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I 1n!!..l:.|ll I ‘ § I u COMPARISON OF COIGUMER EXPENDITURE PATTBRI‘B. .URBAN 51mm COBBUT'ENG UNITS AND TWO- AND FCUR- Iv‘IEMBER FAMILIES by Alice Mills Morrow ATHESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of ' MASTER OF ARIS Department of Home Management and Child Development 1965 ACKNOWLEDGEMENTS The author would like to express her appreciation to the members , of her Guidance Committee: Dr. Beatrice Paolucci and.Dr. Denzel Cline; special thanks and appreciation are given to the Chairman of this Comp mittee and director of this research, Dr. Carol Shaffer, for her time, patience, and excellent direction. 11. TABLE OF CONTENTS ACKNOWLEDGEMENTS . . . . . O 0 O 0 LIST m TA Has 0 O O O O O O 0 O 0 Chapter I. INTRODUCTION. . . . . . II. REVIEW OF LITERATURE III. METHODOLOGY AND DESCRIPTION IV° ANALYSIS OF DATA. . . . OF SAMPLE V. CONCLUSIONS AND IMPLICATIONS. LITERATURE CITED . . . . . . . APPEmI-X 0 0 O O O O O 0 0 0 0 0 0 iii. 0 0 O O O O O O O Page ii iv 20 31 53 63 Table 1. 7. 8. 9. 10. 11. LIST G“ TABLES Page Description of Personal Interview Sample. . . . . . . . 29 Mean Expenditures and the Percentage of Before Tax Income of Urban Single Consuming Units in the North centralRegiUneeooeoooooooeeoeoeoo 32 Largest Mean Expenditures of Before Tax Income of Urban Single Consuming Units in the North Central Region 0 I I O O O O C O O O O O O O O O O O O O O O O O 33 Mean EXpenditures and the Percentage of Before Tax Income of Urban Two-member Families in the North central Region 0 O O O O O O O O O O O C O O O O O I O O 36 Mean Expenditures and the Percentage of Before Tax Income of Urban Four-member Families in the North central Region 0 O O C O O O O O O O O O O O O O O O O O 37 Largest Mean Emenditures of Before Tax Income of Urban Two-member Families in the North Central Region 0 O O O O O O O O O O O O O O O O O O O 0 O O 0 O 38 Largest Mean Expenditures of Before Tax Income of Urban Four-member Families in the North Central Region 0 O O O I 0 O O O O O O O O O O O O O O O O O O O 39 Mean Per Person anoenditures of Single Consuming Units, Two-member Families and Four-member Families in Urban Places in the NOrth Central Region 1.1 Changes Emected in Food Expense if ReSpondent Here Married and a Member of a Two-member Family. . . . . . . ’42 Respondents' Attitudes and Facts Concerning Trans- portationExpenditures................. 1433 Changes Expected in Housing Expense if Respondents were Married and Member of a Two-member Family . . . . . M: iv. , Table Page 12. Respondents' Attitudes and‘Facts Concerning Food amenditures O O O I O I O O C O C O O O O O C l O O O O 146 13. Respondents' Information Concerning Housing . . . . . . . ’48 1h. Respondents? Information Concerning Laundry . . . . . . . 50 V. ABSTRACT COMPARISCN Cl" CGGSUI‘ER EXPENDITURE PATTERNSUURBAN SIMIE COISUMILG UNITS AND TWO- AND FOR-HENRI? FAMILIES by Alice Mills Morrow Many studies have been conducted on the expenditure patterns of families, particularly the four-member family. There has been rela- tively littleJ research done on the expenditure patterns of the single consuming unit. Literature reviewed in the areas of family taxation and home economics showed a lack of precise understanding of how expendi- tures are affected by a change in the size of the consuming unit. The purpose of this study is to analyze the variations in expenditures in relation to the size of the consuming unit and to interpret the find- ings with respect to home management and family finance. Data for this study were from two sources; the Bureau of Labor Statistics "Consumer anaenditures and Income',‘ and twenty personal inter- views with single consuming units. The Bureau of Labor Statistics data were used to support or negate the following hypotheses: l. The largest mean expenditures of income of the single consuming unit, other than personal taxes, will be in the areas of food, clothing, housing, and transportation. 2. The mean per person expenditure for food, clothing, I housing, and tranSportation will be larger for the single consuming unit than it will be for the two- and four-member family of the same income group. Alice Mills Marrow 3. Within areas of food and housing, differences will appear between the single consuming unit and the two- and four-member family. a. The mean percentage of food expenditure for food eaten away from home will be greater for the single consuming unit than for the two- and four-member families. b. The mean percentage of shelter expenditure for rented dwzllings will be greater for the single consuming unit than for the two- and four-member families. c. The mean percentage of household operation expenditure for laundry sent out will be greater for the single consuming unit than for the two- and four-member families. The data support hypbtheses 2 and 3. Hypothesis 1 was not sup- ported in full by the data. Food, clothing, and housing were major enqaenditures of the single consuming unit. However, the expenditure for gifts and contributions was somewhat larger than the expenditure for clothing in the 35-5999 and 36-7’499 classes. The personal interviews were used to obtain qualitative data on the attitudes and expectations of the single consuming unit. This study has important implications for those persons teaching in the area of home management and family finance. Since expenditure patterns differed among income classes and the three sizes of consum- ing units studied, the needs of all students will not be met by teaching how to make decisions about individual eXpenditures such as food, cloth- ing and shelter. In order to meet the needs of all students, we must place increased emphasis on financial decision-making as it applies to any expenditure. Students must also have information concerning changes in ewenditures which will probably take place as the size of the con- suming unit changes. CHAPTER I INTRIDUCTION Interest in.Expenditure Patterns and the Size of theConsuming'Unit We learn about a particular group by studying it, and by compar- ing and contrasting it with groups which are different. In order to study the single consuming unit we must focus on it, and also compare it and contrast it with other size consuming units. In the area of family finance a great deal of study has been con- ducted on the expenditure patterns of family units, but very little re- search has been conducted on the expenditure patterns of single consum- ing units. The Bureau of Labor Statistics estimates that 16.6% of all consume ing units consist of one person; 30.0% are two-member families; 17.3% are three-member families; 16.0% are four-member families; 10.3% are five-member families; and 9.h% are made up of six or more members. (2) Froeder states that: Although single consumers make up an important part of the consumer market, relatively little attention has been given to data on their ‘ spending patterns, which differ significantly from those of families. The same economic forces--employment levels, price changes, and availability of goods and services-~of course affect the incomes and expenditures of both families and single consumers. ‘Differences in- characteristics and living patterns between the two groups, however, cause major differences in.how much they earn and how they spend their incomes, although economic changes in recent years appear to have dimished these differences. (10:1h2) -1- -2- The expenditure patterns of the single consuming unit have been of interest in the past primarily from a tax viewpoint. Providing equitable tax treatment for the single individual and the family unit has always been a problem. Experts in the tax field say that while there are econo- mies of scale in family living, there is little precise knowledge about these economies. (12:106) Gross and Crandall identify the fundamental purpose of management as bringing about change in an orderly'way; This change may be the re- sult of achievement of freely chosen goals, or it may consist of adjust- ment to changes which are beyond the control of the individuals or the family. (11:7) What are some of the changes that result from a change in the size of the consuming unit? The area of family finance is particularly concerned with changes in expenditures as the size of the consuming unit changes. Gross and Crandall imply that the rise in family expenditures as the family grows is not proportionate to the increase in family size. Some living costs vary directly with the size of the family, while others remain fairly uniform regardless of family size. (11:200) How do the expenditure patterns of the single consuming unit differ from those of larger families? If we are to help those people who remain single, and those people moving from the single consuming unit to the larger family or vice versa, we must have knowledge of the expenditure patterns of the single consuming unit and how they differ from the expenditure patterns of larger consuming units. Objectives The purpose of this study is to analyze expenditure patterns in relation to the size of the consuming unit and to interpret the l I i. {I I ‘1!- .ll. -3- findings with respect to implications for home management and family finance. This study will focus particularly on the single consuming unit; it will look at the e>q3enditures of other size units in order to compare and contrast them with those of the single consuming unit. The analysis of this relationship will be of importance to those teaching and counseling in the area of family financial management by providing a basis with which to predict the changes in expenditures that will result from change in the size of the consuming unit. The specific objectives of this study are: 1. To identify the expenditure patterns of the single consuming unit. 2. To investigate differences between the expenditure patterns of the single consuming unit and the two- and four-member family. 3. To draw implications for the home economist working in the area of home management and family finance. Linwtheses The data are to be analyzed to determine the relationship between expenditures and the size of the consuming unit. The analysis will focus on evidence to support or negate the following hypotheses: l. The largest mean expenditures of income of the single con- suming unit, other than personal taxes, will be in the areas of food, clothing, housing, and transportation. 2. The mean per person expenditure for food, clothing, housing and transportation will be larger for the single consuming unit than it will be for the two- and four-member family of the same income group. 3. Within the areas of food and housing, differences will appear 4,- between the single consuming unit and the two- and four- member family. a. The mean percentage of food expenditure for food eaten away from home will be greater for the single consuming unit than for the two- and four-member family. b. The mean percentage of shelter expenditure for rented dwellings will be greater for the single con-_- suming unit than for the two- and four-member family. c. The mean percentage of household operation eiqaenditure for laundry sent out will be greater for the single consuming unit than for the two- and four-member family. Assumption The following assumption is fundar‘nental to this study: There is a pattern of expenditures that can be identified for the single consuming unit and for larger families. Definition of Terms Data from the Bureau of Labor Statistics will be utilized in this study. With the exception of "single consuming unit," all definitions will be those used by the Bureau of Labor Statistics. Single Consuming Unit Conceptual differences between the Bureau of Labor statistics and other similar surveys center around the definition of the income unit and the time reference for determining'its composition. Adult children who live with their parents pose the main definitional problem. All surveys include these persons in the same income-receiving unit as the -5- parents if the income is pooled with the family head for purposes of consumption. If the children do not pool income, whether they are included in the same unit with their parents or regarded as a separate unit may depend upon their marital status. Single person units are classified by the Bureau of Labor Statistics and the Federal Reserve as "families" while the Bureau of the Census usu- ally treats them separately as "unrelated individuals." (2S:xxxiv) In this study a single person living away from home or living at home and not pooling income with the family will be called a single consuming unit, regardless of his marital status. Bureau of Labor Statistics Definitions Total food expenditures This includes food eaten at home and away from home. Total housing expenditure This includes shelter either owned or rented; other real estate not used for family business and not occupied or rented; fuel, light, refrigeration, and water; household operations; and house furnishings and equipment. Household operations This includes laundry supplies, cleaning supplies, and household paper supplies; laundry and cleaning sent out; domestic service; day nursery care; telephone and telegraph; equipment repairs; moving, freight, express, and storage; and postage and writing materials. Housefurnishings and equipmegt This includes household textiles, furniture, floor coverings, «~6- major appliances, small appliances, housewares, and miscellaneous items. Total transportation This includes automobile purchase and operation, public transporta- tion, and car pools. Total medical care This includes prepaid care and direct expense. Personal care This includes haircuts; shaves; waves, shampoos, tinting, etc; other personal care services; and personal care supplies. Total recreation This includes television, radio, phonographs, tape recorders, etc.; musical instruments; special admissions; fees, dues, and equip- ment for participant sports; club dues and memberships; hobbies; purchase and care of pets; toys and play equipment; recreation out of home city; and other recreation. Gifts and contributions This includes cash, goods, and services given to persons not in the family and money to organizations. Net change in assets and liabilities This is the algebraic sum of increases or decreases in liabilities which represents a net saving during the year. Net decreases in assets or increases in liabilities represent a deficit (=) or net dissaving. Money income before taxes This is total money income during the survey year of all family -7- members from wages and salaries (including tips and bonuses) after deductions for such occupational expenses as tools, Special required equipment, and union dues; net income from self-employment; and income other than earnings such as net rents, interests, dividends, Social Security benefits, pensions, disability insurance, trust funds, small gifts of cash, regular contributions for support, public assistance or other governmental payments. ‘The value of two nonmoney items--‘ food and housing received as payh-are counted as money income and as expenditures. Money income after taxes This is money income after the deduction of personal taxes (Fed- eral, State, and local income taxes; poll taxes; and personal property taxes.) These are the definitions of the terms appearing in the hypotheses and tables. The Bureau of Labor Statistics data were analyzed to provide evidence to support or negate the hypotheses. mean eXpendi- tures for each category were obtained from the Bureau of Labor Statis- tics "Consumer Expenditures and Income, Urban places in the North Central Region, 1960-61.” (3) The mean expenditures in the Bureau of Labor Statistics report were used to determine the percentage of income spent by the single consum- ing unit, the two-member family and the four-member family; the per person expenditures of each group and the percentage of major components spent for individual components. Further information to provide insight into the expenditure patterns of the single consuming unit was obtained from.persona1 interviews. CHAPTER II REVIEW CF LITERATURE The literature describing differences between the single consume ing unit and the larger family is widely dispersed. Studies dealing with particular aspects of expenditures are frequent, while studies dealing with total eXpenditure patterns of the single consuming unit are infrequent. Feldman in The FamilLin a Money World writes that variations in spending patterns exist for the single person and stem fromthe meaning money has for them. Single people often spend money for luxu- ries rather than necessities since the luxuries serve as substitutes for love, companionship, family, and children. Loneliness may result in an undue preoccupation with extravagant living or may, on the other hand, make the person fearful of spending money, since it represents the only security he has. Feldman does not suggest that all persons living along spend money reaklessly or are extremely penurious. She does say: It is true, however, that a person living alone, well adjusted and sound as he may be, actually does have additional Spending needs. The lack of other persons with whom to share costs means that his daily needs cannot be met as economically as those of a family. Even the single persons income tax rates are higher. (9:65) Since most of the studies deal with particular aspects of ex- penditures, the literature will be reviewed under the particular aspects with which it is concerned. -3- -9... @255 Morgan, et. a1. reports that married men are more likely to work than are single men. harried men may work because of additional r85“ ponsibilities or working men may be more likely to marry because they are able to support families. The differences were not related to age, education, race, or other factors used in Morgan's analysis. (l9:h2) The work activities of women show the reverse situation. Single women and female heads of households have higher labor force partici- pation rates than married women who have husbands to assume the main financial responsibility for the family. (23:835) The single women in the labor force may be divided into two groups. The larger group is composed of young women under 35 years of age, the great majority of whom will marry in a short time. The smaller group, about 39% of the total, consists of women 35 and over, most of whom will remain single and at work until they reach retirement age. (2h) Feldman suggests that single persons may have broader work oppor- tunities than married persons because they are freer to change their places of residence. (9:6h) Mincer and Schiffman have similar findings consistent with the hypothesis that when the primary family provider is unemployed, other persons in the family try to find work as an alternative to dissaving. (18:582, 23:83h) If the family provider is out of work because of a general scarcity of work in the geographic area, then other family members might also experience difficulty in locating jobs. However, the family does have a potential source of income which the single consuming unit does not. -10- Exes Much has been written in tax literature regarding the federal income tax in relation to single and married people. The literature reveals conflicting attitudes toward the present tax structure and toward possible alternatives. Providing equitable tax treatment for the single individual and the married couple has always been a problem. In 19h8 the split- income provision was passed enabling married couples to assume, for tax purposes, that their entire income was equally divided between husband and wife. The split-income provision was deemed essential because of community property laws existing in twelve states which enabled married couples to consider their total income as belonging half to the wife and half to the husband. No sooner was the Revenue Act of l9h8 passed, establishing the split-income provision, when questions were raised concerning the fairness of this to single people under all circumstances. It ap- peared that some concessions were required in some cases. Thus, in 1951 Congress established a special category of tax-payers called "heads of households," defined as single persons who maintain prin- cipal places of abode for themselves and an unmarried child or grandchild or any other person who is a dependent for tax purposes. The heads of households were given a concession which amounts to approximately half of the benefit of income-splitting. Henle states that the split-income provision results in a sig- nificantly lower tax bill for families whose taxable income is 312,000 or above. A family with 820,000 total income and $16,000 taxable income in 1959 would have paid a tax bill of $3920. A single -11- person on the same amount of taxable income would have paid $5200, or 33% more. According to Henle, this preferential treatment for upper income families results in a loss of over $h billion to the Federal Treasury. He suggests developing separate tax tables for married couples and single people in which the amount of taxable income in each tax bracket for married couples would be one half the amount in the tax table for single persons. He also feels that more liberal exemptions for married couples would be better than retaining the present high inequitable split-income provision. (13) Davidson does not accept the theory that today's tax system unduly penalizes the single taXpayer and benefits the married taxpayer. He points out that the greatest benefit from income splitting falls in the middle income brackets, with the peak at about $30,000. The relative benefit tapers off very rapidly through the higher income brackets, to the ultimate point of almost total disappearance. Davidson feel that the income tax should be levied on the per person net income rather than on total taxable income. As he describes this, the tax rate would be increased as income increases, but the tax would be levied on the per person net income. (5) Thus, Davidson implies that there are no economies of scale it group living. Froeder says that families have the advantage of group sharing of expenses, particularly in housing, household operation, and house furn- ishings. Economies are also experienced in food costs with increases in family size. "It is therefore reasonable," she says, ”to consider the survey families, averaging 3.3 in size with an average income of $h22h, 'better off' than the single consumers with an average of $1895." (10:150) Pechman holds the view that income splitting reduces progression because, in effect, it doubles the width of taxable income brackets for -12- married persons. This tax advantage progresses to a maximum of 325,180 for married couples with taxable incomes of $h00,000 or more. (21:275) He raises the question of equity in the distribution of tax burdens by income levels and between single persons and married couples. The classic argument in favor of the present 2:1 relationship be- tween the tax liabilities of married couples and single persons is that husband and wife usually share their incomes equally; However, Pechman raises the question of whether the sharing argument wh.ch justifies treating husband and wife as one tax payer unit, also justifies taxing them as if they were two single persons each with one half their com- bined income. (20) Pechman does not choose to use the argument that the tax law should recognize that there are economies in marriage. His reasons for this are three: first, there are diseconomies as well as economies in marriage; second, there is no way of measuring what the net economies of married couples may be at different income levels; and third, even if these measurements could be made, it would be diffi- cult to devise simple rate schedules that would make the differentiation desired at every income level. He feels that if there are differences in living costs, the only practical way to make the necessary differ- entiation is to adjust the personal exemptions. (20) Other tax systems seem to account for economies in group living. For example, in Ceylon income is divided among members of the family (and others) for tax purposes as follows: Single person 1 units Married man 3 units Wife unit Child unit Dependent relative unit -13- The maximum number of units applicable to a family is limited to four. (12:10h) .A 1963 conference on the tax.treatment of the family brought out the point that we do not have any very precise knowledge of the "economies of scale" that attend famiLy living. (12:105) The final note of the confer- ence was that little sympathy was to be expected for bachelors and Spin! sters because they shirk the responsibilities that families accept. (12:106) While the tax literature indicates a need for reform in the areas of deductions and rate tables, recent emphasis has been on tax cuts rather than tax reform. Even though tax cuts are no substitute for tax reform, this emphasis will probably continue. (1, 26) Housing Shelter David in Family Cflosition and Conwtion concludes that ”the data on rental housing show unequivocally that the renter of larger dwellings benefits from substantial economies of scale. Larger fami- lies rent larger dwellings and buy at quantity rates." (hz95) Increas- ing family size is associated with a decline in quality of housing cons sumed by the family both as owners and renters. (h:9S-96) The minimum housing needs and estimated monthly costs for New York City as compiled inHA FamilyiBudget Standard may be summarized as fol- lows: (8:32) No. of No. of Cost Cost persons rooms unfurnished furnished 1 2 36o.h8 $75.59 2 3 70.72 88.h1 h 5 82.00 not given -1b- The estimated cost for shelter increases as the size of the con- suming unit increases. The increase in cost, however, is not propor- tionate with the increase in size. Froeder reports that women keep house much more frequently'thanl men. In her study, over seven-tenths of the women kept house as compared to one-third of the men. Women were also more than twice as likely to be homeowners. Among both men and women single consumers, home ownership was positively correlated with age. (10:1h8) There has been an increase in the number of single individuals maintaining their own households. In 1960, 13% of all housing units (21% of rented and 9% of owner-occupied) were occupied by persons liv- ing alone. In 1950, 9% of all housing units were occupied by persons living alone. Over half of these persons living alone were over sixty years of age. (22) Household Operation As a basis for cost estimation A Family Budget Standard lists the following amounts of electricity needed for consuming units of l, 2, and h persons. (8:37) No. of Kilowatt Hours of Electricitygper Honth persons Light Refrig. T. V. Radio Small Total Appliances 1 25 no 15 S S 90 2 . 50 to 15 S S 115 h 75 to 25 8 17 165 The total number of kilowatt hours of electricity used increases as the size of the consuming unit increases. However, the total amount used by the four person consuming unit is less than twice that used by the single consuming unit. -15- As a basis for cost estimation A FamilygBudget Standard lists the following amounts of gas used for cooking for consuming units of l, 2, and h persons. (8:37) Gas for Cooking, Monthly Basis No. of Persons Cubic Feet 1 360 2 570 h 960 There is a rise in the amount of gas used for cooking as the size of the consuming unit increases. Again it is not proportionate with the increase in the size of the consuming unit. The cost of household supplies and launderette service reported in.A Family Budget Standard may be summarized as follows: (8:h0) Cost of'HOusehold Supplies and Launderette Service, October, 1962 Size of Household Supplies Launderette Family per year Self Service per week 1 $18 3 .ho 2 3h .80 h us 1.60 According to A FamilyBudget Standard the cost of housefurnish- ings, like other housing expenses reviewed, does not increase in the same proportion as the size of the consuming unit. The cost of the self-service launderette as reported in.A Family .EEQSEE Standard increases proportionately with family size. However, The Agricultural Research Service reports that when a family has five loads of wash per week, washing and drying at home begins to cost less than the self service launderette. Thus the larger family -16- finds economy in doing the laundry at home. (16) Housing_pf Relatives According to Morgan 53:31; single persons are more likely to house relatives than are married persons. The resistance of wives to another woman in the kitchen may be more important than the need for a wife to care for the relatives. Having children at home, in addition to a wife, makes the housing of relatives even less likely. (19:168) In.Hovermale's study on the spending patterns of single women, one fourth of both the clerical workers and the professional workers reported that they were responsible for the support of a person, or persons, other than themselves. (1h:155) Home Production Morgan et.al. found that married couples save most through home production. (19:98) David found that large families are more likely to purchase washing machines, dryers, and freezers than small families. This leads to the belief that large families substitute home production for the purchase of services on the market. (h:95) £229 The United States Department of Agriculture estimates that the per person food costs for single consuming units are 10% greater than they are for two-member families. Per person food costs for the two-member family are 10% greater than they are for four-member families. (7) These differences in cost are due to the fact that large families have advantages in quantity buying as well as less spoilage and other losses than small families. A Family Budget Standard states that when a food budget is made -17- for a single person who lives in a furnished room or non-housekeeping apartment, the cost of restaurant meals should be substituted for the cost of food prepared at home. The social and health values of eating some meals out should be considered in the food budgets of elderly per- sons living alone, even when they have access to cooking facilities.(l8:lS) Clothing Hovermale in "Spending Patterns of Single Women, With Emphasis on Clothing," states that clothing--long an important status symbol-~has been replaced in eminence by the automobile, housing, income, education, occupation, and the like. We are currently spending a smaller proportion of the consumer dollar on clothing than previously. (1h:12) A Family Budget Standard lists average clothing costs for various age, sex, and activity groups. The increased cost of the clothing as the family size increases is not as significant as the increased cost of cloth- ing as age and activities change. The highest clothing cost listed is for the employed woman and this is $5.90 per week. The next higher costs are for girls and boys, 16 and over who are employed. The next groups in order are girls and boys, 16 and over who are in school; the costs for these groups are higher than those for an employed man. (8:22) It is evident that clothing costs are not subject to economies of scale as family size increases. Clothing costs seem to be more related to age, sex, and activity than they are to family size. Automobiles David reports that significant Changes in the consumption of auto- mobiles occur as family size varies. Family size alone does not explain the consumption of automobiles; some life cycle groupings must also he -18... used. The consumption of automobiles by persons hS and over is below that of persons in similar situations but whose age is under hS. (hz9l, table 6.5) Within the group of married couples with children, the aver- age level of automobile consumption drops steadily as family size in- creases. Single people appear to spend more money on cars than married people. (h:5h, table 6.1) This may stem from differences in the residence and transiency of single and married persons. (h293) According to Froeder, the average single man spends proportion- ately more for transportation than does the average single women. (10:1h9) Froeder found, however, that the single consumer spends less on trans- portation than do families. (10:150) Life Insurance Survey Research Center has found that, for the most part, the need to carry insurance to provide protection for a family is not a strong factor with unmarried people. Unmarried people between the ages of lB-hh are more apt to carry life insurance than are older unmarried people. (17:15) A Family;Budget Standard has adopted for the standard a commercial life insurance plan which provides (a) a plan that will give the insured maximum protection for the amount of premium available; (b) a fund for burial; and (c) a fund for a period of adjustment in the event of the death of the breadwinner. (8:53) The average cost per year according to family size and composition is as follows: (8:5h) Family Size Family Composition Av. Cost/Yr. 1 Head of Household $69.00 2 Head of Household 1 Other Adult 86.00 h Head of Household 1 Other Adult 105.68 2 Children -19- Medical Care Annual medical care costs compiled in.A Family Budget Standard may be summarized as follows: (8zh6) Annual Medical Care Costs for Families of Specified Size and Composition Family Size Family Composition Cost 1 Adult under 65 $103.93 1 Adult 65 or over 1h0.30 2 2 Adults under 65 207.86 2 2 Adults 6E or over 280.60 h 2 Adults, 2 Children 302.16 It is apparent that the need for medical care increases as age advances. The relatively large medical care expenditure by older persons is probably due in part to their lower participation in health insurance and group medical care plans. (10:1h9) Summagy The literature reviewed indicates a difference in the expendi- ture patterns of single consuming units and larger families. Froeder reports that differences in the needs and purchasing power of families and single consumers are only partially revealed in the distribution of expenditures by major categories. Differences in ex- penditures are much sharper for certain components of major categories. (10:150) This study focuses on some of the differences between single consum- ing units and larger family expenditures in major categories and in com- ponents of major categories. It also attempts to explain why some of these differences exist. CHAPTER III METHODOLOGY AND DESCRIPTION OF SAMPLE Methodology The data for this study are from two sources; the Bureau of Labor Statistics "Survey of Consumer Expenditures in 1960 and 1961," and personal interviews. Survey of Consumer Expenditures The information utilized from the Bureau of Labor Statistics is from "Consumer Expenditures and Income." (3) The Bureau of Labor Statistics survey date are obtained from a carefully selected sample representative of the United States population and of regional populations. Thus, generalizations may be made on the basis of survey findings which are applicable to the United States or to regional areas. The primary objective of the Bureau of Labor Statistics survey was to obtain data for use in the revision of the Consumer Price Index. The tabulations available are designed to provide data serv~ ing other important survey objectives, such as analysis of expenditure patterns for purposes of economic policy and marketing and academic research, The survey was conducted in 2 years - in 1961, covering family expenditures and income in the calendar year 1960, and in 1962, pro- viding data for 1961. A three-stage sample design was used to select a sample repre- -20- -21- seating all families in the urban population. The first stage was the selection of cities to be surveyed. At the second stage, a sample of living quarter addresses was obtained in each city. In the final stage, the addresses for the survey were selected. This procedure yielded a sample of 12,000 living-quarter addresses in 66 urban places. All data were collected by personal interviews. Interviews for the 1960 and 1961 Consumer EXpenditure Survey were conducted in the spring and summer of 1961 and 1962 respectively. Reported receipts and disbursements were summarized and reviewed in the field to deter- mine the completeness, consistency, and reasonableness of the reported account. A total of 9,h76 families in urban places in the fifty states fhrnished usable schedules. City averages obtained were combined with the regional level with a system of weights based on the 1960 Censes of Papulationm The four major geographical regions are North.East, North Central, South, and West. For this study, data from the North.Central Region were used. The personal interviews were conducted in the North.Central Region, making the two sources of data more comparable. The Bureau of Labor Statistics reviewed, edited, and screened all data to minimize processing errors. Preliminary calculations of the sampling error applicable to the 1960-61 Consumer Expenditure Survey averages for the Uréhn'United States indicate a standard error of less than 1% for total expenditures. For five selected com- ponents (food; housing; clothing; transportation; and health, re- creation, etc.) the relative error for no component exceeded 1.5%. The largest relative error, 15%, was for the net change in assets and liabilities which can vary widely in both a plus and a minus -22- direction. Averages for families at the extremes of the income scale are based on small numbers of families which may differ sharply in their Spending patterns. Therefore, those groups are not being used in this study. The income groups which have been selected for this study are $h~h9993 35-F999; and $6-7h99. These income groups represent in- come after personal taxes. The average age of these income groups is h9.2, 52.0, and h8.8, respectively. The average education is fairly similar, being 11.5 years, 12.7 years, and 13.6 years, respectively. Since factors such as geographical region, income, age, and educa- tion are similar, the probability is increased that differences which appear in expenditure patterns are due to differences in the size of the consuming unit. The Bureau of Labor Statistics data have certain limitations. There is considerable variability in family expenditures for indivi- dual items and groups of goods and services. In a given year the number of families purchasing a particular item may be only a small portion of all families and the amount spent by each family purchas- ing the item may vary widely. The average expenditure is the product of the percentage of families purchasing and the average amount spent by those who purchased. Also, certain reporting errors can be expected. With respect to the accuracy of recall the following six groups can be identified: (252xlv) 1. Large, single transactions such as the purchase of a home or automobile are fixed inmemory by their importance and_arr usually supported by records. 2. Regular recurring receipts and disbursements such as salaries and rents usually require only reference to the most recent transaction and some investiga- -23- tion into possible changes occuring during the year. 3. Accurate recall of expenditure for items bought infrequently and irregularly, such as clothing and house furnishings demands intensive probing and thorough investigation. h. Reports of annual° expenditures for items pur- chased frequently, such as haircuts, hosiery, and movie admissions are obtained.generally as estimates based on the usual amount of each exp penditure and the frequency with which.the expenditure is made. 5. Expenditures for items purchased in great number throughout the year such as specific foods can be recorded with accuracy only for short periods of time. 6. The most difficult to account for are a group 0f receipts and disbursements which the respondent does not know about, forgets because they are unusual and of minor importance, or knowingly. conceals. .Among these are savings accounts, odd Job earnings of individual family members, the disposition of children's allowances and school expenses, and expenditures for alcoholic beverages and tobacco. ‘Despite these limitations the data are useful for this study. The data do provide empirical data on.the expenditure patterns of consuming units of different sizes and the sample used by the Bureau of Labor Statistics is representative of the North.Centra1 Region. Therefore, it is possible to make generalizations concerning the North Central Region. The Bureau of Labor Statistics data were used to support or negate the hypotheses. For Hypothesis I, the mean.percentage of income spent for the items listed in the Bureau of Labor Statistics data was computed by dividing the mean expenditure by the mean income before taxes of the income classes being studied. If the largest mean -21;- expenditures other than personal taxes in the three income classes are food, clothing, housing, and transportation, Hypothesis I will be supported. The mean per person expenditures for food, clothing, housing, and transportation were computed from the Bureau of Labor Statistics data for the single consuming unit, the two-member family, and the four-member family to test Hypothesis II. If the mean per person ex- penditure for the items listed are larger for the single consuming unit than for the two- and four-member families, HYpothesis II will be supported. In Hypothesis III, components of major expenditures will be analyzed. The Bureau of Labor Statistics data will be used to deter- mine if differences in the areas of food and housing do exist between the single consuming unit, and the two- and four-member families. The mean percentage of food expenditure for food eaten away from home will be obtained by dividing the total expenditure for food eaten away from home by the total food expenditure of the con- suming unit. Part A of Hypothesis III will be supported if this percentage for the single consuming unit is larger than the per- centages for two- and four-member families. The mean percentage of shelter expenditure for rented dwell- ings will be obtained by dividing the expenditure for rented dwell- ings by the total shelter expenditure of the consuming unit. Part ..B of Hypothesis III will be supported if this percentage is larger for the single consuming unit than the percentages for the two- and four-member families. The mean percentage of household Operation expenditure for laundry sent out will be obtained by dividing the expenditure for -25- laundry sent out by the total household operation eXpenditure of the consuming unit. Part C of Hypothesis III will be supported if this percentage is larger for the single consuming unit than the percentages for the two- and four-member families. Personal Interviews In order to gain insight into why the single consuming units Spend as they do, personal interviews were conducted with twenty single consuming units. These interviews were for the purpose of obtaining qualitative data about the attiLudes and expectations of the single consuming unit. The interview schedule is a "fixed question-free answer" schedule similar to those used by the Survey Research Center. (15) Some questions can be answered yes or no and some are supplemented with nondirective probes such as "why do you say 50?". The questions are designed to elicit answers about the attitudes toward present ex- penditures and changes the single consuming unit could expect if he were married and a member of a two-member family. The original interview schedule was pre-tested on four summer school students who had been employed prior to starting school. Dur- ing the pre~test it was found that the reSpondents would not give answers to questions about amounts of money spent for particular items without extensive probing. In most cases, rather than asking for amounts of money spent, the questions asked whether the respon- dent feels a particular expenditure is high, average, or less than average. I The interview schedule which was used may be found in the appen- dix. The interview took from 15-20 minutes. Schedule A of the -26- questionnaire entitled "Economic Well Being" included general ques- tions about the respondents' attitudes toward their finances. In addition to eliciting general information, Schedule A prepared the respondents to answer the questions about specific expenditures. The areas of expenditures about which the respondents were asked on the remaining schedules are housing, tranSportation, meals, laundry, fam- ily obligations, and changes they would expect in income and expendi- tures if they were married and members of two-member families. The frequency with.which the pre-coded answers are mentioned was summarized. These and the answers to the non-directive probes were’used in the analysis to help explain the Bureau of Labor Statis- tics data. The interviews were conducted on the Michigan State University Campus. The nnames of single staff members were taken from the Hichi- gan State University Staff Directory and the names were cross-checked with the student directory in order to eliminate part-time students. Faculty members also were not used as part of the sample. Staff members were contacted to see if they were single with no dependents and over 25 years of age. It was desired that they be over 25 years of age as they would be more likely to have established expenditure patterns and they would be more similar to the Bureau of Labor Statistics sample. Selection from the Michigan State University Staff Directory was not entirely satisfactory due to errors in the directory, changes in marital status, changes in campus addresses, vacations, termination of employment, and the fact that many of the single persons contacted ( had dependents. Because of these difficulties, other respondents were I‘ll-’41 till -27- obtained through personal contacts rather than through the directory. In all instances the respondents were 25 years of age or older, single with no dependents, and residing in the Lansing, Michigan, area. Description of Sample: Personal Interviews The personal interview sample consisted of ten males and ten females all residing in the Lansing, Michigan, area. All of the respondents were at least 25 years of age. The women, a somewhat older group than the men, had a median age of hb. The median age of the men was 28. All of the respondents were presently single with no depen- dents. The men were all single, never having been married. Seven of the women had never been married and three were widows. One of the widows had three children who were over eighteen years of age and not dependents; the other two widows were childless. The educational level of the men was higher than that of the women. .All of the men had had some college education as compared to half of the women who had had some college education. Occupations were put into categories as defined by Thomas. (27) Seven of the ten men were in either professional or mana- gerial occupations. Of the other three, two indicated that they might return to college in the near future in order to obtain better jobs. Eight of the ten women interviewed were clerical workers. The median number of years on the present job was somewhat less for the men that it was for the women. For many of the men, this was their first full time job. -23- The present income of the men was higher than that of the women. This corresponds with the fact that men typically have higher incomes than women, the men had more education, and the men.were in profes- sional or managerial type jobs. Almost all of the reSpondents reported that they were making the same or more income than they were a year ago and they felt that they were as well off or better off than they were last year. Eighteen of the twenty respondents had some money in a savings account or in government bonds. Only four felt that the amount of these funds was fully adequate. Most of the respondents had a difficult time answer- ing the question concerning their source of money if they were out of work for a considerable time period. Some of them remarked that they had never really thought about it. The results are summarized in Table l. -29- ooflwa cow.mfi-oommg N owsfl amen mmoa Hamil): Amenm b~nn m.m~ mo-mm ON Y‘ _~ _.,fi ,,, omoma oofimuoommfi m~.m cmua amen mama HHCDO H—SHMH b-m a: Noumm OH ocean cow.mfl.oowaa N NHaH can» mesa MJOM 0001mm mm 041mm OH cmeoz omcmm mmep daemon .quoGw paumoud camps: umcmm non peomoua do mums» mow>uom Hmufiuoeo Hmwuummcm: HmuMcnoop «HmCofimmomoum :ofimeSUUO summed umocm>pm .omuHHoo upmvcmpm .mmoHHoo upmsumumucoc .mmoHHoo Hoozum mmocfimsm oumvumum Hoonom Ammm aompmuscm asamxmz 33033 uofiuume um>mc amfimcww, mspmpm Haoaumz snaps: enema: om¢ onwm magamm maqemm Hmpoh damask mHm: sopH ofiaemm 3om>nopcm Hmcomuoa mo cowpawpowun1afl vague n30- m o m :ocx p.¢on H H o m~>HpmHum .2 m w mop—$3.655” S o m 355m m a 2 mpHHuCun HamEhOHnam xuos.mo pa. mH zed-e mo meadow ; N N Basses“ 3 3a m m ; muopowmmewm hHuHmm m m m oHuuHH oou you 3:33 32% mHoom pamoConHmmu 30m mH m m apnea p.>om no pcvooom xcwn GH mmaH>mm mcH>mn .oz m N H omnos 0H m m seam u m : umppom 0mm mama m on omanEOU coHpHmoa HmHocmch N o N omens... 02 N H H mmoH 2 m a «no: can wash m on ounmaaoo uaoocH oHaamm Hmpoe onaum mHm: EupH 8:528 4 298. CHAPTER IV ANALYSIS OF DATA All hypotheses will be supported or negated with data from Supplement 3~Part A to Bureau of Labor Statistics Report 237c35, July l96h. (3) In the Bureau of Labor Statistics Report the average expenditures are reported by income class, family size, and region. In this study the income classes being studied are~ $h-h999, $5~S999, and $6~7h99. Families are grouped into the income classes on the basis of money income after taxes. The con- suming units being compared in this study are the single Con- suming unit, and two- and four-member families. The region being used is the urban north central region. Information obtained from the personal interviews will be used to gain further insight into the expenditure patterns which appear in the Bureau of Labor Statistics data and to gain information concerning the attitudes and expectations of the single consuming unit. flypothesis I The first hypothesis states that the largest mean expenditures of the single consuming unit, other than personal taxes, will be in the areas of food, clothing, housing, and transportation. In order to prepare Table 2, the total expenditures in the three income classes for each of the expenditure categories were taken from the Bureau of Labor Statistics data. To compute the mean percentage -31- -32- .Hm mama op msoucH Km» gonna conou Hmupcoo canon on» :H mpHcv mcHanmcoo mHmch cmnun Ho uaouaH xmp daemon Mo mmmpcoonua on» new mouSpHucudXo caesium mHnmb wommmHo uaoocH hUHuH houhm Egan HO gunfigfinflm 5 Mom .ROOH cu. .Dfim voc «Hm: mgfloo manpcuouwnm ”£82 oatHH N~.omm mm.m mN.o~m o~.m pm.~mN moaaaHanaaH one muommm cH umcmno boa :o.~H aququH om.zH m;.NHm om.mH oa.mm~ Hence .muxmp Hmaomesm mN.m mmomma m~.o mH.om; No.0 om.;Hm macapsnaupcoo one madam Nm.m NH.mom m~.m ao.wMN mhoz :N.m;N Hence .suamesmcH Hmcomesm mm.N Hm.mmN Na.N mm.m~H mH.H mo.No Hench .nsooamHHooma: HH. No.w «N. m~.NH HN. NN.HH Haney .coMumoscm. mo. am.Nm No. mH.Nm Hm. Hm.N: Hanan .maaomom mo.m oo.m;N oo.m :~.HmH om.N Ho.mmH Hmooa .aoapmoeoom :N.H Nm.o:H mw.H 4m.oHH m~.H am.ma Hmnoa .meau Hmaomcom Nm.N oN.~mH coon mm.mmN moon :~.oma Haney .samo Hmouaox mo.mH smonoH 44.0H 4H.~oo so.mH oN.mHa Hence .cOmpmbaoamcmea Hm.4 Hm.wwm mm.m mm.mmm «v.0 m:.mmm moom>nmm a mHmHuopma chanoHu mg.oN oa.mmoH no.HN NH.mcmH oa.mH ma.Hom Hence ameamsom mm. mmon pp. mH.mz 4m. Ha.mz ooomnoh mH.N om.m~H ao.H am.~oH NH.m ma.NoH mamauo>om oaHoeooH< oo.oH :~.omm ma.Ha mN.mma om.aH oo.mNa Hmpoa .uoom monanUCuaxu OOH oo.mwom¢ OOH mo.ommoa ooH mm.wmmm¢ mmxmp spoken quocH emu: R a M m, m. EopH mmaNaoa mwm . _ wa -._ a m33m of income spent for the particular items, the mean expenditure was divided by the mean income before taxes of the income class. Mean income before taxes was used as the divisor in order to give a more accurate picture of the allocation of total income. The consuming unit does not make an in- dividual decision about how much money he will allocate to taxes, but nevertheless taxes are an important expenditure and should not be omitted from the analysis. When rounding was done the following rule was used: If the number preceeding the 5 to be dropped was an even number, it was not changed; but if the number preceeding the 5 was odd, then it was raised by one. (6) The mean expenditures of the single consuming unit are shown on.Table 2. The largest mean expenditures of the single consuming unit are shown on Table 3. TABLE 3--Largest mean expenditures of before tax income of urban single consuming units in the north central region Income class Expenditure % of income before (after tax income) taxes 3h-999 Housing 18oh0 Personal Taxes 15.30 Food 1h.80 Transportation 13.6h CIOthing 6°72 . Gifts and contributions 6.02 35-5999 Housing 21.6h Personal Taxes 1h.36 Food 11.79 Transportation 10.hh Gifts and contributions 6.73 Clothing 5.52 $6-7h99 Housing 20.h9 Personal Taxes 17.6h Transportation 13.03 Food. 10.60 Gifts and contributions 9.79 Clothing h.81 -314- Table 3 shows that in each income class, housing, food, and trans- portation are major expenditures. However, the data do not support clothing as a major expenditure. In the $h-h999 class, clothing is a slightly larger expenditure than the next item, gifts and contributions. This is not true in the other income classes. In these, gifts and contributions is a larger percentage of before tax income than is clothing. In the Bureau of Labor Statistics data, gifts and contributions . are defined as those given to persons not members of the family and to organizations. Since the Bureau of Labor Statistics defines the single consuming unit as a “family", gifts given to the family of origin would be included as gifts given to persons not members of the family. During the personal interviews, eighteen of the respondents whose families of origin were living were asked about financial obligations to their families. Three respondents said that they presently had financial obliges tions to their families of origin. .All of the respondents with families living, except two, felt that in time of financial emergency their family would look to them for help. In the past year, four of the respondents had given financial assist- ance to their families of origin. This help was for college expenses for brothers and sisters, clothing expenses of a mother, wedding expenses of a sister, and financial help to sons who were not dependents. Fifteen of the respondents had families and had married brothers or sisters. Nine of these felt that in time of emergency they would have more financial responsibility than the married brothers or sisters, and six.felt that they would share expenses equally. -35.. From the personal interviews, it appears that even though the single consuming unit does not have dependents, he does feel a sense of responsi- bility to his family of origin. The respondents may be over-optimistic about the help they would be able to give in a time of emergency, but since four of the respondents had given help as needed in the past year, it appears that single consuming units do accept this responsibility. Table 3 also shows the importance of taxes as an expenditure; taxes are the second largest expenditure in each of the three income classes. It is important that taxes be thought of as an expenditure even though they are not an area where the person has a choice about the expenditure. Two of the respondents to the personal interviews reported paying taxes at the end of the tax year as an unexpected financial event. For the purpose of comparing the single consuming unit with the larger family, tables have been compiled from the Bureau of Labor Statistics data for the two- and four-member family in the same manner described for the single consuming unit. The mean expenditures for the two- and four-member families are shown on Tables 14 and 5, respectively. The largest mean expenditures of the two- and four-member families are shown on Tables 6 and 7, respectively. Tables 6 and 7 show some of the changes in expenditure patterns as the size of the consuming unit changes. As the size of the consuming unit increases, taxes as a percentage of income decrease somewhat. How- ever, the tables illustrate that the income splitting provision does not benefit these income classes to am great extent. In the larger families, gifts and contributions do not show up as a major expense. In the two- and four-member families, there are probably more gifts exchanged between members of the family than are given to peOple -35a .Hm mama ob women nouns unmocmum Ho npomamHQXm am now RooH on com boa HHHa maevHou ommbaouaom "meoz ma.m oN.amo om.» mm.moa om.a Na.mNN nsHoHHannHH one mammmm CH omcmno boa «H.4H mm.maoH os.NH mm.ma~ NH.HH mo.-m Hence .nsxns Hssoansn ma.a -.mNm oN.a aa.ooN mm.a oH.aaN assassnanacoo can «sumo ao.a aa.amm ae.s mm.NaN aa.s Ha.asN oceansaca Hacaacsa ao.N mH.mmH No.H am.mo mH.H wa.mm Hence .nsssanHoomH: 5N. am.oN mm. m;.mm am. am.mH Haas» .eoaososcm Ha. aH.mm ca. om.~a om. aH.o; Hanan .mcacnsm oa.N mH.owH mH.N mo.HoH mH.m aa.amH Hanan .ccasaonosm ma.H ao.HmH aa.H a:.HNH No.N mo.HmH Hanan .snno Hosannea aN.m oo.ooa mN.m mN.wNm ma.o NH.amm Hobos .snao Hsoacs: N:.oH 50.nom m~.HH Hm.~mw ma.bH 20.:Hm Home» .coHumpuoamcmuw oH.o oa.oas aa.m ma.oom ao.o mH.amm assasasa a ananoons .acasaoHo mo.HN HH.aaoH oH.NN am.mmmH oa.oN No.0mmH Hanan .acamsom mm.H No.mHH Nm.H aN.ma o~.H mH.mm nuances wo.H ww.mNH o:.H :0.Hm HH.H mm.mm mommno>on oHHonooH¢ mm.:H o~.mmHH mm.~H mm.HmoH mm.mH pm.mzm HmHOH aboom mouSHHucoaxm 00H m:.H:-n ooH mo.mmmon OOH ow.moom® mmxmp shaman oaoocH emu: m, Ml, mu, ml, [a » seeH wmaanma mammuma aaamnaw AesoocH xmb pubmmv mommmHo oaoocH conou HmuHCoU canon onu cH mmHHHamw nonaoaaoap manna Ho oaoocH Km» uneven mo ommHCoouoa opp mam mopanvcoQXo amazing mum<9 .Hm mama o» women nouns unmocmbm Mo cpomcmHaxo am you .RooH on new boa HHwa measHoo ommpcouuom «whoa mm.m ow.mmm mm.H om.mw mw.© I OH.wmm I mquHHHanH van muommm :H madman boa mo.oH Hm.gow m~.m 0:.mmm no.» mm.b~m moxmb Hmcomuom ab.m mw.mmH Hm.w am.m~H Hm.m :w.mmH mcoHpanuHCoo new mumHo om.m om.mH: ow.m bo.m:m mo.m mw.HmN oocmunmcH chomuom w:.H mm.~oH NH.H m©.~o mw.H Hh.mo Hmbop .mnoocmHHoomHz mm. mm.bb om. mm.mm ms. wo.om Hobo» Napomospw Na. am.Ho Na. mm.m; o». ma.:m Hence .msaossm m:.m mH.mmm mo.: m4.m4w m>.m 4m.mmH Hmpop .GoHpmopoom NN.N aw.~oH mp.m om.:©H om.m mo.me Hmpop .oumu Hmcomuod am.; oa.mom oN.o sm.oam am.m om.oaN Haas» .snno Hashes: mg.wH mw.o>m mH.wH Hm.wmw mm.©H m~.bmm Hmpop «CoHpmupoamcmuh mm.m om.mNo ma.a om.wom oa.a No.aoa nsoasnsa a anHnsosa .mcacooHo wm.:m mH.N:wH oH.©N wo.o~mH 4:.om mw.:omH Hmpop .mcmmnom Hm.H mm.mm m~.H mH.;oH ao.m mo.ooH ooomnoh NH.H Ha.am oo.H NH.ao ma.a mN.ma nomnns>on oHHoccoHe ao.oN aH.mHmH Na.NN pa.HmmH oa.oN ma.aHmH Hanan .aoom moustucoaxm ooH «H.00mwa ooH mm.mHoofi ooH om.m4m:9 mmxmb shaman esoocH emu: .L rIIMwaIIlPI. as»; «maple» luv, -mwmmlr » Hugo AesooaH Nap henna mommmHu esoocH :onou Hmnpnoo space on» cH moHHHamm nonsuaunsom coma: Ho uaoocH xmp uuomon no ommaaouuoa on» new mouapHucoaxs cmolem uHm