OASI DATA OF THE FARM LABOR FORCE Thesis for H“ Degree of DH. D. MICHIGAN STATE UNWERSITY UeI Blank 1960 This is to certify that the thesis entitled OASI DATA OF THE FARM LABOR FORCE presented by UeI Blank has been accepted towards fulfillment of the requirements for Ph. D degree in Agricultural Economics Major professor Date 14 December 1960 0469 LIBRA R Y Michigan State University OASI DATA OF THE FARM LABOR FORCE By Oscar Uel Blank .{_" ,m w ~. :5: ‘ésfl‘m A THESIS Submitted to ,. Michigan State University ' . : ”‘9' ”'1": ‘ in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY V taunt“ J" C‘ *de'rtment of Agricultural Economics p Salts-e ABSTRACT OASI DATA OF THE FARM LABOR FORCE by Uel Blank ‘ t This study was an investigation of 1955 data of the United States .fi‘g'ricultural labor force that were newly generated from the program 1 ‘ ' C L ‘ I i," .Efold Age and Survivor's Insurance. The first objective was to define a was population included; farm entrepreneurs were the main focus, I. " ’ Mough hired farm workers also received treatment. An objective I‘D Sieqml importance was an examination of the basic characteristics and potential of these data that result from collection and handling 1“ ~§fo<§edures and from implicit definitions. 7‘ "‘ r’e's‘llllvspecial set of 33, 469 punch cards was supplied to Michigan State 0 .- T ‘f'fiifersity by the Social Security Administration for use in doing this ".fjfiicir‘ch. These represented one percent of all with employment .: @cfied by the OASI program as farm entrepreneurs and/ or farm wage ‘ j. um 72:14:; ‘ Numbers data of the 1954 Census of Agriculture and farm 1 ' estimates of the Agricultural Marketing Service were used as l .‘rd‘s 'of comparison. Use was also made of data from the: Current ' 'r pon'Survey of the Census Bureau and from the Internal Revenue .Efith‘e development of various estimates. " ere only 39 percent as many OASI farm operators as the Uel Blank ~31 operators accounted for an estimated 73 percent of the commercial ' 4. ‘ ,igg‘r'icultural production. Gross agricultural sales per OASI operator {were estimated at $9, 600 -- compared to $5, 200 for Census operators. L; Net income from all sources was less strikingly different —— it was ’ estimated at $3, 110 and $2, 890 respectively. An estimate of $15, 064 ,million as the total net money income to the agricultural population was inade using OASI data. This compares with the 1955 Agricultural . L'Mlarketing Service estimate of $16, 178 million. Some common statis- ' ‘tical sources were utilized by both estimates but basic procedures 9'3 “differed. . ‘3 The most unique feature of OASI data is that it is possible to trace -.‘the same individuals from year to year, thus operating as a continuous register. By contrast, all commonly used agricultural data series are ‘ cross-sectional with respect to individuals. A result is that many ' , dynamic elements are not reflected in the data now in use. It was , 91'. “possible to make a test of this characteristic of OASI data because the A 34" cards used had information on covered employment for previous years. 3"3Asnong the results of this study of the time dimension of OASI data were ‘ 3:7. following tentative hypotheses: (1) OASI operators are less involved - .' off-farm jobs than farm operators are generally assumed to be, (2) ' operators are less secure in nonfarm employment than the 1 age nonfarm laborer. (3) opportunities in farm and nonfarm employ- [flééin both present income and the employment pattern. “ ,- 735-1 ‘ iii Uel Blank .1 éASI farm operators are defined as largely comprising the ' 1 making system of commercial agriculture. The continuous I\."ri"v 'L ‘ lter characteristic of OASI data is expected to make possible a (.‘~- ided advance in insights into the dynamics of the pattern and pro- 1' 1'8 by which change in this population comes about. Key"; ~ Saran ' slaw}: ~ pa’LCIFJ'H . - gt3§‘b~l-l: ‘ _ p i. TABLE OF CONTEN TS ' A ‘ pter ‘ . I. INTRODUCTION ....... . ..... ....... Old Age and Survivor's Insurance, A New Source of Farm Data Purpose of the Study Procedure Data Series of the Farm Operator Population in Current Use Farm Income Statistics Some Special Considerations Relating to the Number of Farm Operators and Their Income ' II. OLD AGE AND SURVIVOR'S INSURANCE DATA OF THE FARM LABOR FORCE--A QUALITATIVE ANALYSIS . . . Background and Rationale of OASI Data for Farmers Definitions ‘ Sources of OASI Data The Continuous Work History Sample Specific Information Available Classification by Employment Factors Affecting the Farm Data Obtained from the One Percent Continuous Work History Sample of the Old Age and Survivor's Insurance Program Time of Availability Anticipated Future Changes Summary A COMPARISON OF OASI FARM OPERATOR DATA WITH STATISTICS FROM OTHER SOURCES: AGE, RACE ANDLOCATION. ............ ..... .. Age Racial Composition Regional Variations Summary JV. THE SIGNIFICANCE OF OASI FARM OPERATORS IN ‘ THErAGRICULTURAL ECONOMYm-A COMPARISON OF NUMBERS AND AGRICULTURAL PRODUCTION . . . . .A Comparison of Farm Operator Populations V/vi Page 21 21 26 32 35 37 39 55 55 65 68 79 Number of Farm Operators of the Census of Agriculture and the Current Population Survey Quantitative Comparisons between OASI and Current Population Survey Statistics Multiple Operators per Farm Overall Reconciliation of OASI, Census of Agri- culture, Current Population Survey and Internal Revenue Service Data OASI Operators Classified by Gross Farm Income Agricultural Production of OASI Operators Summary and Conclusions A COMPARISON OF NET INCOME ESTIMATES OBTAINED FROM OASI DATA WITH THOSE OBTAINED FROM OTHER SOURCES ........... ............ Net Incomes of the OASI Farm Operators An Estimate of Total Income to the Farm Population Summary and Conclusions FARMERS IN THE NONFARM LABOR MARKET--AN EXAMPLE OF OASI DATA IN USE . ..... . . . . . . . . ..... Limitations to a Time Study with Present Data Extent of Involvement in Off-farm Employment Stability of Off-farm Income Sources Some Relations of Off-farm Experiences to Present Circumstances Summary SUMMARY AND CONCLUSIONS REGARDING THE POTENTIAL VALUE OF OASI DATA IN AGRICULTURAL ECONOMICSRESEARCH......' ...... . ..... OASI Data Sources and Limitations-~Summarized Data of OASI Farm Operators Compared with Other Farm Operator Statistics The OASI Farm Population Defined Implications for Use of OASI Data of the Farm Labor Force Data Refinements Indicated ‘_,_IXA. SAMPLINGERROR " I'ix“Bl SUPPmMENTARY DATA 0 I C C I U U Q C C C ' I O O . C U D I I ‘Vié‘mY...'. IIIII C IIIIIII .U..OOCIIVICICII...I..I.... 11H: it :- Vii Page 87 89 100 103 107 131 134' 136 152 176 179 181 186 199 212 214 216 220 226 229 238 LIST OF TABLES Page Percentage distribution of OASI and 1954 Census of Agriculture farm operators, by age .................... 56 Percentage distribution of subgroups of OASI and 1954 Census of Agriculture Farm Operator Population, by Age . 59 Distribution of farm operators filing Social Security tax reports, and individuals reporting $400 or more of self— ' employment farm earnings in the Current Population Survey, by age, 1955 ................................. 61 Racial composition of OASI and 1954 Census of Agriculture farm operator populations .............. . . . 66 Distribution of OASI and 1954 Census of Agriculture farm operator population, by United States regions ....... 70 Distribution of OASI and 19 54 Census of Agriculture farm operators having the specified off-farm work. by United States regions . . . . . . . . . ....................... 71 _ Percentage distribution of United States farms, by . economic class and region, 1954 ..................... 72 Distribution of 1954 Census of Agriculture farms with $600 gross sales and 1956 OASI operators. by United States regions . . ............ . ............. . . . . . . . . 77 Distribution of persons 14 years of age and over. by farm self-employment income, 1955 ............... . . . . . . . . . 91 Summary of estimate of farm operators excluded from OASI farm operator population because of $4, 200 maximum OASI taxable income, 1955 ..... . . . . . . . . . . . . . 98 7‘. Reconciliation of OASI, Census of Agriculture, Current Population Survey, and Internal Revenue Service Farm .EOpsratorNumbers... ......... ...... 104 Selected characteristics of farms and farm operators by Ueeonomic classes offarms,1954 110 Page Farm operators not reporting income and reporting incomes less than $500, by economic class of farm, l950.................... ........ ........ 111 Adjustment of numbers in the 1954 Census economic classes of farms to account for the inclusion of landlords' share of gross income ............................... 112 Census farm operators in the OASI farm operator population,by gross farm income classes ........... . . . 114 Total agricultural production of OASI farm operators . . . . 132 Estimate of income excluded from OASI farm operator data because of $4, 200 limit on taxable income, 1955 . . . . 141 Value of farm income excluded from OASI taxable income because of special provisions for reporting capital gains, 1955 . . . . . . ............ . ............. . . 143 Income to OASI farm operators from sources not covered by the OASI program, 1955 . . . . . .............. 147 Estimate of total net income of the OASI farm operator population, 1955 . . . ....................... . ......... 149 Distribution of individuals reporting self-employment income from farming in the Current Population Survey, by total money income, and an estimate of aggregate farm operator income, 1955 ................ . . . . . . . . . . 151 Average gross farm sales, and average total net income for farm operators of the OASI, Census of Agriculture. and Current Population Survey ........... . . . . . . . . . . . . 153 Income to spouse and other members of the family or OASI farm operators, 1955 .. ..... ..... 157 Family income of Census farm operators not in the OASI farm operator population, by economic classes of farms and aggregate, 1955 . . . . ....... . . . . . . . . ....... . 158 Farmwage earners, 1955 165 ,fl‘poome of farm wage earner population, 1955 . . . . . . . . . . . 169 if, ' 1X ‘ Page Aggregate money income of farm population, 1955 ..... . 175 Patterns of employment in 1950-1954 for OASI farm operators with earnings from covered types of employ- ment prior to 1955. by employment group ....... . ....... 188 Average taxable income and four-year income range of OASI male farm operators receiving one or more quarters covered income each year of 1951 to 1954, by employment groups for years 1951 to 1954 . . . . . . . . . . . . 189 Farm and off-farm income to indicated farm population and specified OASI farm population for years 1951-1954. . 192 Indexes of employment and weekly payrolls, averages by years for 1951-1955 .............................. 193 Percentage distribution and taxable income of OASI male farm operators, by employment classification and United States regions, 1955 .................. . ........ 201 1955 earnings of OASI self-employed male farmers, by age first employed in specific periods and employment groups ..... ............................... 206 Distribution of mean 1955 income between wages and farm self-employment for OASI self-employed male farmers in the SEF, WSO employment group, by selected patterns of past covered employment . . . . . . . . ...... . . . . 207 1 Average taxable income per year employed prior to 1955 t and average 1955 taxable income for OASI self- ‘ employed male farmers with first covered income in ! 1950 or earlier. by percent of years employed and employment group........... ....................... . Summary of characteristics of indicated agricultural populations as estimated by the use of OASI data, compared with statistics from commonly‘used sources . . LIST OF FIGURES Page Median income of male OASI farm operators by age and employmentindication, 1955 62 Distribution of United States farm operators in a one percent OASI sample wage and salary income, 1955 . . . . . 97 Distribution of a one percent sample of OASI farm operators by taxable income, 1955 . . . . . . . . . . . . . . . . . . . . 138 CHAPTER I IN TRODUC TION Old Age and Survivor's Insurance--A New . . Source of Farm Data .i'it 1‘." 1‘ 'p‘fl‘lfi , In 1955 farm entrepreneurs were included for the first time in the 1 V‘Lpgrqgram of Old Age and Survivor's Insurance,hereafter referred to as 1, OASI, which is operated by the United States Department of Health, ,i-Education, and Welfare. Hired farm workers, whether on wage or salary, .I‘."1§ad been included since 1951 although in a relatively limited manner. Eilfipme of these restrictions upon hired farm'workers were reduced in 1955. 9 t. This year was, then, the first in which the farm labor force was V .1 Quantitative” represented in the OASI program. It ushered in a new 1’ Wential source of data regarding farm workers. 7 1 15““ , _‘ United States agriculture is already acclaimed as the "best Ljigticed" in the world. The economist looking for data on farm ' ation, the farm labor force and agricultural income will find what age to hem embarrassment of riches. Numerous statistical series .1 ',_fpubli_shed based upon the Population Census, the Census of Agriculture, cgftions made from income tax reports to the Internal Revenue. ’ ,1 the Currenthopulation Survey, and the crOp and livestock ; _ system and special surveys of the Agricultural Marketing 2 '.. ~ .Grove answers this in a paper given at the Conference on Research .3 o . '_.‘_,f'1ncome and Wealth in March, 1956 at Princeton, New Jersey: "My ‘- II C l I I r! ‘- gonclusmn on farm 1ncome 15 that we are not yet out of the woods 1n - . determining for sure what its size distribution is or was at any one time, d u ' ht alone determining what changes in the distribution may have taken '1‘, 1 .1 place over time. " This was further amplified by Koffsky and Grove in . ; a statement before the Subcommittee on Agricultural Policy of the Joint C1 Economic Committee of Congress in 1957: "We have, however pieced ‘. _ . ._r 1 together . . . a very preliminary and tentative set of data which roughly ' : :‘indicates the income levels and trends for the farm-operator families . . . . 2 1 ’4 , " {This points to the need for an expansion of our statistical program . . . . . , .. - , These are only two examples of the problem familiar to all who ..- look for anything more than superficial, gross data. The mirage of a , ‘. ‘ ~ ‘Jilethora becomes in reality a famine. Ultimate purposes of the social My - . :gdences, prediction and direction, require an understanding of what is a h, . .rv L’Zheliind the aggregates-~a delving into the why. Not only are statistics M, l '. t'jfieeded to give better resolution of the picture at a given time, but 1 .1 ~ ' \ 'll.‘ . ' {insights into the nature and process of change from one "snapshot" to the a» - » {1111‘ ‘ i i 1E. -W. Grove, "The Size Distribution of Farm Income, " An Appraisal ;' urthe 1950 Census Income Data, Vol. XXIV, Studies in Income and Wealth, port of the National Bureau of Economic Research (Princeton: 1 f ton University Press, 1958), pp. 307 ff. .1 1 1 EN. M. Koffsky, and E. W. Grove, "The Current Income Position --3 1 - a'ercial Farmers, " Policy for Commercial Agriculture, papers 5 was by panelists to the subcommittee on Agricultural Policy, ' 0?‘ U 8. Government Printing Office, 1957), p. 79. are required. Present data series are especially lacking in their trayal of dynamic elements; yet such insights are critical to decisions . ‘ - t >. - 3 .i and actions, both public and private. . 7 (a 3L} Statistics of agricultural population and income assume importance i, I“. ' ‘afor a. number of reasons. Prime among these is the strong political . l . -'e..‘po‘eition that farmers have occupied since the 1920's. This has brought .4. t 'I r }' agricultural legislation into being, requiring measures to base agri- . ' cultural programs upon and comparative measurements to justify and l v Q o’ " l " ‘tevaluate them. For the long run, overall considerations of the national ‘:sconomy--re1ative inputs and outputs of each segment and the dynamic '5 interaction between them--are primary. In the case of agriculture this 138 complexly interwoven with our legacy of an agrarian past; with our ‘Q I ”prime physical resource--1and; and with the fact that the economic Enrganization of agriculture--many small individual proprietorships-- .‘f' l 2 '1 . 3' unique in our commercial economy. It‘- \- r. S 9‘ ‘ . . . . . These then, are some of the Just1f1cat10ns for yet another excurs1on Bearch of additional useful data relative to agriculture. Purpose of the Study tial of OASI farm data. Means to this end are a definition of the m'rwras recognized two decades ago by L. A. Salter Jr. , and 111‘, "Part- Time Farming Research, " Journal of Farm-Economics 3491’ pp. 581- 600. They pointed out that most existing studies ' ‘lfikstatic descriptions. 4 ' station included and an examination of basic data characteristics that 'ult from implicit definitions and collection and handling procedures. I l- . ~ Characteristics of the farm population included in OASI data are used in this study but are incidental--not the focus--except in Chapter VI. To report incomes, income distributions, and ages of a population without \ '. “first having a. clear understanding of what that population is would only ”add to the confusion felt by many and voiced by Weigmann. 4 He points out that much of the confusion in farm income comes about because of 0 :1‘. : . unsophisticated use of data and suggests a clarification of definitions of p- . farm population and income that are in common use. The problem of " definition is highlighted further by statistics of the labor force in agri— culture. One series of the Census Bureau reports agricultural workers '1 1 lat.6, 718, 000 in 1955, 5 while Agricultural Marketing Service by collecting . ’3... and treating its data differently arrives at a figure of 8, 364, 000. 6 ' Farm entrepreneurs are the main focus. These are defined in the data as individuals reporting farm self-employment income to the Bureau of, Old Age and Survivor's Insurance. They will usually be referred to as 1' " fiarm operators. This segment of the farm labor force is generally .4F. H. Weigmann, "Farm Income--A Confused Picture, " Journal 1 oiFarm Economics, Vol. XXXIX (May, 1957), pp. 490 ff. .‘v' ’ _ r' MW 5 5U. S. Bureau of the Census, Current Population Reports, Annual - rts of the Labor Force 1955, Series P- 50, No. 67 (1956). The' l 1‘ e quoted is from a new definition reported in Economic Report of .94 ‘ patient (January, 1960), Table D- 17. Under the old definition the 9‘ n the agricultural labor force Was 6, 730, 000. ’t' (.3 (Eduction and farm people. Farm hired laborers are fewer in number V13" " most definitions, and hired farm work is considered only a temporary . f stage in the lives of most individuals who are thus employed. 1‘ . ,‘1 Each set of statistics possesses its own distinctive characteristics - C i" that fit it for some purposes and limit it for others. In this objective c look at the potential as well as the limitations of OASI data of farm ‘ reperators certain features stand out: Numbers of those included as farm operators are incomplete in terms of our customary way of defining farm operators, 1. e. , the definition of the Census of Agriculture. In addition, some are a part of the OASI farm operator group that are not so defined by the Census of‘Agriculture. Income data of those included as farm operators by OASI are incomplete. There are maximum limits to the amount, and Only money income from certain sources is considered. In general, these sources are the earnings from current economic contributions of the individual but in each case are specifi- cally defined by statutes. Income data come from actual records--not memory surveys. Thus, for the range and kinds included, they are probably the most accurate available. The data are collected annually. It is possible to identify the same individual from one year to the next. This continuous register characteristic of OASI data This excludes income from investments, capital gains and retirement ‘0va Income are, however, aggregated to such an extent as to limit ' fees ,in studies of a single industry. 6 is its outstanding distinction and offers potential for greatly expanded insights into the dynamics of the farm operator , population, their income, and interaction with other parts of the economy. ' This study aims at an appraisal of these and other less salient stures of the OASI data. Procedure 1 5, In cooperation with the staff of the Bureau of Old Age and Survivor's g“: insurance, the items of information that would be useful in a study of ‘- .L , 9 1 131‘!!! labor force and their income were selected. These items were put 3' {gate a special punch card that was provided to Michigan State University ~ 'vf‘for research use. Data from a special one percent sample that is :' :irxaintained continuously by OASI were employed. A tabulation program -\ 51.1 ‘Li'was set up, designed to explore aspects of these data and their use. Al- '. . .- _j‘.fdgether about thirty tabulations were made to answer questions and test o r. , hypotheses. 31:3 ' Results of these tabulations are reSynthesized into an integrated 3.49, - 1. ii: finition of the OASI farm operator population. The limits and potential " {m 5:1" é. use of OASI data for this population are developed: qualitatively, by I 1;" "11* . I. ~‘-- '— », ediexpository treatment of factors influencing the data; both qualitatively ,.‘ I ‘J ‘ ‘ " $1 . . . I The population studied could be identified as farm operators in ' a single year--1955. Despite this limitation, part of the potential Lgtiostudy in time depth is demonstrated in the test of the data by use. i #«A result is that this study provides new insights into farm and nonfarm } l ifiterrelationships as well as serving principally to indicate possible 0 " {2..3315e‘as of use for OASI farm operator data. ea- ‘- .. Data Series of the Farm Operator Population in Current Use ,. \ .‘_, .0 .u. Reference has already been made to problems in the statistics of J . 1...; .. " C farm population and income posed by differences in definition and data as. . . treatment. Such diversity is not an unmitigated evil; some is justly a occasioned by the varying purposes for which statistics are used. Others . garise because of the manner of data collection. All occasion misgivings 1:301" the tyro, or even more probably, he is likely to be blissfully unaware 10 $33164: there are qualifications to statistics that are employed. For the L . 1'1“ . ‘gorphisticated user caution is required, often entailing a study of data Jflééllection‘ procedure and treatment to ensure the meanings that are étonded. In a sense these difficulties are inherent in the nature of a 1 ' (Elie Census of Agriculture, a cooperative undertaking of the ; :i‘tments of Commerce and Agriculture, is the standard measure of operators. It achieves this distinction rightfully; it is far more . . prehensive than any other single farm data source and is the only I ‘1‘ I I. Zane derived from an attempt at total enumeration. The procedure of ”the Census of Agriculture in determining the number of farm operators “ “is, to first define a farm, then one person and only one is designated as ‘1 ' . This operator of that farm. By definition, then, there are exactly as v . ‘ ' r , ._ many farm operators as farms. In 1954 places having an annual value of sales of agricultural products of $150 or more were counted as farms. £11 the place had 3 acres or more it was counted whether the $150 worth I ,§‘-‘ mi agricultural production, exclusive of a home garden, was sold or II ‘1 r "1 -.“;g?onsumed at home. Places not meeting these requirements in 1954 :"could also be considered as farms if they might have normally been , . vefiected to produce the stated minimums. This procedure resulted in a guilt of 4, 783, 021 farm operators for 1954.1 Against this standard there is considerable diversity in the method defining, hence in the number of the farm operator population and in 3J1" tics for other characteristics of this group. The 4, 783, 021 farm tors of the Census of Agriculture are counted without regard to 000 farms. See Introduction to Vol.11, Census of Agriculture, xxxii to xxxiv. 9 07‘ -9 _ a _ 12 , , ‘ ~42" be of residence, while the figures for the farm population are determined ' . 'fi'om a count of all people living on farms regardless of occupation. Farm employment figures of the Agricultural Marketing Service and the Census Bureau are both determined from surveys in which the main basis for classification is the time spent at agricultural employment.14 Despite this, the 1955 figures for the agriculture labor force from the two sources differ widely; 6, 718, 000 (Census Bureau) and 8, 364, 000 (Agricultural Marketing Service) as was previously noted. The Current Population Survey produces three sets of figures that are an approach to the number of farm operators. 15 One is based upon place of residence--rural farm families and unrelated individuals (5, 376, 000 in 1955); one classifies by the occupation in which the most 12 . . . . . 8. 8% of operators were estimated to be 11v1ng in urban or rural nonfarm in 1950. See: D. A. Johnson, "An Appraisal of the Data for Farm Families," An Appraisal of the 1950 Census Income Data, op. cit. , pp. 287 ff. 13This was the procedure of both the Population Census in 1950 and the Current Population Survey since 1950. Those living on farms but paying cash rent for their dwelling are excepted. 14In the AMS figures farm operators were counted as part of the agricultural labor force if they worked one hour on the farm during the survey week; unpaid family laborers were counted as in the agricultural labor force if they worked 15 hours a week; any period of work qualified hired farm laborers for enumeration. A major difference between the '1. AMS figure of the agricultural labor force and that generated by the Current _' Population Survey of the Census Bureau is that the Census Bureau only Counts as agricultural labor those spending more time at farming than at 3.". . . . gang-other occupation. There are also differences in treatment of workers 3578111419: 14 years, and AMS may double count cases of multiple employment. . l'5U. S. Bureau of the Census, Current Population Reports, ‘ lfld’i.‘d.. . 10 spent--farmers and farm managers (3, 552, 000 in 1955); another Pants all those receiving self-employment income from farming .74. 792, 000 in 1955). -I 6, , \‘ 15’ . 1' i§?Statistics of Income published by the U. 5. Treasury Department, 0 "l , . . { "OASI data of farm operators depend upon the income tax collection ‘ ,3. x. ' li‘s'ystem. Gross sales of agricultural products and/ or expenditures for A less-used source of data on farm operators is contained in the " finternal Revenue Service. It is important to this study since current ”agricultural production are the classification criterion employed in this , . . 1 - data series. Methods used for enumerating farm entrepreneurs may be sum- , ' marized: On the basis of one each per farm (Census of Agriculture); . '1 fin-those working at least one hour a week (Census Bureau, Current - v ' 3%; Population Survey, and Agricultural Marketing Service in the determination \ f of farm labor force); the occupation at which the greatest number of ' z ’ 1' f’hbu'rs is spent (Census Bureau, Current Population Survey); head of a , ‘ *‘fsmily residing on a rural farm (Current Population Survey); and the I‘ t a“- «receipt of farm self— ~employment income, or loss (Current Population 0! v“:8urvey and Internal Revenue Service). Some of these closely approximate "t. 41--.. wk other. All series include a substantial number that would be , ., nttfied as farm operators by most definitions. It is from the marginal ‘ T‘of definitions implicit in each series that differences arise. k r._ 11 Farm Income Statistics g ,1 ‘- Just as the Census of Agriculture is the standard for the number .1; . I ‘rw farm operators, statistical estimates of the United States Department ,, 31-3 '1}! '95 Agriculture occupy this position among series relating to farm income. .' U". _ J gout major series are available from these estimates: (1) realized net '3', income of farm operators from their farms, (2) total net income of ‘ 13 farm operators from their farms (including the values of the net change it .' “fun farm inventories of crops and livestock), (3) net income of the farm . ‘ 3‘ ‘14 M5 !;Jopulation from all sources, and (4) net income originating in agriculture . ' " I’ . . . 17 . . . ,_ isonmdered as a Single industry. The estimates of agricultural income ._, u tonne built up as aggregates from data on production, marketings, prices, ;, and costs. Net income is determined by subtracting total costs from 1 ‘ "M, the gross value of production. Included in gross value of production is Q“ . 1"“ {Finn-money income to the farm population from the value of owned housing, -, 1‘1 '7' ,‘s’nd the value of home consumption of agricultural commodities produced it}, , L- w £11 the same farm. Series such as that of the income to farmers from all sources draw w additional material. The special cooperative survey of Farmers' inditures for Farm Living and Production18 is one of these. 7U. S. Department of Agriculture, Major Statistical Series of the artment of Ariculture, Agri. Handbook 118, Vol. 111, Gross 12 .- "red information on production expenses and off-farm sources of ‘ome to the farm operator and his family. These items are used in ' . flée Agricultural Marketing Service estimates and for other general 313: Wposes. The statistics on off- farm income are especially useful in 1; this study to supplement OASI income data. -L‘t. “ Data from the Internal Revenue Service list gross incomes, and :production expenditures by industries reporting. 19 Like estimates of .the United States Department of Agriculture, only aggregated figures 1 lare given by source. No attempt is made to classify individuals by .industry, as farmers, and report their total personal income. 1“"; 7 r 1 ‘~ "i (.131 . 7‘3" “h: fidiscussed as possible measures of the farm operator population, give " “1.?- L .., :— ' f 150th the mean income and an income distribution for the population that . ' hx‘f" . " 20 . . _2§§I included. Two of these, by farm reSidence and by the industry . -31 "' «havingthe most time devoted to it, are distributions of total income. . _‘ $11. iiflhe series of those receiving self— employment income from the farm ‘1‘ 151 ' -, @113 a distribution by farm self- employment income only. A distribution ”(1591,, 'W‘total income for this Current Population Survey group, receiving farm 1 A I 13:1 Each of the three series of Current Population Survey data, already — 0 a9. "1. c ‘. tfiégibemployment income, was obtained from the Census Bureau for use " U. S. Internal Revenue Service, Statistics of Income, for indi- «corporations and partnerships. 5 Bureau of Census, Consumer Population Remix-ts, Consu_____me1:.v 5’ ' flies P- 60. '3 13 Some Special Considerations Relating to the Number of Farm Operators and Their Income Some of the problems attending data of farmers are briefly illustrated in preceeding sections. The most common current use of these data, but not necessarily the most important possible use, is in welfare comparisons between farm and nonfarm people. Despite extensive study, agreement appears to be general with regard to only one point--that we are not able at the present time to make satisfactory comparisons , 21 . . between farm and nonfarm incomes. Such an indicated state of 21A brief review of some of the range of thought in this area follows: Hazel Kirk, "Income Distribution as a Measure of Economic Welfare, " American Economic Review, Vol. XL (May, 1950), pp. 342 ff. , concludes that income even between nonfarm peoples is an imperfect measure of economic welfare. N. M. Koffsky, "Farm and Urban Purchasing Power, " Studies in Income and Wealth, Vol. XI, part II, A Report of the National Bureau of Economic Research (Baltimore: Waverly Press Inc. , 1949), notes particularly differences in living standards, prices paid and home production between farm and urban families. J. R. Bellerby, Agriculture and Industry Relative Incomes (New York: St. Martin's Press, 1956), argues that a comparison of'farm and nonfarm personal incomes should include only the return to human effort and enterprise, and should exclude return to capital. He devotes a full chapter to reasons for a supply price to the human factor in agriculture that is only 60 percent of the level in other industries. D. Gale Johnson, "Comparison of Farm and Nonfarm Income, " Farm Policy Forum (Spring, 1956), p. 2, adds a consideration of age distribution, taxes paid, economic class of farm and regional differences. N. M. Koffsky and E. W. Grove, "The Current Income Position of Commercial Farmers, " Policy for Commercial Agriculture, op. cit. , pp. 79 ff., separate out as commercial all those farms that sell over $2, 500 worth of agricultural commodities annually. They also con- sider the return to owned equity in capital assets. A discussion of the USDA income series in, USDA, Maior Statistical Series of the U. S. Department of Agriculture, Vol. III, Agricultural Handbook No. 118, "Gross and Net Farm Income, " 1957, p. 9, recognizes factors such as psychic incomes to farmers as well as allowing quantitatively for other items. * Taken together, the overall effect of this abridged sketch is to Moaté the complicated nature of the farm income and comparative welfare oblem. l4 cy demands further developments in our statistics of farmers. .3 3‘"! 'der to help focus thinking upon the data development needs, three . v - ' ' ~.>”pa questions concerning farm population and income are raised below. ‘.‘~ ”3’.“ 1 The first question deals with both the data and our approach to the we ' problem. How adequately do static measurements of population and v -. ’ ".fiacome provide the insights needed for decision-making? These may be 1 it." either public or private decisions aimed at directing problem solutions. . 1' -~ A ‘Public policies that are involved may focus upon the agricultural sector "' {A 91- may require information about agriculture as it contributes to and is a _..“ part of the entire economy. ' $- . Each of the data series discussed in the subsections immediately g O I‘ 5’ preceeding this one might be called time series of the agricultural 1.5 ‘ industry but they are static, cross-section data with respect to the , . . ‘}:' ‘._ induals within agriculture. So far as the individual operators are . . merned there is no necessary relationship between their position in l- 1‘4 " ‘ ’ t .. V. 1. J33: A and year B compared to that of the aggregate agricultural 4. 21 mug-y in these two periods. The data in present use, even though {35 figgugive only'a static image, are essential to the study of United States 7» "culture. The most important elements, however, are the dynamics r ,2 , Vifififi'patterns and processes by which changes come about. Much of . A I '— ...-A--.....___ 15 , arm peoples and between different segments of the farm population. ‘ A real need exists for insights into the reactions and adjustments , fif individuals in the farm economy: To policy measures; stages of the -Hlbusiness cycle; national economic deviations (as wartime); and to the changing relationships in the commercial economy. Aggregate statistics 4 -‘>’- for all of agriculture mask these. An understanding of such individual u adaptations is needed not only for comparisons between farm and nonfarm but among groups of the agricultural industry itself. These insights into the dynamics of change may not only prove supplemental to present welfare comparisons but be of even greater relevance in policy direction. The second broad question is: What is the relevant farm population? An approach to this might be by means. of the concept of classification : . of the population into decision-making systems. One such system can be ' greadily identified in agriculture, although its lower limits can be disputed. ‘ 2" It consists of the farm entrepreneurs responsible for the bulk of commercial ‘ ' I ‘ l ”agricultural production--the commercial farm operators. In a given year . . 1 athis is the most important agricultural group so far as our commercial "-"; t .. - O. economy is concerned, yet, depending upon definitions, they probably _I: .ifetomprise less than one-half of the agricultural population. The central 1., ‘(ture of this group--their commercial contribution- -is an approach that . Mf .1" gore u‘geful for purposes of overall national welfare than the comparative, ustry, welfare approach commonly used in studies of the farm” 3'11, ’Knowledge of individual patterns for this group will also be an understanding of the responses and welfare of commercial l6 ' . _.'\‘ :‘ . Another less well-defined group consists of those who are more I! 1‘ '7. ,1 *‘ jar-operly pa rt of nonfarm. industry, although they have interests in ‘ l ' ' .1 I 1 r ,1 1 t. » , . . . A. :.."agriculture. These are reS1dent1a1 farmers, some part-time farmers, ‘. a, 4‘" and others. One way to define them is by means of their dependence ‘h . I“. r _ ’ upon agriculture as Ducoff has done. 22 Those with more than half of : their realized income from other sources may be part of a nonfarm decision-making system, but not necessarily. Some may, by definition, be part of the commercial agricultural sector even though they receive more income off-farm than from their farming operation. In fact, in '. the complexly interrelated economic and social system of today most ' l -, . people are parts of many decision-making systems. This is complicated, in the case of agriculture, by a nostalgia for the bucolic past and a . p l ' {.2 Sentimental-attachment to the land. Harry Truman, while President, . ,4 . 5:, trwas reported to have listed his occupation as "retired farmer" on occasion. .‘1' " Most of our present farm operator statistics not only include some .‘ I, . ‘ j with their primary economic dependence outside of agriculture, but also ‘ fflxhany others who contribute little to commercial agricultural production 4 .‘ :éven though this is their major source of income. In what decision-system a} fideithese subsistence farms fit? This group lacks representation in . . '1 f; Igg‘ganized farm groups. The Farm Bureau and Grange clearly speak #1:. J. Ducoff, "Classification of the Agricultural Population in " Journal of Farm Economics, Vol. XXXVII (August, 1955), ‘?.L..x"’-“'.L..;_‘. 3 l7 1' ‘ fiprvice to small farmers' problems, its recommendations are in "on . It‘d?” of commercial agriculture. A result is a scarcity of spokesmen _ ‘ [fir low-income farms within such vestiges as remain in Congress of the 3 Farm Bloc. Would it be better to consider such farmers as special 1 problems in welfare, and in economic growth and development rather is than as a part of the agricultural decision-making system? Rural . O t v ., development programs show some progress in this direction, but the II . ' needs for mustering support of agricultural programs will almost (f certainly guarantee pressure to continue consideration of both subsistence a ‘ farmers and part-time farmers as part of the agricultural decision- ( making system. i The third major question concerns the concept of income: What ?. .. does it measure? What is the relevant income to study? ‘ « .. f.‘ 'T- . ’ L- Income is a conglomerate of a number of factors and can be measured ‘. '. i m a. number of different bases. The specific use determines the approach 1 . 7‘ ' 9‘ s A . ‘ a"; 315” is appropriate. Comparisons require that components of income be I i a “ ' . J ‘ “measured, yet these may be constituted differently for different individuals q‘ i.‘ A ' , ., 5' and industries. ‘-<» J . -. L (3: I On an industry basis net money income or value added, may be ‘. ‘2’ vi.- . ' ,“ ,md as a partial measure of the productive contribution of that industry the commercial economy. The economic organization of the industry, ,1, . . j, and relative rates of growth are some of the more important _ \ i v ‘ ‘ implements. Because of these elements, the meaning of net , Q ~ \ . fl. 1 .‘~ v. {we 0" t 1 A. ‘ 7.. l8 1‘: . y income must be interpreted with care as it applies in any given .3f’dtistry case. '! . . . . Ind1v1dua1 1ncomes from a given source reflect something of the industry situation plus individual productivity or what might be more broadly characterized as relative opportunity. Among the items that may cause personal opportunity to vary are location, control of capital, education and personal abilities, soil fertility, distance to population centers, and a wide complex of other social and individual factors. The measurement of all components of income present other special problems in inter-industry comparisons. Money income does not bear the same. relationship to total income in every case. American agriculture, for all the tremendous technological advancement, still views the ' commercial economy as a maiden feels toward her suitor--yielding, yet half afraid! Developing commercialization, transportation, and commun- '7 . ications cause the nonfarm economy to impinge upon the farm economy. Farm living standards have responded to the demonstration effect, ‘demanding large cash incomes for support. Over the recent past output . . . . . 23 per man hour has advanced faster 1n agriculture than in nonfarm 1ndustr1es. Despite this, 45 percent of the retail value of food consumed by rural In Production and Efficiency; (2) U. S. Bureau of Labor Statistics, 7 7 em: and Earnins annual supplements; (3) Board of Governors ,fieral Reserve System, Federal Reserve Bulletin). ‘ ‘N ’- c ‘5 1" t, . “I o.) h.‘ 5 4 \ I Q s o 1“. v |-| iv 19 24 e”- .1 families of two persons or more in 1955 was home produced. hic income from farming, compared to a wage job, and rural values - "2%”.31‘6 still held by many are admitted factors that defy quantification. _ A common experience for one who has assisted farm families with the appraisal of their opportunities in recent years has been a declaration on the part of some families that they planned to farm despite a knowledge of higher dollar incomes available in other industries. United States Department of Agriculture estimates c0nsider some of these factors; 25 they will be mitigated over time, but large problem areas remain. Welfare comparison between farm and nonfarm peoples requires . the use of total incomes. It is thus subject to the difficulty of measuring income components just discussed. Where incomes to the family unit are derived from more than one source, there is also a question of the validity of classifying by a single industry for welfare comparisons. A comparison of money incomes alone encounters fewer difficulties . in measurement but it is not considered valid for welfare comparisons ~ ‘between farm and nonfarm peoples. Can money income be interpreted " in any manner to show relative productivity? Non-money components {rand market imperfections have already been discussed as complications 24U. S. Department of Agriculture, Household Food Consumption ‘ .ve , 71955, Report No.1 (December, 1956), and Report No. 12 Juary, 1958). Average annual food consumption of these families was “id at $1521 at retail. That produced at home had a retail value of {’Speeifically: Value of home produced food and fuel, rental ‘ dwellings, and differences in prices paid. See: Major Statistical etheUSDA” Vol. III, _o____p. cit.,p. 9. i‘ ——v—v'——- five- vr. _ wvv—- ————~— - .— ‘ . WT — v w , 20 ment of money income as the simple sum of the marginal deduct: of management, labor, and capital for agricultural I Aflu 3‘ Insure. Money income does measure the extent of involvement L31 ‘ i'eommercial economy, however. It can thus be used to measure :eontributions to commercial production between individuals in ""' 3.1 industry. Depending upon the factor of market imperfection, stream a measure of the relative commercial contributions of " ”1 13.. indifferent industries. 1; 311‘ 1!” 1r?” ' l" m ' ' 4"1‘. ‘m and ' 1 ," “1‘ ’311151 ~s,v icitn': 7 .musf n. 1... am hitch ‘ .‘cc p0: 24:1. .. CHAPTER II OLD AGE AND SURVIVOR'S INSURANCE DATA OF THE FARM LABOR FORCE-—A QUALITATIVE ANALYSIS It is only rarely that a new data source for the United States farm : labor force becomes available. OASI farm data are totally new in content and character even though derived from the same primal sources as the . Statistics of Income. The privilege of being the first to use these new data carries with it an obligation for blazing an easily visable trail through the labyrinth of detail. Accordingly this chapter is a qualitative treatment. It purports to lay the foundation for an understanding of OASI data of farmers, and to set up guides for their use. An effort has been made to go beyond simple description. The rafiomle of the OASI program and brief historical background is included "I: " . 1%here it is pertinent to understanding and use of OASI data. Implicit A , , definitionsand data characteristics result from the rules and procedures .1" by which the program operates. These provide a framework within which A . '0', the social scientist, who would use OASI data to draw inferences about 1‘ ..,‘l farmers, must work. v" “2"“. ‘ ' . its. Background and Rationale of OASI Farm Data 22 J'391d-a'ge, or death of the breadwinner. Only money income that results from current productive effort--labor and management-—is taken into consideration. Taxes are collected upon this current income to finance benefit payments and resulting records generate statistics of income and employment for the United States' labor force. . Old Age and Survivor's Insurance is administered by the Social Security Administration (a part of the United States Department of Health, Education and Welfare). and by the United States Treasury Department. , .3 '. The Bureau of Old Age and Survivor's Insurance, abbreviated BOASI, in the Social Security Administration keeps the earnings records on which benefits are based, and handles claims for benefit payments. The f ' Internal Revenue Service collects the social security taxes and the 0 - Treasury Department makes the benefit payments due on claims certified by the Social Security Administration. The Social Security Act of 1935 provided for old age insurance with an extension in 1939 adding measures for protection for dependents and survivors of insured workers. Coverage under the program was at first Ilirnited to nonfarm wage earners. This restricted coverage permitted those who were responsible to gain administrative experience at collecting .lfi'ata, maintaining records, and processing claims for benefits using -.‘- ‘ rmation reported by urban employers. These latter were more — J "tensed at maintaining accurate employee rei‘rds, and were thus plthat would be easiest to work with during the difficulties of 7 new program. 23 Preliminary discussions of social security in the 1930's reached a measure of agreement that both farm laborers and self-employed farmers should be included in the program. It was not until 1951, however, that sufficient experience was felt to have been accumulated to justify expanding coverage of OASI to members of the labor force in addition to nonfarm wage earners. Self-employed nonfarm businessmen, hired farm laborers and a number of others were included in 1951. Farm entrepreneurs were not covered by OASI until 1955, and were one of the last large segments to be included. Many self-employed professional occupations were also first covered in 1955 and 1956. The delay in including these was occasioned by an anticipated difficulty in the reporting of earnings by these occupations; obviously self-employed individuals must report for themselves. There were other additional reasons. The farming occupation had long been looked upon as one- offering security in old age. Rural values also were a factor; studies of farmers‘ attitudes as recently as the early 1950's showed some who were unwilling to admit that a factory workers' program (OASI) would also work for farmers. 1 These same studies also indicated a substantial number who would be unable to meet retirement needs; and, above-mentioned values to the contrary, the majority looked favorably upon extension of OASI ,IW. E. Adkins, and J. R. Motheral, The Farmer Looks at His Economic Security, Texas Agriculture Experiment Station Bulletin 774 {College Station, Texas, 1954); and R. E. Galloway, Farmers' Plans ~rEconomic Security in Old Age, Ky. Exp. Station Bulletin 626 ' __,_xington, Ky., 1955). 24 to them. 2 Findings of these studies were influential in the decision to include farm entrepreneurs in 1955. In a strict sense OASI may not be regarded as covering certain occupational groups; rather, the relevant concept is that of covered employment. Anyone receiving income from employment defined as covered, receives credits under OASI depending upon the way that their income conforms to the specifications of the program. An important part of the concept of eligibility under OASI, in addition to the kind of employment, is the extent and continuity of involvement as a member of the labor force. This is justified on the grounds that individuals who only work a small amount of time--as a high school youth on an occasional Saturday--are not dependent upon the given income source for a livelihood. Hence they do not have an income to be maintained. For this reason minimums of days worked and/or dollars received are set up as a condition for being considered in the labor force by OASI. Eligibility to receive benefits is a function of time and continuity in the labor force, as determined by quarters of coverage. The limits and their rationale are discussed in detail in the next section. 2Ibid; also: I. M. Baill, The Farmer and Old—Age Security: A Summa-r—y—‘Analysis of Four Studies, 1951-54, Agriculture Information Bulletin 151 (Washington: U. S. Government Printing Office, 1955); W. C. McKain, E. D. Baldwin, and L. J. Ducoff, Old Age and Retire- ment in Rural Connecticut, Storrs Agriculture Experiment Station Bulletin 299 (Storrs, Conn., 1953); and W. H. Sewell, C. E. Ramsey, and L. J. Ducoff, Farmers' Conceptions and Plans for Economic . ~ ‘Sécurit in Old A-e, Wisc. Agriculture Experiment Station Bulletin 25 the income to farm entrepreneurs from capital gains and investments. These come about, partly, because the income tax reporting system is need as the means of collecting OASI taxes for self-employed individuals. This attachment to an already going collection system was a matter of administrative practicality. Thus the definitions employed by the Internal Revenue Service for income tax purposes carry over to OASI. Profits from real estate sales clearly do not fit into the OASI concept of current income; they are reported separately under income tax rules and not counted as farm income. At this point the concepts agree. The Internal Revenue Service also separates, as capital gains, income from the sale of livestock kept for dairy, breeding or draft purposes. This is a much less clear-cut case than that of sales from real estate or securities. From most views income from the sale of a cull dairy cow or beef brood cow that had been raised on the same farm represents production and should count toward OASI. Unfortunately a workable reporting system demands standardized treatment that is almost certain to~yield some injustices. Problems of a somewhat similar nature attend the treatment of income from investment. Rental income or the interest from bonds -‘R ' , gl‘ftheoretically continues in terms of disability or even death. Hence there r 26 , ‘11 'ered income for purposes of OASI. However, self-employed I". 135,- 3 _ _ _ _ . , ”Qindiwduals receive income that is a compos1te of returns to labor, Lentrepreneural ability and equity in their business. The proportions ‘ - ‘ vary for each individual, with no simple way to separate the return to investment in the business from others. Thus a farm operator may receive some coverage credits from investment, while an individual receiving wage or salary income plus returns from investment in property in the form of interest, dividends, or rents could count only the wages or salary toward his OASI. A defense of the inclusion of 1 return to equity in an owner—operated business may be made on the grounds that this income is more closely bound up with management abilityiand industriousness than that from other kinds of investment. Again, the overriding consideration is the practical problem of a reporting system. Definitions This section is logically a part of the discussion of background and rationale. Its purpose is to bring together in one place terms used 11‘ L in the discussion of OASI data of farmers that may not be generally ~i“- ". ‘ F' t I ‘“ “\f—Junderstood. A distinct separation from other sections permits easier .1 , '13 ..‘ .-, " ‘~"I¢catibn for reference by the reader. Coverage is used here to indicate income in a given year and/ or . “J . m” '4 n.\'- -... 3s. given source. It always means that there was enough of the right ’5‘}? 1" 'ceme reported to qualify as counting toward OASI benefits. 27 ’4 \t‘ 3Coverage Credits are the amounts of income earned at covered fioyment to be taken into account in calculating benefits to an .- ‘ V"igniividual under the OASI program. Since the intent of OASI is to _ replace only part of the income that may be lost, an upper limit was ,_ placed on earnings credits in a given year, except in 1937-39 when the limit was $3, 000 per employer. In 1940-50 a maximum of $3, 000 of the income from all covered sources combined could be credited to the account of any individual in one year. This was raised to $3, 600 in .1951 and to $4, 200 in 1955. There were also minimums to the amounts that could be credited to an individual OASI account. These are dis- cussed under Covered Employment and Quarter of Coverage. I) Covered Employment is employment in which credit may be W." . earned to qualify an individual for benefits under OASI. The definition ‘3. ’1 ispecifies kinds of employment and the minimum income that must be earned in a given time period. Minimums differed in 1955 among kinds of covered employment, largely because of compromises resulting from collection problems. . Because of the generally adequate bookkeeping and clerical services I. 4‘"- . maintained by nonfarm employers, wage earners in these industries , , , ' ‘ e u n '1"‘.y:c_~ould receive a quarter of coverage credit by earning $50 from one or J .i snore nonfarm employers during a calendar quarter. A compromise was ) ’uu’. 28 ' ‘employer to be considered as working at covered employment but they were not restricted to a given part of the year and could earn four quarters of coverage in a single calendar quarter. As a compensating feature, it was necessary for them to have twice the amount of earnings required of nonfarm wage earners for each quarter of coverage. Farm hired werkers could receive credit for one quarter of coverage if they had $100 from one employer in a calendar year and up to, but not over, four quarters if they earned $400 or more. The nature of self employment income made impractical an accounting by calendar quarters. They received coverage from self-employment income without regard to time of receipt during the year, but unlike wage earners they were required to be involved in their self-employment at least to the extent of receiving a year's coverage credit. They received four quarters of coverage for a net self-employment income of $400 or more. but none at all if net income was under $400. There was an exception in the case of self-employed farmers, they could report one- half of a gross income between $800 and $1800 in lieu of net. These minimums for farm entrepreneurs eliminate large numbers sometimes defined as farm operators. Farmers having above these minimum money " . ",‘incomes from farming may be regarded as the group who contribute ; I ‘ g. H ,3 t: p- . H (D B O :5 r? e H ‘3 O O :3 (D f? p. D O O 8 (D H H O B U! ('D p—I M l m B "U 1..- O ‘4 B (D b H I” ff 5? i a. on —. {2 “A; .,L .;'5| ”partly the result of a scientific inquiry into what constitutes I 29 J'gnificant involvement in and dependence upon farming as a source of income. It is actually a compromise between attempts of the Internal Revenue Service to set a high minimum, the Social Security Administration to set it low, and whatever additional considerations may have prevailed upon legislators. As a matter of practicality the collection of the tax was taken over by an already operating system available through the Internal Revenue Service. To avoid an added strain on their facilities the Internal Revenue Service was interested in keeping the minimums for OASI as near as possible to the $600 minimum income required for income tax reporting. The Social Security Administration, having a stronger welfare orientation, wished to include as many people as practicable in the OASI program. Hence they wanted the minimums lower. Earnings Credits, see coverage credits. Kind of Coverage refers to the nature of the employment from which coverage credits were received. The data used in this study reported four basic types: (1) farm self-employment, (2) nonfarm self- employment, (3) farm wage and/ or salary (referred to in the text as farm 'wages), and (4) nonfarm wage and/ or salary (referred to in the text as nonfarm wages). Combinations of these are discussed in the section treating classification of the sample by employment. Optional Reporting Method is allowed to farm operators only. In . 23955 it permitted them to report 50 percent of gross income as their net m1 30 above $800. The maximum "net" that could be reported by this method in 1955 was one-half of $1, 800 or $900. This was actually a concession to the bookkeeping problems of small farmers, and to the year to year variability of farm net income. It was felt that smaller farmers would accept the reporting requirement better if only gross income needed to be calculated. The determination of net as one-half of gross income originated from farm statistics that showed this to be approximately the ratio of net to gross in 1955. A change in the optional reporting method for 1956 illustrates the manner in which considerations, other than precise economic relation- ships, may enter into a system such as that of the OASI. Although the trend was for net to become a smaller proportion of gross, Congress changed the law to allow farmers to report two-thirds of their gross income as the net for OASI purposes. This was largely the result of a desire on the part of legislators to ”do something for the farmers. " A little-advertised feature of the optional reporting method is that farmers might "option out" as well as ”option in. " This was possible for those having $400 or more net income from farming but less than $800 gross income. Quarter of Coverage is any calendar quarter in which $50 in wages was earned at covered nonfarm employment in 1955. In farm wage employ- ment one quarter's coverage is credited for each $100 earned from one employer at any time during the year, except that not over four quarters can be earned in one calendar year. Anyone having only self-employment 31 earnings either receives a full four quarters per year or none depending upon whether or not they receive the minimum income required-- $400 per year. Quarters of coverage are an indication of the degree of continuity of employment and the extent of involvement in the labor force. BOASI uses them to determine eligibility for benefits; individuals are required to have had coverage in six of the last thirteen quarters or a total of at least forty quarters of coverage. Taxable Earnings include income up to the maximums stated for coverage credits from any one employer earned in covered employment. Since each nonfarm employer is required to report and pay taxes quarterly on wages or salary earned from him up to these limits, total taxable earnings may exceed the stated limits if an individual draws wages and salaries from more than one employer during the year. Where income is from self-employment only, limits will not be exceeded since self-employment income is reported to the Internal Revenue Service at the end of the year, and the total year's income from all sources is known at the time of reporting. Neither will taxable earnings be above the maximum for coverage credits in cases where there is income both from self-employment and wages and salaries but where wage and salary income totals less than the top limits. If covered wage and salary income totaled $3,6001n 1951-54 or $4,2001n 1955, there would have been no indi- cation t0 the BOASI of self-employment, even though this may have been an important source of income in addition to wages. In some instances 32 taxable earnings are reported to the BOASI but do not total the minimums for covered employment. This results in the individual appearing in the data as employed but not having a quarter of credit for the given year. Total Earnings include all income from all sources whether covered employment or other origin. Sources of OASI Data Both fixed and varying data for each individual are maintained in OASI records. The first source of OASI data and the principal source of that which is "fixed" arises from the application for an identifying social security number. Each individual must have such a number assigned before earnings can be credited to him. Items recorded here are sex, race, date and place of birth, parents' names, and place of issue of the number. "Varying" data include those items of information that may change from year to year throughout the individual's work history. The most important of these for research purposes are earnings, and kind, place, and pattern of employment. Sources of Varying Data for Wage Earners. --Quarterly reports are filed with the Collector of Internal Revenue by all nonfarm employers listing employees, their taxable incomes, and the industry in which they work. Farm employers report on an annual basis. This is forwarded by Internal Revenue Service to BOASI and thus becomes almost the sole 33 source of varying data for wage earners who have not applied for OASI benefits. These reports are supplemented by employer information obtained at the time he applies for an employer identifying number. In this application the employer gives the nature of his business, number of employees, and type of organization, e. g. , individual proprietorship, partnership, or corporation. If operating in more than one place, the nature of the business in each location is given. While this information may be fixed for a given employer, it is variable for an employee to the extent of his mobility from job to job. Each year these data are recorded separately for each employer with whom an individual had covered employment. These detailed employer-employee records are not utilized in this study but are expected to be available later. Sources of Varying Data for Self Employed Persons. "Varying data for self-employed persons originate with their report of income tax and OASI tax due to the Internal Revenue Service. Individuals, whose only self-employment income was from farming, reported on schedule 1040F. Attached to $1040F was a tear sheet, summarizing information pertinent to OASI, that was forwarded to the BOASI by the Internal Revenue Service. Persons having nonfarm self-employment reported all income from self- employment on schedule C. This form also has a tear sheet that is for- warded to the BOASI. In addition to reporting the amount of income, the tear sheet on schedule C asks the taxpayer to indicate the type of business. 34 His answer to this question determines his classification as to industry and whether he has farm self-employment income; for example, an answer might be: ”Retail grocery and farming. " Should farming be unimportant relatively, it could conceivably be omitted by the taxpayer from the description of type of business. Reporting of Income from Both Waies and Self—Employment. ~- Should an individual have income from both wages and self-employment, the wage income up to $4, 200 was counted first as earnings credits toward OASI benefits. Self-employment income is considered only after all wage income received from covered employment. This results from the fact that employers are responsible for reporting and paying all the OASI tax of wage earners. 3 The wage earner makes his individual report to the Internal Revenue Service, using as a partial basis a report of wages earned and taxes withheld that is supplied him by his employer. A report of self-employment earnings is added for which the individual alone is responsible and these, with other income liable to income taxes, make up his report of total income taxable by the Internal Revenue Service. Application for Retirement Benefits. --These are another source of OASI data. No use is made of this source in the current study but it 3One-half the OASI tax is withheld from wages and one-half is paid by the employer, but the employer is responsible for withholding, reporting and paying the entire OASI tax on his payroll. 35 will be increasingly important in securing the complete work history of individuals covered by OASI. . . 4 The Continuous Work History Sample As already noted in the introductory chapter, a one percent sample of that part of the 1955 labor force receiving self-employment income from farming or wages and salaries from farm work was used in this study. This is actually part of a permanent one-percent sample of all individuals, who are issued social security numbers, that is maintained by the Social Security Administration and that is referred to as the Continuous Work History Sample. Its purpose is to provide statistical information to the United States Department of Health, Education and Welfare for use in guiding social security programs. The same individuals remain in the sample continuously and may be identified from one year to the next. This gives the Continuous Work History Sample the characteristics of a continuous register. Its value is thereby greatly enhanced for many types of social science research. 4B. J. Mandel, The Continuous Work History Sample Under Old Age and Survivor's Insurance in the USA, A paper presented at the First International Conference of Social Security Actuaries and Statisticians, Brussels (Rome: Societa Grafica Romana, November, 1956); and B. J. Mandel, "Sampling the Federal Old-Age and Survivor's Insurance Records, Journal of the American Statistical Association, Vol. XLVIII (September, 1953), pp. 462-475. 5Donald J. Bogue, A Methodological Study of Migration and Labor Mobility in Michigan and Ohio in 1947, Scripps Foundation Studies in Population Distribution, No. 4 (Oxford Ohio: Scripps Foundation for Re- search in Population Problems, June, 1952), shows that mobility within a single year can be studied as well as between years. Such an intra-year study can only be made for nonfarm employment. 36 Whether or not an individual is a part of the Continuous Work History Sample depends solely upon the number that is issued to him when he applies for an identifying social security number. Once in, an individual remains a part of the sample throughout his life with further additions accruing to the sample as more numbers are issued. The account number contains nine digits arranged in three groups as follows: 000 00 0000 Geographic area A group or sequence The serial number. of issuance (identifies that can be issued in any 10, 000 numbers can be states). area. issued for each group in any area. Selection of the Continuous Work History Sample is through a process making use of the "serial, " or sixth to ninth digits, of the account number. Only numbers in the 2000 and 7000 blocks of the serial are used. 6 This produces a 20 percent sample that is reduced further to 1 percent of the total population by the selection of certain digits within these blocks. Numbers issued to district offices for assignment to new applicants are controlled by the central headquarters at Baltimore to ensure each applicant an equal chance of being included in the sample. This procedure, then, produces a sample that is stratified by area and then selected in two stages. Posting of earnings to accounts is organized to be carried on throughout the year. The 2000 and 7000 blocks have their earnings posted for a calendar year and are thus used for the Continuous Work History Sample. Other blocks of the serial are divided into 3 groups, each having earnings posted for a four-quarter period but including parts of two calendar years. 37 The actual universe of the Continuous Work History Sample consists of social security account numbers. These numbers represent members of the labor force and it is this latter that constitutes the real universe of interest. Specific Information Available The information on the punch cards that were used for this study is shown in the list at the end of this section. This included all per- tinent information available from the continuous work history records, for the period 1937 to 1955. There is additional 1955 information available for those who had wage employment. This is contained in employer-employee cards and gives, among other items, type and locations of industries in which the individuals worked during a given year. This is not recorded as a part of the continuous work history and was not used. An example of its use is given by Bogue. It was possible to put together various combinations of the infor- mation because of the versatility of punch card procedure. Also some added information was obtained, e. g. , wage income could be found by subtracting self-employment earnings from taxable earnings. Some items were included that later proved of little value. This was the case for items 15, 16 and 17 on the list. It is conceivable that these may be more useful in the future when a wider span of lifetimes will be available from the data. 7 . Bogue, op. c1t. Items of Information from Continuous Work History Records Contained in the Punch Card Used for Study of OASI Farm Data. -- . . Number of Columns Item and Descr1pt1on Used 1. Account number 9 2. Year of birth (first digit omitted) 3 3. Sex indication--male, female 1 4. Race indication--Negro, other than Negro l 5. Coverage indication for 1955 4 This includes: Nonfarm self-employment (abbreviated SEF) Nonfarm wage and/ or salary employment (abbreviated WSO) Farm wage and/or salary employment (abbreviated WSF) 6. Coverage indication for each year 1951-1954. 4 Indicated whether coverage was from self- employment, wages and salary, or com- binations of these. 7. Taxable earnings each year of 1951-55 (tens of dollars) 15 8. Self-employment taxable income each year of 15 1951-55 (tens of dollars) 9. Cumulative earnings credits (1937-1955 (tens of 5 dollars) 10. First year employed 2 11. Number of years employed during 1937-55 2 12. Pattern of years employed during 1950-55 (an 2 additive code) 13. Number of quarters of coverage each year of 1951-55 5 39 Item and Description Number Of COIumnS Used 14. Indication of continuous or intermittent 1 employment since first year of employment 15. Insurance status-~indicates whether or not in- 1 sured and status of entitlement for insurance benefits 16. Benefit states--indicates benefits received 1 17. Year of entitlement or death 2 Some spaces of the card were left blank intentionally to receive special punches for use in sorting. Those used were: 1. Employment combinations or groups. 2. 1955 taxable earnings. 3. i 1955 age. The various pertinent characteristics of these items of information are discussed throughout the balance of this study. Classification by Employment An important hypothesis was that interrelationships between farm and nonfarm incomes could be studied to advantage using OASI data. This made it important to classify the population according to their kinds of employment. The 1955 coverage indication made this possible by showing four basic types of employment. For self-employed farmers this can be expanded into eight groups by considering all possible combinations. .-e no 1‘. 40 The group having coverage only from farm operations in 1955 was further subdivided into those with previous coverage and those without previous coverage. This was a significant subclassification, since any coverage received prior to 1955 would have been from off-farm employment. Combinations of Present and Past Employment for Persons Reportingas Farm Operators to the BOASI in 1955.--The numbers and symbols used to represent the nine groups of self-employed farmers are given below: GroupNo. Abbreviation Description 1. SEF Received income from farm self-employment only. No coverage prior to 1955. 2. SEF-PC Received income from farm self-employment only but had been employed at covered employ- ment in prior years. Such prior employment would necessarily be off-farm since income from farm self-employment was not covered prior to 1955. 3. SEF, SEO Received income from farm self-employment and from other self—employment in 1955. 4. SEF, WSO Received income from farm self-employment and from nonfarm wages and/ or salaries. 5. SEF, WSF Received income from farm self-employment and from farm wages and/or salaries. 8In the 1955 data there were a large number of factors that could operate to distort a classification of farm operators by past or present off-farm employment. Among these were: kinds of employment not covered (mainly Civil Service, railroad employment and some self-employed professionals), minimums required for coverage, reporting problems, and length of time that the program has operated (some may have worked off- farm prior to 1937). 41 Group No. Abbreviation Description 6. SEF, SEO, Received income from farm self-employment WSO and nonfarm wages and/ or salaries from farm self-employment plus other self-employment. 7. SEF, SEO Received income from farm self-employment WSF plus other self-employment and farm wages and/ or salaries. 8. SEF, WSF, Received income from farm self-employment WSO plus wages and/ or salaries from both farm and nonfarm sources. 9. SEF, SEO, Received income from self-employment both WSF, WSO at farming and other business plus wages and/ or salaries from both farm and nonfarm sources. Combination of Employment for Persons Reporting as Hired Farm Workers, Without Self-employment Farm Income, to the BOASI in 1955.-- Although statistics of hired workers, who were not also farm operators, are only used as total figures in this study, a breakdown by 1955 income that was consistent with the classification of farm operators was made. A subdivision comparable to that of farm operators with only farm income into those with and without prior coverage was not made. There was a group with only coverage from farm wages, but since farm wages were also covered prior to 1955 a subdivision of this group according to prior coverage would not have the same implications as it had for the operator group in 1955. Employment groups of hired workers are as follows: Group No. Abbreviation Description 10. WSF Received income from farm wages and/or salaries only. 11. WSF, WSO Received taxable income from both farm and nonfarm wages and/ or salaries. 42 Group No. Abbreviation Description 12. WSF, SEO Received taxable income from farm wages and/or salaries plus from nonfarm self-employment. l3. WSF, WSO, Received taxable income from both farm and SEO nonfarm wages and/ or salaries plus nonfarm self-employment. Basic data for both farm operators and hired farm workers, by employment groups are included in Appendix B. Factors Affecting the Farm Data Obtained from the One-Percent Continuous Work History Sample of the Old Age and Survivor's Insurance Program As is the case with all statistics, data obtained from the Continuous Work History Sample of the OASI program have certain inherent features. These must be assessed before generalizations are made from the data. This section specifies the more important of these factors. Factors Related to Program Administration. --Many of the distortions related to administration will be mitigated with the passage of time and the accumulation of administrative experience, for example, about 3 percent of the participants in OASI have had multiple account numbers. By 1951 this was reported to have been reduced to . 3 percent. 9 Possibly a number of self-employed farmers, who had been previously assigned a number, reapplied in 1955. This would distort the study of previous work histories 9B. J. Mandel, The Continuous Work History Sample Under OASI in the USA, op. cit., p. 18. 43 of farmers, but no means for measuring the distortion are available. Reporting difficulties--late reports, accuracy of reports and reporting failure-~are other administrative problems. These may also be expected to be reduced over time. Reporting irregularities are thought to be of relatively greater consequence in the case of the farm population than for nonfarm workers. The industrial employer is well equipped to maintain records and accustomed to reporting. This is less true for farm employers. Self-employed farmers report their own incomes and substantial numbers of these are unfamiliar with income tax reporting and are poorly equipped with knowledge of OASI.10 Later sections treat these problems in greater detail. Limitations Due to Sampling. --Since a sample is used, rather than the entire universe of OASI numbers having earnings credits, it is necessary to reckon with sampling variability. Note has already been taken of the fact that the sample is stratified by area, this is expected to reduce sampling variability. The procedure of using only blocks of the serial part of the OASI number may give an effect somewhat different from random samples. Pending results of investigation on the part of BOASI of the variation resulting from such sampling procedure, the data are treated as though the sampling variations are the same as would be expected in random samples. A guide to the probable sampling error is contained in Appendix A. 10.1. R. Christiansen, C. M. Coughenour, L. J. Ducoff and A. L. Coleman, Social Security and the Farmer in Kentucky, Ky. Agri. Exp. Sta. Bul. 654 (Lexington, Ky.: January, 1958). 44 Farmers Defined on the Basis of Money Income. —-Problems inherent in the use of Census enumerations of farm workers or farm population are brought into bold relief when a special statistical source as that of OASI is used. Any numbers count must have its own explicit and implicit definitions. Hence a data set may have limited value in a given use without regard to its reliability. The universe of the sample of OASI farm data consists of those receiving money income whether as self—employed farmers or hired workers. It is not a measure of the entire farm population as this term is commonly used. Nor are all those with money income included. Minimum income limits for coverage in a given type of employment exist; these further reduce the OASI farm group. Comparison of OASI and Census of Agriculture Definitions of Farm Operators as These Affect Numbers in the Respective Operator Populations.-- The most important factor causing numbers of farm operators to vary between these two data sources is in the lower limits of their farm operator definitions. In 1954 an individual could have been considered a farm operator by the Census if he had as little as three acres of land or produced $150 worth of agricultural commodities. These commodities need not have been sold. In 1955 OASI required $400 net income or $800 gross sales of agricultural commodities. There was also a restriction in items that could be counted as agricultural income under OASI that further widened the difference in numbers between the two. 45 Another difference between the Census of Agriculture and OASI data of self-employed farmers is in the number of operators per farm. The Census of Agriculture defined a farm as described, in part, above. The number of Census operators is determined by identifying one person, and only one, with each farm. In this way there are exactly the same number of operators as farms. Since OASI data are on a "per-income- receiver" basis of self-employment income from farming, the number of farm units has no relevance. In a large majority of situations the two will indicate the same individuals as operators. In other cases OASI may designate a number of individuals who are attached to a single farm as farm operators, while the Census of Agriculture selects only one. Multiple operators are considered most likely in two types of circum- stances: (l) where there are adult partners of various kinds;11(2) where there are minor children on the farm who have a project, as with FFA, 4-H, or independently and from which they derive substantial self- employment income. For larger farms the differences in definitions would be expected to increase the OASI farm operator population compared to that of the Census. It is possible, for smaller farms, that the splitting of income could result in putting all operators on a farm below OASI limits and hence reduce the operator population as defined by OASI. 11Some of these may be related as brothers, or father and son. Others may consist of an owner as a non-operating partner who shares the decision-making function with the individual doing the farm work. Some are hired managers sharing in profits. 46 Differences in Territory Covered. --The 1954 Census of Agriculture statistics apply only to the 48 states of continental United States. 12 OASI data include all territories and possessions of the United States. This is another difference requiring correction in order to have strict numerical comparability. The sole location indication in the data used is that from the OASI number. This only tells place of issue and its accuracy as an indication of present location is certain to have been impaired by worker mobility. It was used, since it was the best available. 13 The general rule followed is to use only OASI data from the continental United States when direct comparisons of operator numbers are made with the Census of Agriculture as in Chapter IV, but to use OASI data from all areas when special characteristics are studied as in Chapters III and VI. The Entire Farm Labor Force. --The entire farm labor force is customarily thought of as including farm hired laborers and unpaid family laborers as well as farm operators. Anyone receiving farm wages as of a given date is regarded as a member of the hired farm labor force according to most practices. This fails to count the total number who were in the farm wage force throughout 2Except for a special report: U. S. Bureau of the Census, Census of Agriculture: (1954), Vol. III, Special Reports, part 3, Alaska, Hawaii, Puerto Rico, District of Columbia and U. S. Possessions (September, 1956). 13The location problem appears temporary. In 1957 OASI data indicated the location of the farm on which self-employment farm income was earned. 47 the year, because of mobility of workers. OASI, by contrast, considers all having farm wages at any time in the year, as long as they received $100 or more from one employer in 1955. The first of these factors tends to cause the OASI hired farm worker population to be more comprehensive relative to both Census Bureau and Agricultural Marketing Service data, the other restricts it. OASI farm data may be represented as seriously understating the labor force in agriculture because all farm income is often attributed to the family head and unpaid family laborers are not counted. By the more traditional approaches this is true. There are, however, some offsetting factors that should be considered. One is that there is not the clear-cut distinction between the farm business and the home that exists in most other industries. The wife may sometimes work in the fields and do chores, but how much time does the husband spend working in the garden, on the dwelling, in trips to town for groceries, in preparation of food and fuel and in other activities for which he would not have received pay in a commercial situation? Similarly children may work on the farm, but often the limitation is capital and managerial skill rather than simply labor. There is no knowledge of careful inquiries into the added pro- duction resulting from the added manpower--yet this is crucial to the entire unpaid family labor accounting problem. Does the "old man" simply loaf while the boys are working? In a commercial agricultural area, older sons may be counted by OASI since they often develop paying projects of their own. Unpaid 48 family laborers will not be counted by OASI on low income or subsistence farms but these are not producing so far as the commercial economy is concerned. These arguments are not to deny that there are cases of substantial production resulting from unpaid family labor. The purpose is to raise a question as to the real meaning of present enumerations of unpaid family labor. What is their significance in terms of measuring human resources in agriculture ? Distortions to Numbers of OASI Farm Operators Because of Special M' --If the definition of farm operators implied by the lower limits of the OASI--$400 net from self-employment or $800 gross--is accepted, there still remains some distortion of numbers. One of these is the loss. from the OASI farm operator population of individuals having total wage incomes of $4, 200 or more in 1955. This occurs because income from self-employment is reported after wage income. Self-employment income is not recorded by OASI if income from other covered employment exceeds the maximum taxable earnings allowable under the program. The optional reporting method resulted in some individuals being included on the basis of their gross incomes who had insufficient net incomes to qualify. It was also possible for those having a net of over $400 but less than $800 gross income to ”option out" and avoid paying the tax. They would not appear in the OASI farm operator population. 49 In one set of conditions OASI may include as farm operators, individuals with less than either $400 net from farming or $800 gross value of sales. Farm operators, who also have other self-employment income, may add self-employment net income from all covered sources together to attain the $400 minimum. They were also permitted to use the optional method of reporting one-half of gross, even though gross was under $800, if this was added to other self-employment incomes. The data do not permit a separation of farm and nonfarm self-employment income, so estimates of the effect of this factor must rely on other means. OASI Income Data of the Farm Population. --OASI income data includes only money income from current labor, entrepreneural or professional effort. It thus is a measure of the extent to which members of the work force are currently contributing to the commercial economy. This is a relevant concept inhstudies of commercial production and of the human resources involved in this production. Most studies of farm personal income have had as a major purpose the comparison of real incomes between farmers and non-farmers. OASI data would need to be heavily supplemented if used for this purpose. Important items of money income excluded from OASI farm data because it considers only return to current productive effort are those from capital gains, interest, dividends, rents, annuities, retirement pay, and transfer payments. Some kinds of farm income are excluded such as farm rental income, and sales of breeding, dairy, and draft 50 livestock. These are required to be handled as sales of capital items. There are still other factors that may modify both an income distribution and an income average. These are: (1) the fact that OASI does not take into account income above $4, 200, (Z) the optional reporting procedure, (3) types of employment not covered in 1955, (4) income in amounts too small to qualify as covered employment. The above, plus the problem of non-money income to farmers, pose formidable limitations in the use of OASI data for welfare comparisons. Even within agriculture itself, direct welfare comparisons based upon OASI income figures might be subject to question. These doubts arise because of expected variations in the components of excluded income between groups, e. g. , subsistence farmers have a larger proportion of their income in non-money form; residential farmers average relatively large retirement payments. For income types that are included, an income distribution derived from OASI is regarded as more accurate than others available. OASI data originate from actual records to the extent that farmers' income tax reports are so based. In this respect it enjoys a distinct advantage over most income statistics of farmers currently in use, since the latter are derived from surveys depending upon recall. The range is truncated on the upper end by the $4, 200 limit, and the distribution is probably Mainly self-employed professionals as lawyers, dentists, optometrists, chiropractors, osteopaths, naturopaths, veterinarians, doctors of medicine, plus railroad employment, and Civil Service Employees. 51 biased upward below $900 by the optional reporting feature. Where off- farm income is a factor, optional reporting may effect income throughout the range from $400 to $4, 200, but this affect is not regarded as large. This suggests that there is a wide range for certain kinds of income that is reliably reported in OASI data. Distortions in income-age relationships are produced by the recent extension of OASI to farmers and provisions for retirement with minimum years of coverage by older people. Individuals who are a number of years from retirement are likely to look upon the tax assessed by the program as an added cost to be reduced as much as possible or avoided altogether. Those in the age group with prospects of early returns from the program are more likely to report as much taxable income as possible--in some cases even altering their business to produce more income--in order to qualify for larger benefits. Expected results of such differences in viewpoint would be the reporting of relatively larger incomes by the "over 60" age group. It could conceivably result in a disproportionate representation of those ”over 60" in the OASI farm operator population. In any event, this is a temporary distortion that should be mitigated as the program matures. Time of Availability Annual collection of OASI statistics is thought to enhance its usefulness. At least part of the value of this feature depends upon how promptly data from this source can be made available. 52 Punch cards used in this study from the year 1955 were not avail- able for research purposes until the spring of 1959. There were certain extenuating circumstances not expected to recur: This was a new program, and BOASI was involved in shifting over to a different system of record keeping. Perhaps a better indicator is the appearance of Farm Coverage Statistics 1955 by the Bureau of Old Age and Survivor's Insurance in November, 1957. This was only 19 months after the deadline for filing income tax returns for the year 1955 to the Internal Revenue Service. Factors that will determine time of availability are: Completeness desired in the data, i. e. , the cutoff date of the data; the processing timetable of the Internal Revenue Service and the Bureau of Old Age and Survivor's Insurance, and programming by whatever agency tabulates the data. It is too early to assess these properly, at the present time. Anticipated Future Changes It is already possible to predict changes in OASI farm data between 1955 and subsequent years. These will come about due to statutory changes in the laws governing OASI and to the manner in which people react to the program. Statutory changes already on the books include: (1) a change in the optional reporting procedure for farmers; two-thirds of gross in- come within a range may be reported instead of only one-half. This 53 became effective in 1956 and will operate to include more of the lower income farmers. (2) "Materially participating" farm landlords could be covered in 1956. The operation did not have to be a bona fide partnership as was true in 1955. (3) There was an expansion in coverage of self- employed professional workers in 1956. (4) The maximum covered income was increased to $4, 800 in 1959. (5) The minimum income for farm workers from one employer was increased to $150 per year in 1957; or alternatively they might qualify with 20 days of farm work for one employer. The effect of all of these, except the last, is to enlarge the number of those who will be included as the farm population. There is an advantage in greater inclusiveness, but year to year comparability is rendered more difficult. Changes resulting from reaction of people to OASI will come about mainly: (1) because of growing knowledge concerning reporting on the part of many who failed to report in 1955; (2) by reduction of temporary distortions brought about in initiating a new program. Among these are the age-income distortion suggested in the previous section. A preliminary report suggested that large numbers of older farmers were dropping out of OASI in 1957, having met the special requirements to receive retirement benefits. After some maturity has developed for the OASI program, changes of this nature might be expected to be less abrupt. At the present stage they will need to be kept under careful surveillance. 54 Summary The Continuous Work History Sample of OASI data provides a sampling of major segments of the labor force and measures their contributions to the commercial economy from labor, and entrepreneural or professional services. OASI has now been expanded to cover nearly all major forms of employment but does not include those who are not significantly involved in the given form of employment. This exclusion may be interpreted as resulting in the inclusion in OASI data of only those who contribute significantly to the commercial economy. In addition to data showing sex, age, and race for each individual, OASI furnishes statistics on kinds of employment and income. A unique feature is that income and employment data are potentially available for the entire working history of each individual, subject to limits of what is included. Omissions and distortions in OASI data apparently limit their usefulness in making direct welfare comparisons. They do measure, within limits, the money income of an individual from participation in current production in the economy. ‘55 CHAPTER III A COMPARISON OF OASI FARM OPERATOR DATA WITH STATISTICS FROM OTHER SOURCES: AGE, RACE, AND LOCATION This chapter continues the definitive treatment of OASI farm operator data begun in Chapter II. Quantitative comparisons are begun here with commonly used data sources; principally those of the Census of Agriculture, the Current Population Survey, and estimates made by the Agricultural Marketing Service.1 General familiarity with statistics from these sources makes it possible to use them as standards of comparison. It is not intended, at this point, to set up OASI data as the means to a rival quantitative estimate of the various farm population characteristics; rather, comparison provides the most direct means to an accurate evaluation. Age, race, and location characteristics are considered in this chapter to the extent that they contribute insights into the nature of OASI farm operator data. This quantitative analysis is continued in the two following chapters with an examination of the total number of farm operators and their income. Age Only the Census of Agriculture provides a distribution of farm operators by age. This is compared with that of the OASI farm operator l , . . . . . Agricultural Marketing SerVice, Farm Income Situation, issued four times yearly. This contains estimates of income to the farm population. 56 population in Table III-1. Average ages will be observed as close-- . 4 of a year difference. Also, the two distributions are not widely different, with that of the OASI somewhat flatter and exhibiting a slight bi-modality. TABLE III-1. Percentage distribution of OASI and 1954 Census of Agriculture farm operators, by age Census of OASI farm Age group , a b (years) Agriculture operators (‘70) ("70) Under 25 1. 9 2.. 7 25 - 34 13. 2 14. l 35 - 44 23. 4 21. 3 45 - 54 24. 6 21. l 55 - 64 20. 3 22. 6 65 and over 16. 6 18. 2 Total 100. 0 100. 0 Number in category (1000's)C 4,695. 6 l, 887. 8 Mean age (years) 49. 6 50. 0 aSource: U. S. Bureau of the Census, Census of Agriculture: 1954, Vol. II, Chapter 2 (1956). This includes all classed as operators by the Census of Agriculture, who reported their age in a total enumeration. bSource: A tabulation of 1955 data from the Continuous Work History Sample supplied by BOASI. It included all with known ages who received covered income from farm self-employment. c:Census figures include only the 48 states of continental USA. OASI figures include in addition those from Alaska, Hawaii and all other territories but these are only . 6% of the total number. 57 Distribution by age is often a distinctive feature of a given population. The close similarity observed here might lead one to the conclusion that OASI data are a random sample of that of the Census of Agriculture. This conclusion will be shown untenable in succeeding sections, but two indications of its fallacy are readily at hand. In the first place a chi-square test of differences between the distributions show them to be highly significant--beyond the one-tenth percent level. Secondly, a preliminary consideration of components of each of the sets of data emphasizes substantial differences in their character. Multiple operators per farm, included in OASI data but not in the Census of Agriculture population, could contribute to the flatter age distribution of the OASI data. Relatively more young farmers would appear as OASI farm operators in cases of father-son partnerships where the father was of middle age. The Census would designate only the father as operator, OASI could include both. OASI would also include youths, not bona fide partners, who were operating a substantial farm project. In partnerships having one member advanced in age, the Census of Agriculture would be likely to count only the younger. OASI could include both, with a result that relatively more older operators appear in these data. Another factor operates to increase the proportion in the older age brackets in OASI data. This results from the prospects of benefits in the near future to older farmers. They would have incentive to attempt 58 to qualify as "covered" under the program. Men under fifty-five would be ten years or more away from benefits and thus feel little need to make a special effort to become covered immediately--if indeed they did not make a positive effort to avoid the OASI tax. Field studies in Kentucky and Texas indicate that circumstances will affect the relationship of age to participation in the OASI program. Both studies agreed that younger farmers were better informed about OASI, at least in its earlier stages. Part of the reason for a difference in knowledge came about because younger farmers had obtained cards incidental to recent off-farm employment. In the Texas study the local availability of state old age assistance reduced desire for participating in OASI. In Kentucky older farmers in the poorer agricultural sections were participating in OASI in a relatively high proportion. Age was a less important factor in better farming areas. This suggests the relative situation with regard to economic security to be an important determining factor in interest and participation of older farmers in the OASI program. OASI data in general confirm the Kentucky observation that older farmers made a special effort to participate in the OASI program. It will'be noted in Table III-Z that those with only farm self- employment and no previous covered employment, the SEF group, were 2J. R. Christianson et a1. , op. cit. ; and R. L. Skrabanek et al. , Texas Farmers and Old Age and Survivor's Insurance, Texas Agri. Exp. Sta. Bul. 886 (College Station, Texas: January, 1958). ’\t 59 £03850 H.300 0:“ m0 go . >18 0.1m omofiu ado. mowhofiuuou .3230 in pan $0303 .mxmmfiw 80: 0mofi cofiwppm a: 30.30:“ mmudmfl Hm15 02:23 mmhdwfi mdmchm .mmsoum UQ-hMm paw hMm 05. 0.8 omeFH Jamaioagoufiom Show 80¢ mm? 08023 p0u0>00 >30 0m0£3 Sm 030.3050 .mgumw 38.8ch can 085-»qu .Hoflcopwmou mo muofizomo mopgocmp .2 $5930 cw mmdouw unofigoasm mmod m0 Goflnfiuomop memo .mewOm >0, ©3396 magnum >houmflm Mao? 95.903000 05 803 3.30 mmofi mo 0030153 < "moudoma 40mm: N Hoummsu .HH 40> .vmm: Hondufiaomumxx m0 35000 .mdmcoU 05 mo ddmudm .m .D ”monsomd k .3 m .:N a .QNN a .3m w .3: N .25 4 o .34 4 s .$~.m 1980: cohommumo a: .02 o .03 o .03 o .03 o .2: o .ooH o .2: o .ooH o .2: Zach. w .oH N .o o .2 w .o h .oN m .N AJN o J; u0>0 pad mo w .m: m .3 a .NN w .3 N .\.N HJN m .3 m .ON vb . mm o .NN m .NN w .NN A .NN m .2 0 .ON. a .«N w .wN vm u muv m .mN w .wN w .wH o .wN o A; o .3 m .NN w .MN vw - mm as: NAN cg: N4: 0N “NH N.: aJL vm u mN «so .k a? .m «an .N 9E .m $0 .m a? .m «on .H gm .m mm 325 . ommmd E meEmw mEumm .mm3 .hmmw Ow>> .hmm OMm .hmm Unmuhmnm .mHm :00 05005 :uofio: mo #3938800 Show mugmummO m0 muoumuomO A9233 00553 .1050: can 0m< madcam “cogoafls >9 macadaoao Hm¢O 13935800 m0 muoumuoao 0 n oudufidomuwxw no 36000 0mm >3 .mcofimasmom noumuomo Show oudfidowuwxw mo mdmcoU wmoa paw Hm9 0030990 030.3% 0300003 M003 000003000 05 000.3 .300 m0 00300500 < ”00000m A0H0>0000H 000.».um m0 350032 0.0 p030~n5 0m< . . . _ . . mp 00 mm om mv ow Unmnhnmm Omanmmmm O 0 OHm .hmm _ mm om _ _ mN ON SH «0003on om $25 0.1 coma I. coca I coma I OOONm .1 8me t 000000H $602 mmS 00300305 0000033000 000 0mm >9 000000090 0:3 HmCIDJr ted receiving above this figure. The curve of the distribution thus drOps abruptly to zero at $4, 200. Those receiving above $4. 200 are estimated by assuming that the distribution of wage and salary incomes is Proportionately the same for this group as for all United States wage and s alary receivers. Details are given in Table IV—2. According to thi 3 method of estimation, OASI farm operator population is smaller by 2 7 ’ 000 because of the $4, 200 maximum on taxable income. 18 the 18A note is in order concerning the method of extrapolating beyond WQ known distribution as shown in Figure IV-l, and in Table IV—Z. It 13le be possible to fit a mathematical curve to the data, however this b Qunts to assuming a shape for the distribution that would be determined Y the particular equation employed. An empirical guide is thought bet1:er even though there’are likely to be differences in the distribution of Wage income of all wage earners and that of the wage earners in the farm c)I-5erator population. The strong right skewness observed in the income distribution Curve, Figure IV-l, suggests a hypothesis that supports the method of estimation used. Possibly two populations are involved in the group of OASI farm operators who have off-farm wages. These could be composed as follows: The almost vertical part of the curve on the left is made up mostly of those who are basically not wage earners and/ or whose total income is low; the flat right segment of the curve is made up of those who are more properly wage earners, rather than farmers. Chapter VI supports this contention by showing that farm operators with relatively high sustained wage incomes have substantially lower incomes than average from farm self-employment. To the extent that this part of the farm operator population is composed of those who are basically wage earners, the use of a general distribution of wage earners by income as a guide for extrapolation is not in error. 7 .HmHoEH come mo 3:33:14 udpofiofimv mndfioQ GM 06023 Pagan no \93 Meme _ _ _ . . _ _ _ _ 1. oomw ooow comm ooom comm ooom coma ooo~ oom saw mm 2:1 .m.~ E 330338 >9 so am poomadofimu .0922 203-82% es 5. com I com I dunes u; .xoqumN cow I. 93121:) 91 com .I 000 .1 Km mmm~ .msooflw Shm. . WNW Dam 0mm? kfl UHAHEdw HWQO “amokom mco m. Cw whoumhomo «2th 0.33m «003:3 mo 05350.93me .A1>H HMDUHW 98 TABLE IV—Z. Summary of estimate of farm operators excluded from OASI farm operator population because of $4, 200 maximum OASI taxable income, 1955 Distribution of Distribution ofwage and salary incomes Income income received of farm operators from OASI data Category from wages and salaries in the In OASI . c U. S. in 1955a population Estimated (:3) (%) (1000's) (1000's) Under 1,000 25.8 263.4 1» 000 to 1,999 14.0 53.1 2- 000 to 2,499 8.1 13.0 2- 500 to 2, 999 7.0 11.4 3’ 000 to 3,499 9.0 8.1 4' (5)00 to 3, 999 7.8 8.2d d 4' 500 to 4,499 7.6 3.2 4.8 5' 000 to 4,999 5.3 5.7 ' 00 to 5,999 7.7 8.1 {0000 to 9, 999 6.8 7.2 ' QOOandover 1.1 1. 2 ‘3 0 \Totals 100. o 380. 4 2 . Se ‘ a'Source: U. S. Bureau of the Census, Current Population Reports, 1‘lee P-60, No. 23 (November, 1956), Table 10. Q bNumbers in this column are from tabulations of data from the uohtinuous Work History sample supplied by BOASI. Data are for all I1ited States territories but this is regarded as introducing an error of ess than 1 percent. CFigures in this column are those parts of the distribution missing bt-Z‘cause of the $4, 200 limit on reporting of taxable income to BOASI. These are farmers who did not report farm self-employment income to BOASI because their wages were $4, 200 or higher. The estimate is made by assuming that the distribution above $4, 000 is proportionately the same as that of wages and salary incomes for all wage and salary receivers as reported by the Current Population Survey. dActual data only include incomes from wages and salaries to $4, 200. It stops abruptly at this point with only one individual reporting wage and salary income over $4, 200. This is regarded as proof of the hypothesis that a number with wage and salary income above $4, 200 were excluded. In the $4, GOO—$4, 499 income category the "actual" and "estimated" columns together total 8, 000. 99 Reporting Failure and Late Reporting. --The preceeding discussion of various segments of the Current Population Survey farm operator population can now be summarized. A result is an estimate of those apparently eligible for coverage who failed to report: Thousands 1. Total 1955 CPS farm operator population 4, 792 A. Exclusions: (1) Of net farm self-employment income below $400 1, 941 (2) Added exclusions because of differences in OASI and CPS farm income definitions 192 (3) Over $4, 200 wage income 27 B. In OASI population but with net income from farm self-employment below $400: (1) Net because of optional reporting 150 (2) Adding farm income below $400 to other self-employment income 55 C. Net number excluded from OASI (A minus B) 1, 955 2. Total eligible for coverage under OASI from farm self-employment net income 2, 837 Less OASI farm operators 1, 876 4. Discrepancy 961 w The discrepancy of 961, 000 farm operators is interpreted as those who failed to report--either an outright failure, or who reported late. All of these were required to report farm self-employment income on the basis of their net incomes. This does not include those who might have reported optionally had they chosen to do so, but who did not exercise the option. BOASI estimates a total of 2, 336, 000 in the farm operator 100 population of continental United States when all reports are in. According to this, 380, 000 of the 961,000 indicated as reporting failures, will eventually report farm self-employment income to BOASI. This is the result of the cut-off date of the data that are used in this study. "Late reporters" are treated here in the same manner as reporting failure. In many cases data from an earlier cut-off date will be more timely and thus more useful. Later studies should be able to determine the nature of distortions resulting from use of such data. Failure to report has already been treated to some extent. More thorough discussion will follow in this chapter. For this reason there is no further elaboration at this point. Multiple Operators per Farm In computing the total number of individuals in the Internal Revenue Service farm operator group, data of partnerships were used. This provides a starting point for an estimate of the cases of multiple operators per farm for use in comparing OASI and Census of Agriculture data. The added number estimated to result from two or more operators 2 on one farm unit is 161, 000 operators, 0 or 4. 4 percent of the total 19U. S. Department of Health, Education and Welfare, Farm Coverage Statistics, 1955 (November, 1957), Table 7 Revised (November 1958). This estimate is made from partial returns, on the basis of experience with nonfarm reporting. onhere were 140, 000 partnerships estimated, with a net of 302,000 partners. 302,000 minus 140,000 is 162,000. This is reduced by 1,000 to allow for those reporting from outside the 48 continental states. 101 Internal Revenue Service operator population. On the basis of average gross farm incomes per individual, it would appear that those reporting partnership farm income should be relatively more numerous in OASI than in the Internal Revenue Service data. The average gross for individual partners was $8, 680. This was 40 percent above the average of $6, 080 for sole proprietors. Higher average incomes for operators involved in partnerships suggest that fewer of them would be excluded by minimum OASI income requirements and other factors in the complex related to reporting of taxable income to the BOASI. The proportion of partners in OASI data is increased 50 percent-- . ‘ . . 21 to 6. 5 percent--as a conservative allowance for their higher incomes. 21 . . . - Qualifications to the use of those reporting as partners to the Internal Revenue Service as a measure of cases where OASI counted two or more operators on one Census farm, must be recognized. On the one hand there may be a distortion resulting from cases where two or more individuals reported on form 1065 (the Internal Revenue Service partner- ship form), but the Census of Agriculture enumerated their operations as several separate farms. There are other cases of two or more farmers on one farm unit who do not use form 1065, instead each reports his'share of expenses and receipts separately on 1040F (the individual Internal Revenue Service form for reporting farm income in 1955, now Schedule F). Since adequate means of allowing for these considerations are not available they can only be given expository recognition--amounting to the assumption that they cancel each other. In Chapter II it is theorized that splitting of incomes from a small farm business may decrease the number eligible for OASI coverage from farming. This does not affect the problem under consideration at this point. Here the discussion concerns only those actually in the OASI . population and their relationships to the Census of Agriculture population of operators. 102 In 1954 there were approximately 1. 5 family workers per farm in the United States. 22 Some of these were the partners mentioned above, although it is possible to be a bona fide farm partner without qualifying as a member of the agricultural working force. Some of these were spouses. Others werechildren. There are certain to be cases where children have projects as with 4-H or F. F. A. in which they receive an income requiring them to report to the Internal Revenue Service. In areas where agriculture is heavily commercialized, such cases may become important. Vocational agriculture statistics from the commercial agricultural states of Illinois, Indiana, Iowa, Missouri and Ohio, were employed as a guide. There were an estimated 63, 000 vocational agriculture boys in those five states in 1955. Fifty-six thousand of these were making money from projects--amounting to 6 percent of the number of farms in . . 23 this area. Fifteen thousand are estimated to have pr0ject incomes of $400. 22U. S. Agricultural Marketing Service, Farm Employment, Statistical Bulletin No. 236 (September, 1958), p. 15, reports an average of 6,579,000 family workers in 1954. Census of Agriculture: 1954, Vol. 11, Chapter 11, p. 1150 reports 6, 869, 693 family workers from 4, 242, 000 farms. 3Estimates made here based upon figures obtained separately from the Vocational Education Divisions of the five states. It was not possible to secure figures for 1955 from every state, nor were all the factors considered available in each case. While the numbers given are the best that could be done with what exists, short of extensive research, they are guides--not firm figures. They are used here to indicate the order of magnitude of youths in the OASI operator population. The age distribution of the OASI data neither supports nor denies this estimate of 1. 5 percent for family members who were not partners. There were . 3 percent under twenty, and 2. 4 percent in the 20-24 year age range. 103 The 15, 000 figure will be noted as almost 1 percent of all OASI operators. Youth with profitable projects are regarded as concentrated in this area-- these five states sold one-fourth of the value of all agricultural products in 1954, but there will be substantial numbers in other states. In addition, not all youth will be included within the Vocational Agriculture figures. An allowance for reporting problems, plus other factors named above, suggests an estimate of 1. 5 percent for the family members in the OASI population as a conservative allowance. The OASI farm operator population is estimated to contain 8 percent who live with another operator on the same Census farm. This is needed in analyzing interrelationships betweenvCensus of Agriculture and OASI data. Items involved in this estimate are: Numbers reporting farm partnership income to the Internal Revenue Service, their incomes compared to sole proprietors, and family members with farm incomes. Overall Reconciliation of OASI, Census of Agriculture, Current Population Survey and Internal Revenue Service Data A summary of the overall relationships between the four data sources used in this study is now possible. This is dependent upon the estimates and assumptions made in the foregoing part of the chapter. It is presented in tabular form in Table IV-3. Table IV-3 can be understood better by means of the following reasoning steps: 104 TABLE IV-3. Reconciliation of OASI, Census of Agriculture, Current Population Survey and Internal Revenue Service farm operator numbers --------- Data sourcesa --------- F ' h t ' t' arm income c arac eris ic BOASI Ag. Censusb CPS IRS f t 0 Opera or group (1000's) (1000's) (1000's) (1000'81 1. Number in each population also appearing in OASI population: 1, 876 1, 726 1, 876 1, 876 a. Over $400 net taxable income (1, 671) (1, 536) (l, 671) (l, 671) b. Under $400nettaxableincomec (205) (190) (205) (205) 2. Reporting income from farm self-employment to IRS but not to BOASId ..... 1, 680 1, 824 1,824 3. Over $400 net farm taxable but not reporting income from farm self-employment to IRS ----- 883 961 ----- 4. Under $400 net taxable income and not reporting income from farm self-employment to IRS ----- 491 131 ----- Totals 1, 876 4, 780 4, 792 3, 700 aSource: See text page 82. b . . Numbers in OASI and CPS populations are reduced 8 percent, to allow for farms with more than one operator, in the determination of the corresponding number in the Census population, except for item 4. c:Those in the OASI operator population who have less than $400 net income are estimated as 150, 000 because of optional reporting pro- cedures plus 55, 000 who add self-employment income from nonfarm sources. Corresponding figures in the Census data are 140, 000 and 50, 000. dCPS and IRS figures contain 27, 000 estimated to have over $400 net income from farm self-employment but because they also have $4, 200 income from wages they do not appear in the OASI operator group. Also see footnote 24. 105 1. The procedure starts with the number in the OASI farm operator population of row 1. These same operators must be in the Internal Revenue Service population and are assumed to also be in the Current Population Survey group. Eight percent of those in the OASI population are assumed not to have been counted as operators by the Census. This is an allowance for more than one operator per farm. The same relationship--the Census number equals the Current Population Survey number, less 8 percent--is carried through rows 2 and 3. 24 2. Once the number in the Internal Revenue Service who report to OASI is known the number who are not in the OASI population but who reported farm self-employment to the Internal Revenue Service can be determined by subtraction. This is assumed to be the same number in the Current Population Survey population, but lower by 8 percent in the Census. 3. An estimate of 961, 000 for the number of individuals with net taxable farm self—employment incomes over $400 but who did not report self-employment income from farming to the Internal Revenue Some error in this assumption for rows 2 and 3 of the Census- CPS-IRS relationships may be present but means are lacking to specify this relationship more suitably. For example in row 2 it is likely that partners reporting to CPS are less prominent than the 6. 5% estimated, but other family members with small net incomes from farming should be more prominent than the 1. 5% estimated for them. It is also possible that row 2 contains a number of small farmers who are actually partners but do not use the more complicated method of reporting income tax on form 1065. Thus changes may be at least partly offsetting. 106 Service was made earlier in this chapter. These are in the Current Population Survey population and 8 percent fewer are assumed in the Census population. 4. The numbers with taxable farm self-employment net incomes below $400 and not reporting to the Internal Revenue Service are computed as residuals for the Census and the Current Population Survey populations. The numerical value determined in this way is used in the comparison of OASI and Census economic classes of farms that follows immediately. According to this procedure the number of Census farm operators who did not report to the Internal Revenue Service is not the simple difference between the two total populations-~1, 080, 000; rather, it is the sum of rows 3 and 4--1, 374, 000. This is 27 percent of all Census farm operators in 1954 who did not report farm income to the Internal Revenue Service. Combining this with the conclusion of Stocker and Ellickson, it is seen that the 27 percent of operators who failed to report accounted 25 for 14 percent of the sales of farm products in 1955. This indicates their relative unimportance in the agricultural economy. 25F. C. Stocker, and J. C. Ellickson, "How Fully Do Farmers Report Their Incomes ?" National Tax Journal, Vol. XII, No. 2 (July, 1959), pp. 116-126. They conclude that reports to the Internal Revenue Service included 86 percent of the receipts from sales of farm products, in 1955. 107 OASI Operators Classified by Gross Farm Income The foregoing part of this chapter serves as prologue to this section and the next. Here OASI farm operators who are also Census farm operators are classified by their gross farm income. The next section reconverts this into a classification by economic class of farm to permit an estimate of total agricultural production. Useful insights have been achieved thus far into the makeup of OASI farm operator data. Additional relationships are brought to light in this section. These contribute understanding in their own right, but serve the primary purpose of aiding in the estimate of agricultural production accounted for by OASI operators. The immediate discussion focuses upon Census of Agriculture and OASI data, drawing upon relationships with other farm data that have already been established. Economic Classification of Farms. --The economic classification of 26 farms as used by the Census of Agriculture is a key tool in this estimate. Farms are classified into eight groups on the basis of similar character- . . 27 . . . istics and problems. Three factors are used as the baSis for claSSifi- cation: size of business, or the total value of farm products sold; number of days the farm operator worked off the farm; and the relationship of 26U. S. Bureau of the Census, Census of Agriculture: 1954, Vol.11, Chapter II (1956), pp. 1131 and 1132. 27K. L. Backman, ”An Appraisal of the Economic Classification of Farms, " Journal of Farm Economics, Vol. XXX (1948), pp. 680-702. 108 income received from nonfarm sources by the operator and members of his family to the value of farm products sold. In addition to the factors used by the Census of Agriculture in making the classification, other studies have associated various socio- economic characteristics of operators and farm families with the eight classes. Some of the more important of such items are listed in Tables IV-4 and IV—5. Extensive use is made of the characteristics shown in these tables in categorizing OASI farm operators. Table IV-5 can be used to illustrate this: This table shows the proportion of farm operators reporting incomes of less than $500 from their business and those not reporting income of any kind. These proportions provide approximate guides for inferences of those who would be ineligible for OASI coverage, or who might not be reporting to OASI. There is a difference in years treated, Table IV-5 is for 1949 and 1950, 28 and the figure of net income is for $500 in the table, against the OASI minimum net of $400. These differences must be considered in making use of the table. Conversion of the Economic Classification of Farms to a Classification of Farm Operators. --Gross income per farm unit is the basis for the Census of Agriculture's economic classes of farms. OASI data are in terms of the individual income receiver. To convert the Census classification 28In the use of Table IV—5 differences in the farm situation between 1950 and 1954 are useful. Parity ration was 101 in 1950; 89 in 1954. Operator's net income per farm was $2276 in 1950, and $2357 in 1954. 109 from a gross per farm to a gross per operator an adjustment must be made for rented farm units. Details of this adjustment are given in Table IV-6. This adjustment allows for the landlord's return from rented land that is included in the economic classification of farms. Tenant operators are treated as having a gross equal to 60 percent of the gross of the farm that they operate. The resulting classification, the right hand column of Table IV-6, is a classification of operators by gross incomes. In later manipulations of these figures, as in Table IV-7, it is assumed that tenant operators have a net income, bearing the same relationship to gross as that of owner operators. This is justified on the assumption that expenses incurred by tenants in operating land that produces the landlord's rental payment compensate for taxes, interest, upkeep, and depreciation charges that are borne by an owner- operator on his entire owned acreage. Census Farm Operators in the OASI Farm Operator Population by Gross Farm Income. --Table IV-7 is an extension of Table IV—3. In it the Census of Agriculture operators are classified according to the reporting of farm income to the Internal Revenue Service and the BOASI and by gross farm sales classes. This is used as a systematic means of examining farms and farm operators from an overall point of view. 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HOW on>H 3an mmm m. mm Eumw 05 we magma ca amsu Raging noumfimmo EH3 .8Q 0800:“ 8.33 mmOuw >3 coflmgflmmmau .m ma mafia. .fiCd n .0800“: Shaw mmoum >9 8mg wcgfimmflu vcm mpofigmmo Hm15 wawmd MI>H mind? mo ComemHXm Gm ma 3an mEHm 88 .8» .H 88 83 88 .8: 88 .2; 88 .28 88 88 .H .88 88 8 :38. ooo .om 800 .03 .. ooo .02 . ooo do» ooo .oom ommw 33me 42> 88 .8 88 83 88 8: o8 .8 88 .3 88 .mz. 88 .8... 8H .8 - 8% A; 88 .mm 88 .3 88 8.2 88 .me 88 .82 88 8.: 88 8% 2: .H - 8% .9 88 :1: 88 .3 88 83 88 .S. 88 .2m 88 8.: O8 .2» 82. .~-8~ .8 .> ooo .omv . 800 .mi ooo .mm ooo .wom ooo .mh ooo .wmm omm .vuoom .Na .>H ooo .omm . 800 .o: ooo .w ooo .mm ooo .om ooo .Hvo ooo .auooo .mm. .HHH ooo .omm .. Soc .3 ooo .N ooo .w ooo :: ooo .mmm owodmuoooda .HH 88 .8 - 88 .3 88 .8 8o .v 88 .w 88 .2: O8 .38 .55 .H @809: Hm3 dofldfidmom youmnomo gnaw Hm<0 «:3 GM muoumfimmo EH3 mdmch .N...>H SMAVPH 115 above and below it. 29 Complementary to Table IV-7 is a categorical discussion by economic class. These two devices, the overall view of Table IV-7 and a class by class consideration of factors, are inter- related and mutually supporting in a determination of Census of Agri- culture operators who were also OASI farm operators. A class by class discussion of Census of Agriculture operators who were in the OASI group falls naturally into three parts: The lower economic classes--VI, VII and VIII--are assumed to have contributed relatively few to the OASI farmer population; the upper economic classes I, II and III, are expected as heavily represented in OASI; and classes IV and V are thought of as intermediate. The classes are treated in the order named. Economic class of farm VIII includes those selling less than $250 worth of agricultural commodities. Operators of such farms could have received OASI coverage from farm self-employment under only one condition: where they added farm self-employment income to other self-employment income to reach a total of $400 net or more. The total number adding farm self-employment income of less than $400 to income from other self-employment has already been estimated at 50,000. Largely from considerations in the makeup of Table IV-7, 20, 000 are estimated to be in class VIII. 29 The reader will note that economic classes used here are in terms of gross farm income per operator, but that characteristics of operators in each class are assumed similar to those of operators in the usual classification by gross sales per farm unit. 116 Economic class of farm VII, part-time farms, are those selling $250 to $1, 199 worth of agricultural commodities and having other family income greater than the total value of sales or where the operator worked 100 days or more off the farm. A general indication that a very large proportion of part-time farmers are not present in the OASI operator population is given in a check with Current Population Survey data. According to the Current Population Survey, 1, 507, 000 individuals received both wages and farm self-employment income. 30 Only one- fourth of this number in the OASI data, 387, 400, had the same income combination. Relatively few are thought to have reported optionally, in terms of gross farm income. The gross farm earnings of operators in class VII show a strong right skewness: The midpoint of the gross income range is $725, while the average gross is $620. On this basis only 125, 000 are estimated to have had over $800 gross sales, as these sales are calculated by the Census of Agriculture. Even fewer had over $800 gross sales when computed according to the rules for taxable income under OASI. This number is estimated at 100, 000. These constitute the operators who were eligible to report on the basis of the optional method. Contrary to the situation in economic classes IV, V and VI, most of the operators in class VII are thought to have reported to the Internal 30U. S. Bureau of the Census, Current Population Reports, Consumer Income, Series P-60, No. 23 (November, 1956), computed from Tables 6 and 7. 117 Revenue Service, because of the high percentage receiving income from nonfarm sources, see Table IV-4. Relatively few are expected to have used the optional method of reporting because they have coverage under OASI from other income sources. Comparing with the number who might be reporting optionally in other classes, an estimate of 10, 000 is made. This is explained further in the discussion of Table IV-7. Farm expenses of class VII are observed to be two-thirds of gross sales, Table IV-4. Average net is thus about $200 and would be lower if all expenses are considered. For this reason fewer are thought eligible for OASI because of net farm income than those who could qualify optionally. The 15 to 20 percent eligible on the basis of gross farm income is thus reduced to an estimated 5 to 10 percent on the basis of net, or 40, 000. Some, but not all, of these two groups overlap. A high proportion of those eligible on the basis of net is considered to report self-employment farm income, or 30, 000. Those not reporting net income may have been in the "over $4, 200 from wage and salary" group, or may have neglected farm income because it was small compared to other sources, in addition to simple reporting failure. To this 40, 000 (10, 000 reporting optionally; 30, 000 with net over $400) another 20, 000 is added, estimated to have added farm self-employment income to self-employment income from other sources. The result is a total of 60, 000 operators from class VII who were in the OASI farm ope rato r population. 118 Economic class VI has the same gross income limits as class VII, a value of sales between $250 and $1, 199, but includes only those farms with "other" family income less than the value of farm sales and/ or operators working less than 100 days off the farm. The 540, 000 in this class are the real subsistance farms in the United States. Their low gross and net incomes place many of them in the group ineligible for OASI. Another useful consideration in determining operators from this class who were in the OASI population is their reporting characteristics. Many who are eligible for OASI coverage failed to report because of their lack of contact with information about the program, and unfamiliarity with reporting to the Internal Revenue, Service. Studies made in 1956 verify this. 31 Average net farm income computed from Census of Agriculture data is $380. After allowing for expenses not listed by the Census, and for income not counted toward OASI, net could average as low as $250. This suggests that one-fourth to one-third--approximately 150, OOO--had net farm incomes over $400. The average value of gross sales in the class serves as the basis for an estimate of less than half having gross incomes over $800, or 220, 000. If 30, 000 of these are assumed to have had $400 net and less than $800 gross, there were 100, 000 who were eligible by optional means only. 31J. R. Christiansen, et al., op. cit.; and R. L. Skrabanek_e_t_. al., op. cit. 119 Reporting problems of this class, together with comparisons to other classes in Table IV-7, result in an estimate that only 20 percent of eligible class VI operators were in the OASI population. This proportion is assumed for both those eligible because of net income, and because of gross alone. The result, 50, 000, plus 5, 000 estimated to add farm self-employment income of less than $400 to other self- employment income, makes a total of 55, 000 from class VI in the OASI group. The analysis shifts at this point to the three classes at the upper and of the economic classification. Like the lower three classes, there is a reasonably firm basis of estimating operators in classes I, II and III who would be in the OASI'population. Simply stated, it is that incomes of operators in classes I, II and III were sufficiently high that they must have been familiar with the Internal Revenue Service reporting and most would have been eligible for OASI coverage. Thus a large proportion of operators from the top three classes should appear in the OASI operator population. This conclusion is exactly opposite to that made with regard to the three lower classes. Economic class I included those operators having gross incomes of $25, 000 or more. Corporate farms present the first problem in this class. Those reporting to the Internal Revenue Service number 32 9, 421 and have an average gross farm income of $250, 000. They 3.ZU. S. Internal Revenue Service, Statistics of Income, 1955, Corporate Income Tax Returns (1958), p. 5. 120 were accordingly presumed to all fall into class I. The problem of treating corporate farms revolves about the question of their organ- ization and the way in which operators were assigned to them by the Census of Agriculture. The situation of some would be such that a number of farm operators might be involved as renters in each case, and each operator could appear at any point in the economic classification and also in OASI data. For those corporations where a single manager was designated as operator, he surely would be in class I of the Census data but could not appear in the OASI operator data-~corporate employees do not have self-employment income. Arbitrarily 4, 000, a little less than half, are assumed of this type. 'This number appears in row 1 of column 5 in Table IV-7. Of the 104, 000 remaining in class I most should have been eligible for OASI, Table IV-S indicates 3 percent with business and professional income below $500 in 1950. The cost-price squeeze between 1950 and 1954 is likely to have dealt more severely with larger operations because of labor and other cash operation costs. Census and OASI methods of income calculation are also thought to be more divergent in the case of large units; if for no other reason than that these units attempt tax savings. to a greater extent. Above considerations suggest that at least 5 percent of class I operators will not have been in the OASI population. At the same time the number who could escape must be low--not over 10 percent. As a compromise, 92. 5 percent is used. 121 Economic class II included those with gross farm incomes of $10. 000 to $24, 999. By most standards these are large farm enterprises. Such operators would be expected to be reporting to the Internal Revenue Service in about the same proportions and to have as few limitations to their eligibility for OASI coverage as those in class I. Thus the same percentage of this class is estimated to appear in the OASI farm operator population. This is 330, 000 out of an adjusted number of 355, 000. Economic class III has gross income class limits: of $5, 000 and $9. 999. The lower limit is sufficiently small that some class III operators would not have been paying an income tax regularly if at all. For example: The average farm family has approximately four members.33 With just four members this family would need to be making a net income of about $2, 670 before any income tax was due. In cases where farm expenses are equal to one-half of gross, this represents a gross farm income of over $5, 300. Many farm families are much larger than four, and when calculated as above a family of six might have almost $9, 000 gross before owing a tax. There were also many farms in 1955 where net income was not one-half of gross. Since penalties are not assessed for non-reporting when a tax is not due, many families whose income was well below that required for reporting did not bother to do so. 33U. S. Department of Agriculture and U. S. Department of Census, Farmers' Expenditures in 1955 by Regions, U. S. Department of Agri- culture, Statistical Bul. No. 224 (April, 1958), Table 59. Average size of families in the Farm Expenditure Survey was 3. 83; in the 1955 spring food survey it was 4. 01. 122 All of those who had not had the reporting habit would not be expected to be suddenly aware of the greatly lowered tax liability requirements in 1955. The fluctuating yearly incomes to farmers would aggravate this problem. Some who were normally in a lower economic class, would have moved up into the $5, 000 to $9, 999 range of sales for a given year due to the nature of production and product prices. 34 Because of the above factors and because class III shows a small increase over classes I and II in the proportion with self—employment incomes of $500 and less, class III is estimated to have been represented in the OASI population in a smaller proportion than classes I and II or at 87 percent. This is 550, 000 of the adjusted number of 641, 000 operators. The six classes already discussed account for l, 111, 000 of the 1,726, 000 Census farm operators who appeared in the OASI farm operator population. Classes IV and V are more difficult to reconcile individually than the others because of their intermediate position. Minimum income requirements excluded large numbers from classes VI, VII and VIII. The high gross incomes in classes I, II and III guarantee that most of these had the habit of reporting and nearly all would have been eligible for coverage under OASI. Classes IV and V were computed as residuals. The problem then was to allocate the remaining 615, 000 operators between these two classes. 4Milton Friedman, A Theory of the Consumption Function (Princeton: Princeton University Press, 1957). See discussion of permanent income hypothesis. 123 One important basis for allocation was the assumption that a much higher proportion of class IV was represented than of class V. The most important considerations involve interclass comparisons from Table IV-7. They resulted in a decision that 50 percent of class IV should be represented in OASI data and 25 percent of the operators of class V. Some examples will illustrate the reasoning: If the proportion by which class IV is represented in the OASI population is increased appreciably this lowers the proportion from V to a point that does not appear reasonable when compared to lower classes and when income to operators that compose it is considered. Should the number of operators from IV be raised to 500, 000--about 60 percent of the class--this drops the number in V to 115, 000 or only 15 percent. This would appear too low compared to the plus 10 percent already estimated to be reporting from class VI. If the numbers are juggled in the opposite direction we rapidly reach a point where differences, implied by the socio-economic characteristics of classes IV and V, become too narrow. Before leaving the discussion of class IV two other items deserve mention. One is that the entire range of gross income, $2, 500 to $4, 999, is less than the gross required for an average farm family to pay an income tax. A computation of tax liability appeared in the dis- cussion of class III. The other item concerns optional reporting. It is estimated that 18 percent of the operators in class IV, or 150,000, 124 could only qualify for OASI coverage from farm income by means of the optional method. Table IV-5 provides much of the basis for this estimate. Ten percent had under $500 from business and profession in 1950. This is assumed to represent the proportion with less than $400 in 1954. 35 In addition, 18. 2 percent reported no income in 1950. It is assumed that a much higher proportion of this 18 percent had incomes under $400 than the average--4O percent instead of 10 percent. The sum of (. 40 x .182) plus 10 percent is approximately 18 percent. One-fourth to one-third of those in class IV who are only eligible for OASI optionly, are estimated to exercise this option. Table IV-7 comparisons provide the basis for this latter estimate. Economic class V included operators with gross incomes of $1, 200 to $2, 499. Although already partly discussed under class IV, some significant aspects of this class merit further treatment. Among these are the 24 percent working off-farm 100 days or more, and the 24 percent with a family income greater than the value of farm sales shown in Table IV-4. Because of the large proportion working off-farm, class V is considered to include as high as 30 to 40 percent of the 27, 000 individuals estimated to have a self-employment income from farming of $400 or more but who are not in the OASI population because 35The parity ratio was 12 points lower in 1954. Another factor is the inclusion of all income from businesses and professions. Still another is the difference of OASI and Census methods of computing farm income, this alone could account for $50. 125 they had over $4, 200 of wage income. This swells the number in class V who report self-employment farm income to the Internal Revenue Service but not to BOASI. Economic classes VII and VIII also report self-employment income from farming in large numbers to the Internal Revenue Service but not to BOASI, but most operators in these classes have net farm incomes that are too low to qualify. About one-third or 250, 000 of this class are estimated to be eligible only by optional reporting. This estimate is based upon information from Table IV-4 and computed in the same manner as that employed in the preceeding paragraph. Table IV-7 is the most important means of determining the proportions of those appearingin the OASI population from the 250, 000 eligible because of gross income and the 520, 000 eligible and required to participate because of net income. Throughout the discussion of economic classes it was frequently necessary to refer to Table IV-7. A discussion of the separate columns in this table will serve to explain additional details of the classification of Census operators who are in the OASI group. Table IV-7 and the class-by-class discussion are a unit. They are considered separately for the sake of simplicity and clarity. All figures in Table IV-7 are the result of two-way comparisons of rows against columns. Readjustments were made until the table was internally consistent and agreed with other estimates made here, and with data and assumptions about the characteristics of each class. 126 Column 7 of Table IV-7 is an estimate by classes of farm operators having less than $400 net income from farm self-employment who were included in the OASI farm operator population because they added farm income to other self-employment income. These were estimated to total 50, 000, see Table IV-3 and its discussion. Such individuals are thought to be mostly confined to classes VII and VIII, since net farm incomes were low in these classes and there were large numbers with nonfarm businesses. The number is estimated to fall drastically when moving from class VII to class VI because of the much smaller number with nonfarm businesses, lower average incomes from the nonfarm business, and an assumption of a lower proportion who reported to the Internal Revenue Service in class VI. Every economic class probably contained some such individuals, but the numbers would be small in classes above V because this is the last class, as we proceed toward higher gross incomes, having a large number of operators with net farm incomes below $400. Column 6 of Table IV-7 is a distribution by economic class of the 140, 000 estimated to have reported by the optional method and who had insufficient net self-employment farm incomes to be eligible for OASI coverage. Some could have reported optionally in class VIII and 36U. S. Bureau of the Census, Census of Agriculture: 1954, Vol. III, part 11 (1956), Table 12. Nonfarm business incomes, for those having it, average $845, $2, 878 and $2, 811 in classes VI, VII and VIII respectively. 127 become eligible for coverage who might not otherwise have qualified but the number doing this is considered to be inconsequential. With 81 percent of the operators in class VII working off-farm, it is inferred that a high proportion had OASI coverage from other than farm income sources. Only 15 to 20 percent of class VII were estimated to have over $800 gross from income. Together these considerations suggest that few in class VII would have appeared in the OASI farm operator group by use of the option. A larger number who were in the OASI population because of the option was estimated for class VI both on the basis of a larger proportion in this class with a gross of over $800 and because these individuals were less likely to have had coverage from other sources of income. The number from class VI was not large, however, because of the low proportion estimated to have reported to the Internal Revenue Service. The bulk of the total in column 6 is estimated to originate in economic classes IV and V. These two classes had the largest numbers eligible on the basis of gross income alone and reported farm income to the Internal Revenue Service in larger proportions than operators in class VI. 37 In classes I, II and III the number in column 6 falls off rapidly. Most of the individuals in these classes are thought to have reported income regularly, but the number with net incomes under $400 was small. 37There are 150, 000 and 250, 000 operators estimated as having $800 gross farm income and less than $400 net in classes IV and V respectively. Class VI is the next closest with 100, 000. 128 Column 5 of Table IV-7 is a distribution of operators who did not report farm self-employment income to the Internal Revenue Service, and who had net farm incomes under $400. Economic classes VI and VIII contain the bulk of these. The low farm gross of class VIII suggests that the 180, 000 assigned to column 5 from this class may be too conser- vative. On the other hand, the proportion of class VIII operators with other income and off-farm work suggests that it is not impossible that 80 percent could have reported their farm operation to the Internal Revenue Service. This results in most of class VIII being classified in column 3--reporting farm income to the Internal Revenue Service but not enough to qualify for OASI. A large proportion of class VI was not eligible for OASI coverage from farm self-employment income, and fewer than half are estimated to have reported income. This accounts for the large number of class VI operators in column 5. By contrast, operators in class VII are assumed to have reported in large proportions, because of off-farm work. Most are expected to report 8A problem of the group, neither reporting farm self-employment income to the Internal Revenue Service nor eligible for coverage under OASI from net farm income, is that the 491, 000 total estimate could be as much as 100, 000 too low. No more suitable method for calculating this group was at hand however, than that used in Table IV-3. An important reason for thinking that 491, 000 is too small is that as many as 300, 000 may be estimated to have had no farm sales in class VIII. This figure was not directly available for 1954 but is based upon 1944 and 1949 figures. In these years 7. 2 percent and 6. 7 percent respectively reported no sales; see Census of Agriculture: 1954, Vol. 11, Chapter 10, p. 915. But increasing the number from class VIII in column 5, would require reducing the number from class VI in column 5 and increasing correspondingly in class VI operators who reported to IRS but not to OASI--column 3. If a sizeable shift of this nature takes place, a point is soon reached at which the proportion reporting to the IRS from class VI appears too high compared to class V. 129 farm income along with the report of off-farm income, but because of small farm enterprises few qualified for OASI coverage from farm self-employment earnings. As the result 80 percent of class VII operators are in column 3. Those delinquent in reporting to the Internal Revenue Service, but who actually had a net income that required them to pay a tax for OASI-- column 4 of Table IV-7, are estimated to be concentrated in class V with somewhat smaller numbers in IV and VI. Most class Voperators had sufficient gross income to imply a net of over $400 from farm self-employment, yet a high proportion are estimated to have not reported this income. Class IV operators have higher incomes and more should have acquired the "reporting habit. " In class VI many not reporting did not have sufficient net income from farm self-employment to qualify for OASI coverage. Hence relatively fewer class VI operators are in column 4. Class V may be used to provide an example of the internal con- sistency within a class. Numbers in columns 3, 5, 6 and 7 should sum to the total estimated as having net farm incomes below $400. The actual sum is 262, 000 compared to the 250, 000 estimated earlier. Most of this discrepancy is accounted for by an estimated 10, 000 to 12, 000 with over $4, 200 wage earnings. Figures in columns 3, 4, 5 and 8 must sum to that in column 2. Thus, given any three, the fourth is determined. 130 In each class the total number who reported to the Internal Revenue Service is equal to the sum of figures in columns 3 and 8. Class VI has the lowest proportion who reported to the Internal Revenue Service--only 40 percent. This rises to 46 percent for operators in class V, to 60 percent in class IV and 91 percent in class III. Central Premises. --At the present time it is not possible to guarantee the detailed accuracy of figures in each cell of Table IV-7. The table provides a mechanism for systematic analysis and, it is hoped, may be useful as a framework for building more reliable estimates. More important than the detail of Table IV-7, however, is the general nature of the figures reconciling numbers of operators by economic classes of the Census of Agriculture with the OASI operators. The central premises are that operators in the three highest classes, I, II, and III, had a farm self-employment income compelling coverage under OASI and they will have largely developed a habit of reporting to the Internal Revenue Service. For these reasons, all but a few of the operators in classes I, II and III will also be found in the OASI population. Operators in the three lower economic classes VI, VII and VIII, had such low incomes from farm self-employment that relatively few could qualify for OASI coverage. Further, many who could qualify will not have reported to the Internal Revenue Service in 1955. Thus relatively few of these were in the OASI population. Classes IV and V are intermediate and can be calculated as residuals. As the estimates have developed, 131 numbers assigned by this method to classes IV and V appear reasonable, compared to adjacent classes. There is thus reason for confidence in the overall accuracy of this class-by-class estimate. Agricultural Production of OASI Operators An estimate of the agricultural production accounted for by OASI farm operators is made in Table IV-8. The procedure used was to reconvert the operator gross income classification to a classification of farms by gross sales. Production is determined by assuming that farm numbers thus derived are representative of those in their class. The result is some extremely useful information: whereas farms represented in the OASI are only 36 percent of all Census farms, they account for almost three-fourths (73 percent) of farm products sold. Another fact is that farms having over $5, 000 gross value of sales accounted for 79 percent of all sales of agricultural products, and 83 percent of these are estimated to be included in the OASI data. These farms, with over $5, 000 gross value of sales, only represent 27 percent of all Census of Agriculture farms, but they comprise 62 percent of OASI farms. At the other extreme of farm size, those units with sales of less than $1, 200 make up 40 percent of the Census of Agriculture farms but only 9 percent of the OASI farm group. 132 .w GESHoo {tux/H @388 Eouho .853 Mom moamm Hmuggowumm mmouw mo makes. a: ma i m. GESHOU 8. poflmm/w .N cEdHoo a“ muocccdc o» @3138 Con? GOmHom pom oEOocfi 8H3 uno8>oamgoufiom mmonw mo magma a“ mp coflmodflmmmao mEHn .H mmmfio .HoH pogo: ma ammoxo mmmfio .305 mo o>39comohmou poadmmm ohm m c5530 5 335 Shaun .muoumnomo 8.33 Hm3 :oflodp noun Haudfidoflwd m0 039’ 05 mo coflmgflmo Gm osfimmom moxme mEH 3:5,. .89 mofimm Haudfidofiumm mmOHm mo mummo. on“. no powfimmmfio mEumw mo muonEdc on Moan .0508: unorc>oamvcoufiom 88mm mmonm >9 pofifimmmao paw Goflmfidmom youwpomo 8.3mm Hm 8... .2 88 .m 2. 8m 83. 88 .3. - 8m .8 .3 o; .m 88 .m E :8 8m 88 .8 - 88 .8 .5 88 .8 $8 8 3 83. 8m 88 .8 - 88 88 .n 888. 8 8» .s 8 8.: 8 88 .88 .85 .H 802:8 a: 802:8 fi 28 888: 888: mEuww wousfidofiuwxw mmmdo panda ouofimnomo 5.4.0 mo 99980 99950 Hommmouw nommmOHw mmmao UMEOcoom HO COmuUdUOHnH .GOSUSfiOHQ HNuOH. m0 “—GvUHmnH fivwwfimmddu Umwwwmmmanv fl 8 m a m N mmuoumHomo 5.1mm HwH MAMo >39me >80 883 8.88 .9244. 899 3 988.8888. 8988388 8999 Go 88¢8 839.2 8>89 3 99359» 8% mms 80w 8.8 m8udw¢ Hm<0 89g. 88m 898 . .883888w< mo 8.98880 89... >9 8mm: 8 8898.88.28 88 88988 8.8m mo 8.385 mmOhw 88. mo 888.8m mu .8 IMMMIIJWM 88838089 8.88.8828 8.8m Hm<0 9899 88988388 883880.29 838m 883.8388 98839.98 -Cmm .28 a: Adm .8898 wcflmflmdzw .8888 >.8> 8% 858880 88. >9 98.9 8 8.8 889808 88.88% 898.8988 80w 888388 ooov 898 3888.89 M 95098 885mm Gown—8380.3 988% 899 8883888 3.. .>oc8umwmcou m0 888 899 new 88.88 8“ 88883.88 39H. 83098 8.8 E .mnm .Nw mo 880889 Hmndfidowuwm 988» 983 8803880988 988.99 -Hduflwm away .0 .88838m 889 88085 89.8.8980 .mms 88085 HO 883.8385 "80.3 8888 8058989808 8999 80% 88383888 89H. .83“ U8>o88u 89 coflodvoum 8899 88.8 80381829 Hm9 888: 88 888508 89 on. 8888388 88.89 88.8.8988 003V 899 new 8888 3 8888.938 .8983 H 8888 CH .8888 899 8 88.23 8.98880 9.88» 3 88889 8883 mo .8988» 898. 8.8 88.88 899 8.“ Gofludvoum :8 mo aofiuomoum 8888 899 89 0”. 8885888 89 888.3 Hm 6mm: 8ndfido€m< mo 8.98880 858880 89» mo 588usm .m .D ”8ondom8 .8Hdv8ooum 8999 >9 U8Q098>8U 888388 899 .8889 888589.98 m“ coflodvonm .2899 888 8.888898 833958 899 U888 89 3.9098 8H .>u>H 899.89. 89 .Gofimgmom 808828 HmH 838R. 808w >H 88.88 8“ 88088“ 8.8% 889% no 88938888 8.89.2290 mo .89858 ~88» 899 89 u: ooo .wmm .913 899.89 wNw 5 >H 88.88 098 H2 8888 808“ U8>o8 .898H8 89”— 8M u: ooo de 8.89.5 .Aooc .omvv .mwlm u ooo .vm .H: 8888 on @8388 888 >H 88.88 808m “8&3 8.8 ooo .2. 98.8 > 8888 808 fi 089 @8508 8.8 ooo .mw. ”ooo .omaV 8.8 >H 8888 5 8.89.8828 85 83898 new .8888 88939 8x8: 89p 08“ M889 8958 8.8 9I>H 899.88 am 88.88 .833 8 38 88958 cofluomofim 8888 89H. .943 89988 8 8808 8.88. mo 8888>8H 89a >28fi88888 8“ 8888 88.8.“ o» 88098.8“? 808m MGEH8>GOU mo 888808m 89h.“v 134 Summary and Conclusions Data from the Current Population Survey, the Internal Revenue Service and the Census of Agriculture can be used in a coordinate manner to define the OASI farm operator population. One of the most usefulproceduresis the translation of Census of Agriculture farms into terms of the OASI and their classification by farm production. This makes possible an estimate of the place of OASI farm operators in the commercial agricultural economy. One of the most significant findings is that numbers of OASI farm operators were only 39 percent of the total of Census operators but these OASI operators accounted for 73 percent of the commercial agricultural production. Corollary to this, 83 percent of Census farms selling $5, 000 or more of agricultural products were represented by OASI data. On these grounds the OASI farm operator population is considered basically to represent commercial agricultural producers. An incidental conclusion may be noted in passing: This research supports field studies in pointing out that there are a substantial number of low-income farmers who cannot qualify under the OASI program. Ironically, these are the ones most in need of benefits from Old Age and Survivor's Insurance! 135 CHAPTER V A COMPARISON OF NET INCOME ESTIMATES OBTAINED FROM OASI DATA WITH THOSE OBTAINED FROM OTHER SOURCES A concept of the contribution of OASI farm operators to commercial agricultural production was derived in Chapter IV. Only 36 percent of the Census of Agriculture farms were represented in OASI data but they accounted for 73 percent of all sales of agriculture products. OASI operators were thus responsible for the bulk of the commercial agricultural production. In further pursuit of meaningful characteristics of the OASI farm operator population and the OASI farm data, this chapter examines net income relationships. Specifically, two questions are treated: how does total and per person net income of OASI operators compare with that of other farm operator populations, and can OASI farm population data be used to help estimate net income of the total farm population? OASI income data have been interpreted as essentially the monetary return to an individual for his current economic contribution. This may include entrepreneural return from a farm and in some cases a nonfarm business; a return to labor either in the form of wages or as part of the income from a business; and there may be a return to professional skills. Self-employed individuals may also receive a return from owned equity as discussed in Chapter II. Because of the components of income not 136 included as taxable income in OASI data it is necessary to draw upon other sources to supplement what is reported in the data of OASI farm operators in order to estimate their total money income. No attempt is made here to compare incomes of farm people with incomes of those in nonfarm industry. At the same time it is not entirely possible to excape problems of income measurement due to widely differing income components. Within the farm population there are considerable variations in the value placed upon being one's own boss in day-to-day operations, and in the receipt of other non-money forms of income. There are also variations in economic opportunities of individuals within agriculture and in the degree to which off-farm alternatives constitute realistic possibilities. The farm population is not homogeneous and weight must be given to all these factors even in an intra-industry study. Net Incomes of the OASI Farm Operators Net incomes of the OASI farm operators will further define this group by indicating the relative command that they have over total current income. In addition to the return that they receive from their current economic contribution, total income also includes other returns because of command over resources, transfer payments, plus income elements excluded because of definitions used in the OASI program. A detailed expository treatment was given most of these items in Chapter II. 137 Taxable Income. --A total of $3, 482, 104, 000 income was reported to BOASI by the l, 876, 100 receiving self-employment farm income in the 48 states of continental United States.1 The distribution of receivers of this income is shown graphically in Figure V-l. Since actual records, and not memory are the basis for income reports, this distribution is thought to be the most reliable obtainable, within the institutional limits of the OASI program. Both the lower and upper parts of the taxable income distribution are affected by institutional limits to the OASI program. Only those with $400 or more of taxable income are included. Those with taxable incomes above $4, 200 appear in the population but most of these are listed as having incomes of exactly $4, 200. Z A total of 172, 600 or 9. 1 percent of all operators had taxable incomes of $4, 200 or above. Ninety- five percent of these reported exactly $4, 200. According to this, Figure V-l gives a picture of the income distribution from covered sources for about 90 percent of the OASI farm operators. Income Distribution above $4, 200. --A total income estimate required extrapolation beyond the curve shown in Figure V-l to determine the 1All farm operators reported $3, 507, 536, 000. The 12, 300 operators in United States territories and trusts reported $25, 432, 000. 2Optional reporting procedures may distort the distribution some- what but this is largely confined to incomes under $900. As estimated in Chapter IV, 27, 000 are missing with taxable incomes above $4, 200 because of wage incomes above $4, 200. The 8, 700 reporting incomes above $4, 200 make up less than . 5 percent of all OASI operators. 138 .Hm8m888 mag o..— oofi E 803 :wm mmmL .8802: 83.8888 >9 whom—888A? comm 8.8m Hm<0 no 83888 888.8Q 8:0 .8 mo Gofidfluumwfl .9u> HMDOHM SS'QID BIdILI‘BS ut .qutunN 139 distribution of the 9. 1 percent reporting $4, 200 and above. This was done using a total income distribution from the Current Population Survey as a guide. 3 Details of the extrapolation and the computation of income to be added to that of the OASI operator are given in Table V-l. Livestock and Forestry Sales Reported as Capital Sales. --A special provision of income tax rulings requires the reporting of livestock kept for dairy breeding or draft and certain forestry products as sales of capital items. This excluded some income from being counted as taxable that is properly a part of agricultural production and that would have been considered income in Census and Agricultural Marketing Service statistics. Not all receipts from sales of livestock kept for breeding, dairy and draft can be fully counted as increasing net incomes. Receipts from livestock raised on the given farm from which they are sold can be fully counted, but this is not true for breeding livestock that were purchasedfor 3The regularity of the income distribution curve shown in Figure V-l invites fitting a mathematical curve to these data for purposes of extra- polation. Problems attending such a procedure were discussed in connection with Table IV-Z. Such mathematical extrapolation beyond the data range, while having the appearance of yielding neat, precise answers, gives results that are largely determined by the mathematical characteristics and treatment of the fitted curve. The distribution used as a guide--"Total Incomes of Farmers and Farm Managers" from Current Population Reports, Series P-6O has a number of points to commend it. The proportion with incomes over $4, 000 is nearly the same as that of the OASI population and it only includes individuals who devote most of their attention to agriculture. A disadvantage is that it includes money income from all sources. This is at least partly offset by the lack of restriction upon the relative effort devoted to nonagricultural occupations by the OASI group. OASI operators may thus range higher in incomes from nonfarm sources. 140 use and later resold. A farmer raising and selling males or females for breeding purposes counts these as ordinary income. For this reason it is necessary to estimate the number of such livestock that were originally purchased. This estimate is crude, made on the basis of observed practices in important livestock areas, and it ignores cycles in numbers and prices. All adult females were assumed to have been used for dairy or breeding. Males posed another question-~stags resulting from poor castration practices had to be estimated. Horses are a special problem. Because of their rapid decline it is not possible to ignore the "horse cycle, " in addition, many horses are permitted to die a natural death. Table V-Z and its accompanying footnotes gives details of this estimate. The total is very close to a similar estimate by Stocker and Ellickson despite different assumptions. 4 OASI farm operators are assumed to account for 73 percent of the total, since this is the proportion of all agricultural sales attributed to them. Income from Sources not Covered by OASI. --The 1955 Survey of Farmer's Expenditures also collected information on off-farm sources 4rOp. cit. , p. 120. Their estimate of the l. 3 billion for sales of breeding cattle, sheep and hogs is almost identical to that made here ($1. 06 billion x 1. 25 = $1. 32 billion). They assume . 2 billion of other sales, and an allowance of one-third for failure to report on schedule D. No allowance is made for purchases from breeders, nor are timber sales considered. Stocker and Ellickson's allowance of one-third for improper reporting appears excessive. No adjustment for improper reporting is made in Table V-Z under the assumption that any downward adjustment required by it applies against omitted items. 141 ooo.ooo.mmwa ooo.ooo.aoo 000 .000 .wmh ooo .owm .wwo . 0cm 6% ad ooo .mn: . . . .o>Hco .m .3 3333300 5 muoemuomoiugfl OONJVG mo omdmoon vmpgoxo oEoocH muoumuomo Hmo cow .w ”Cotonou rhodofiw @8023 How mocmkrozm mmod ooo.ooo.o~o.sa ooo.~n~ m.o~ o.oa annexe ooo.ooo.omm ooo.ov oom.o m. m. ooo.m~a um>nv ooo.ooo.vo~ ooo.om oo~.m~ a. n. ooa.¢~m..ooo.mam ooo.ooo.ava oom.~a oom.fia o. o. ooo.vsa..ooo.osm ooo.ooo.m~¢ ooo.w oom.~m m.~ o.m moo.oa..ooo.om ooo.ooo.mn om~.m oom.ms a. ooo.ma..oom.mm o.a ooo.ooo.¢o om~.m ooo.na o. sov.ma..ooo.ma ooo.coo.mva omp.¢ ooa.om o.a o.~ mam.¢e..oom.vw ooo.ooo.so~ omm.¢ oom.¢~ em.~ m.~ mo¢.¢a..ooo.¢a nay Aav Ag; Ag; mdouw mo omoEoog muvnEdZ 20353336 acofldnwhumflp adoopom “Coopona oEoocw .3308 owmuo>< 0800:“ H.309. ....... 840 iii: 233. n mmnv so add: oom :va .«0 omdmnomn. dado nonopoao Show $40 Sod popgoxo oEooGw mo oumemumm m m m: 680on 39823 .~u> ”Ham/VB 142 .muofimuomo Sm wo oEooCfl pouuomou we? ob mowhofiuuou mopmum @8ch a: mnouwfiomo mo moEooGM potommn Ho 03.2 05 mfi mEB #:00qu N. . >0. voodoo“ ma oom .«é o>onw pmuuomoh wasp Ho: mm poumaflmm oEooGw H38 05 $3.90 moumpm @3ch Amazocflcoo mo mammn m op m3» umdflpm OH .mofiuofiyuou mom—3m USED Gun muoumuomo mmpdfiosfi 559? mm :oflmfidnmu 93.0 .owcmn 00v June. I ooo .Xw o5. cw Eooumm m .N m5 m0 Em: Ho>o 3.971999% nofiwfimmo Hm23 Goon 330.34“. 033 moEooaM .305 «om; .vw paw ooo .vw Cook/won. Saw omofi mo oov .NN mocfim .owcmu baboon“ mow 3; .. ooo 6% 05 GM 00> 6w. on op woumewumo 0.2m 0.32:6 .mofinowoumo “mg pom umhfl o5 HOW ammoxo momcmH o5 mo muGMOQEE of mm swim“ and mommuo>oo..m pom oow JG mo moEoon pm: ooo .N: o H33 <3 .ousfidownwm Sod @5003 m0 Gofiuomoum 05 0» mm pouowfimou «on m“ msouw Hmoo bona 5:3 ponEdc Edam m mopgog .omm; op “Godwmompsm mwfiapmo pouuoaop ”3053/ was?» 06.2% 0» 95 mo mahofimm mdoocmzoomflgo .: $395 5 pocwfimmm muongdc o... pcommonpoo who: muobEdZ .HH HopmmflO ca masonw “CoEIAOHQEo mo coflmflomop womb do?» Judo a: 6502.: pouo>oo HOW monoEougqop Home Ho: EU mmcdzmo £05m wcflmomop odoopom OH ou m efioumewxonmmda .quE>oHQEo Ho mode: pono>oo Scum mwcficumo 2.33, 53 mopgocH .Hm9 poflmmdm vacuum >uoumfim v20? moodsflsoO of SOS Sop mo :oSmHSQS < ”ooudomm 2 3 m e e e ON 2: £3 3-5138. NM mm. o1 ml ml .ml «w 2: Z a 8 m om m: m e m o mm 03 EN 095 swam .e S em o m m a om 2: a2 Gum swam .m 0 mm 3 w m o o 03 wmm Omnhmm .N 23 E: 3.; 3.; GE 33 E3 3.; Am .000: vm_uom_ wm.le. muofiO Hos om: poo Nmod vm.£mm. vmlwmm. vmg Soc mm: “Coononm .59852 0 ob. acid 0... acid Hos Nmma no: mmma mmummqfi ow ng panchw pong/OD Uouo>oU popo>oO weave/00 pouo>oO mdoscficou “nongofiem uuuuuuuuuuuuuuuuuuuuuu Gnofimm owmuo>oo Hmn mmmfi ou yoga uaostwoacpo mo mom: vogue/00 80.3 mwcacfimo 55> mucumuomo Show Hm gamma. 189 TABLE VI-2. Average taxable income and four-year income range of OASI male farm operators receiving one or more quarters covered income each year of 1951 to 1954, by employment groups for years 1951 to 19548“ Employment Average Average Range as a Number income c percent of group range per year average (1000'8) ($5) ($3) (“M 2. SEF-PC 19. 7 1934 1710 88. 6 3. SEF,SEO 39.6 2510 1040 41.5 4. SEF,WSO 57.1 1810 1120 62.0 Groups 5 to 9 23. 7 2120 1100 53. 5 Total (2 - 9) 140.1 2080 1180 56. 9 3'Source: A tabulation of data from the Continuous Work History sample, supplied by BOASI. bSee explanation of employment groups in Chapter II. CDetermined by subtracting the lowest taxable income received from the highest received in 1951-1954 for each individual and averaging. Standard error is not used because only four observations are involved. 190 one quarter's coverage for every year of 1951-54. Year-to-year off-farm income for this group provides further insights. This is summarized in Table VI-2. Mean taxable income was $2, 080 per year for the period. The range of income received for just these four years was well over half of the average--57 percent. Year-to-year income variation as measured by the range was highest for the SEF-PC group. This is emphasized as a significant factor later in the discussion. Those with nonfarm wage income in 1955 were numerically the most important, making up 41 percent of the total. Although they continued in 1955 with off-farm income they had a range in year-to-year incomes equal to almost two-thirds, 62 percent, the average received in 1951-54. Thus even off-farm employment in every year did not assure a stable income from this source for the relatively few farm operators having it. In the period studied there is evidence of an unsteady pattern of off-farm work, and a widely varying income for those with off-farm employment each year. This directs attention to another major factor: Can instability in off-farm work be associated with the period under consideration; More specifically we may ask: How does the nonfarm income received by farmers vary with the demand for nonfarm wage workers, hence with the business cycle? If nonfarm incomes of farmers are less secure than nonfarm incomes to other segments of the labor force, then this source of income to farm operators may actually exaggerate fluctuations in nonfarm employment. Rather than a stabil- izing element in the incomes of farmers, nonfarm incomes would act 191 as an unstabilizing factor. Important facets of this question can be studied with OASI data at hand. First, a brief look at conditions prevailing during the years 1951- 1955 is necessary. The period began with a rise in demand for agricul- tural products and other products generally due to the Korean conflict. This slackened and was followed by falling farm prices and, in 1954, an industrial recession. Despite the recession, farm cash costs continued to rise throughout the period, and net income of farm operators dropped steadily. In 1955 it was $11, 767 million, down from $16, 334 million in 1951 and the purchasing power of operators' net cash income from farming was less than two-thirds its 1943 to 1947 level on a per-farm basis. 11 Drought in some areas contributed to farmers' difficulties in 1954 and 1955. Generalizations from so short a period must be made with due care, however it covers a wide range of conditions, since it includes both an expansion and a contraction in agricultural demand, and an industrial recession. Estimates of aggregate non-agricultural income to the farm popu- lation fell in the 1952 to 1954 period, but relatively more slowly than the net income of farm operators from farming. See Table VI-3, part A. 11 U. S. Agricultural Marketing Service, Farm Income Situation (February, 1960), pp. 29 and 33. 192 TABLE VI-3. Farm and off-farm income to indicated farm populations and specified OASI farm populations for years 1951-1954 -------------- Income--------—----- Population and income group 1951 1952 1953 1954 (mil. dol. ) (mil. dol.) (mil. dol. ) (mil. dol.) A. AMS estimate sa 1. Income to the farm population from non- agricultural sources $5, 600 $6, 100 $6, 000 $5, 800 2. Total net income of farm operators from agricultural sourcesb 16,334 15,337 13,278 12, 691 B. OASI income to those who were male farm operators in 1955C 1. Total taxable income 487 492 495 432 2. Taxable income from d wages only ----- 328 330 264 3. Total taxable income to those who were male farm operators in 1955, with SEF-PC class excluded 345 364 389 386 (1000's) (1000's) (1000's) (1000's) C. OASI numbers data of those who were male C farm operators in 1955 1. Number with OASI taxable income 316 324 337 312 2. Number with wage income 245 249 258 229 3. Number who were SEF- PC in 1955 114 109 102 61 a'Agricultural Marketing Service, Farm Income Situation (February, 1960), p. 29. Population as measured by AMS is on the basis of farm residence and income sources. 193 TABLE VI - 4. C ontinued Includes non-money income and government payments. c:Tabulations of data from the Continuous Work History sample supplied by BOASI. Note that all income is off-farm since farm self- employment income was not covered in these years. Directly comparable 1955 data are not available. dNot tabulated. TABLE VI-4. Indexes of employment and weekly payrolls, averages by years for 1951 to 1955 Employment Manufacturing industriesc total non- Total Production Production Year agricultural labor k w ke civilian labor income wor er or r forcea’ employment weekly payroll 1951 100.0 100.0 106.4 129.8 1952 101.0 108.3 106.3 136.6 1953 103.2 116.9 111.8 151.4 1954 101.4 116.0 101.8 137.8 1955 104.7 123.8 105.6 152.9 aSource: Economic Report of President (January, 1957), Table E-l7. Index constructed by setting employment numbers in 1951 equal to 100 percent bSource: Economic Report of President (January, 1957), Table E-12. "Wage and Salary Disbursements and Other Labor Income. " Index con- structed by setting 1951 labor income equal to 100 percent. CSource: Monthly Labor Review (April, 1956), Table A-4, 1947-49 : 100 for both employment and payrolls. 194 These are estimates by the Agricultural Marketing Service and provide the basis for the usual conclusion regarding the income stability resulting from nonfarm wage work. There are at least three grounds for objection to use of these data in support of such a conclusion: (1) parts of the population included are basically nonfarm--they do not fit the concept of a family farmer bolstering farm income with wage work; (2) other components than wages are included in the non-agricultural income; and (3) the data used are basically an annual cross-section series--it is not possible to follow individuals from year to year. The OASI data in Table VI-3 do not completely satisfy all the above objections, but they are a decided improvement. It consists mainly of individuals shown to be important in agriculture in 1955 and an assumption is that they were also closely associated with agriculture in the 1955-54 period. Wage income is more relevant to the subject under discussion and it is traced through 1951-1954. The number with wage income dropped 11 percent and total wage income dropped 20 percent between 1953 and 1954. This compares with a 1. 5 percent drop in civilian non-agricultural employment, and less than a 1 percent fall in labor income. Even the more volatile indexes for the manufacturing industry each fell only 9 percent. In this comparison the total nonfarm wage force was increasing annually, but so were the numbers in the 1955 OASI farm population who had off—farm experience. Those having covered income for the first time were 2. 8, 2. 8 and 2. 5 percent respectively for 1952, 1953 and 1954 in terms of all operators who had had this experience. 195 See Table VI-4. The above is apparently clear cut evidence of unstability in the wage income to farmers. It occurred in a dynamic situation making a simple assignment of cause-effect relationships impossible. Unfor- tunately the OASI data are not complete and, used in this manner, have some notable distortions. The following observations serve to supplement the data and add further insights. A first item worthy of special note is the 22 percent fall in the purchasing power of operator's net cash income from farming during 1951 to 1955.13 This is certain to have had its effect in discouraging farm families, and unfavorable weather in some parts of the country in 1954 made farming even less attractive. A decade of favorable farm profits had greatly elevated farm living levels, requiring a sustained flow of cash income for their maintenance, as would be suggested by the "Ratchet Theory. ”14 All of these combined to put pressure on farmers to seek off-farm sources of income. Without such a concert of factors it is probable that the total off-farm wage income might have dropped more 1 than 20 percent in 1954. 5 13 U. S. Agricultural Marketing Service, Farm Income Situation (February, 1960), p. 33. James S. Duesenberry, Income Savings and the Theory of Consumer Behavior (Cambridge: Harvard University Press, 1949). There were almost twice as many with off-farm income in 1955 as in 1954--564, 500 compared to 312, 000. This might suggest that large numbers of farmers took off-farm employment as the general economy recovered in 1955, but there are many qualifying factors. Among these are the new categories of OASI covered employment added in 1955 in 196 Now consider the SEF-PC group-~those with only farm self- employment income in 1955 but who had had previous off-farm coverage. Table VI-3 presents evidence that the drop-out in numbers of this group with off-farm employment may have been one of the most important factors in the decline of off-farm covered income between 1953 and 1954. It is proposed here that an important element of the SEF-PC class is composed of individuals who were involuntarily separated from the off-farm wage force in 1953 and 1954. They were young--46 years of age compared to 55 years for the SEF class. Their mean 1955 income was the lowest of any class--$1, 670 compared to an average of $1, 875 for all males. Still more revealing his the relationship between years of off-farm employment and 1955 income. The more recent the period of off-farm employment the lower the 1955 income. Income in 1955 averaged $1, 735 for the SEF-PC class who had no coverage after 1950. It fell to a low of $1, 490 for those employed in 1952 and 1953 but not 1954.16 This suggests that many in this latter group were involuntarily separated from the nonfarm labor force in 1954. They were forced back upon a farm unit that was inadequate. For this reason their 1955 incomes were addition to that of farm operators. There is some evidence of individuals previously eligible who first reported in 1955. For example, the SEF, SEO class jumped from 83, 400 to 210, 000 between 1954 and 1955. Thus the present data leave a number of items poised as a question mark. 16There were 313, 800 of the SEF-PC group having off-farm coverage before 1950; 34, 700 did not have coverage in 1954 after having it in 1952 and 1953. See Table VI-l. The difference between the average incomes of $1, 735 and $1, 490 is highly significant statistically. 197 low compared to incomes of farmers who had farmed full-time for several years. There is another important element in the SEF-PC class that should be kept in mind when making comparisons. It is made up of those who use nonfarm income to gain capital and who returned to full-time farm operation voluntarily. In Table VI-3 it will be seen that the number of the SEF-PC group who had covered employment falls every year. This is a result of the definition of the class--those who voluntarily or involuntarily returned to full-time farming, and this tends to exaggerate the numbers forced out of nonfarm jobs in 1953 and 1955. Over half the SEF-PC class had all their nonfarm coverage prior to 1950 but even those who had been full-time farmers for five years had an average covered income in 1955 of only $1, 735 compared to $1, 755 for farmers of the SEF class. Even though small this difference is statistically significant at the . 1 percent level. Were these individuals marginal nonfarm workers at some earlier period? There will be occasion in the next section to examine an interrelated aspect of the SEF-PC class. It was considered necessary to invite attention to this possible distortion in data due to the look backward from a specific year, although it cannot be fully assessed. This section has argued that nonfarm income is less a stabilizing factor to the incomes of individual farmers than currently used estimates lead us to believe. For those farmers who are important in the commercial agricultural economy and who remain on the farm there is evidence that 198 nonfarm income may fluctuate widely. Relatively few commercial farmers are steady participants in the nonfarm labor force and even those who are have a quite varied year-to-year income from this source. There is also evidence that suggests farmers to be more sus- ceptible to the business cycle in their nonfarm wage income, than are other elements of the labor force. The dynamics of the situation and limits to OASI data from a single year make it difficult to quantify this exactly. Ample a priori reasons exist substantuating the case developed here for unreliability of off-farm employment for self-employed farm operators. Having to divide his time and attention between two interests, the part-time farmer proves unreliable to his employer. He may require time off to handle farm emergencies and to do farm work at critical seasons such as seeding and harvest. Often his skills and work inclinations are such as to put him into jobs, as construction, that are plagued by their nature with viscissitudes. An employer may consider that laying him off causes the least individual difficulty since he has another income source. His location is fixed, this hampers him in moving with jobs or ranging for employment. All these operate to set the farmer at a disadvantage to the nonfarmer in competition for jobs and to make him a marginal employee in many situations. 199 Some Relations of Off-farm Experiences to Present Circumstances General types of relationships between farm and off-farm employment are well recognized although much remains to be done to quantify elements involved. 17 Some individuals take off-farm work as a means of gaining capital for a farming operation. In cases where the individual works part-time at farming and a nonfarm job this may be a transitional stage from farm to nonfarm status, it may be simply a temporary means of supplementing farm income or it may be a case where a basically nonfarm worker prefers to reside in the country. Most of these relationships are with reference to current employment. Relatively little information is now available concerning past experiences and present circumstances. In this section some of the salient aspects of past and present experiences are examined in their relationship to characteristics of individuals involved. Opportunities for Income. --The present income commanded by an individual depends partly upon a complex of factors that may be termed opportunities for income. These include personal characteristics such as ability, the family socio-economic level, and regional factors. 7See for example, U. S. Bureau of the Census, Census of Agriculture: 1954, Vol. 111, part 9, Chapter VIII, "Part-time Farming (1956), pp. 7-10. 200 There are important regional differences in levels of communications, education, availability of nonfarm employment, and average incomes. Random occurrences and personal goals are other important items that may influence money income. Full-time farm operators with previous off-farm covered income were found to have a lower mean income in 1955 than full-time farmers without such experience. Apparently many of the former are individuals whose opportunities have been inferior to other full-time farmers. 18 One aspect of this was explored in the discussion of stability of off-farm labor income. Evidence was presented showing that some of this class were victims of uncertain off—farm jobs and apparently forced in 1955 to live on the income of an inadequate farm unit. Regional data, provided in Table VI-5, shed additional light on distinctions between the two classes of farmers whose only covered income was from farm self-employment in 1955--the SEF and SEF-PC classes. The largest number, relatively and absolutely, of full-time farmers were found in the West North Central region. This region may be regarded as one of the better agricultural areas. Mean income of the SEF class is relatively high in the West North Central region--$l, 815 18Some in the SEF-PC group are thought to be retired. Such individuals would not necessarily fit into the discussion of this section. Such evidence as is available, however, indicates a relatively low proportion of retired individuals in the SEF-PC class. The proportion over sixty-five is 9. 5 percent compared with 17 percent for all male OASI operators. 201 TABLE VI-5. Percentage distribution and taxable income of OASI male farm operators, by employment classification and United States regions, 1955a ---------------- United States regionsC—-------------—- Employment North South East West South roupb Atlantic Atlantic North North Central Western g Central Central A. Percent Distribution (‘70) (‘70) (070) (‘70) (‘70) (070) l. SEF 32 35 40 51 34 23 2. SEF-PC 34 33 32 23 31 36 3. SEF,SEO 16 11 9 9 12 19 4. SEF,WSO l4 l8 16 13 l7 l4 5. SEF, WSF 1d 1d 1d 1d 2d 4d 6. to 9 4d 3d 3 2 4 5 Totale 100 100 100 100 100 100 Number in each region 124, 500 162, 500 410, 200 573, 200 312, 900 199, 600 B. Average Taxable Income (Rounded to Nearest $5)g ($1 ($1 ($1 ($1 ($1 ($1 1. SEF 1,085 1,295 1,855 1,815 1,395 2,345 2. SEF-PC 1,705 1,370 1,720 1,675 1,400 2,130 3. SEF, SEO 2,390 2, 080 2, 285 2, 155 2, 120 2, 890 4. SEF, W50 2, 405 1, 795 2, 355 2, 070 1, 870 2, 500 5. SEF, WSF 2, 245d 2, 350d 1, 805d 1, 780d 1, 715d 1, 670d 6 to 9 2,815d 2, 540d 2, 640 2, 310 2,330 2, 800 Average for region $1, 985 $1,540 $1,950 $1, 860 $1, 610 $2, 385 aSource: A tabulation from the Continuous Work History sample supplied by BOASI. See description of employment groups in Chapter II. numbered as assigned in Chapter 11. Groups are 202 CRegional divisions include the same states as the Census of Agriculture: 1954, Vol. II. The North Atlantic region combines the New England and Middle Atlantic regions. The South Central region com- bines the East and West South Central regions. The Western region combines the Mountain and Pacific regions. Regional classification is on the basis of place of issue of OASI number. It is inaccurate to the extent of worker mobility, but this is regarded as small for farm operators. ClFewer than 100 in the sample. eDetail may not add to 100 percent because of rounding. fThe total number involved in this tabulation of OASI male farm operators was 1, 782, 800. This is less than the 1, 805, 800 total of all males in all United States possessions because of 12, 300 who were outside continental United States and 10, 700 with railroad employment at time of issue of card number who could not be classified by regions. gStatistical significance: As a very approximate guide to statistically significant differences, where the population from which each sample mean compared is taken is 100, 000 a difference of $10 is significant at the 1 percent level. Where each population is 10, 000, mean incomes must have a difference of $20 to be significant at the 1 percent.level. This illustrates an added advantage of OASI data; the relatively large numbers in each sample category make it possible to detect even small differences between the populations represented. ‘ *‘ A_.___ 'V M..— 203 compared to $1, 295 in the South Atlantic and $1, 085 in the North Atlantic regions. SEF mean income is higher in East North Central than in the West Central region but in the former there is also relatively more demand for nonfarm labor. An important item for attention is the ratio between numbers in the SEF class vis a vis those classified as SEF-PC. The better the agricultural area, and/ or the less available the nonfarm employment, the lower the proportion of SEF-PC to SEF in the population. An opportunity differential hypothesis appears to explain much of the observed differences. 20 In the better farming areas, one of the best means of accumulation farming capital in the 15 years of 1940-1955 was in agriculture itself. Those who were forced to go to nonfarm jobs to accumulate capital would be more likely to be the relatively disadvantaged ones. Their 1955 income reflects this. In the poorer farming areas of the South and North Atlantic, nonfarm jobs offered better ways of 21 accumulating capital than agriculture alone. Those who took the nonfarm 19"Better" and "poorer" agricultural areas, refer to the average opportunity for per capita income in agriculture. 20 . . . . . . The Western region appears an exception in this generality just as it was found to be atypical in a number of respects in Chapter 111. It has a very low proportion of SEF but the highest average income. The Western region varies markedly from others in its pattern of migration and recent development, e. g. , reclaimation projects among others. Farmers moving to these also indicate problems of opportunities and are likely to have a history of past off-farm employment. Another factor in the West is the large agricultural units offering employment to operators of nearby smaller units. 21Vernon W. Ruttan, "The Impact of Urban-Industrial Development on Agriculture in the Tennessee Valley and Southeast, " Journal of Farm 204 route fared better on the average than others not doing so. Despite the superior performance of the SEF—PC group in the poorer agricultural areas, their incomes in these regions were not as high, except in the North Atlantic region, as in the North Central region. This, combined with the lower proportion of SEF-PC in the North Central region where there was some of the best agricultural opportunity, resulted in a lower 1955 mean income for the SEF-PC class as compared to those whose only experience was at farm work. Age at the time of first nonfarm employment is also closely related to opportunities available. Those starting at a relatively young age are likely to be more successful in a nonfarm job, hence improving their chances for accumulating capital. It also indicates that they have oppor- tunities for nonfarm work available, they are aware of it and able to take advantage of the opportunity. An individual's starting nonfarm work later in life more often may result from an unsatisfactory farm income, or severe misfortune forcing him to make such a decision. Persons not employed off-farm till age thirty-five or beyond would also be expected to have less adaptability and lower earning capabilities at nonfarm work-- handicapping them still further. The level of OASI income in 1955 was decisively related to age at first nonfarm employment. All operators who were under twenty-five years of age at the time of first covered income between 1941 and 1950 Economics, Vol. XXXVII (February, 1955), pp. 38-57, discusses how an industrial complex may affect the incomes of all in the vicinity: on-farm, off-farm, and nonfarm workers. 205 had an average 1955 income of $2, 040. For those over thirty-five at the time of first nonfarm employment in 1941 to 1950, average 1955 income was $1, 560. Table IV-6 gives more detailed breakdowns of income by age at time of first covered employment. Effect of Continuity and Tenure of Off-farm Wage Work. --There were 215, 900 male farm operators in the 1955 OASI farm operator population who had wages and salaries from nonfarm sources in addition to farm self-employment income, this is the SEF, WSO group. 22 The distribution of their 1955 income between wages and farm income, according to their pattern of past employment is shown in Table VI-7. Few will be startled to find that wage income increases proportionately as a farmer is employed longer and more regularly off-farm. Data in Table VI-7 give documentation of the fact, and serve as a complement to the discussion of part of the SEF, WSO class on page 185. Differences in total 1955 income ranging from $1, 685 for those with erratic coverage to $2, 550 for operators covered every year are largely accounted for by differences in the wage component. For all these part-time farmers mean farm income is not widely different. There is an easily-identified tendency, however, for income from farming to be lower as off-farm work is more stable. This is the opposite of the strong correlation of 1955 wage income with regularity of off-farm work. 2Does not include those having other types of income in combination with that from farm self-employment plus nonfarm wages and/ or salaries. 206 .Hm222 poflamdm wagon 2:02.33 v2.83 92052232200 02.3 50.3 dump mo 22033253 .4 .poqfimono 022m ow 62,362.23;th 683 .23.qu 602262.893 pono>oo mo 2203?:on 62.3 5 mowcmno mo mEoEOpQ @295 O» pond 0.203 mpowuom Hmoauounm .HH HoaoSO 2.22 239% HGoE>onEo Ho coflmfiomop mom AmmoH 5.2 maflndooo p .popdfiocfl “on 0022030253 Famufiflzo n ”OUHUO md armNH owm .2 ~12. 02. .2 o .2.m com .2 o 2.2 So .N a .2222 .2 oo2~ oaaouo 03.2 2. .N omm .N w .2. com .2 m .m com .N o .22 e or aoem 3580 3.22.2 mo ooo.~ 0.2.2 03.2 22.22 ommd mlmm meow Owe/Qua .2. 3.2 .N 2.2. omm .N 2.2. ooo .2 2. .2 222.2. .N m .2.2 m .o2N 022m .mmm .m 8212 mom 22222.2 ormm 8212 mam $22.2 moo 222mm 02-2mm .N 22: 2982222 223 2.2.2225: 22: 2982222 222 2.2.2222: $.08: mwcwcpmé mwawchmo mchumo mwGEHMo $2 3.28572 $222 aooeoaz 32.2 3228572 32.2 3228572 ooo2o :2 omeno>< owmum>< omenoao. owmuo>< quEdG nmdonw H.308 2coE>oHQEH mm own .2332. mN own oHOHom mm 6mm non—m4 mm 6mm oHOHom 6 3122.2 8.22228... 222.2 2.2.22.2 229202.282. 2922.2 .m mmdouw unogunonEo pad mpowuom 6230on 222 26920388 $.32 own .3 £268.23 322222 po>oa8otfiom 5.4.0 mo mwficumo mms .o -H> Mdmaad. 207 TABLE VI-7. Distribution of mean 1955 income between wages and farm self-employment for OASI self-employed male farmers in the SEF, WSO employment group,by selected patterns of past covered employmenta d --------- 1955 taxable income --—---- Pattern of past Number Average ---- Source ----- covered employment of c per operators operator Wages Farming (1000'81 ($1 ($1 ($1 1. Each year of 1952-54 81. 3 2, 550 l, 400 1,150 2. Covered 1952-53, not 1954 12. 9 1, 835 585 1, 250 3. Covered 1952, not 1953-54 8.9 1, 810 470 l, 340 4. Covered 1953, not 1952 and 1954 7. 2 1, 685 320 1, 365 5. Not covered 1950 to 1954 40. 0 1, 915 340 1, 575 aSource: A tabulation of data from the Continuous Work History sample supplied by BOASI. Farm operators in the SEF, WSO class had wage and/ or salary income from a nonfarm job as their only covered income in addition to self—employment from a farm operation in 1955. Individuals in each pattern group may have had covered employ- ment prior to the earliest year given. CThere were 215, 900 in the SEF, WSO group. The five patterns shown are selected and do not include the entire number in the group. Statistical significance: All of average total incomes shown here have differences that are statistically significant at the 1 percent level. More important than the differences between average totals, however, is the pattern of an increasing proportion of total taxable income from wages as covered employment prior to 1955 is more recent and continuous. 208 TABLE VI-8. Average taxable income per year employed prior to 1955 and average 1955 taxable income for OASI self-employed male farmers with first covered income in 1950 or earlier, by per- cent of years employed, and employment groupa Percent of years ------- Income by employment groupb ------- With GOV?“ Number Total of 2 3 4 111C0me Slnce in groups 5 t0 9 9"“ Year Of category 2 to 9 SEF-PC SEF,SEO SEF,WSO- employment (1000'51 ($1 ($1 ($1 ($1 ($1 A. Average Taxable Income per Year Employed Prior to 1955 (to Nearest $5) Less than 25% 262.1 190 180 265 195 260 25 to 49% 288. 6 665 625 1, 035 565 630 50 to 74% 169.1 1,090 1,080 1,430 895 1,100 75 to 100% 81.5 1,420 1,390 1,650 1,310 1,600 Total 800. 3 895 745 1, 265 925 1,115 B. Average 1955 Taxable Income (to Nearest $5) Less than 25% 262.1 1,790 1,730 2,170 1,880 1,890 25 to 49% 288. 6 1, 870 1, 680 2, 360 2, 060 2, 225 50 to 74% 169.1 2, 010 1, 595 2, 605 2, 225 2, 425 75 t0100% 81. 5 2, 420 1, 590 2, 570 2, 685 2, 895 Total 800. 3 1, 930 1, 680 2, 410 2, 215 2, 380 aSource: A tabulation of data from the Continuous Work History sample supplied by BOASI. See description of employment groups in Chapter II. 209 Table VI-8 quantifies other relationships between regularity and time of off-farm employment to income. Average income per year worked for those starting before 1950 rises from a mean of $190 for those working fewer than 25 percent of the years after their first coverage to $1, 420 for those working three-quarters or more of the elapsed years. Similarly 1955 income rises from $1, 790 to $2, 420. In the case of the SEF-PC class the 1955 income relationship is inverted; those working the smallest proportion of years since first coverage have the highest 1955 incomes. This is in accord with previous dis- cussions of the opportunities of the SEF-PC class and their security in nonfarm jobs. Wartime Coverage. --Since the period of World War II was one of heavy nonfarm demand for labor and many farmers had their first nonfarm experience at that time, it was thought that relationships between income and the wartime work pattern might prove valuable. Unfortunately data are somewhat parsimonious in this respect. Only the "year of first covered employment" can be definitely associated with specific years prior to 1950. In Table VI-6 relationships between the period of first coverage and 1955 income are given by age at the time of first coverage. Time of first coverage appears to have little relationship to the incomes of those who were over thirty-five at the time it occurred. Farmers under twenty-five at the time of first coverage had higher 1955 incomes if this 210 occurred in 1941—45 rather than in 1946-50. This difference is more likely due to 1955 ages than to other factors. Average 1955 incomes for all first covered in 1941-45 were $1, 820. This compares with $1,790 for all those first covered in 1946-50 and with $1, 875 for all males. (The figures $1, 820 and $1, 790 use the same data as Table VI-6 but are computed separately from it.) Differences in these figures are hardly sufficient to base broad inferences upon. While some differences in the data of Table VI-6 are statistically significant, the nature of the data raises grave doubts concerning implications drawn from it. This is discussed below. Twenty-two percent of all those with off-farm experience had their first covered employment in 1941-45. This compares with only 9 per- cent with their first experience in 1946-50. This is difficult to interpret because of the data limits. The average OASI operator would have been 36 years old in l945--sufficiently old to work off-farm, and there were powerful inducements in the 1941-45 period. Once having his first covered employment, he could not have this experience in a later year. Twenty-nine percent of the SEF-PC class reported their first covered experience in 1941-45. This compares with only 16 percent for all others having off-farm experiences and the difference is significant at the 5 percent level. In addition, a higher proportion of the SEF-PC class first covered in 1941-45 were over thirty-five years of age--56 percent as against 39 percent of others receiving first coverage in this period. 211 These highlight limitations of our OASI data to give an unbiased picture with a backward look. The reader is again reminded that the population with which we deal is composed of those who are again or still on the farm in 1955. Those people over thirty-five starting off-farm work in 1941—45 could not be younger than forty-five years of age in 1955 and their average age would be much higher. Above age fifty the proportion having off-farm wage work declines rapidly. Thus those starting wage work in wartime who were over thirty-five and who were farm operators in 1955 would be sufficiently old that they would be less likely to also have off-farm wage employment, hence they would be classified as SEF-PC rather than SEF, WSO or a combination in 1955. A somewhat similar data problem attends the higher proportion in the SEF-PC class who started in 1941-45. Most of the SEF-PC class either deliberately used off-farm work to supplement farm income, found nonfarm employment unsatisfactory, or were marginal nonfarm employees--at any rate they returned or stayed on the farm. Those who took off—farm work in this same period and completely left the farm without returning are lost from our OASI farm operator population. Sixteen percent of all with off-farm work in 1955 began covered employment in the war period and were engaged in both farm operator and off-farm work in 1955. i The backward look from a given point, however, serves to limit the field of vision since we have lost the ones who migrated. 212 Aside from the meager information that there is apparently little relationship of first coverage in wartime to 1955 income, it appears that little of value can be gleaned from OASI data for specific years prior to 1950. Summary Data in current use show the farm population to be heavily involved in the nonfarm labor force. They suggest that nonfarm income apparently serves to stabilize fluctuating farm income. In contrast, relatively few of the OASI farm operator population are found to be employed steadily off-farm. Income from off-farm work varies widely from year to year even for those receiving it annually. This, again, is at variance with the picture of a stable aggregate of nonfarm income to the farm population. There is also evidence that farmers are less secure in nonfarm employ- ment than are other members of the labor force. This could cause the nonfarm income of farmers to magnify declines in the business cycle. Relative opportunities on farm and off are associated with the employment experiences and present welfare of OASI farm operators. Nonfarm experience was relatively more important for operators in poorer agricultural areas. Years of off-farm work and its pattern are found to be associated both with the level of present income and the ratio of farm to nonfarm income. 213 The data used were a sample of those who were farmers in a single year. This produced significant distortions resulting from the dynamic interrelations of individuals with different segments of the economy over time. In any given year we may classify individuals as part-time or full-time farmers. With respect to the future some of these will become entirely nonfarm, some will continue as full-time farmers, others as part-time farmers. Some who are part-time operators now will become full-time operators and conversely. Others who are not in the farm population in a given year will enter it and become farm operators. Only year-to-year data following each indi- vidual can trace this pattern. In the study of relationships for a past year the data available here give only a partial view because those who migrated are missing. Despite these limits, we are able via the time dimension of OASI data for 1955 operators to gain perspectives previously unavailable. 214 CHAPTER VII SUMMARY AND CONCLUSIONS REGARDING THE POTENTIAL VALUE OF OASI DATA IN AGRICULTURAL ECONOMICS RESEARCH This research mounts an investigation of the data of farm people derived from the program of Old Age and Survivor's Insurance. Its primary purpose is to determine ways that OASI data may be used to close gaps in our knowledge of farmers, of their interaction with other industries, and of the general economy. It is not intended here to refute the claim articulated by O. V. Wells: "We in the United States probably have the best agricultural statistics in the world. "1 Indeed, it is thought to be correct! But relatively advanced as United States agricultural statistics may be, there are obvious inadequacies when attention is brought to bear upon the specific questions of what, how much, and why. Answers to these questions are needed as the background information for both public and private decisions. Outlines of the more important deficiencies in our present statistical series may be sketched briefly. Among the ones receiving a large amount of attention is the matter of inadequate knowledge concerning farmers' 2 . . income level and its distribution. A somewhat less obVious problem is 1U. S. Department of Agriculture, Major Statistical Series of the U. S. D.A. , Agriculture Handbook No. 118 (1952), p. ii. 2See pages 1 and 2 of this thesis. 215 that of population definitions. Often the farm operator population as reported by the Census of Agriculture is taken as given without adequate recognition of the fact that any population statistic has implicit assumptions derived from its definitional boundaries. Many a tyro who uses the 1954 Census of Agriculture figure of 4. 8 million farmers would be surprised to learn that large numbers are included who bear little resemblance to his personal concept of a farmer. Least often recognized explicitly, but perhaps the most serious limitation of all, is our vague knowledge of the internal processes, currents, and trends in the farm population as it operates in the setting of a dynamic society. Failure to recognize this deficiency probably comes about because data now in use are thought of as time series data. They are time series data with respect to the agricultural industry, but all commonly used statistical series are only static, cross-section data of farm people. It is individual people that are a primary concern in our democracy! Such deficit areas in the United States agricultural statistics suggest an inchoate state, and the need for further sophistication. How may OASI data of farmers contribute ? A leading hypothesis is that the continuous register characteristic of OASI data can make possible a distinct advance in our insights into the dynamics of change in the agricultural population, its income, and the interrelations of the farm labor force with other industries. The nature of information about farm population characteristics, their occupation, and income that is supplied by BOASI may also contribute to our knowledge 216 about farm people, in addition to tracing individuals over time. Before proceeding to a statistical summary a brief review of sources and limitations of OASI data is in order. OASI Data Sources and Limitations--Summarized Backgound of Old Age and Survivor's Insurance. --The purpose of Old Age and Survivor's Insurance is to maintain partially the income of individuals in the event of disability due to age, illness, or death of the breadwinner. As a by-product of this program data on income, employment, and other items are collected about each individual who qualifies to be included. All who have earnings above a given level from specified sources are considered as qualified. Benefits are determined on the basis of special taxes paid on income. Most nonfarm laborers were included at the program's inception in 1937; nonfarm employers were thought to maintain the best records and be better able to do the required reporting. The coverage of the OASI program was expanded to other types of employment as administrative abilities developed. Farm hired workers were partially included in 1951. In 1955 farm entrepreneurs were added and the rules for including farm hired workers were liberized. This made 1955 the first year in which farm workers were quantitatively represented in OASI data; hence 1955 data were used in this study. Records and Data Collection. --OASI records on each individual are maintained by the Bureau of Old Age and Survivor's Insurance which is a 217 part of the Social Security Administration in the United States Department of Health, Education and Welfare. The first data that are collected from persons in the OASI program are obtained at the time of application for a social security number. It includes items such as sex, race,and date of birth. The Internal Revenue Service is the collecting agency for Social Security taxes paid on income. After collection the Internal Revenue Service forwards information on income and employment to BOASI to be incorporated into the records of each person. In this way a complete record of covered employment and earnings over the work history of individuals is as sembled. The Continuous Work History Sample. --A statistically selected, one percent sample of all persons in the OASI program is maintained by the BOASI for purposes of program direction and administration. This is called the Continuous Work History Sample and it provides a workable sample for study of the United States labor population and its segments. In the research reported here use was made of the farm segment of this Continuous Work History Sample. In addition to 1955 income and employment, a history of covered employment back to 1937 was available from the data used. Because of this historical information it was possible to make a test of the use of OASI data in a time depth analysis. Limitations of OASI Farm Data. --Limitations to the use of OASI, Continuous Work History data in the study of farmers are of three types: 218 (1) the sampling error, 3 (2) problems associated with program administration and reporting, (3) limits imposed by the rules of the program. The last two of these comprise what some have referred to as the "non-sampling error"4 and are of by far the most consequence. They are discussed briefly. Incomplete reporting is the most important administrative problem so far as use of the data of the OASI farm group is concerned. Farm operators are self-employed and must report their own incomes to the Internal Revenue Service. But farmers in the lower income range are unaccustomed to either bookkeeping systems or reporting procedures. For this reason a high proportion of these farm operators who were eligible and legally required to report in 1955 did not do so and are thus not included in the data. There are also indications of a substantial number of farm hired laborers who were eligible for OASI coverage but who were not included in 1955. This occurred in spite of the fact that responsibility for reporting of hired workers is upon employers. Use of OASI data of the farm labor force implies a definition of farm operators and farm laborers determined by the rules under which 3Se e Appendix A. 4P. M. Hauser and O. D. Duncan (eds. ), The Study of Population, An Inventory and Appraisal (Chicago: The University of Chicago Press, 1959), p. 80 5See Chapter IV and V for details. An estimated 961, 000 farm operators who were eligible for OASI coverage from farming did not appear in the data used in this study. Among these were 380, 000 esti- mated to report late. An estimated 450, 000 farm laborers who were eligible did not appear in the data. These figures complement Table VII-1. 219 the OASI program operates. This is a limitation only in the sense that the resulting definition may differ from that which is appropriate for use in a given situation. Differences between the OASI definition of farmers and that of the Census of Agriculture serve to direct attention to the fact that there is no absolute number of farmers; any statistic has its implicit assumptions that may or may not fit a given use. OASI data, in general, defined farm operators as all who receive a self-employment net money income from farming of $400. In the case of farm hired laborers, all receiving over $100 in wages in a year from one employer for farm work were considered as qualifying. There are three modifications to the basic OASI definition of farm operators that deserve brief note. Two of these permitted coverage as a farm operator even though self-employment income from farming was under $400. One was an optional reporting rule that applied in certain situations of low income. Another rule permitted the aggregation of self-employment incomes from all sources to attain the $400 minimum required for qualifying under the OASI program. In a third case, some with over $400 from farm self-employment were not included as farmers because they had wage incomes of $4, 200 or more. 6This study estimated an addition to the OASI farm operator population of 150, 000 due to optional reporting, an additional 55, 000 because farm and other self-employment incomes could be added together, and a reduction of 27, 000 because of individuals with wages above $4, 200. These figures complement Table VII-1. 220 OASI income data are subject to analogous problems of reporting and administration as affect OASI population numbers. In addition, the rules of the program operate to exert a unique influence upon income. Only net money return from current productive effort is counted as income under the OASI program. In general this includes income from labor, skills, and entrepreneural ability and excludes income from investments and capital gains. There are certain special interpretations of this in the case of farm operators because the same system of reporting as that employed for collection of the income tax is employed. This was a matter of administrative feasibility--an already going system took over the collection of OASI taxes on self-employment income. For this reason the general definitions of farm income taxes carry over to farmers' OASI taxes. An example of an income data problem arising from the collection system is the inclusion of income from owned equity in OASI income data for self-employed persons while all other investment income is excluded. In 1955 the OASI program did not apply to income above $4, 200. The effect is that the OASI income distribution is truncated at $4, 200. These income characteristics require compensation when comparisons are attempted. Data of OASI Farm Operators Compared with Other Farm Operator Statistics An understanding of the composition of the OASI farm labor population is essential to its use. For this reason a summary of 221 comparisons of pertinent characteristics of the OASI population against other data sources is made in Table VII-1. The purpose is a definitive characterization of the OASI farm operator population. Operators are the main concern of most farm studies. Some data of hired farm workers are shown in Table VII-1 but are not discussed in this section. Operator Numbers and Definitions Compared. --Since data from the Census of Agriculture are in common use, the Census farm operator population is used as a standard of reference for defining the 1, 876, 000 OASI farm operators. OASI data indicated only 39 percent as many farm operators in 1955 as the number reported by the 1954 Census of Agri- culture. With exceptions, already generally noted, OASI data define a farm operator as any individual receiving $400 or more of self-employment income from farming. The procedure of the Census of Agriculture was to define a farm--a place selling $150 of agricultural products or if over three acres it was counted if $150 worth of agricultural products exclusive of a home garden were produced even though consumed on the farm--then one individual was designated as the operator of that farm. Age. --A first look at the age characteristics of operators suggests that OASI operators might be a random sample of those from the Census of Agriculture. Average age is nearly the same--49. 6 years for Census farm operators and 50. 0 years for those from OASI data. The age distribution is flatter for OASI operators as demonstrated by having TABLE VII- 1 . 222 Summary of characteristics of indicated agricultural populations as estimated by the use of OASI data, compared with statistics from commonly used sources Statistics OASI as Agricultural population and percent of . . . used for _ population characteristics , a OASI comparative comparison . . statistic b A. All Farm Operators 1. Total number (cont. U. S.) 4, 780, 000 l, 876, 000 39. 3% 2. Number by U. S. regions a. South Atlantic 859, 000 171, 000 20% b. West North Central 905, 000 597, 000 66% 3. Average age 49. 6 years 50. 0 years 4. Percent over 55 years 36. 9% 40. 8% 111% 5. Number of farms represented , a. Total number 4, 780, 000 1, 726, 000 36% b. Economic classes Ito III 1, 290, 000 1, 070, 000 83% c. Economic classes IV & V 1, 575, 000 615, 000 39% d. Economic classes VI to VIII 1, 915, 000 135, 000 7% 6. Commercial production $24, 728 mil. $17, 990 mil. 73% 7. Average gross agri. sales $5, 200 $9, 600 185% 8. Total net income (all sources) $2, 890 $3, 110 108% B. Hired Farm LaborersC 1. Total number (cont. U. S.) 3, 300, 000 1, 390, 000 42% 2. Number with over $100 farm wages and no self-employ- ment farm income 1, 800, 000 l, 350, 000 75% C. Farm Populationd 1. Total net money income $16, 178 mil. $15, 064 mil. 93% a . . . . The statistics in this column are from commonly used sources and are arrayed for comparison with the OASI statistics in the same row. The sources vary and are given separately in footnotes below for each figure or group of figures. b U. S. Bureau of the Census, Census of Agriculture: 1954, Vol. II (1956). 223 TABLE VII-1. Continued CU. S. Agricultural Marketing Service, The Hired Farm Working Force of 1957, Agricultural Information Bulletin No. 208 (June, 1959). dU. S. Department of Agriculture, Major Statistical Series of the U. S. D. A. , Vol. 111, Agricultural Handbook No. 118 (December, 1957). an 11 percent higher proportion in the "over 55" age category than is true for Census operators. Race. --While age is not greatly helpful except in a detailed investigation of operator characteristics, a comparison of racial composition is immediately useful. Very few Negroes are included in the OASI farm operator population. An inferior average socio- economic position is suggested as the most important reason for such a wholesale omission of Negroes from the OASI data. A rough measure of the comparative economic position of Negroes in 1955 is given by the following: The median income for rural non-white males was $600-—on1y 40 percent of a median income of $1, 484 for rural farm, white males. A low socio-economic status for a given farm operator group may influence the number appearing in the OASI population in two principal ways: because of a low average income, fewer could meet minimum qualifications, and such individuals are less likely to be acquainted with accounting and reporting procedures. 7U. S. Bureau of the Census, Current Population Reports, Series P-60 No. 23 (November, 1956). 224 Region. —-Further corroboration of the conclusions reached in a comparison of racial composition of the OASI farm operator population with the Census operator population is obtained in a study by United States regions. In the South Atlantic region, where average agricultural incomes are relatively low, there are only 20 percent as many OASI operators as the number of Census of Agriculture operators. By contrast, in the West North Central region the number of OASI operators is 66 percent of the total designated as operators by the Census. Differences in average opportunity for income from farming in the two regions are assumed to have a major influence here. A measure of the agricultural opportunity in the two areas is given by the average sales per farm. This was $6, 690 in the West North Central region and only $3, 260 in the South Atlantic region in 1954. 8 As in the case of Negroes, low incomes would reduce the proportion in the South Atlantic region who had over $400 of farm self-employment income. There would also be less likelihood of familiarity with the system of reporting income to the Internal Revenue Service. Agicultural Production and Income. --Regional, race, and age comparisons provide interesting semi-quantitative descriptions of the OASI farm operator populations. But interesting information alone is 8U. S. Bureau of the Census, Census of Agriculture: 1954, Vol. 11, Chapter 9 (1956). 225 not adequate as a basis for defining operators of the OASI population. In order to use OASI farm data for drawing implications about the farm population, those represented must be specified in terms of their relationship to the economy. Fortunately it was possible to define OASI farm operators quantitatively with regard to both commercial agricultural production and net income. OASI farm operators were estimated to operate only 36 percent of the farms as defined by the Census of Agriculture, but they accounted for 73 percent of the commercial agricultural production. In rough outline, the procedure for estimating the commercial production of the OASI farm operator population was to translate this group into terms of the economic classes of farms as defined by the 1954 Census of Agriculture. It was then assumed that the OASI farm operators had a production that was average for the economic class in which they were found. In terms of commercial agricultural sales per operator, OASI farm operators account for almost twice the production of Census of Agriculture operators--$9, 600 compared to $5, 200. In terms of net income from all sources OASI operators have a much smaller margin of superiority-~their average net income was estimated at $3, 110 compared to $2, 890 for Census operators. 9The total net income of OASI operators was estimated by adding income reported to OASI to other income not reportable for OASI purposes. This included income excluded because the total was over 226 The OASI Farm Population Defined It has been seen in the preceeding section that OASI farm operators are relatively specialized in agricultural production and heavily committed as commercial producers. The net income com- parison introduces another consideration: Those Census of Agriculture farm operators who were not in the OASI farm operator group were not necessarily low income families--but, in general, their farm businesses were smaller. On the basis of the evidence presented, a broad characterization of the OASI farm operator population may be made. It can be considered as including those individuals who comprise the decision-making system of commercial agriculture. Depending upon the lower limit of those farm operators that may be considered commercial, OASI farm operators may be defined as 21.5. commercial agriculture segment. There are certain data imperfections that have been noted in preceeding chapters. The most important of these concerns complete- ness of coverage at all levels of income and the problem of rules that $4, 200, plus that excluded because of its source--such as transfer payments and investments. In this comparison all farm net income, except to nonfarm land- lords, is allocated to operators as defined by the Census. This is thought to make the net income of Census operators higher than it should be in comparison with the $3, 110 total net estimated for OASI operators, but satisfactory means for a quantitative adjustment are lacking. 227 permit coverage as a farm operator in some cases even though a minimum net income is not attained. In addition, some individuals will be included whose farming interests represent a secondary economic concern and whose farm business may thus operate in an atypical manner. Despite such difficulties, the OASI farm operator population is sufficiently representative of commercial farms to be useful in drawing implications concerning them since almost five out of six operations with sales above $5, 000 are estimated to be included in it. In general, the United States population associated with low income farm units are excluded from the OASI farm population. These may be of two kinds: (1) families having substantial incomes from other sources and thus a part of the decision-system of nonfarm industry, and (2) families without appreciable income from other sources. These latter are more properly problems of welfare and national development; they are families that somehow do not have economic opportunities on a par with many others. This may be due to environment, misfortune, age, or other disability. It is estimated that the bulk of those eligible for coverage as farm operators under the OASI program, but not included in 1955, are individuals whose farm incomes are relatively low. Many such omissions can be expected to be rectified in the future. As a result the number of operators in the $400 to $1, 000 range of net farm income may increase relatively. There will be positive gains from such tightening 228 up in program administration; the data should lend itself better to analysis because of reduction in the area that must be treated mainly by conjecture. The primary emphasis of this study is upon farm operators, but data for those who were hired farm laborers were also available and were used in achieving a concept of the entire human resources and income of the agricultural sector. Hired farm workers as a group are poorly-defined compared to farm operators; less is implied about their families, they are not as stable in their position, and there was no direct means in the Continuous Work History data to identify them with a given farm operation. The OASI hired farm laborer population has a low minimum requirement--only $100 in farm wages from one employer. It may thus include many who are marginal in their role as farm laborers. But note should be taken of two items. In the first place 60 percent had no other covered source of income in 1955.10 Secondly a crude tie to farm size may be made on an a priori basis; in only occasional instances would a sub-commercial farm operation pay wages of over $100. These suggest a degree of commitment to commercial agriculture on the part of OASI hired farm laborers. Individuals who are included in the farm operator and hired farm labor populations of the OASI data are the OASI farm labor force. f 10Appendix B, Table 1. 229 These, plus their families, are the OASI farm population. The OASI farm labor force is regarded as representing the bulk of the labor force _ , 11 of commerCial agriculture. Implications for Use of OASI Data of the Farm Labor Force This section serves as the climax for one phase of study of OASI farm data. Actually, however, it is only the foundation for what lies ahead. Should research with OASI data not proceed beyond this point little would have been gained. The harvest is in the future. Having illustrated the limitations and special features of OASI data and defined the population that it circumscribes, the question is posed: How may OASI data be used to contribute unique insights and to what ends ? The ends may be stated briefly. Insights into the vital processes of significant sectors of the United States economy are not merely interesting information; they are primarily of consequence as they can be brought to bear in the process of decision-making with regard to policy direction. Such decision-making is not necessarily reserved to elements of the formal government such as the administrative bureaucracy or a legislative group. Individuals, firms, and private organizations also participate in public decisions in the complex 11 . . . . . . A due regard for imperfections must accompany this definition. One large problem area is that of unpaid family labor. Another is the imperfect coverage of the program, particularly among low income operators and hired workers. 230 processes of a democracy, as well as in decisions pertaining to more immediate private matters. The aim is a contribution to the quality of both private and public decisions so that the net effect of formal and informal systems acting in concert is a closer realization of prevailing goals. Both farm and nonfarm sectors of the economy are involved, separately, and as an integrated whole. For some purposes it is desirable, to view agriculture as a microcosm or even to compare types of operators or regional variations. 12 Welfare studies require inter- industry and intra-industry comparisons. Among the more useful views is a study of the contribution of farm people to the commercial economy and the interrelationships of the labor force between industries. As the result of this attempt to define the OASI farm operator population and other elements in the farm labor force, and of a brief exploration into potential of the data, the following six areas of use for OASI farm data are proposed: The Anatomy of Change in the Commercial Farm Operator Population. --What is the real dynamics of the impact of social and le. S. Agricultural Marketing Service, Farm Costs and Returns, Commercial Family-Operated Farms by Type and Location, Agriculture Information Bulletin series. These publications make comparisons of farm businesses from year to year and consider briefly the major physical and economic factors operating upon them. This procedure is in contrast to but would be a useful supplement for OASI data where the focus is upon the labor force. 231 economic events upon commercial farmers ? Present data series give us only static cross-section views of farm operators. The Census of Agriculture will reveal certain changes to have taken place in the farm operator population between 1954 and 1959. But this is the net effect; it has come about as the result of currents and cross-currents that are poorly known and poorly understood in nature, direction, and magnitude. It is these primary elements that are important. Direction can only be achieved by helping to create a more favorable climate for desired trends and by mitigating or diverting others. Within the commercial farm population answers are needed to the question of who does what. Whose income is most affected by a given event? Who is able to adjust farm operations and maintain income-- by region, by ages, etc. ? Who adjusts by moving to nonfarm employment, either part-time or full-time? How well do those fare who enter nonfarm industries vis a vis those remaining as full-time operators? How seriously affected are those who are unable or unwilling to interact with the march of events ? These are only a few of the many questions needing attention. A hypothesis posed as the result of investigation into time dimensions of OASI data in Chapter VI provides an example: Relative opportunities in both farm and nonfarm industries influence not only current income but the employment pattern of farm operators. These patterns of opportunity vary by region. In areas of relatively low agricultural income a pattern of previous off-farm employment is associated with improved agricultural opportunities. This was indicated by higher average incomes, due 232 possibly, in part, to a better capital position. In areas of relatively high agricultural incomes, off-farm employment is likely to be associated with inferior opportunity as measured by current income levels. The ability to use OASI data for comparing work history, location, and present income of individuals produced this hypothesis. Later study may substantially modify and/ or elaborate this, not only because better year-by-year data will be at hand but because patterns may be altered over time. Interrelationships of the Entrepreneurs in Commercial Agriculture with the Nonfarm Economy. --Two hypotheses concerning OASI farm operators in nonfarm jobs resulted from the investigation in Chapter VI. They are used here as the focus for discussion: 1. OASI farm operators who remain on the farm are employed off-farm to a much more limited extent than are farm operators as defined by the Census of Agriculture. Relatively few of the former are employed steadily off-farm year after year. 2. OASI farm operators are less secure in nonfarm jobs than are other segments of the labor force. Although 31 percent of the male OASI farm operators had other covered employment in 1955, only 4 percent of them had had coverage off-farm each year of 1951-1954. This support of hypothesis number one above illustrates the difference between information obtained as a cross- section in a single year and data having a time dimension. A static view reveals only half-truths because of the dynamic nature of the labor force. In any one year farm operators with off-farm jobs may be: (1) in a transitional state from farm to wholly nonfarm—~this group will cease 233 to be in the farm operator population within a few years, (2) basically farm operators with a sideline or occasional off-farm job, or (3) basically nonfarmers with interests in a farm business. This study suggests that OASI farm operators with nonfarm income prior to 1955 fall largely in the second category. Hypothesis two is deceptively simple in form. It actually treats a challengingly complex array of factors. The basis for posing this hypothesis came from study of farm operators in the 1954 recession. The phenomenon under observation was not merely reactions of a particular group of the labor force-~although this was observed. It was fundamentally a study of industries attempting to adjust themselves and of dynamic interaction of economic segments under stress. Serving as the backdrop was the entire economic and social syndrome of the 1954 period. Among the reasons that the above can be posed only as hypotheses are the limitations of the OASI data used in this research. Those studied were farm operators in 1955 and investigations of the 1951 to 1954 years, of necessity, were limited to this group alone. It is recognized that the actual farm operator population as defined by OASI would have been different in 1951 and 1954 from what it was in 1955. Also, some who were farm operators in 1955 may have been only nonfarm laborers in 1951 to 1954. A year-bly-year study beyond 1955 with the aid of OASI data would have fewer of the handicaps encountered in the use of data from one year 234 alone. Challenging potential appears to await such an undertaking. The Comparative Welfare of Farm People. --Many agricultural policy measures are based on the assumption of a relative disparity in the state of welfare of farm people. Attempts to measure the inequity by comparing income levels of farm and nonfarm people have met with indifferent success. Differences in income components of the two groups cause difficulties that are unresolved in producing an income figure for farmers that can be compared with that of nonfarmers. OASI data offer the possibility of an approach to welfare measures that should prove a useful complement to methods in present use, if not an alternative. It is suggested that response to economic stimuli, that the income pattern over time, and wealth position when used in conjunction with personal characteristics such as age and with environmental factors, may serve as indicators of welfare. A farm operator who expects substantial capital appreciation may wisely discount a temporary period of low current income. Is there a difference in welfare of different groups over a period of the business cycle or a lifetime as compared to a measurement based upon current income from a single year? What are relative rates of mobility, e. g. , of farmers to nonfarm jobs, of non- farmers between industries and localities, of different segments of the population? Under what conditions does immobility indicate inability to move ? When does it indicate lack of incentive to move? Does mobility result in improved income? How does this vary by age, race, and location? 235 These are a few of the many questions that bear upon relative welfare that OASI data can help in answering. As a requirement for such a study parallel information about the nonfarm labor force is needed as well as data of farm operators. The Labor Resources in Commercial Agriculture. --Agricu1tural Marketing Service data now in use determine the labor force in agriculture 13 as a yearly average of periodic checks made during the year. Operators and unpaid family members are defined on the basis of time spent at farm work with no consideration to other activities. Any individual receiving farm wages in the check period is counted as a hired farm laborer. There are serious limitations to such a data series. Foremost among these is the same problem plagueing many other statistical series--this is cross-section data yielding an average number, not the total number, of individuals involved. This tells us something about average deployment of labor resources by industry but is woefully short on insights into dynamics of the labor force, and the interrelationships between industries. Other problems relate to questions concerning actual productivity l4 attributable to unpaid family labor and productivity of operators on small farm units. 13U. 8. Agricultural Marketing Service, Farm Employment Monthlj blStates 1950-57, United States by Years 1910-57, by Months 1940-57, Statistical Bulletin No. 236 (September, 1958). 4Discussed in Chapter II. 15U. S. Bureau of the Census, Current Population Reports, Series P-57, Monthly Reports on the Labor Force. This serves as the basis for 236 OASI data of the labor force in agriculture have their limitations, but they also have features that offer potential for gaining more compre- hensive knowledge about the agricultural labor force. The most important feature recommending them in this respect is that all individuals with money incomes above given levels are included. 16 In most cases incomes may be specified by sources, and individuals' work patterns may be traced over time. It will be possible to not only determine the number of farm operators and hired laborers as of a given year but their relative involvement in agriculture and its changing pattern over the years. Additional Data on Individual Incomes. --For the population included in OASI data, an accurate distribution of net income from current productive effort (not investments or capital gains) is available. This has the advantage of being reported from records not memory as is the case with other individual income data. For farm operators the most accurate section of this income distribution range in 1955 was that lying between $900 and $4, 200. In the case of farm laborers the accurate range extended from $400 to $4, 200. Institutional factors distort the range above and below those figures. The upper limitation was not as serious as might yet another estimate of the farm labor force. It has many of the same properties of the estimate made by the U. S. Department of Agriculture, as well as some distinct differences, e. g. , workers are classified on the basis of the occupation at which they spend the most time. Subject to limits of the administration of the program and of the rules by which it operates. See Chapters 11 to V. 237 appear, in 1955 only 9 percent of farm operators and 3 percent of hired farm laborers had covered incomes exceeding $4, 200. This maximum limitation has since been raised to $4,800. In a majority of cases covered income from off-farm and nonfarm sources can be separated from farm income and its source identified. Both farm and nonfarm income can be identified with individuals who may be subdivided by age, race, and location, and traced through time. The Estimation of Aggregate Income of the Farm Population. -—In Chapter V income data from the OASI was used as the basis for an aggregate income estimate of the farm population. Although a number of common sources were used, the approach differed from that of the Agricultural Marketing Service in its estimating procedure. Total income was determined as the aggregate of individual incomes. By contrast, the basic method of the Agricultural Marketing Service is to subtract total farm costs from the value of total sales of agricultural commodities. Both estimates compare closely, but that of the Agricultural Marketing Service is larger--as is almost always the case when it is compared with other aggregate estimates. Whether or not a regular series of aggregate income estimates such as that made in Chapter V is justified depends upon further investigations into its relative economy and accuracy as compared with estimates of the Agricultural Marketing Service, and upon a possible superiority, e. g. , showing the incomes of components of the farm population separately. 238 The most immediate use of the aggregate income estimate made in Chapter V is to give sharper definition and perspective to the OASI farm population. It adds conceptual depth to the total farm population income figure by highlighting various population and income components and by serving to direct attention to the arbitrary nature of farm population definition 5 . Data Refinements Indicated A by-product of this focus upon farm statistics is the highlighting of finite areas that need attention in addition to the broad categories that are the general subject of this chapter. The more important of these special areas are listed to direct attention to them: 1. Little is known about farms operated as partnerships or cases where there are two or more with entrepreneural income from a single farm unit. Who are the individuals involved. What are their incomes? What are the kinds of farming operations ? 2. There is little definitive knowledge of unpaid family labor. How much production can actually be attributed to it? Is it accurate to count family labor on subsistence farms? 3. What is the production that is accounted for by youths on farms who are not bona fide partners but whose incomes are accounted separately from that of the principal operator of the farm unit? Closely allied to this and to "2" above is the problem of the allocation of farm income between the family head and other members. 4. Corporation farms--How are they organized? What do they produce? How is farm production accounted by them? How are they classified in our Census data? The deficiency of information in this area is amazing in view of the popular use of corporation farms as a scape goat when dealing with prob- lems of surplus production. 239 In addition to the above there are special areas of information that are specific to the OASI data, that are required for its best use, and that need better definition: 1. The reporting of partners in OASI data and, after 1955, of "materially participating" landlords. 2. Characteristics of those reporting by optional methods. 3. Incomes from current effort above $4, 200. 4. Income for the OASI operator population from sources not covered by OASI data. 5. Definition of those apparently eligible for OASI but not reporting. The conclusions of this study are partially dependent upon estimates made of the above nine areas. Refinement of these estimates can add confidence to OASI farm labor population data, and facilitate its use and treatment. M0 APPENDICES 241 APPENDIX A SAMPLING ERROR A guide to the probable sampling error at the 5 percent level for the OASI Continuous Work History Sample of farm operators used in this study is given in the following table: Sampling Variation Number of Estimated number workers Percent variation workers in in the given class at 5 percent level sample class in population of significance 10 1, 000 62. 0% 50 5, 000 28. 0% 100 10,000 20. 0% 500 50,000 9. 0% l, 000 100, 000 6. 0% 2, 500 250, 000 3. 7% 5, 000 500, 000 2. 4% The estimated workers in a given class C of the population is determined by C = Re; where R is the sampling ratio and c the number of workers in the given class in the sample. It is expected that the total number of workers in a class of a given size, the middle column, will be within the percentage variations shown in the right hand column 19 times in 20. 1W.G. Cochran, Sampling Techniques (New York: John Wiley and Sons Inc. , 1953), Chapters 2 and 3. An unbiased estimate of the variance of the estimated number of units in a class in the population, is given by the formula: ' 242 s 2 _ N(N - n) Np — n - 1 where: N = total population p = proportion a sample class is of total sample n = total sample 9 = (1 - p) Because of the low sampling ratio, the finite population correction is not greatly useful. The actual formula used for calculation was: ' Pq = 101/— SNp n Table APPENDIX B SUPPLE MEN TARY DATA Distribution of the OASI farm labor force by employment, sex, and race, 1955 ................................... Percentage income distribution and average income of OASI farm operators, by sex and race, 1955 .............. Percentage income distribution and average income of OASI hired farm workers, by sex and race, 1955 ........ Percentage income distribution and average income of the OASI farm labor force, by sex and race, 1955 ........... Percentage age distribution and average age of OASI farm operators, by sex and race, 1955 ....................... Percentage age distribution and average age of OASI hired farm workers, by sex and race, 1955 ................... Percentage age distribution and average age of the OASI farm labor force, by sex and race, 1955 ................ Footnotes for Tables 1 through 7 of Appendix B appear at the end of Table 7, page 250. ‘ 243 Page 244 245 248 249 244 N .mvm 2 .02. m .mmm 0 .mmer. m .m2N 0 .mm0.m 0 .200.m 0 .m0N 0 .020 .0 00.202 202202 8.202 5.40 222 .022 .2.2. N .N2: 2 .2. e .o2N 0 NS .2 N .2.2 N .e2.N .2 N .SN .2 N .22.N N .N2. .2 200822 252222 62 0 .002 0 .002 0 .002 0 .002 0 .002 0 .002 0 .002 0 .002 0 .002 2230.2... 1... 5.-.. ....t.. 2.. ll... m. m. t... m. OMm.Om>>..mm>> .m2 t... u... t... 0. 2. 0. 0. 2. m. OMm..mm>> .N2 N.2N 2..oN N .NN N.o2. NNN N .02. 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