the aggregate expenditure for consumption by consumers at each income level is shown.2 More than half of the total expenditure, including home produced food and rental value of owned homes, was made by families and individuals having incomes between $500 and $2,000, and over 85 percent was made by consumers with incomes under $4,000 a year. Only 6 percent of the total consumer expenditure was derived from incomes over $10,000. Thus, in considering the structure of wants as reflected in actual expenditure, it must be kept in mind that one is dealing primarily with wants as they are made effective out of relatively small incomes. The reason why small-income consumers dominate the pattern of expenditure is partly to be seen in chart It I, which shows that nearly two-thirds of the total con- This tendency to save a larger proportion of income at the higher income levels is of major significance for the structure of the American economy. It will be discussed in some detail in chapter VI, along with the factors which make for a larger or smaller volume of total expenditures on consumption. In this chapter discussion will be focused on the structure of wants as they are reflected in expenditures on consumption. The CHART II 2 These data and the data in the following section are all expressed in 1935-36 dollars. They were drawn from the report of the National Resources Committee, Consumer Expenditures in the United States. The estimates apply to the 12-month period from July 1935 through June 1936. They were based primarily on the data from the Study of Consumer Purchases, a Works Progress Administration project, conducted by the United States Bureau of Home Economics and the United States Bureau of Labor Statistics in cooperation with the National Resources Committee and the Central Statistical Board. AGGREGATE EXPENDITURES FOR CONSUMPTION BY INCOME LEVELS 1935-1936 the trends of change in the direction of expenditures reflecting changes in wants through time? If each of these aspects of the structure of wants could be set forth. they would provide a fairly clear indication of what the national economy would probably be called on to produce under different possible conditions.3 The total consumer expenditure of American families and individuals in 1935-36 was approximately 50 billion dollars. The proportioning of this expenditure among the major types of expenditure is indicated in chart IV. Outstanding in the structure of wants as reflected in the relative expenditure is the dominant role played by the basic essentials, food, clothing, and housing. These three items together accounted for 63 percent of the total of consumer expenditure. Operation and upkeep of the home (light, fuel, furniture, and similar items) and automobile expenditure account for another 21 percent, leaving only 16 percent to go for private expenditure on medical and personal care, education and reading, recreation, and other items. A significant light can be thrown on the structure of wants by comparing the way money expended on consumption is apportioned among items by consumers with different levels of income. Chart V shows the average amount spent in 1935-36 by consumers in each income group on each major item of expenditure, while chart VI shows the proportionate distribution of these average expenditures among major items. The latter chart indicates that at higher incomes a much smaller proportion of consumer expenditure goes into food and a larger proportion into clothing, automobiles, and education, while about the same proportion goes into housing, household equipment, personal and medical care, reading, and other items, no matter what the level of income. More detailed figures show some increase in proportionate expenditure for household operation and recreation, and some decrease in that for tobacco. One item, transportation other than automobile, shows little change in the proportion of expenditure devoted to it except for the group with incomes over $10,000 where the proportion increases, presumably reflecting greater expenditure on travel. The difference in the way money is spent at different levels of income is strikingly shown in table I which compares the allocation of the expenditure of a million dollars if spent by 1,414 families having incomes between $500 and $750 with the allocation of the same amount by 145 families falling into the $5,000 to * See Consumer Expenditures in the United States, National Resources Committee, for detailed discussion of certain aspects of the structure of wants in addition to those bere enumerated, including the effect on the structure of wants of family size, degree of urbanization, and geographical location. ⚫ of this 50 billion dollars, 414 billion, or 9 percent, represented the value of homeproduced food and the rental value of owned homes. The extreme categories, under $500 and over $10,000, are not used in this com parison because the figures are believed to be less reliable than those for the less extreme categories. Source: Based on Consumer Expenditures in the United States, National Resources Committee. $10,000 income group. These figures clearly indicate the shift in the emphasis of expenditure as the power to spend is expanded. The changes here shown in the relative emphasis on particular wants as the power to satisfy wants is expanded gives one dimension to the structure of wants. As more detailed information becomes available from the study of consumer expenditures it will be possible to indicate the influence of buying power on different items within those large categories. From these data, for instance, it will be possible to measure the lesser importance of bread, cornpone, and potatoes in the TABLE I.-Effect of size of income on direction of expenditureComparison of expenditure of 1 million dollars by consumers at 2 different levels of income food budget and the greater importance of meat, milk, and fresh vegetables as buying power is greater. But even the gross figures for food, clothing, and other major items give a rough basis for examining other dimensions of the structure of wants, especially the direction and magnitude of change which might be expected to result from a change in the amount and distribution of income and expenditure. In spite of the marked differences in the pattern of expenditure at different income levels, very considerable differences in income distribution do not appear likely to alter appreciably the proportion of a given national expenditure which would be devoted to each of the major items of expenditure, except, possibly in the transition period. The effect of a more even distribution of income may be gauged by means of an extreme example. If the total national expenditure were made in the proportion characteristic of consumers with average expenditure, how would the results differ from the actual distribution of expenditure in 1935-36? The average expenditure per consuming unit in 1935-36 was $1,273, corresponding to an income of between $1,250 and $1,500 in that DOLLARS EXPENDED 9500 9000 8500 8000 7500 7000 6500 6000 5500 AVERAGE EXPENDITURES FOR CONSUMPTION AT DIFFERENT INCOME LEVELS 1935-1936 Source: Based on Consumer Expenditures in the United States, National Resources Committee. PERCENT OF CONSUMER EXPENDITURES year. If consumer income had been so evenly distributed that the whole of the 50 billion dollars spent on consumption in 1935-36 had been spent by families or individuals with incomes in this range, and if their expenditure followed the same proportions as the expenditure actually made by such families, the expenditure on the major items would have been that given in table II. The expenditure of all families and individuals in 1935-36 is also given for comparison. million dollars or 8.1 percent more being spent on food with an equal distribution of income than with the unequal distribution of 1935-36. The largest percentage increase is that of tobacco, showing 19.5 percent more spent on tobacco with equal distribution though involving an absolute increase of only 189 million dollars. Since any difference in income distribution arising in the near future is likely to be very much smaller than that assumed above, the differences shown are very much greater than any likely to arise from differences in income distribution. Thus, while the structure of the wants of individuals is such that greater buying power brings marked shifts in proportionate expenditure, a shift in income distribution of the magnitude likely to occur in practice would not bring a significant shift in the proportioning of expenditure among the major categories of goods, provided the same total amount was expended. The CHART VI Although the figures in table II are based on the extreme assumption of an equal distribution of income compared with the unequal distribution existing in 1935-36, the differences in the direction of expenditure are not of great magnitude. The largest absolute difference in expenditure shown is that for food, 1,363 7 The average expenditure for the $1,250-$1,500 income group was $1,285. The average income of all consumers was $1,502. The average expenditure corresponds to a less than average income, owing to the greater proportion saved at higher income levels. PROPORTIONATE DISTRIBUTION OF AVERAGE EXPENDITURES FOR CONSUMPTION |