The Family Income Today

THE family's chief economic concern is the size of its income. To a high degree the income today is an index of its social rating and, more important, an index of the scale of living it is able to maintain. Income conditions, if it does not determine, the character of the family's food, clothing and shelter and its power to secure the comforts and amenities of life. It is one of the independent variables with which the well-being of the family fluctuates. Since the family is in the main the unit for which goods must be provided, it is family not individual incomes that are important. It is not sufficient that incomes be adequate for the adults who earn them. All members of the family, young and old, sick and well, workers and nonworkers, constitute the consuming group for which income must be forthcoming.

WHAT IS INCOME?

The term income must be precisely defined and real income must be distinguished from money income. Real income refers to the flow of commodities and services used or available for use during a period of time. It is made up of loaves of bread, pounds of meat, quarts of milk, kilowatts of electricity, pairs of hosiery, the services of houses and furniture, doctors and chauffeurs. Money income is the purchasing power in dollars acquired during a given period. Real income and money income may move together or in opposite directions. Some writers refer also to psychic income, the enjoyment or satisfaction derived by persons from their real income. Psychic income evidently would defy measurement, varying with different persons or at different times with the same person.

MAJOR ELEMENTS IN THE FAMILY INCOME

The total income of the family as the total income of the nation can not be measured by the amount of the money income alone. The total real income is derived in two ways, or the commodities and services that compose it fall into two groups. There are the goods purchased by the use of money income and there are those that are available for consumption without using money as an intermediary. It is the indirect method of supplying our wants that makes necessary the use of money to secure food, clothing and shelter. The more we resort to the indirect method the more nearly total income is identical with money income. The more we use the direct method and produce what we consume the larger are the nonpurchased elements in income.The outline given below is designed to show the major elements of the family's income as a whole and the relation between money income and real income. . Real income or goods available for consumption during a period of time . Goods that may be available without use of current money income Food and fuel furnished by farm or garden "Use" of house, its furniture and equipment, automobile and other durable goods Services of housewife and other members of the family "Free" goods and services from public schools, libraries, parks, etc. (These goods and services involve no money outlay during this period of time. They may represent income foregone, value used up and goods paid for by taxes.)

. Goods that may be purchased by use of money Food, drink and tobacco Clothing Upkeep and operation of house, its furniture and equipment Use of house when not owned Personal supplies and services Upkeep and operation of automobile Books, periodicals, educational facilities Medical services and supplies Plays, concerts, recreational facilities

. Reserves for replacements, additions, improvements and other savings

. Gifts, contributions, income tax, etc.

It will be observed that real income is here made synonymous with consumed income, or the stream of goods that actually come into the possession of the family for the satisfaction of their desires during the period of time in question. Savings are excluded; they furnish security or similar satisfactions, but in other respects they lower current, real income as here defined. It is their function to increase the real income of the future. Real income as here used should not be confused with such a concept as "real wages." The latter refers of course to the purchasing power of money wages assuming that they are all spent for consumers' goods.

The kind and quantity of commodities and services available to the family without the use of current money income vary considerably from family to family and from time to time. Today there are four main types of such goods. The most important group and the one which is an element of the total income of practically every family consists of the services rendered by the housewife and other members of the family. Another element in total income that involves no money outlay during the period of time in question is the use of the house, furniture and equipment, automobile and similar consumers' goods owned by the family. Ownership of a house adds to real income just as money spent for rent adds to goods enjoyed. A third group of items that may add considerably to the family's income consists of the goods made available by the community or state without a quid pro quo. The family that makes use of public schools, parks, libraries, playgrounds and so on increases its total income without making use of its money income. The mere availability of these resources increases only potential income; it is only as they are used that they add to realized income. The same distinction must be made in the case of goods privately owned. The family that closes part of its house or does not use its equipment fully decreases thereby its realized income.

If we wish to estimate the total national or family income the problem arises of reducing all the items involved to a common denominator. But when we attempt to reduce to monetary terms the items in income that have been furnished directly by the family or have involved for some reason or other no expenditure of money during the period in question difficult questions arise.

Source: Economic Problems of the Family