enterprisers as given under (A) and (B). But omit in the reckoning (a) all children, (b) one-half of all female laborers, (c) non money-earn- ing farm laborers, and (d) all farmers, because of rent charges or inter- est charges figured under (1). b. For each farm laborer earning money count $60 per annum as rent. c. Of city homes only 38% are owned by inmates. That is, consider this percentage as applying equally to enterprisers and wage-earners in the city. Then take 16% on enterprisers' incomes a? rent-charge (as suggested by family-budget data), the income being taken at $1,300 as before. Of the total sum take 62% as rent actually paid. d. The value of city residential property was computed at $21,500,- 000,000. Of this 12.7% was mortgaged (Census figures). Assume it mortgaged up to one-half its value, at 6% interest. e. Wage-earners were divided into three classes with respectively $600, $965, and $1440 for 1910 (based on figures for 1904 with increases in next six years). Assume that each class paid of its income respectively 18%, 17%, and 16% for rent, and count one-half of the female earners in the lowest income-class, and all fee earners in the highest class (with $1,440), at respective percentages of their incomes for rent. But since only about 62% paid rent, the rest owning their homes, take only 62% of the total rent thus calculated to have been paid by wage and fee earners. — Thus national wealth and all incomes actually paid out among groups are accounted for. Incomes for 1890 For the year 1890 we have to rely upon statistical data of some- what different make-up, hence the mode of procedure varies slightly from the one just outlined for the year 1910. A. Wages. The same steps were observed, except that from the earnings based on Professor Streightoff's data 12% were deducted, in accord with Dr. Rubinow's index. 78 RISING COSTS OF LIVING B. Rentals. 1. The total mortgage-debt on real estate was placed by the Census at about $12, 500,000,000, the rate of interest being indicated. 2. Farm rents were found as before. 3. Home rents were found as before, but, of course, lower prices meant lower percentages on (lower) incomes paid for such rent (see Table 14, p. 70). 4. Savings income was calculated as before. 5. Interest charges on public debts were computed as before. 6. An interest charge of $200,000,000 on property not elsewhere ac- counted for was assumed. C. Profits. Profits were made a residual by deducting from the total national income of SI 2, 500,000,000 (indicated by various data) the sum of wages (and fees) plus rentals. The incomes for the three shares are thus: Wages (and fees) 87,375,000,000 Rentals SI, 800,000,000 Profits S3,325,000,000 S12,500,000,000 TABLE 13a LABORERS AND ENTERPRISERS IN 1890 AND 1910 (Based on Census Reports of 1890 and of 1910, V. IV). I. Laborers A. Agricultural Pursuits Agricultural Laborers Lumber- and Rafts-men Herders and Drovers Woodchoppers, Turpentine laborers; etc. Dairy Hands 1890 3587 6088 66 127 30 70 53 70 18 35 3754 1910 6390 B. Professional Services Clergymen, Teachers (except of Art and Music) Electricians, engineers, etc., Journalists Government Officials DISTRIBUTION 79 C. Domesticetic and Personal Services Janitors and Sextons Laborers (not specified elsewhere) Launderers Nurses and Midwives Bartenders, Servants, Waiters Housekeepers Soldiers, Sailors, etc Watchmen, Policemen, and "Other Service". 27 113 1913 1317 248 663 48 215 1511 1969 92 189 28 77 90 251 3957 4794 D. Trade and Transportation Boatmen and Sailors Bookkeepers, Accountants, Clerks, Stenographers, Type- writers, etc Commercial Travelers Foremen, etc Draymen, Teamsters, etc Messengers, Porters and Helpers, Packers, Shippers Salesmen and Women Steam and Street Railway Employes Telegraph and Telephone Linemen and Operators Newsboys, Weighers, Gaugers E. Manufacturing and Mechanical Pursuits Carpenters, etc., Masons Plasterers , Roofers, etc., other Mechanics Employes in Chemical Industry Clay, Glass, and Stone Industry Mining Industry Butter and Cheese makers "Other Food Preparers" Employes in Iron and Steel Industry Leather Industry Beverages Industry Lumber Industry Other Metal Industries, except Clockmakers, etc Paper and Printing Textile Industries Seamstresses, Tailors Hat, Shirt and Collar makers : "Other Textile Workers" "Miscellaneous" (except Manufacturers, etc., and Photog- raphers) All Laborers. 779 1034 39 51 22 41 26 115 171 246 387 906 11 17 115 247 690 1653 304 366 31 51 320 667 133 296 200 359 466 ■ 783 338 497 45 101 16 119 539 1383 4632 8932 15,152 27,017 80 RISING COSTS OF LIVING II. Fee Earners Actors and Showmen Architects, Inventors, etc Artists, etc Dentist, Physicians, Surgeons Lawyers, Literary Persons, etc Musicians, "Other Services" 28 70 17 63 22 34 122 198 101 162 70 171 360 698 A. Agricultural Pursuits: III. Enterprisers Farmers, etc 5283 73 41 5982 Gardeners, Florists, etc 143 Stock Raisers 52 5396 6177 B. Domestic and Personal Service. Barbers, etc Hotel Keepers Restaurant and Saloon keepers Boarding and Lodging Housekeepers 85 190 44 65 91 146 44 165 264 566 C. Trade and Transportation. Agents, Bankers, etc Hostlers, Livery stable Keepers Hucksters, etc Merchants, etc Officials Undertakers, Auctioneers 210 494 81 98 59 80 691 1004 40 144 13 25 1094 1800 D. Manufacturing and Mechanical Pursuits Fish and Oyster Men Bakers, Confectioners, Millers Clock and Watchmakers, etc Milliners and Dressmakers Photographers Painters, Glaziers, etc Paper Hangers Plumbers, Fitters, etc Manufacturers, Officials 60 68 136 161 25 35 356 479 20 32 222 341 12 26 61 168 154 566 1016 1876 DISTRIBUTION 81 All Enterprisers All Gainfully Occupied. 7806 23,318 10 ,452 38,167 From above number of manufacturing enterprisers deduct one-third as (probably) laborers. Hence, final figures: Enterprisers. Laborers Fee Earners.. 9,827 27,642 698 TABLE 13b ITEMS OF INCOME FOR GROUPS A. Wages Male laborers and children. Female laborers Officials Fee Earners B. Profits Farmers Other Enterprisers Corporate Dividends C. Rentals From Farm Real Estate From Corporate Bonds From Savings From Public Debts From Home Rents From other Property Total National Gross Income $12,579 $ 2 ,703 750 900 S 3,100 $ 4,715 $ 2 ,200 730 $ 1,381 180 175 $ 1,496 504 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 $16 ,932 ,000 .000 $10,015,000,000 $ 4 ,466 ,000 ,000 $31,413,000,000 Note: This estimate, made before the publication of Prof. Willford I. King's "Wealth and Income of the People of the United States," is in fairly close accord with the calculation there presented (p. 158). By another route Prof. King com- puted the total national income at $30,529,000,000. Statistics on production for 1909 would give us about $32,000,000,000, so that on that side, too, the agreement is reasonably satisfactory. CONCLUSION From the family budget, just because it is a sort of microcosm, we may now return to the larger world in order to read the meaning of rising costs of living in a somewhat different light. If anything is clear it is that the social dividend since 1890 has not decreased, but on the contrary increased. If costs of living have risen, therefore, it could not mean a curtailment of goods for society or the average individual. The explanation must lie elsewhere. Dissatis- faction arose not from absolute dearth but from excessive wants, or from a change in the apportionment of wealth and work to which not all people have been able to adapt themselves. In short, a great pro- blem of "making ends meet" arose for some folk because old production and value relations were suddenly upset. This is only one way of admitting that human nature is complex and erratic, that reason does not rule omnipotently, but that instead we are swayed by emotions and caprices. Our inner Self collides with facts outside. We fail to adjust ourselves to the environment. We seek to combine irreconcilable elements. Our views like our habits overlap. We, so to say, change by installments. But nature and the forces of pro- duction will swerve without warning, letting us follow as best we may. Thus costs of living have a physical and a psychical aspect, a social and an individual bearing, a supply and an income side, a functional and a structural interpretation. We have advance and recedence simultan- eously, betterment not in all respects nor for all, hardships and unearned increments, incomes growing and yet not intensified gratification to match. Whichever way we look at it, the social picture attracts us because it mirrors life in action. "Costs" in this regard are always dyn- amic, a part of progress and a manifestation of new energy. The process of change goes through two phases, namely one of work and one of values. Between the two many events come to pass, to be woven into a complete story of budgetary pressure. The last decade of the nineteenth century saw a final disappearance of the "frontier," that is of lands free for the asking. Hereafter land was thrown open to the public more rarely, little of it being fit for the plow in virgin state. Harvests were increased, not by bounty of nature but by dint of hard labor and much ingenuity. Inevitably this meant a change in the farmer's methods of production, in the uses he made of his tech- CONCLUSION 83 nical knowledge or of his capital, in the value attached by society to his products, and the direction given to the annual surplus. For the sur- plus, nonetheless, grew. Since the Civil War the country had developed at an unprecedented rate. Soil and mine and forest ranges had yielded vast wealth prized more highly abroad than at home. Foreign trade rose to gigantic proportions, and with it new opportunities for invest- ment came as rapidly as the inventiveness of man allowed. Inventions increased in number, revolutionizing our ideas on right living. Many of the epoch-making devices patented during the eighties and nineties were not commercialized till the dawn of the twentieth cen- tury. Since then, as the first tools and plants for their application took tangible shape, industry expanded with a bound. Capital was systemati- cally industrialized, leaving agriculture to its own advantages coupled with peculiar limitations. The bulk of human energy was harnessed to machinery in cities, above and below the surface of the earth. Further- more, an enormous food-stock was saved by the mere fact that laborers came at an adult age to us from Europe, without our spending a cent to rear them. Millions of strong hands and trainable minds were put to work in fields created by inventions of machine or management, or through change of demands based on nothing but the instability of the human order. Two things happened as a result. The first was a widespread dis- placement of labor, as shown in Table 15, the second a socialization of TABLE 15 NUMBER OF MONEY EARNERS BY FIELDS OF PRODUCTION, 1890 AND 1910 Field Number 1890 Per- centages of Total Population 1890 Number 1910 Percent- ages of Total Popula- tion 1910 Agriculture, Forestry, Animal Husbandry, Fishing 8 ,341 ,000 5 ,619 ,000 8 ,491 ,000 13 .3% 9-1% 13 .5% 10,275,000 10 ,739 ,000 14 ,792 ,000 H.2% 11.6% 16.1% Mining, Manufacture, Hand Trades, etc Professions, Trade, Transpor- tation, Personal and Domes- tic Services Totals 22,451,000 35 .9% 35 ,806 ,000 38 .9% 84 RISING COSTS OF LIVING production tantamount to a revaluation of goods. With each installa- tion of machinery and labor new duties strained the labor market. Men were laid off or given another occupation. Many changed masters and earnings at the same time. The side-tracking was swift, but the repair slow. It was a struggle for the survival of the fittest, a test as to who could meet emergencies by superior talent and who would fail for lack of initiative. Precisely in this manner much personal training went to waste. Work lost its pleasure and became pain. Workers transferred their efforts haphazardly or stepped out of the race in despair. Inferior labor held on, but really sold itself for a flitting illusion. Whole groups of wage-earners thus saw their income reduced temporarily or permanently. Like so much material equipment their specializations went to the scrap-heap. Income took undesirable forms or lagged behind. Per- sonal services gained over material social wealth, and the return to normal fitness prolonged distress. On the other hand, the obstacles encountered proved largely tran- sient. Improvements levelled wants and raised average shares. Costs rose for one group relative to others rather than for society in general. The crux of the matter was redistribution more than diminishing re- turns in any one field. This indeed follows from what has already been said, from rights of property and differences for human capacities which vary always, viewed statically or with particular reference to changes in environment. As tasks of production changed, so the disDosition and chances of capital. Property is an exclusive right in primary use-bearers, or in what may be styled the secondary and tertiary. Land and all natural resources make up the first kind, tangible capital-goods the second, and inven- tions applied materially or non-materially, the third. Such rights par- take of the essence of monopoly. They provide differential advantages, a control over consumption-goods, and a lien on income either as it is added to existing wealth or where merely in course of transference. When demands grow faster then the bounties of nature their owners will charge more for the use of them. This is one way of explaining rents. Another is to think of a persistence of desires after irreproducible supplies begin to wane. A third is to suppose demand altered while the respective means of production remain immobile. A fourth is to have costs fall from under fixed pricings at a given moment. Any way we conceive it there arises then a prospect for the favored parties to claim more than a purely competitive share. They swell their gains till the consumer has learned to defend himself or till new alignments of capital efface the old. CONCLUSION 85 During the years 1890 to 1914 a redistribution of incomes was accom- plished on that basis. The farmer profited as land was put to better because more intensive uses, as demand for his products over-reached supply, as with each betterment of live stock, plant or fruit he catered to discriminating tastes, furnishing excess values. Industrial combination, gifted with superior powers of production and not infrequently also with a snug control over primary goods, lowered costs more than prices. The latter thus could rise though wages moved on a level. Or, where organized labor kept step with the march of technical factors, wages rose too, but by no means for all for everywhere alike promptly. In general, it would seem, the proceeds went to the most deserving. A mobilization of capital down to the smallest units privately owned gave labor a share in the social fund that formerly it had not been wont to expect. Rents rose per unit of land, but in the aggregate .not as much as profits. Interest rates tend to supplant both rents and royalties. Monopoly triumphed as never before, but not more as a selfish aim than to the advantage of all. It must however be admitted that there is a difference between control over primary and control over secondary materials. The distinction is a very practical one. One of the least commendable features of recent national development is the concen- tration of ownership in timber, lands, ores, and water-power, because in principle it has nothing to do with social progress. Productivity does not depend on expropriation but on cooperation. The need is not a consolidation of property but one of management and the material agents as such. The tactics of big business for control of the former sort are not calculated to produce, but to transfer the ownership of goods, the cause of improvements being subordinate to, or even incompatible with, them. Certainly it is one thing to socialize income through superior abilities in person or capital-formations, and another to regulate it re- gardless of direct efforts, simply by unqualified proprietory rights. When profits rise due to such forces, when prices are at the mercy of rapacious landlords — in the widest sense of the word — it is time for the government to interfere and to restore an equilibrium by all the weapons at its disposal. Public regulation, then, will have to offset one kind of redistribution by another which repudiates both "natural value" and un- limited monopoly-gains. 1 For in their balancing lies the true prosperity of all. 1 The social interpretation of value and income rights is distinctly gaining in recent economic literature. Numerous publications might be cited, but see especially Carver, T. N. Essays in Social Justice, ch. 10; Hobson, J. A. Work and Wealth, A Human Valuation; Ely, Richard T., Property and Contract, e. g., V. I, p. 245; Pigou, A. C. Wealth and Welfare. BIBLIOGRAPHY The following is a partial list of the sources and secondary material used in the preparation of this essay. Only the main authorities relied upon, or books whose thought underlies our treatment of the theme, will be mentioned here. For others see notes appended to each chapter, in which credit is given to whom it belongs. A. Publications of the United States Government, Washington, D. C. I. Census Publications. 1. Thirteenth Census of the United States, 1910, Vols. 1, 4, 5, 8, 10. 11 2. Twelfth Census of the United States, 1900, Vols. 1, 3, 5, 7, 9-10 Special Reports on Employees, Wages and Occupations 3. Eleventh Census of the United States, 1890 Compendium, three volumes Special Reports — Crime, Pauperism, and Benevolence Farms and Homes Manufacturing Industries Mineral Industries Real Estate Mortgages Population Insane, Feeble-minded, Blind Agriculture Wealth, Debt, and Taxation 4. Special Reports of the Bureau of the Census — Wealth, Debt, and Taxation, 1907 Statistics of Women at Work, 1907 Manufactures in 1905 Fisheries of the United States, 1908 Central Electric Light and Power Stations, etc., 1907 Benevolent Institutions, 1910 Financial Statistics of Cities having over 30.000 population, 1912 Paupers in .Almshouses, 1910 Telephones and Telegraphs, 1912 Wealth, Debt, and Taxation in 1913, two volumes II. Publications of the Department of (Commerce and) Labor 1. Statistical Abstract of the United States, annual 2. Bulletins of the Bureau of Labor Statistics, Whole Number: 114 to 140 3. Annual Reports of the Commissioner of Labor — Seventh Report Eleventh Report Eighteenth Report 4. Report on Condition of Woman and Child Wage-Earners in the United States, Sen. Doc. 645, 61. C, 2. Ses. 5. Reports of Immigration Commission Sen. Doc. 633, 61. C. 2 Ses.; 747, 61. C. 3 Ses. 6. Reports of Commissioner of Corporations, 1903 to 1914 BIBLIOGRAPHY 87 III. Publications of the Department of Agriculture 1. Annual Reports for 1911, 1912, 1913, and 1914. 2. Yearbook for 1904, 1905, 1911, and 1912 B. Private Publications I. Literature on the High Cost of Living 1. Clark, Walter E., The Cost of Living, 1915 2. Gerber, G. H., The High Cost of Living, 1915 3. Nearing, Scott, Reducing the Cost of Living, 1914 4. Franklin, F., The Cost of Living, 1915. 5. For many instructive and succinct accounts of special aspects of the problem of changing costs of living see: Readers Guide to Periodical Literature, 1904 to 1914 II. Works largely Statistical in Nature 1. King, Willford I., The Wealth and Income of the People of the United States, 1915 2. Mitchell, Wesley C, Business Cycles, 1913 3. Nearing, Scott, Income, 1915 Wages in the United States, 1911 4. Spahr, Charles B. Present Distribution of Wealth in the United States, 1896 5. Streightoff, Frank Hatch, The Distribution of Incomes in the United States, 1912 6. Article on the Recent Trend of Real Wages in the United States, in American Economics Review, Dec. 1914, by Dr. Rubinow, I. M. III. Books on Economic Theory a. On the Quantity Theory of Money T. Fisher, I., The Purchasing Power of Money, 1909 Why the Dollar is Shrinking, 1914 2. Hobson, J. H., Gold, Prices, and Wages, 1914 b. General Theory 1. Anderson, B. M., Social Value, 1911 2. Cairnes, J. E., Some Leading Principles of Political Economy 3. Davenport, H. J., Economics of Enterprise, 1913 4. Fetter, Frank A., Economic Principles, Vol. 1, 1915. 5. Fisher, I., Capital and Income, 1906 6. Hobson, J. A., Work and Wealth, A Human Valuation, 1914 7. Marshall, Alfred, Principles of Economics, 1890 8. Patten, Simon N., The Theory of Prosperity, 1902 Reconstruction of Economic Theory, 1912 New Basis of Civilization, 1907 9. Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations 10. Watkins, G. P., Welfare as an Economic Quantity, 1915 11. Wieser, Friedrich von, Natural Value (W. Smart's translation) IV. Books on Sociology 1. Cooley, Charles H., Social Organization, 1909 2. Ross, E. A., Social Control, 1901 Social Psychology, 1908 THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO 50 CENTS ON THE FOURTH DAY AND TO $1.00 ON THE SEVENTH DAY OVERDUE. f£B_lA_iS33_ FEB 15 193£ -7 rJ - ~mjMMyyiQ SEP 25 1988 WTO 0)SC«25 $g LD 21-95rn-7,'37 *^