Sunday, November 2, 2008

Household Expenditures in Historic Perspective

People who know me, know that I have been writing about economics from the perspectives of families and households for most of my career. The main agenda is trying to understand how people are able to forge a meaningful life out of the project of organizing and sustaining a daily routine of everyday activities. The organization of activities reflect the social, cultural, material, biophysiological, and temporal resources and barriers (both in terms of amounts and qualities) present in their local family or personal cultural-ecology. This is a theoretical project that reflects my work with Tom Weisner at UCLA since the late 1990's.

In recent years, I have been thinking about household or family expenditures and how these relate to perceived well-being among family members. Rashmita Mistry and I have co-authored a few papers on this theme, using data from the Milwaukee sample for the New Hope evaluation. This is a timely topic, as households, families, and individuals find themselves challenged in material terms by a rapidly worselning national economy.

One theme that often comes up in contemporary discussion of the national economy is in its comparison to the Great Depression of the 1930's. For example, Pam Mertens posted an excellent piece on this weekend.

I often have a discussion with an economist friend about how much the USA today looks like the USA of that earlier era. Surely, there are parallels in terms of the creation of a massive credit bubble (much larger than that of the 1920's! -- or so I understand). But, there are subtantial differences in terms of other economic issues. It is useful to sort through the similarities and differences if we ever hope to understand just whatthe heck is going on!

Let's look at household expenditures as an example. The data in the chart below are taken from the US Bureau of Labor Statistics, which has tracked income and expenditures for much of the last 100 years in the United States. In putting together this chart, I was interested in mainly in those expenditures that are essential for the ongoing organization and sustenance of family routines. These include expenditures for food (blue), housing (red), apparel and services (yellow), transportation (green), and healthcare (purple).

One obvious consideration is that expenditures on these basic necessities required over 80% of the average family pre-tax income in the earliest decades of the 20th century up to and including the middle of the 1930's! By 2006, these expenditures had dropped below 60% of average families pre-tax income (technically average income of the BLS "consumer unit").

The earliest expenditure pattern reflects a harsh reality of wage labor in the first phase of industrial capitalism, wages were kept low enough to just ensure the survival of wage earners and their families as described by Zygmunt Bauman in his book, Work, Consumerism, and the New Poor. This was seen by indutrialist employers, Bauman argues, as a means of motivating the kind of routinized, soulless factory labor the most wage earners took on. The source of motivation came from in the comparison of the "dignity of honest work" over that of the wretchedness of the lives of the non-working poor that teemed in the underbelly of London or Paris, and later in cities like Chicago and New York. Bauman writes,
It was hoped [by the elite classes] that the more the life of the non-working poor were degraded and the deeper they descended into destitution, the more tempting or at least the less unendurable would appear to the lot of those working poor who had sold their labour in exchange for the most miserable of wages, and so the cause of the work ethic would be helped and its triumph brought nearer. (p. 12)
More interesting the BLS reports on who households likely relied on for its meager income in 1901,
  • 95.9 percent of households had earnings from husbands
  • 8.5 percent had earnings from wives
  • 22.2 percent had earnings from children
  • 23.3 percent had earnings from boarders or lodgers
  • 14.4 percent of households had other sources of income
Similar data are not available for the middle 1930's. But, it is still instructive that so many households in 1901 relied on more than one source of income in order to earn enough to afford basic survival needs, of note is that 22% relied on earnings from children!

Things are certainly different today. Most households have come to rely on earnings from the men and women who head them, either as individuals or jointly. Certainly, any earnings from children are much rarer than 100 years ago. What's more, the contributions of wage earners today allow consumer units to afford considerably more beyond those essential needs that assured survival. And ... these additional expenditures would come to redefine notions of family life and family well-being in America ... but that's a topic for another day.

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