ECONOMIC

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Farm wages and farm income received in kind (such as food and lodging)and medicare payments are generally concentrated among the poor, andthey reduce income inequality. The inclusion of imputed interest frombanks and insurance companies does not significantly change inequality.When personal income taxes and payroll taxes are deducted from moneyincome plus imputed income, the dispersion of income declines.Because of the extreme difficulties involved, no effort was made to computethe distribution of capital gains or losses among families. Nor was aneffort made to remove the effect of transitory influences on income in anyone year. Capital gains and losses, however, tend to be concentrated amongupper-income families, and for years of net capital gains their inclusion inthe income concept would clearly increase family income inequality. Severalstudies suggest that if accrued capital gains are included in income a veryhigh proportion of families earn incomes falling in ranges in which the taxsystem is essentially proportional.The huge growth in Federal food, medical, and other in-kind subsidiesto the poor during the past 10 years would certainly reduce inequality ifthey were included in the income measures. In addition, families differ intheir use of government-subsidized goods and services, such as manpowertraining programs, public schools, national parks, and roads, but the incidenceof benefits by income level is not known.Family Composition and Work in the Labor MarketFamilies vary considerably in the hours they work in the labor marketto produce measured money income. The difficulty of imputing a value towork done at home has already been noted. The fact that a wife does notwork in the market can be taken to mean that she considers her productivityat home to be of more value than what she could earn in the market. Knowingthat she does not work in the labor market is not sufficient, however, todetermine the money value of the wife's work at home.Table 36 indicates roughly how families at three levels of income differin their composition and work in the labor market, and how this has changed.In both 1952 and 1972, families in the lowest fifth were much more likelyto be headed by a woman or by a person either less than 25 years of age orolder than 65 years. Partly because of these differences in age and sex, theheads of lower-income families are less likely to participate in the labormarket, and so are the other family members.Such families consequently depend more on income from sources otherthan earnings, such as social security, other retirement incomes, and publicassistance. By contrast, upper-income families generally have many earnersper family and are more likely to include a wife who works. Presumablythese families have less time for work at home, and they must buy with theirearnings some of the services that would otherwise be produced at home.144
TABLE 36.—Selected characteristics of the lowest, middle, and highest fifths of families ranked bymoney income, 1952 and 1972[Percent]Family characteristicLowest fifthMiddle fifthHighest fifth195219721952197219521972Total families100.0100.0100.0100.0100.0100.0Female head22.032.07.17.14.83.2Head under 25 years of ageHead 65 years of age and over7.130.113.232.86.07.87.57.91.37.91.65.9No earners2 earners or more25.322.436.420.61.236.72.457.0.666.3.874.0Husband-wife families100.0100.0100.0100.0100.0100.0Wife in paid labor force18.919.921.241.338.151.6Mean number of children.1.141.091.431.351.101.25Source: Department of Commerce, Bureau of the Census.These differences in the characteristics of families by income class havebecome more intense. They raise problems of interpretation which are importantfor public policy designed to influence the distribution of income.Some of these issues are discussed below in the section on poverty.DETERMINANTS OF DIFFERENCES IN EARNINGSAMONG INDIVIDUALSWage rates and annual labor market earnings of individuals vary considerably.Much of this variation can be related statistically to individualdifferences in measurable characteristics—schooling, post-school training,region of residence, and other demographic characteristics, as well as restrictionson entry into occupations. How far such unmeasurable characteristicsas innate ability, diligence, personal attractiveness, and contacts explainthe remaining differences is not known. Nor can it be ascertained how importantluck is in determining the distribution of income.Other aspects of earnings are not included in earnings data. Psychicearnings from having a pleasant job or living in a pleasant locality are notmeasurable. Earnings received by individuals in kind, such as free lodgingand fringe benefits purchased by the employer, are measurable in principle,but difficult to measure in practice.SCHOOLINGSchooling is an important determinant of the distribution of earnings.Table 37 shows average usual weekly earnings for males 35 to 44 years ofage who worked full time. Those with more schooling have substantiallyhigher earnings; and this relation has been persistent in many different setsof data.145
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ECONOMICTRANSMITTEDTO THE CONGRESSF
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CONTENTSPageECONOMIC REPORT OF THE
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ECONOMIC REPORT OF THE PRESIDENTTo
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of the inflation rate of 1973, and
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or permit incentives—including hi
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people of an easy time. Like our pa
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THE PRESIDENT:LETTER OF TRANSMITTAL
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CHAPTER 3. INFLATION CONTROL UNDER
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Page7. Unemployment Rates by Sex an
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Page53. Maximum Percent Change in E
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We have specific problems, too, asi
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This curtailment of supply does, of
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consumption we would not have chose
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outside the food and fuel sectors a
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about $14 billion from deficit to s
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8 percent, at annual rates. Continu
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A third method, which seems to have
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DEVELOPMENT OF LOW-COST ENERGY FOR
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would otherwise have been invested
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TRANSPORTATION REFORMLast year the
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constraints. Restrictions on entry
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In early 1974 the Commerce Departme
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Consumer SpendingConsumer expenditu
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Chart 1Changes in GNP, Real GNP, GN
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During the fourth quarter the downt
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A number of points may be noted abo
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income do not appear to have played
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Chart 2Changes in Real GNPPERCENTUN
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of essentially declining participat
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The unemployment rate for adult mal
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from job losers, the remainder of t
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to maintain a somewhat larger work
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Chart 3Changes in Selected Price Me
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TABLE 12.—Changes in selected pri
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production workers, and it is sensi
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the profits that companies report a
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Two measures of changes in income t
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About $8 billion of the growth in e
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effect of covered wage and employme
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Since these apparent stabilization
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MONETARY POLICY AND FINANCIAL MARKE
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lation requiring ceilings on all CD
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TABLE 19.—Offerings of new securi
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CHAPTER 3Inflation Control Under th
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(A more detailed presentation of th
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ate of advance in grocery store foo
Page 100 and 101: to the economy but also in the sens
Page 102 and 103: were imposed, limiting prices to th
Page 104 and 105: spurring of domestic inflation by e
Page 106 and 107: was more than twice as high in 1973
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Page 110 and 111: TABLE 26.—Behavior of items in co
Page 112 and 113: Chart 6Changes in RelatedWholesale
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Page 116 and 117: CHAPTER 4Energy and AgricultureFOR
Page 118 and 119: al gas have contributed to the low
Page 120 and 121: TABLE 30*—Wholesale prices, all i
Page 122 and 123: tion sector, which in 1972 accounte
Page 124 and 125: United States on oil imports, OPEC
Page 126 and 127: of old oil and prices of imported a
Page 128 and 129: LONG-TERM PROSPECTSThe price of imp
Page 130 and 131: important that the higher costs be
Page 132 and 133: improving the environment. The fund
Page 134 and 135: pollutants into the atmosphere will
Page 136 and 137: of research and rapid mechanization
Page 138 and 139: lion in fiscal 1972. Actually the a
Page 140 and 141: a minimum income. Unless prices fal
Page 142 and 143: The Administration supports the exa
Page 144 and 145: and estimates of some of these effe
Page 146 and 147: Since families typically pool their
Page 148 and 149: ability were not perfectly correlat
Page 152 and 153: TABLE 37.—Average usual weekly ea
Page 154 and 155: Chart 9Real Incomes for Men in Diff
Page 156 and 157: ecause they have acquired more expe
Page 158 and 159: whose owners or white workers have
Page 160 and 161: Several factors can be mentioned to
Page 162 and 163: y social pressures, however, which
Page 164 and 165: TABLE 42.—Relation of wage and sa
Page 166 and 167: ferences in their mix of occupation
Page 168 and 169: for public housing may be valued by
Page 170 and 171: 8 to 20 percent for black females.
Page 172 and 173: sufficiently high to cover the addi
Page 174 and 175: TABLE 45.—Federal Government tran
Page 176 and 177: given to the problems of poverty du
Page 178 and 179: TABLE 47.—Trends in the employmen
Page 180 and 181: enefit increases greater than the i
Page 182 and 183: (Table 45). Medicare is chiefly des
Page 184 and 185: Public assistance is specifically d
Page 186 and 187: Then, subtracting equation (4) from
Page 188 and 189: policies, and the tensions among co
Page 190 and 191: In the fourth quarter the dollar ro
Page 192 and 193: which include trade, grants and oth
Page 194 and 195: tarily by foreign central banks, ev
Page 196 and 197: ply of oil, and by domestic price c
Page 198 and 199: in the United States. In view of th
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TABLE 52.—U.S. balances on intern
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esult from changes in market value
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TABLE 54.—Major changes in capita
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attempt was made to agree on a code
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The official price of gold was rais
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system, these demand changes were a
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What Pressures Should Be Exerted on
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The composition of reserves among d
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prices of approximately the same or
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tained, they would probably be felt
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Reducing Nontariff BarriersIn order
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Structural problems. Agreements on
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arrangements which are designed to
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capital and the means of putting th
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Canada and four smaller countries u
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currencies have appreciated relativ
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Effective Changes in Other Currenci
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Activities of the Advisory Committe
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Appendix BREPORT TO THE PRESIDENT O
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Report to the President on the Acti
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govern the exploitation of the reso
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Manpower and Social Affairs Committ
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Junior Staff EconomistsJames S. Fac
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Appendix CSTATISTICAL TABLES RELATI
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PRODUCTION AND BUSINESS ACTIVITY:Pa
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE C-2.—Gross national product
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TABLE C-3.—Implicit price deflato
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TABLE C—8.—Gross national produ
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TABLE C-10.—Gross national produc
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TABLE C-12.—Personal consumption
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TABLE C-14.—Relation of gross nat
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TABLE C—16.—Relation of nationa
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TABLE C-18.— Total and per capita
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TABLE C-19.—Sources of personal i
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TABLE C-21.—Saving by individuals
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POPULATION, EMPLOYMENT, WAGES, ANDP
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TABLE C-24.—Noninstitutional popu
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TABLE C-26.— Selected unemploymen
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TABLE C—28.—Unemployment insura
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TABLE C-29.—Wage and salary worke
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TABLE C-31.—.•Average weekly ea
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TABLE C-33.—Changes in output per
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TABLE C—35.—Industrial producti
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TABLE C-37.—Capacity utilization
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TABLE C—38.—New construction ac
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TABLE C-39.—New housing starts an
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TABLE C-41.—Sales and inventories
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TABLE C-43.—Manvjacturers* new an
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TABLE O45.—Consumer price indexes
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TABLE C—47.—Consumer price inde
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TABLE C~49.—Wholesale price index
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TABLE C-50.—Wholesale price index
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194819491950.,1951195219531954Yearo
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TABLE C-53.—Commercial bank loans
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TABLE G-54.—Total funds raised in
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TABLE C-56.—Federal Reserve Bank
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TABLE C-58.—Bond yields and inter
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TABLE C-59.—Short- and intermedia
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TABLE C-61.—Mortgage debt outstan
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TABLE C-63.—Net public and privat
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TABLE C-65.—Federal budget receip
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TABLE C-66.—Relation of the Feder
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TABLE C-68.—Receipts and expendit
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TABLE C-10.—State and local gover
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TABLE C-72.—Estimated ownership o
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CORPORATE PROFITS AND FINANCETABLE
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TABLE C-76.—Relation of profits a
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TABLE C-77.—Sources and uses of f
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TABLE C-79.—State and municipal a
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TABLE C-81.—Business formation an
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Year1929...1933...1939...1940...194
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TABLE C-85.—Indexes of prices rec
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TABLE G-87.—Comparative balance s
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TABLE G-88.— U.S. balance of paym
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TABLE C-90.— U.S. merchandise exp
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TABLE C-92.—International reserve
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TABLE G-94.—International investm
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TABLE C-96.—Consumer price indexe
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